Poverty and employment from a dynamic perspective

aboriginalconspiracyUrban and Civil

Nov 16, 2013 (3 years and 8 months ago)

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1


Poverty and employment fr
om a dynamic perspective

Rodolfo Gutiérrez Palacios

(
rgutier@uniovi.es
)

Aroa Tejero

(
tejeroaroa@uniovi.es
)

Department of Sociology

University of Oviedo



1.

Introduction

Cross
-
sectional indicators often show an image of high stability in poverty
levels. The at
-
risk of poverty rate has varied just slightly more than half a point in all
EU
-
15 countries since the availability of the European Union Survey on Income and
Living

Conditions (EU
-
SILC); it has recorded a top rate of 8 points in 2008 and 2009,
and a minimum one of 7,3 in 2005.

Also the frequency of in
-
work poverty situations is very stable in the majority of
countries, so the differences in this indicator across
countries are also regular. In Spain,
one of the European countries with higher levels of working poverty, the in
-
work
poverty rate remained around 10,5 between 2004 and 2008, although in the last two
years it increased to 12,7 in 2010. In the United King
dom, a country with medium
levels of poverty and working poverty, this indicator keeps on a similar behavior, albeit
in the opposite direction respecting to Spain along last years: the at risk of working
poverty maintained at 8 points in the early years
and has decreased during the last years
of crisis to 6,8 in 2010. Likewise, in France, one of the countries with lower levels, the
in
-
work poverty rate has maintained very stable around 6 points, without changing
significantly in recent years.

The differen
ces across countries, each of them representative of different welfare
regimes variants, are not only about working poverty, but about working poverty
profiles as a function of the basic mechanisms that cause it (Fraser, et al., 2011). In the
case of Spai
n, its highest level of working poverty is mainly associated with two types
of mechanisms: labor participation of the households, due to the frequency of
households with only one member occupied, or by the instability of that labor
2


participation related to

the frequency of temporary work; and the household
composition, so there is a higher working poverty risk in households with several
children (Goerne, 2011; García
-
Espejo y Gutiérrez, 2011). In the United Kingdom, their
medium level of working poverty is
related both to labor participation factors, mainly
part
-
time work, and the frequency of single member households because of the earlier
emancipation of the youth; in this case, in
-
work benefits have a significant effect in the
reduction of poverty risk. I
n France, their in
-
work poverty level has to do primarily with
the low intensity of labor participation, as the minimum wage and in
-
work benefits
reduce that risk of poverty for households with adult members occupied (Goerne, 2011;
Alegre, 2011).

Cross
-
sec
tional indicators provide a limited information about working poverty.
It is well
-
known that there is a high turnover in the lower levels of the income
distribution. Only a small portion of poverty situations are persistent or chronic. The
majority of pove
rty spells use to be short and not extended beyond one year. It may also
be higher the frequency of returning to poverty after leaving it
for

a year. As a
consequence, the frequency which some households are suffering poverty situations
within a period of
several years is usually much higher than the proportion of people
affected by poverty in a specific year. The mobility, the recurrence and persistence in
poverty are central aspects of this phenomenon and they cannot be captured by cross
-
sectional indicat
ors.

On the other hand, the dynamic perspective has been applied in the study of
poverty in recent years thanks to the availability of new and improved data bases that
permit an analysis like this. The EU
-
SILC allows to study from this perspective because
it has information on both household incomes, working situation of the individuals and
different key features of both. For this survey, households and individuals are followed
during four year periods and, therefore, the longitudinal perspective can only b
e
implemented in the medium term.

The dynamic perspective is particularly interesting for answering two types of
questions: on one hand, whether the differences in the in
-
work
poverty levels across
countries

respond to different patterns of persistence or/
and mobility; on the other
hand,
what basic mechanisms of risk poverty may be associated to among the different
patterns of mobility/persistence in countries with diverse institutional settings.

3


This paper argues, first, the importance of applying the dyna
mic perspective to
the analysis of the relation

between poverty and employment

to revise then the main
international results about its dynamics and determinants. Then, the peculiarities of the
EU
-
SILC data for the dynamic analysis are presented, while
are
presented

the main
operative concepts that
are

going to be used. The results of the paper are included in the
three following
sections. The first one to compare transiency and persistence profiles of
working poverty situations in France (continental regime
), United Kingdom (liberal
regime) and Spain (mediterranean regime). The following section analyzes the possible
trivial character of the transitions into and from working poverty, in order to see
whether these poverty transitions occur from income levels
more or less near the
poverty line. Finally, they will be presented the different events associated with
transitions to each side of the poverty line, to determine the basic mechanisms

that
cause the entries and exi
ts of working poverty in the different na
tional contexts.

2.

