Nova workboard

a blog from young economists at Nova SBE


Statistical Discrimination and Poverty: Is there any (still) missing link?

By definition, statistical discrimination occurs when a decision-maker use observable characteristics of individual to infer about another attributes that are relevant but harder to observe. Therefore, agents’ ideas about a specific group will bias their perception and/or determine the way they will treat an individual member of that group. This paper provides a good overview of the theory and clarifies that the decision-makers aim to maximize their utility or profit and face, in the most part of the cases, imperfect information issues about some relevant characteristics such as individuals’ productivity, qualifications, propensity to engage in criminal activity, etc. The rational response to this is to use group statistics as proxies of those unobserved characteristics. Observable characteristics often invoked are easily recognizable physical traits, which are used in the society to broadly categorize demographic groups by race, ethnicity or gender. Also, sometimes this categorization may be based in endogenously chosen characteristics such as club membership or language.

One of the best examples of statistical discrimination happens in the labour market. Race, gender, or any group affiliation is used in the recruitment process and in the determination of wages because it is assumed that workers’ productivity exogenously depends on the group identities. This study using data on American employees between 1977 and 2010 shows empirical evidence of statistical discrimination on the basis of race and gender. This paper published in 2004 did a field experiment randomly assigning resumes to African-American or White-sounding names and simulating a job-search exercise. Results show that, controlling for everything else, White names received 50 percent more callbacks for interviews. These are vexing and shocking numbers.

Theoretical approaches, like Coate and Loury (1993) show that firms may rely on the race of the worker as a useful tool to assess about worker’s skill. This arises a big issue related with investment incentives: if firms believe that workers from a certain racial group are less likely to have the right skills to the job, and in consequence of that impose more conditions in order to assign these workers to their jobs, it will end up lowering these workers’ investment incentives. In the medium run, discriminated minorities will invest less in education, becoming less skilled and therefore meeting firms’ initial pessimistic belief. This work goes deeper in this approach showing peer effects’ importance. The authors prove that peer group effect increases the cost of investment for the group with high investment and decreases the cost of investment for the other group. This is expected to lead to an equalization in the fractions of people that invest. It is shown that under some conditions, a strong integration culminates with groups acquiring the same level of human capital. Therefore, ultimately, this would result in benefits not only for the employees but also to the market itself – which could later translate into benefits for the society.

The labour market is just an example of where we can find statistical discrimination. Data shows that it is a big source of inequality. And specially in this case, when talking about the labour market, it is easy to conclude that this inequality of circumstances and opportunities will lead to an inequality of income and therefore will tend to favour a hypothetical poverty condition for groups who are victims of statistical discrimination.

An obvious solution to this problem is antidiscrimination legislation. In USA, federal law started prohibiting any kind of durable discrimination. Evidence suggests it had a big impact in reducing these kind of behaviours. However, it is still far away from solving the whole problem.

I would say that the solution has to be deeper and longer lasting and is related to a paradigm shift. It is crucial that a collective effort be made to change the widespread perception that statistical discrimination is innocent and harmless, just resulting from a rational process.

Some writers appear to take the position that statistical discrimination is perfectly acceptable because of what was said, trying to excuse discrimination based on the argument that the agent “only” wants to reach an efficient decision and has no intent to harm others during the process. But it seems to me that a sense of morality also has to play a role in here. There are certain groups of people who have been undermined for decades based on too generalist and some obsolete assumptions. And one should not shield himself in concepts of efficiency to justify it.


How is Housing contributing to Poverty

It surprises me how the World faces so many different opportunities, derived by different contexts, from country to country, from region to region and, even more frightening, within the same city. That’s the case of the city of Lisbon, when we talk about poverty housing.

There is no standard definition of “poverty housing” but it can be seen as the absence of “adequate housing” that is defined by the UN International Covenant of Economic, Social and Cultural Rights as “the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions.” In other words, adequate housing stands for “a place to live in peace and dignity” and thus, poverty housing refers to a deficiency in that condition.

The United Nations addresses basic needs in its definition of poverty,  but it also recognizes that poverty is multidimensional, with poverty housing as a separate category that can affect — and be affected by — other aspects of a family’s life. Actually, there are studies that show and justify the correlation between poor housing conditions and the degradation of an individual’s quality of life and wellbeing.

