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Portugal: A Poverty Profile

In December of last year, Statistics Portugal (INE) released the results on the annual Inquiry on Income and Living Conditions for the previous year, 2015. What is the current profile of poverty in Portugal?  How is the country performing when compared to the past? And comparing to other countries, namely those within the EU? What are the main mechanisms through which we can mitigate it? These are some of the questions that require accurate answers in order to better design public policies aimed at the urgent matter of poverty relief.

In 2015, 19% of the Portuguese population was at risk of poverty – measure defined as those whose income is less than 60% of the median. This at risk of poverty threshold was of 5 268€ per year, or 439€ a month, considerably less than the minimum wage of 530€ (in 2015 – currently, the minimum wage in Portugal is of 557€). Although the rate has decreased when compared to previous years’ results, which reported 19.5% of the population to be at risk of poverty (both for 2014 and 2013), the improvements are little in magnitude and the level is still higher than 2012’s 18.7%. PORDATA data helps understand the caution with which we should regard this improvements, as the values are only back at 2002 levels and are, through time, relatively stable around 20%.

When comparing with other countries in the EU, Portugal is the 11th with the highest At Risk of Poverty or Social Exclusion Rate (AROPE) – around 25%. The indicator includes the population at risk of poverty as mentioned above, but also population “severely materially deprived” and “living in households with very low work intensity”. Out of those 11 that perform the worse, Portugal is one of the 5 which was able to diminish the figures between 2014 and 2015. There is still a very significant difference between Portugal and the 10 countries performing the best, for which AROPE are stable below 20% and all decreasing between the two years.

Looking at the employment status, the unemployed are the most affected, as around 42% of these are at risk poverty, while 11% of the employed face the situation. The numbers are stable when compared to previous year’s.  For those retired, the risk has been increasing over the past two years and is now at 16%. Although the risk of poverty rate has decreased significantly among the youngest in the population (less than 18 years old), it is still considerably high – 22.4%. In contrast, it has increased more than 1 percentage point among the elderly, reaching 18.3%.

The Statistics Portugal report further highlights the high levels of income distribution inequality that the country faces. According to the institution, the S90/S10 ratio, which measures the relationship between the average incomes of the 10% richer to the average income of the 10% poorer is of 10.1 in Portugal, comparing to 7.7 in EU28 and 9.5 in the OECD, according to an OECD report. The Gini coefficient (which measures variations in the distribution of income and takes values between 0 and 1) is of 0.339, having decreased between 2013 and 2015 but still being considerably high and above the OECD average (0.318 in 2014).

The heterogeneous expression of poverty among different subgroups reassures the importance of policies to help the elderly. Pension adjustments and welfare benefits tackling healthcare and transportation are of major importance. Youngsters are still the group facing the higher risk of poverty, and policies to mitigate early school drop-outs and to foster higher educational attainment are crucial to alleviate this problem. According to another publication from Portugal Statistics, education and employment are the main drivers of higher income.

In this context, not all are dark sides. Government policies are being implemented or considered to increase school attendance (such as free school handbooks) and alleviate poverty at schools (such as free breakfast at school for needy children). Being the unemployed the other great group at risk, the results from the OECD Economic Survey of Portugal 2017 showing unemployment reductions also seem to be good indicators.

Overall, poverty still seems to be a very serious issue in Portugal. High rates when compared to EU and OECD levels and the persistence fostered by income inequality are the major red flags. Although some good signs are on sight, it is crucial to understand the depth and persistence of the issue, and to continue developing policies to reduce poverty and increase standards of living in Portugal.

Filipe Bento Caires

 

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Author: studentnovasbe

Master student in Nova Sbe

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