National patterns of poverty mobility and determinant factors

The study of poverty has traditionally relied on the analysis of cross
-
sectional
data, aiming at quantifying and characterizing the composition of poverty in a particular
moment

in time (Cantó, 2010). However, the measurement of poverty involves
measuring the standards of living of households,
t
his is
, the balance between their needs
and resources. Looking at those resources (different income sources of households) and
those need
s (different composition and characte
ristics of households), it could be said

that those factors are not stable, but changing
along the

time. From this
point of view
,
poverty is the result of a longitudinal process of accumulation of these resources and
ne
eds (Layte and Whelan, 2002).

Data from cross
-
sectional perspective show a clear stability of poverty rates, but
this does not mean that, below the same cross
-
sectional rate during several years, are the
same people (Headey et al.,
1997
). Thus, in Europe,
8,4% of those who have been
working mostly during 2010 are in poverty, according to data provided by Eurostat.
Looking at a broader period of years Spain, France, United Kingdom and Europe have
rates fairly stable during the last decade,
standing

the at
-
ri
sk of poverty risk
percentage

around 20%, 13%, 19% and 15% respectively, and the working poverty rate
around
12%, 6%, 7% and 8% respectively.

4


Therefore, poverty and working poverty, in recent y
ears, either have experienced
an

upward tendency or,
at least
,
have

not decreased, maintaining a cl
ear stability, at the
same time that a expansive cycle of economy
has been

occurring (Gutiérrez et al.,
2011). This poverty rates stability is what has
led
many researchers to
raise

whether
poverty is a phenomenon as stable as shown by static analysis. The new data sources,
some of which allows to follow the same people during a period of time, have permitted
the implementation of longitudinal perspectives which,
subsequently
, allow
to analyze
the dynamic component of poverty and
notice

if it is a
phenomenon as static as it seems
through the observation of cross
-
sectional data.

The main researches that have applied the dynamic perspective to study poverty
have focused on the study of
mobility and persistence or chronicity of poverty
(Gutierrez et al., 2011; Cantó, 2010). On the one hand, mobility of poverty has been
analyzed, looking at entry and exit rates of low income situations and the characteristics
of these movements; another pa
rt of t
he literature has focused mainly

on what might be
called 'the chronic or persistence of poverty', focusing on the duration of poverty spells
and in their recurrent or transitory character (namely, repeated poverty spells). Also the
factors that affe
ct both the mobility and the chronicity have been analyzed.

These studies show there is a high mobility among people who spend some time
in poverty and
also that most

of poverty spells are generally short of duration. However,
many of those who leave pover
ty return relatively quickly to it,
meanwhile

a substantial
mino
rity experience poverty persists

(Fourage and Layte, 2005). This produces a
paradox
where

poverty is presented, at the same time, as a fluid phenomenon, with high
mobility, a situation exper
ienced by many people, and also as a persistent situation that
produces trapping for some people that, even though they are not the majority, suffer a
more severe situation (
OECD
, 2001).

Data provided by the OECD (2008) about poverty mobility
reveal

in

their last
publication that the media of poverty entries rate for the OECD countries is 5%, while
poverty exit rates is 40%.
In other words
, almost half of the population changes
its

poverty state from one year to the next
one
.
Moreover, t
he report notes
that mobility is
high, but there are substantial differences betwee
n countries, ranging Spain in an

intermediate position with a poverty entry rate around 6
-
7% and with a exit poverty rate
around 40
-
42% (Cantó et al., 2009).

5


From poverty perspective, mobil
ity of poverty can lead to observe that the
greater the mo
bility or volatility of income

is over a certain period of time and the lower
the poverty spells, the greater the prevalence of poverty will be: the larger the period of
observation, the
bigger the
amount of

people will be in poverty. If there is little inco
me
mobility is more likely these

people
will be

kept in poverty and the p
overty prevalence
over time will

be the same as cross
-
sectional poverty rates (and, therefore, the dynamic
analysis would l
ose importance). Conversely, if mobility is high and poverty is suffered
in short spells for the majority of the population, then the probability of being poor will
be more equably distributed (Fourage and Layte, 2005; Muffels et al., 2000).

The
use

of
a

c
ross
-
national perspective to the study of poverty dynamics has
highlighted that, as it happens with the national differences in poverty and working
poverty (Fraser et al., 2011; Lohmann, 2006), the institutional context is also a
determinant factor in the
explanation of the national differences in poverty dynamics
(Layte and Whelan, 2002) because the relationship between current standard of life

and
factors that influence
the level of disposable resources in the household vary
systematically among countries
, in line with the welfare regime theory (Esping
-
Andersen, 1991). And this importance relies on, on the one hand,
the fact that

different
welfare regimes affect directly to the amount of resources that households and
individuals receive (Layte and Whelan,
2002) and, on the other hand,
the government
influence
on

the final income distribution through income redistribution mechanisms
(Headey et al., 1997).