From our perceived knowledge of the world, we might not be surprised when reading facts like “in Papua New Guinea, close to 70 percent of people living in rural areas do not have access to improved drinking water and 60 percent do not have access to improved sanitation” but we are probably not aware of the dimension, although in a smaller scale, that this type of poverty has on developed countries – that is why I call it hidden poverty. Portugal is not an exception.

A recent study conducted by the Energy Poverty European Commission reveals that 23.8% of Portuguese people cannot heat their houses and 28% of them live under humidity, infiltrations and holes in the windows, which are responsible for the high number of slow and silent deaths during the winter in Portugal. According to a recent article, these deaths contribute to the 28% rate of Excess Winter Mortality in Portugal, contrasting to the 15% rate of the EU, making Portugal the second worst country in the EU, only after Malta, to live in an inadequate house, during winter season. Adding to these frightening numbers, there are hundreds of others who, in spite of not being under a “life or death” situation, live under miserable conditions, which constraint their personal development as human beings and marginalize them from the society.

Thus, poverty housing is a hidden type of poverty that is not only causing deaths, as also undermining the development of individuals, especially children, through health problems, low academic achievements, social exclusion, among others. In fact, according to Habitat for Humanity, a non-profit organization that aims to tackle housing poverty around the world by rehabilitating houses, any inhabitant living in poor housing conditions is at increased risk of negative health outcomes relating to their environment. Children, because their bodies are still developing, are more susceptible to these environmental hazards. Additionally, a longitudinal study that followed toddlers through age five found that just having relatively modest elevated lead-paint levels at home reduced IQ test results in children by 7.4 points and additional research suggests that a decline in one IQ point leads to a loss in lifetime earnings ranging from $18,470 (regardless of sex) to $23,085 for men and $20,606 for women.

As fortunate human beings, we as students of NOVA, had the opportunity to access one of the most basic rights: the education. However, that access was a consequence of a set of conditions verified in our lives, like adequate housing. What would have been if we had never made it to primary school? How would we have done our homework and studied for tests if we had not had access to electricity at home? If things like parental support, perception of the education’s value and strong motivation to work hard towards a dream, were met, we would still probably be here, although with a tougher life experience from the past… But what would have happened if we were only “ordinary humans” that follow whatever life path is at our disposition and was shown to us from our role models, and we were living in poverty? Would we still be here, at this university, preparing a dignified future? Probably not… But fortunately, we are. Let’s use this opportunity to allow opportunities to be built for others.

Margarida Castro Caldas


POVERTY IN ONE OF THE RICHEST COUNTRIES OF THE WORLD.

Switzerland historically used to be a poor country – especially in the alpine region. The strength of the reputation of the textile industry in St. Gallen, the word of technological development in Great Britain, the continental blockade due to Napoleon’s wars and readily available hydraulic energy possibilities nourished the early industrialisation of Switzerland and its rise as a highly technologized export country. Today Switzerland ranks as one of the richest countries in this world with a GDP per capita (PPP) only exceeded by Luxembourg, Ireland, Norway and San Marino in Europe (IMF Data 2016). Nonetheless, poverty is not to be underestimated in the heart of the European continent.

To put it bluntly, the meaning of poverty in Switzerland might differ from how poverty is experienced in many other countries. Elaborating what being poor in Switzerland means is the purpose of this post.

 

Applying the definition of absolute poverty used by the UN – i.e. living with US$ 2 or less a day – the phenomenon most probably is not very prevalent. Dealing with poverty in Switzerland one has to be aware that this rarely means fighting for bare survival – the measurement applied and of concern here is the relative poverty in comparison to the total population. Poverty in Switzerland contains two categories: Absolute and At-Risk of poverty. Given the subsidiarity principle incorporated in the Swiss system, the practical implementation and definition of poverty and corresponding social welfare varies among the 26 Cantons and their municipalities. Relative poverty or the category At Risk of poverty follows the definition of the European Union at 60% level of the available median income, which in 2015 was at approximately 30’000 CHF in a one-person household (exchange rate: €1 = 1.08 CHF). In Switzerland, 14.6% of the population are considered to belong to this category with large differences in demographic characteristics. Example given, People living alone, no kids, and younger than 65 years old are at 2.5 times higher risk than couples in the same age group without kids. For couples younger than 65 years and with kids the risk of falling into this category increase with the number of kids in the household (3.7 times less than with three kids). A special case of the people at the risk of poverty are found in the elderly: 21.8% or 27.2% if they are alone respectively. In comparison with the rest of Europe the monetary value expressed in PPP is ranked third after Norway and Luxembourg and in percentage terms is slightly below the European average.

The terms of reference published by the Swiss conference for social welfare (SKOS) acknowledges the absolute poverty level at a level, where people in a household do not own the funds required to consume and buy the necessary goods and services for a socially integrated existence. According to the SKOS 6.6% of the Swiss population (530’000 in 2014) are affected by absolute poverty with single parents, alone standing people, persons without further education than mandatory and unemployed people with especially increased risk. Similar to the numbers of at risk of poverty this category is also dominated by individuals older than 65 years and large differences whether they live alone or not. Furthermore, the highest amount of the people in this category didn’t pursue more than just the mandatory education. Furthermore, 3.3% of the Swiss labour force are part of the absolute poverty category. This is considered a special case as working in general is seen as mean to decrease poverty. Most of the individuals affected in this group work part time or in intervals.

As example for victims of Swiss poverty one may look at the children affected: 73’000 children in Switzerland are concerned, 30% living in households with no salaries and 70% in working-poor families. Consequences of this poverty are e.g. lack of money, no adequate possibilities to do their homework, noisy and humid apartments in neighbourhoods troubled by vandalism and violence. These kids are not capable of pursuing a hobby requiring monetary contributions (e.g. football clubs) or going on holidays. This is regarded as non-conforming with the requirements of what is considered a socially integrated existence.

 

Although poverty in Switzerland compared to the largest number of other countries may be perceived as a marginal problem – both nationally and internationally – it would be a mistake to trivialise this subject.

Xaver Schenker


Drivers of Poverty and Disparate Poverty Policies Between Rich and Poor Countries

Tackling poverty, a strong deprivation of well-being, is fundamental from an economic and ethical perspective.

Notwithstanding, to eradicate poverty, governments, and non-governmental institutions have to understand its causes. Only then they can target interventions and investments.

I will focus on the different drivers of poor and rich countries, assessing whether there are fundamentals for having disparate poverty policies, or if poor countries should mimic rich countries that exhibit lower poverty levels.

For persistent poverty, Lewis (1959) suggests that there is a “culture of poverty”, in which the permanently poor have unstable families, unreliable work ethic, low aspirations, and short time horizons. Their children are, therefore, taught that they deserve to be poor, perpetuating the low aspirations, low effort, and inability to escape poverty. Following this reasoning, overall effective poverty-reducing policies should educate and empower people and help them build permanent assets, not only to exit poverty, but also to overcome economic and social fluctuations, and prevent the re-entrance in poverty and permanent poverty status.

Focusing on developing countries, a World Bank book suggests that only a small group perceives poverty as hereditary whilst, for the majority, poverty is just a situation, and not a permanent fate: when inquired on how to move out of poverty, individuals’ effort, self-reliance, and initiative were emphasised.

The main findings on the determinants of chronic poverty were structural and not individual: (1) insecurity in income and assets provoked by health shocks, economic crisis and conflicts; (2) low participation and lack of voice in governmental systems; (3) living in deprived countries (with low GDP per capita, high child mortality and undernourishment) or in remote or politically marginalized locations, poorly connected to infrastructures such as roads and markets, and with poor natural resources and agricultural endowments; (4) social discrimination regarding gender, race, and caste; and (5) poor economic opportunities for the poor (a clear example is the lesser access to education).

A Voxeu article stresses that to counteract poverty, poor countries have to (1) tackle geographic endowments and address the high prevalence of diseases, lack of access to clean water and poor agricultural yields; and (2) develop institutional reforms to transform development aid into sustained economic growth.

When looking at rich countries, none of this is necessary: the levels of access to healthcare, clean water, and resources are reasonable and reach the majority of the population, institutions are strong and access to opportunities is more equally spread (as suggested by inequality indexes).