Even so, this pattern in terms of welfare regimes theory is more diffused and
difficult to apply with pa
nel data (Gutierrez et al., 2011; Fritzel, 1990). The
socialdemocratic welfare regime, whose social protection systems are universal, with
high benefit incomes and
extended in the population
, is characterized by a lower cross
-
sectional poverty rate and
shorter poverty spell
s, which would result in a lower

frequency of persistence and transiency (Gutierrez et al., 2011). The counterintuitive
result that
might
be derived from the analysis of the persistence in this countries is
that

the persist
ence that is

expected to be is
relatively high as the
higher
, more generous and
universal benefits of these countries may lead in lower level of incentives to improve
the situation and, given the greater income stability that they have, persistence may
appear as a rel
atively more common situation than expected (Fritzel, 1990).

6


Countries with continental welfare states have less redistributive impact than
socialdemocratic ones, although higher than in the Liberal and Mediterranean
traditions
.
They are characterized by
a poorer
universal coverage of social protection systems,
where becomes important the degree of participation in the labor market and, therefore,
the more protected persons will be those who have a broad and stable employment
history, against those who hav
e a more irregular career (temporary, p
art
-
time job
, etc.).
Cross
-
sectional poverty rates are medium level in these countries and it is expected that
persistence and mobility poverty rates also are placed somewhere between the
socialdemocratic countries an
d the mediterranean ones. The results are less precise for
these countries, comparing with the substantial differences founded between the
countries of northern and southern Europe.

Liberal and mediterranean countries are the worst
at

fighting poverty. The
se
countri
es, apart from employment policies tend to be passive rather than active
and
,
subsequently
, have a less protective social protecti
on system with a less coverage
intensity. This implies that in these countries both the cross
-
sectional, transitory
and
persistence poverty rates are higher than those of the other regimes considered. So
poverty is a more frequent situation and, at the same time, with more probab
ilities of
becoming a persistent

situation. In mediterranean welfare regimes the social prot
ection
systems would be less effective in promoting transitions from poverty
at early stages
,
but the higher incentives (given the low level of social benefits) would lead to a
relatively high poverty exit rates. However, the liberal countries, with their
more wage
dispersion, would lead to a lower poverty exit rates (Fritzel, 1990).

Besides the importance of national context in explaining poverty experiences,
individual and household factors are also influent in a complex way (Layte y Whelan,
2002). In gen
eral terms, the literature that has traditionally studied the factors

that
trigger entries and exits of poverty has associated to

the labor changes, such as salary
reduction or occupation change with poverty transitions in United States. However, in
Europe
, this mobility would be more conditioned by the demographic changes, the
household labor participation and the receipt of social transfers (Gutierrez et al., 2011).

Recent research in Europe
outstands

that poverty exits and entries are produced
mainly by
changes in resources (in this case earnings) instead of changes in needs
(Layte and Whelan, 2002; Eurostat, 2001), being the labor incomes the more important
7


in determining positions of people with regard
to

poverty (Jenkins, 2011). Apart from
labor income
s, transfers also play an important role in poverty mobility (Eurostat,
2011). Although it
should

be also highlighted that influence of both income resources
are different
depending on

the country (welfare regime) to which reference is made.

Regarding soci
al transfers
, they are more impor
tant in socialdemocratics
,
but

very little for the southern countries,
standi
ng
the corporatists in an

intermediate
position. Looking at the different impact of these incomes on poverty entry and exit
rates, it would be exp
ected that these incomes would have more importance for exits
than for entries (since it is supposed that social transfers offset decline in other
incomes). This pattern of social transfers influence is very clear for entries, and quite
consistent with wel
fare regime theory, while it is maintained in exit rates, but in a more
diffuse way (Layte y Whelan, 2002).

Employment earnings show an inverse situation to that deduced from the picture
of social transfers. In this case, this income is very important in t
he poverty transitions
in southern European countries, little for socialdemocratic ones and
displays

medium
importance in continental regimes. Again this pattern is much clearer for entries than for
exit rates (Layte and Whelan, 2002). Therefore, and given

the results, it is expected that
the importance of labor incomes in poverty transitions will be higher in the United
Kingdom and Spai
n than in France, and that the first

have more importance of social
transfers comparatively
on the French one
.

There are v
ery different poverty experiences depending on their length
and level
of changes in income

and

living standards. There will be people who have just entry
into poverty and whose living standards are almost identical to last year (because they
were located near the poverty line) and, therefore, poverty does not mean a significant
drop in their living

standards (Layte and Whelan, 2002). On the other hand, there will
be people who fall into poverty suffering a large
descent

in their incomes and, therefore,
in their living conditions. This approach arises to question whether the entry and exit
transition
s are trivial or effective, whether people that transit to either side of poverty
line experience a great decrease in their living standards.