Using the USA as benchmark for developed countries (being one of the countries with the highest total poverty rates of OECD, but still bellow poor countries rates), a study suggests that, on average, 60% of 20 year-olds in America will experience poverty at some point during adulthood and 50% of adults will experience poverty after being 65 years old. Other research estimates that these spells of poverty are short, and only 12% of poverty lasts 10 years or more (confirming the evidence on persistent poverty aforementioned by Lewis, but remarking the low population share on this type of poverty). However, another research alerts the considerable risks of returning to poverty after exiting.

In our proxy for rich countries, the USA, the drivers of people in poverty are job loss (around 20% of people enter poverty when the household head becomes unemployed), earnings decline, lack of education (particularly high school degree), having children, and becoming disabled. These events arise from recessions, labour market dynamics due to changing technology and diminishing bargaining power, and singular factors out of the individual’s control.

Considering the policies to offset poverty between poor and rich countries, there is a match in human capital and income development, and income and asset development support, common to continually being in poverty, as aforementioned in Lewis analysis.

However, comparing other drivers amongst poor and rich economies, while poor economies have to reduce the number of people already in poverty (develop less corrupt and stronger intuitions and provide access to basic needs such as quality resources, healthcare and education), rich and healthy economies have a stronger focus on preventing poverty entries due to economic shocks based on crisis, technological progress, and other unlucky individual factors (providing extended unemployment benefits or additional benefits for the most vulnerable, for example).

Concluding, these different objectives amidst countries suggest that poor countries should pursue their own agenda, and neutralise the high rates of persistent poverty (preventing a high rate of individuals from being born in poverty status) before concentrating on the prevention of poverty entrance.

Master in Economics – Poverty: Concepts and Challenges

3079 – Patrícia Sofia Pinto e Filipe


Inequality Perceptions in the United States of America (and Beyond)

Information is vital both in economic research and decision-making. It is hard enough to measure inequality, poverty and to obtain solid, comparable, measures of them – this issue hinders the effectiveness of computations and policies. But to further complicate matters, the information obtained is rarely decently distributed across populations, which, in turn, affects people’s economic behaviors and democratic decisions. The way towards equality is paved with accurate information, and this should be a guideline for the future.

Inequality in America and many other countries was shaped and enhanced by politics, where the outcome of democratic elections should reflect the views of the median voter. However, polls consistently show that there are large discrepancies between what most voters want and what the political system delivers. It can be argued that the current system seems to operate on a “one-dollar-one-vote” basis instead of one vote per person.

The importance of such fairness to most individuals has been shown by research, going so far as that most individuals would rather accept an inefficient outcome – even hurting themselves – than an unfair one. Studies that compared individuals’ views about what a good distribution of income might look like in the US confirm that most (from all demographic groups) think there is too much inequality. In most people’s ideal distribution, the top 40 percent had less wealth than is currently held by the top 20 percent, and this brings up many questions about propaganda.

To some extent, all countries and all leaders develop narratives that shape how people perceive their government and country. What is different today is that we have far greater understanding of how to shape perceptions and beliefs thanks to the advances in research in the social sciences. Opposed to the reality that perceptions and preferences can be shaped, mainstream economics incorrectly assumes that individuals have well defined preferences and fully rational expectations and perceptions.

If this were true, there would be little scope for advertising. Many, if not most Americans possess a limited understanding of the nature of the inequality in our society: they believe that there is less inequality than there is, they underestimate its adverse economic effects. They underestimate the ability of government to do anything about it and they overestimate the costs of acting. They even fail to understand what the government is doing – many who value highly government programs like Medicare don’t realize that they are in the public sector. In a recent study, respondents, on average thought that the top 5th of the population had just short of 60% of the wealth, when in truth that group hold approximately 85% of the wealth.

Americans are not alone in these misperceptions of the degree of inequality. Looking across countries, it appears that there is an inverse correlation between trends in inequality and perceptions of inequality and fairness. One suggested explanation is that, when inequality is as large as it is in the US, it becomes less noticeable – perhaps because people with different incomes and wealth don’t even mix. But important as perceptions and beliefs are in shaping individuals’ behavior, they are even more important in shaping collective behavior, including political decisions effecting economies. Evidence doesn’t always resolve these disputes: the advocates of different perspectives see evidence in unusual ways – at times, equality may even be considered detrimental.