A study focused on OECD countries (OECD, 2008) shows that many of the
poverty exits occur to positions near the p
overty line and, therefore, they should be
8


considered trivial (not effective) exits
given that

they do not suppose, on the one hand, a
substantial increase in the standards of living and, on the other hand, a effective
transition so
that

it does not move p
eople far from the risk of falling back in poverty. In
the case of Spain,
by

obs
erving the poverty entry rate, it may be also concluded that
they take place

near the poverty line; if poverty exits are
watched
, there is a group who
move to poi
nts near the
poverty line and an
other
which

manage to overcome, in some
cases, the
me
dian of incomes
. The majority of transitions that are produced to points
above
this datum

come from the positions of most severe poverty, while those who are
near the poverty breakdo
wn
move

continuously from one to other side of t
he line.
Observing the precedent

position, the results show that 40% of households which are
situated in poverty in
any

given moment and 45% of those who exit from it, do so
coming from positions very
close

to

the poverty threshold (Cantó et al, 2003; Bárcela
and Cowell, 2006).

3.

Data and concepts

The European Union Survey on Income and Living Cond
itions (EU
-
SILC) is a
tool for
the study of income

distribution and social exclusion.
Indeed
,
it i
s a survey tha
t,
since 2004, all European countries have implemented with the same structure and the
main goal of collecting

information about households and individuals in the European
Union, obtaining results which
can

be easily compared and
represent a real

help
for

a
better understanding of the current economic situation and living conditions of people.

The EU
-
SILC is a semi
-
panel sample, namely, a quarter of the sample is
renewed annually. This is what is called a rotating panel of four rotations. So a
household, or

an individual, could be in the sample only four years and, therefore, the
data presented in
this paper, although
delimitated for the 2004
-
2009 period, refer to
three subperiods of four years each: 2004
-
2007, 2005
-
2008 and 2006
-
2009
1
.

Turning now
to the
operational concepts used

in the paper, the concept of
working poor holds two different realities, namely, have two dimensions, individual and
household level. A working poor will be a person who works and lives in a poor



1
1

When aggregated results are presented 2004
-
2009, it corresponds to de media of the three subperiods
(two in the case of United Kingdom, wich period is 2005
-
2009).

9


household. There are too many ways

of measuring both dimensions, however, for
methodological reasons, in this paper it will be used the definition offered by Eurostat
and which is capable to be used in all European Union countries: a worker is a person
who, during the reference year, have
worked at least seven months, during at least 15
hours a week. And a poor household is defined on the basis of the composition and
incomes of the ho
usehold, namely, it is taken int
o acc
ount the household medi
an
disposable income with the OECD modified scal
e. In this sense, a poor household
would be those situated below the 60% of
the median equivalent income

threshold.

The concept of poverty persistence presented is included in the Laeken
Indicators, which consider persistent poor all of those household wh
ich are in poverty in
a given year, having been in the same situation at least two of the three previous years.
Regarding the prevalence of poverty, since a dynamic point of view, it refers to the
number of people who have been in poverty at least one year

(of the four possible) in
working poverty. The entry rates are expressed on the whole population basis and the
exit rates are based on the number of people that are poor in the first year of the
transition (OECD, 2008).

4.

Per
sistence or mobility of in
-
work
poverty?

This section discusses the persistence, mobility and prevalence of working
poverty over a four year period. The main purpose is to
check
if working poverty
follows the same pattern outlined by the studies
of poverty dynamics; observe whether

the i
n
-
work poverty is articulated as a mobile or persistent phenomenon or, by contrast,
holds the paradox that shows poverty as a situation of high mobility and persistence at
the same time

(OECD, 2001). In addition to it
, a comparison between the countries
ob
ject of our study is made in order to see if the welfare state
pattern remains

or not.

Figure 1 presents the working poverty persistence rate for the available years
(2007, 2008 and 2009) according to the Laeken indicator proposed in the Lisbon
Strategy. I
t confirms the importance of welfare regimes theory in line with the results
obtained by Jenkins and Van Kerm (2011) where the persistence rates vary in function
of the welfare regime to which the
specific

country
belongs to. Thus
, Spain, the
mediterranean

welfare variant,
demonstrates

the worst in
-
work poverty persistence rate,
10


being the working poverty in France and United Kingdom very little persistent (only
around 1% of working poor are persistent).

On the evolution over time, stands out the increase in

the Spanish in
-
work
poverty persistence rate from 2008 to 2009, varying from 4,4% to 6,2% and, therefore,
the Spanish working poor tend to suffer higher persistence risk in the last years. The
rates of France and United Kingdom are stable and,
considering

their low level, the
experimented changes can not be interpreted as significant.

Figure 1.
In
-
work poverty persistence (Laeken Indicator)


Source: EU
-
SILC longitudinal microdata, own calculations.

Table 1 shows the mobility of in
-
work poverty through the analysis of the in
-
work poverty entry and exit rates over the studied period. It confirms the high mobility
as a characteristic of the working poverty, as in all countries more than a half
populatio
n

change their situation from one year to the next. However, there are differences between
countries, so the working poverty in France and United Kingdom is more mobile
(especially because of their high in
-
work poverty exit rates). This may be related
to

t
he
low persistence of working poverty in these countries,
and thus

their high exit rates and
their relatively lower entry rates makes poor population move more from one side to the
other of the poverty line and have less probabilities of persistence. The
other end

is
Spain with
its

lower exit and greater entry rates which confirm the higher probability of
persistence in the Spanish working poor.