In the most recent case of the 2016 US election, it has also been claimed that more equality may be feeding a greater sense of unfairness, indignation, and impotence, all because of the decline in what social scientists call horizontal inequality: systematic disadvantages across gender, racial, ethnic, religious, and sexual orientation lines. There are signs that rising horizontal equality is feeding unhappiness and despair in those left behind by economic transformation, and in those who see their identity and core values unbearably threatened by uncontrollable shifts in mores and norms. Thus, this dimension of equality affects people’s perception of other issues such as income inequality. There is also evidence that people who felt threatened by rising horizontal equality were more likely to vote Republican and, especially, for Trump, but the more educated people are, the more they embrace horizontal equality in the US.

Overall, it becomes clearer and clearer that improvements on perceptions, smoothing of confirmation biases and the elimination of information asymmetries about inequality are urgent. Even if the effects are not direct, both US citizens and the world population would benefit from such efforts.

 

Ana Paisana Belo, 890


Nutrition and poverty in the west

 

Malnutrition is often thought of as something affecting least developed countries. In advanced economies, much of the obese populations, disproportionately of which are poor, do not receive adequate nutrition and suffer from obesity. A paper for the European commission found that over 20% of obesity found in men and 30% of that found in women was due to their Socio economical status.

The main cause of malnutrition in the west is not the lack of calories but their quality. We are facing an over consumption of processed foods filled with so called “empty calories”. Whist the total number of calories needed to live is surpassed the other nutrients needed lack. In Hungry for Change the Fabian Commission on Food and Poverty reports on how vulnerable the poor are to malnutrition and obesity in the UK .  Processed foods are the main source of food for the poor and very unhealthy because they are full of salt sugar and fat. The reason they are favored by the poor is because they are cheap.

Whilst the rent and heating are fixed costs that can not be modified  the food budget is considered a more discretionary spending. In the past the cheapest foods were grains and vegetables whilst fatty and sugary foods were considered luxuries. The low cost of processed foods changed all of this. In the paper “ Obesity and poverty paradox in developed countries” the authors link poverty with obesity and cheap highly processed foods containing no nutritional value.

Why processed foods are they so cheap is worth exploring. One of the reasons is of course that a longer shelf life reduces the costs of logistics. Another reason however is that governments in the developed world subsidize corps which are meant to be transformed into processed foods . As explained in this article by Reuters subsidies have a negative health implications as research has linked consumption of these subsidized processed foods with higher levels of obesity. By making unhealthy food cheap and plentiful our governments are causing damage to the poor who have no other choice but to go for the cheapest option.  

Another barrier to consuming healthy food is simply access. Food deserts have been discussed since the 1990 and are abundant in north America as well as Europe. These are areas in which it is not possible to find healthy nutritious food. The cost to the consumer is not only the price of purchase but also includes time and cost of commute. Research shows that these food deserts are more abundant in minorities and low socio economic regions. Eating healthily is therefore more costly for the poor then for the more well off and can be added to the long list of the “cost of being poor”. 

An attempt to try and curb the problem of obesity and diabetes has been to implement taxes on unhealthy foods and subsidize healthy ones. In Mexico a sugar tax has implemented on soft drinks and seen causing  a reduction in consumption for the second year in a row . Hungary has taxed not only sugary drinks but a variety of processed foods with positive results. The WHO claims that a tax of 20% on sugary drinks reduces consumption by 20% witch is quite positive. The problem is that these taxes can be considered regressive as they will affect the poorest the most. However from a health point of view such a policy can be considered progressive. Research has only been able to find small effects of the taxation of unhealthy food but the strongest effects were for women and children from low Socio Economic backgrounds.

 

Malnutrition and obesity are affecting disproportionately the poor and our agricultural subsidies as well as the lack of accessibility of healthy food accentuate this situation. The health problems that follow contribute to shortening the poor’s life expectancy as well as increase health costs for society at large. This leads me to believe that reforming our food systems is primordial to tackling poverty. The way we feed ourselves currently is unsustainable and puts the most vulnerable among us in harms way. This is especially concerning as developing countries are replicating our food  models and will soon have the same challenges facing their less advantaged socio economic cohorts.