0
1
2
3
4
5
6
7
2007
2008
2009
España
Francia
Reino Unido
11


Table 1. In
-
work poverty entry and exit rates



In
-
work poverty entries



2004
-
05

2005
-
06

2006
-
07

2007
-
08

2008
-
09

Mean of the period

Spain

5,2

5,8

6,3

6,4

6,5

6,0

France

3,2

3,2

3,3

4,6

:

3,6

United Kingdom

:

4,1

4,5

4,2

4,5

4,3



In
-
work poverty exits



2004
-
05

2005
-
06

2006
-
07

2007
-
08

2008
-
09

Mean of the period

Spain

56,0

54,9

49,6

49,1

48,9

51,7

France

73,0

64,0

62,9

55,9

:

64,0

United Kingdom

:

63,2

60,6

67,2

63,9

63,7

Source: EU
-
SILC longitudinal microdata, own calculations.

One of the advantages of dynamic perspective in the analysis of poverty i
s,
confirming
a high mobility,
the fact that it

allows seeing
how

there actually are more
people experiencing poverty than shown

by static rates. Figure 2 shows

this tendency in
working poverty. In Spain 22,4% of workers is at least one year in poverty over the four
observed, being France and United Ki
ngdom countries with lower prevalence, 11,7%
and 12,9% respectively. In the case of Spain and France this finding
means twice the
datum.
That static rates reflect. The higher mobility of working poverty in France and
United Kingdom, in this case, would not

be leading to a higher prevalence comparing to
Spain, where the high prevalence of in
-
work poverty over time is due both to a certain
degree of mobility and a relatively high in
-
work poverty persistence rate.

Figure 2. In
-
work poverty persistence rate


S
ource: EU
-
SILC longitudinal microdata, own calculations.

0
5
10
15
20
25
España
Francia
Reino Unido
12


Therefore, it can be said that the working poverty is also configured as a mobile
and persistent phenomenon at the same time, and it highlights that work is not enough
to avoid the worst poverty situations, the uncertainty generated by the high mobility an
d
the persistence situations that produce a clear decrease in the accumulated resources
and, therefore, in the future opportunities. The high mobility shows that there are more
people living in poverty than what
might

be expected observing the
data
. Final
ly, the
national differences have shown Spain, representative of the mediterranean welfare
regime, as the worst country fighting persistence and mobility of wo
rking poverty, as
could be predi
cted. By contrast, United Kingdom and France present A more simil
ar
situation than expected, given that,
on the whole
, they fight poverty in different ways.

5.

Proximity of in
-
work poverty mobility

After hav
ing
seen

the importance of mobility in working poverty, this section
focuses in the effectiveness of working poverty exits and the severity of working
poverty entries observing from and to what point of the distribution move workers
experiencing transitions to eit
her side of poverty line. Thus, Tables 2 and 3
introduce

the descriptive results of the level of origin and destination of the working poverty
entries and exits, the proportion of entries and exits in working poverty by origin
position and the entry and ex
it rates also by origin position. This analysis
points to

the
2004
-
2009
period

(for United Kingdom from 2005). Workers are distributed in
percentiles respect to the median equivalized income (on which poverty line is
calculated) based on their income in th
e first year of transition (
t
-
1) and the last (
t
).














13


Table 2.
Income level at origin and destination of in
-
work poverty entries , 2004
-
2009





SPAIN



% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Entry rate

[≥0, ≤30]

[>30, ≤40]

[>40, ≤50]

[>50, ≤60]

[>60, ≤70]

25,1%

14,3%

12,0%

29,8%

43,9%

28,0%

[>70, ≤80]

19,4%

21,5%

12,2%

18,6%

47,7%

17,3%

[>80, ≤90]

13,1%

21,1%

15,4%

22,0%

41,6%

10,9%

[>90, ≤100]

8,8%

16,2%

15,5%

34,5%

33,7%

7,2%

[>100]

33,6%

39,6%

7,0%

19,1%

34,4%

2,9%

FRANCE



% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Entry rate

[≥0, ≤30]

[>30, ≤40]

[>40, ≤50]

[>50, ≤60]

[>60, ≤70]

34,2%

4,0%

0,9%

23,4%

71,6%

24,9%

[>70, ≤80]

19,3%

6,1%

8,4%

14,2%

71,4%

10,1%

[>80, ≤90]

10,7%

2,3%

15,1%

13,8%

68,8%

4,6%

[>90, ≤100]

9,3%

14,7%

6,8%

22,3%

56,3%

3,4%

[>100]

26,4%

15,3%

14,1%

18,9%

51,7%

1,4%

UNITED KINGDOM



% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Entry rate

[≥0, ≤30]

[>30, ≤40]

[>40, ≤50]

[>50,
≤60]

[>60, ≤70]

18,0%

15,6%

11,8%

21,4%

51,2%

16,4%

[>70, ≤80]

16,4%

9,0%

12,2%

28,1%

50,6%

10,9%

[>80, ≤90]

11,5%

24,5%

6,1%

25,4%

44,1%

6,9%

[>90, ≤100]

12,5%

28,6%

14,7%

30,1%

26,6%

7,7%

[>100]

41,7%

25,6%

15,6%

22,1%

36,7%

2,4%

Source: EU
-
SILC
longitudinal microdata, own calculations.

Looking at entries in poverty according to their position of origin, in the three
countries analyzed, the majority of people that fall into poverty do so from positions
over 70% of median equivalent income and, therefore, they would not be considered as
th
e more likely population to suffer transitions into poverty. In Spain, only 25% of
people fall into poverty from just above the poverty line, being 34% in France and
18% in United Kingdom. There also are a proportion of people that, being above the
media
n of incomeS and, therefore, being a less vulnerable group, transit into poverty,
being this percentage higher in Spain (33,6%) than in France (26,4%), and specially
striking in the United Kingdom (41,7%). Therefore, the falls into poverty are not trivial
and suppose
an

important decrease in the household incomes and in their living
standards, being this tendency
sharper

in United Kingdom and Spain than in France.

14


A common feature, consistent in the three
analyzed

countries, is that the entry
rate by origin position seems to be determined by the position of the househol
d in the
distribution of incomes. This exit rate decreases

from 28% in Spain, from 24,9% in
France and from 16,4% in United Kin
gdom whose

workers a
re
those that stand

just
above the poverty line, to 2,9%, 1,4% and 2,4% who, respectively, entry into poverty
from positions above the median equivalized income.

Looking at the transitions of entry into poverty and the positions reached, the
majority of th
em (more than 50%) get to some position between 40% and 60% of
median equivalent income, being this proportion higher the lower the origin income
level of the transition is, which may be due to many of the movements of people
standing in the higher part of

the income

distribution do not appear reflected as they do
not involve a entry into poverty, however the closer to the poverty line one would be,
the more probability that income change involve entry into poverty will be (Cantó et al.,
2003).

A distingui
shing feature, especially between France and Spain and United
Kingdom, is that between 25,6% and 39,6% of those who come from positions above
the median in Spain and United Kingdom, respectively, are situated, after the transition,
in the lower end of the
distribution, highlighting the increased volatility of incomes in
these countries and their possible seasonal component. France, however, produces more
trivial entries into poverty, so more than a half of those who fall in poverty (regardless
of their orig
in position) do so to positions near the poverty breakdown.
















15


Table 3. Income level at origin and destination of in
-
work poverty exits, 2004
-
2009







SPAIN

% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Exit
rate

[>
60, ≤70]

[>70, ≤80]

[>80, ≤90]

[>90,
≤100]

[>100]

[≥0, ≤30]

22,9%

17,5%

14,9%

11,5%

10,8%

45,3%

48,4%

[>30, ≤40]

10,4%

21,5%

22,3%

10,4%

6,3%

39,5%

38,5%

[>40, ≤50]

24,4%

20,5%

19,7%

15,5%

10,3%

34,1%

46,8%

[>50, ≤60]

42,3%

27,5%

20,5%

15,6%

9,6%

26,8%

58,3%

FRANCE

% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Exit
rate

[>60, ≤70]

[>70, ≤80]

[>80, ≤90]

[>90,
≤100]

[>100]

[≥0, ≤30]

5,3%

11,9%

2,5%

6,2%

10,9%

68,6%

42,8%

[>30, ≤40]

10,6%

17,7%

26,2%

13,5%

8,3%

34,1%

53,4%

[>40, ≤50]

22,2%

23,8%

25,1%

16,6%

15,0%

19,5%

55,9%

[>50, ≤60]

62,0%

33,5%

21,7%

15,1%

6,9%

22,8%

67,9%

UNITED KINGDOM

% of the
median in


t
-
1

Proportion by
procedence

% of median at
t

Exit
rate

[>60, ≤70]

[>70, ≤80]

[>80, ≤90]

[>90,
≤100]

[>100]

[≥0, ≤30]

16,4%

11,3

18,8

5,0

14,8

50,0

62,7%

[>30, ≤40]

12,4%

16,2

14,8

12,7

12,6

43,8

61,9%

[>40, ≤50]

24,5%

24,6

23,5

9,3

8,4

34,1

60,7%

[>50, ≤60]

46,7%

25,8

17,5

14,2

8,1

34,4

67,8%

Source: EU
-
SILC longitudinal microdata, own calculations.

Regarding in
-
work poverty exits, they show that they do not need
substantial
increases of incomes
, so the majority of the exits start from positions immediately
below the poverty line, between the 50% and 60% of median equivalized income. This
is more evid
ent in France, where 62% of entries do so from that position and, although
in a softer way
, there also are a significant proportion in United Kingdom, 46,7%, and
Spain, 42,3%. The in
-
work poverty exits which are produced from positions below 30%
of the med
ian equivalent income are quite high in Spain and United Kingdom (22,9%
and 16,4% respectively), taking these groups poverty exit rates quite similar at the rest
of the groups (48,4% and 62,7% respectively). This suggests that these groups either
have seas
onal incomes or registered low incomes only occasionally (Cantó et al, 2003).

Exit rates do not show a clear dependence of the origin in the income
distribution, especially in United Kingdom, where the exit rates do not vary a lot in
16


function of the initia
l position (from 61% to 68%), and in Spain, where they vary from
38,5% and 58,3%, but without a clear pattern. Therefore, the exits in both countries
would be more conditioned by demographic or labor events that some member of the
household experiment (Can
tó et al., 2003). In France, by contrast, the exit rate decrease
when the initial position is lower in the distribution, from 67,9% to 42,8% gradually.

An analysis of exits in function of the position that is reached at the end of
transition does not s
how
patterns as clearly

as
for

the entries. However, there is a group
which, starting from the lowest positions in all countries, manages to overcome the
median equivalent income (45,3% in Spain, 68,6% in France and 50% in United
Kingdom). At the same time, an
d in general, from any origin position, more than 20%
(and ranging to 68,6% mentioned in France) also transit to positions above the median
of income. This seems to confirm the seasonal character of some income
s or possible
errors in income

measurement (Ca
ntó et al., 2003).

It can be concluded that in
-
work poverty mobility implies higher changes in
living standards of spanish and british workers, what can be explained by the greater
income volatility of their income distributions. The mobility in these coun
tries,
therefore, is more important so this rapid and extensive changes in the living standards
may lead to the aforementioned household instability, something less present in France.

6.

Events associated with in
-
work poverty mobility

In this last section the

descriptive results of events associated with in
-
work
poverty entries and exits are presented. Tables 4 and 5 show the results for in
-
work
poverty entry and exit rates respectively. It has been taken into account both
demographic events (increases and dec
reases in the number of dependent and adults in
the household), labor events (increase and decrease of working people in the household)
and events related to incomes (increases and decreases of salaries and social transfers
received). The data presented ar
e for transitions between 2004 and 2009 (2005 for
United Kingdom).

17


Table 4.
In
-
work poverty entries by demographic, labor and income events
(2004
-
2009)

2



Spain

France

United Kingdom

Increase the number of dependent
in the household

1,3

0,4

0,3

Decrease

the number of
dependent in the household

0,1

0,0

0,0

Increase the number of adults in
the household

3,2

2,6

0,6

Decrease the number of adults in
the household

1,8

0,9

0,2

Total of demographic events

6,4

3,8

1,1

Increase the number of occupied
in the
household

2,6

0,2

0,5

Decrease the number of occupied
in the household

9,1

2,2

5,9

Total of labor events

11,7

2,4

6,4

Increase in the social transfer
received

0,6

13,2

6,7

Decrease in the social transfer
received

6,3

16,4

13,0

Increase of salary

6,8

11,2

7,4

Decrease of salary

35,4

34,5

51,7

Total of income events

49,1

75,3

78,7

Unidentified events

32,9

18,4

13,8

Source: EU
-
SILC longitudinal microdata, own calculations.

Comparing the importance of demographic versus labor events, it
is clear

that
last of them

are more important in Spain and United Kingdom than the demographic
events, going the opposite in France. Spain and United Kingdom, in this respect, show
results closer to what
could

be expected to happen in United States instead of Europe,
wh
ere demographic events are supposed to be more influent. Anyway, the demographic
events, are also very important in Spain, highlighting the high cost of having dependent
children in these poor households.

The majority of the entry transitions are produced
at the same time of an income
event, especially a labor income event. Taking into account the different welfare



2

Para todas las tablas de cambios, en el Reino Unido el periodo de análisis es del 2005
-
08,

y para Francia
2004
-
2007.


18


regimes
described along

this description, the importance of this theory is confirmed
observing the in
-
work poverty entries. Although labor incom
es are the more important
events, the importance of a decrease of social transfer is also highlighted: 16,4% of
entries are produced at the same time of a decrease of this income in France, following
by United Kingdom, 13%, and Spain, 6,3%, so the differen
t redistributive impact of the
welfare regimes makes that social transfers are less important in Spain than in United
Kingdom and France.

The impact of earnings do not follow the expected pattern (with earnings being
more important in mediterranean welfare

regime, followed by the liberal and continental
ones) so results reflect the same importance of this income in France and Spain, with a
clear distance from United Kingdom where the in
-
work poverty entries are produced at
the same tame as a decrease in wag
es in 51,7% (being around 34
-
35% in Spain and
France). It is remarkable, also, the high proportion of entries produced at the same time
as an unidentified event (32,9% in Spain, 18,4% in France and 13,8% in United
Kingdom).

In
-
work poverty exits show a
picture slightly different of what it has been seen
in the entries analysis and what we would expect regarding the results of other poverty
dynamics research, although consistent with other results of in
-
work poverty mobility
(Gutierrez et al., 2011). Agai
n it is Spain where the largest importance of labor events
appears, comparing with demographic events: the same happens in United Kingdom,
although less sharply. The high importance of the increase of earnings in Spain (12,4%
in contrast with 2,1% in Franc
e and 3,7% in United Kingdom) confirms the importance
of labor participation of all the members in the household as a factor to avoid the risk of
poverty.













19


Table 5.
In
-
work poverty exits by demographic, labor and income events
(2004
-
2009)




Spain

France

United
Kingdom

Increase the number of
dependent in the household

1,1

0,3

0,4

Decrease the number of
dependent in the household

0,2

0,0

0,0

Increase the number of adults in
the household

1,6

1,7

1,5

Decrease the number of adults in
the
household

1,5

0,5

0,4

Total of demographic events

4,5

2,5

2,2

Increase the number of occupied
in the household

12,4

2,1

3,7

Decrease the number of occupied
in the household

4,0

1,1

2,9

Total of labor events

16,3

3,2

6,6

Increase in the social transfer

received

1,1

10,7

14,0

Decrease in the social transfer
received

2,7

17,9

13,2

Increase of salary

37,2

44,7

23,9

Decrease of salary

6,1

8,1

18,2

Total of income events

47,1

81,4

69,2

Unidentified events

32,0

12,9

22,0

Source: EU
-
SILC longitudinal
microdata, own calculations.

The income events are again the most produced in the in
-
work poverty exits.
And the same pattern of importance of social transfers is confirmed, being they much
more important in France (around 30% for in
-
work poverty exits in
France and United
Kingdom and 3,8% in Spain). Among the events associated with social transfers
changes in France and United Kingdom, they occur both whit an incr
ease or decrease in
this income

(indicating they have triggered the transition) and with a decrease of social
transfers, highlighting, in this case, that social transfers works as a
substitute

of other
incomes which could be decreased.

Labor income events do not follow the expected patt
er
n

according to the welfare
regime theory. 44,7% of the exits from working poverty in France happens at the same
time as an increase in the salary, being this rate lower in Spain (37,2%) and United
20


Kingdom (23,9%), when the expected situation would be the

contrary. Also in the in
-
work poverty exits it have been found an important amount of movements that do not
correspond with any of events took into account (32% in Spain, 12,9% in France and
22% in United Kingdom).

The analysis of events associated with w
orking poverty transitions, therefore,
shows an image slightly different to what have been concluded by the main research on
poverty dynamics. There
is great importance of income

events and, therefore, of the
importance in changes in resources instead of n
eeds, as expected. Within this, the labor
events are the most important although the pattern is contrary to what can be expected
and derived from the poverty dynamics welfare regime theory: this are less important in
the mediterranean regime, than in the l
iberal and continental ones. The importance of
social transfers reflect that continental welfare regimes are fighting better against
poverty through the social transfers, followed by liberal and mediterranean ones (where
this kind of events have little imp
ortance).

7.

Conclusions


This study presents a first dynamic analysis of working poverty from a cross
-
national perspective from three Europea
n countries, representative of a

welfare regime
variant
each of them
. The first objective was to observe whether the dynamic working
poverty follow the same patterns shown by dynamic analysis of poverty in general.
With a view to

that, we have analized the in
-
work poverty mobility and persistence
during

last years, at the
same time that we
have tried

to determine whether in
-
work
poverty dynamics suppose substantial income changes. And,
finally
, we have analized
the possible factors that are conditioning the movements to either side of the poverty
line.

It was confirmed that

in
-
work poverty is a mobile and persistent phenomenon at
the same time. This supposes that working poor faced the most challenging and severe
faces of poverty: the uncertainity generated by the income mobility and the depletion of
accumulated resources an
d the future chances as a result of this persistence situation.
This analysis has shown the prevalence of working poverty over a 4 year period is
higher than displayed by cross
-
sectional poverty rates. In turn, Spain, so the
21


mediterranean welfare regime, i
s the one with the higher in
-
work poverty persistence
rates. However, this pattern of persistence do not reflect significative differences
between France and United Kingdom, suggesting that there is little difference in the
dynamics of poverty in two very
different institutional environments.

The analysis of mobility and proximity of in
-
work poverty shows that the
movements are both short and long range; in some cases, the in
-
work poverty
transitions are accompanied by substantial chan
ges in incomes
. These

changes are
greater in Spain and United Kingdom than in France, reflecting the more flexible labor
markets and greater income volatility of the income distribution that exists in these
countries and that makes a less stable pattern of poverty.

Finally, ju
st as happens with poverty dynamics in general, when events that
trigger into transitions of poverty are taken into
account, it has been confirmed
the
major importance of income events, compared

with demographic and labor ones.
However, the tendency of t
his influence is not what was expected so these incomes are
more important in France, followed by United Kingdom and Spain. The importance of
social transfers do ratify the more redistributive character of the social protection system
in France and United
Kingdom where some of the transitions occur with a change in
this incomes, when these are just important in the Spanish working poverty.



22


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