Free Breakfast to Students in Need in Portugal

The provision of free breakfast was born in the 60s inside the Black Panthers Party, in Oakland. Children that work in small hours before schools were the beneficiaries but its popularity and efficiency within the community members drove the FBI Director, J. Edgar Hoover to try to disrupt the program.

Many years later, studies point that children from low-income households are the only demographic group to whom eating breakfast has a positive impact in health and daily basis activities. For these kids, skipping breakfast is not a question of lack of hungry but rather a lack of possibility. In Anne Obrien’s opinion, hunger could affect the child in terms of concentration, slower recall, hyperactivity, and emotional and behavioural issues.

Portuguese government has already perceived the effects of taking breakfast by proposing the provision of breakfast to the poorest students. According to the report released, this measure would overcome the household difficulties – meanly, households whose salary is inferior than the minimum wage – through a system already existent for lunches.

However, the problem is international. In UK and Ireland, 1 in 7 children miss out breakfast entirely which will directly impact behaviour and concentration in lessons, increasing the concerns for the teachers and decreasing efficiency.

To attack the problem in US, a national program (SBP) was implemented by the Department of Agriculture giving the possibility to any public school or non-profit private school to apply to these federal funds – per-meal reimbursements at a free or low-cost price to the students in participating schools – as we can find in USDA’s website.

Also in a particular case, principal Sean McElhaney brought the meal to the classroom reducing discipline problems and improving academic achievement. The No Kid Campaign showed that if 70% of the students qualified for free or half-price lunches, had also the same conditions for breakfast as for lunches, more 807 000 students would graduate from high school every year. Also, more than 3 million children would score better in math standardized tests.

From India, a paper of the Indian National Institute of Nutrition showed that test scores increased by 2% with a regular breakfast.

Oppositely, providing free breakfast has also some trouble issues. Firstly, according to the Food Research and Action Centre paper, more than a half of the eligible students of the SBP program do not take breakfast.

Loss of attention and instructional time for the kids to take their breakfast are other problems. Moreover, it is possible that in the case of cold or not well-prepared meals, students could gain some weight due to the meals’ health condition which has been alarming parents, according to Ann Schimke’s article.

Resorting the work project of Flinchbaugh and Felts-Grabarski, some other important concerns are mentioned: parental negligence of other meals, increase of taxes, schedules and logistics adjustment and longer school time.

So, besides all the problems, firstly, it is important to attack the stigma created by school breakfast for poor kids. Other students need to understand that breakfast is, for many experts, the most important meal and everybody should be able to eat it. Thus, schools should create a mechanism of free and partly-free meals differentiating in terms of income but not in opportunities. A grab n’ go strategy could be interesting if complemented with a card service – more private when considering the problem of the stigma and more useful because there is no conflict with bus schedule and drop-off times – that registers each student who takes the meal.

According to an article of BBC, in UK when new measures were adopted, the government beyond funding the provision of meals, also funded the improvement of kitchens and dining facilities. Nonetheless, almost half of the councils said they would not have enough money to perform everything and an investigation found than more than 1700 schools had no kitchen while others do not have a large enough dining room.

In Portugal, due to all the obesity problems it would be interesting and necessary to include the students in the preparation of the meals. Of course, these meals should be healthy and reaching the recommended level of nutrients. If possible, authorities should increase the duration of morning classes dedicating some time to the breakfast or, otherwise, create a module of Nutritional Education every morning during the time designed for breakfast. With the help of a SIB – provision of dining facilities and instructional contents – financed by some foundations or social investors, this program could be very profitable to students and schools.

João Dias

 

 

 

 

 


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

 


The role of inheritance in wealth inequality

A central fact of social life is that when someone dies, any assets they have managed to accumulate during their lifetime is left behind. Social rules dictate that the property of the deceased rightfully belongs to the family members, which creates an enormous bias of economic distribution towards those born into wealthy families. Strictly based on fortuitous genetics, offspring of well-off families inherit money and assets, as well as traits that influence their ability to further accumulate wealth (like orientation towards the future, work ethic, school attainment, etc.). Recent evidence on the intergenerational correlation of incomes suggests that parental income and wealth are strong predictors of the likely economic status of the next generation: a son born in the top decile has a 22,9% chance of attaining the top decile, whereas a son of the poorest decile’s chance of attaining the top decile is only 1,3%. There is more evidence that validates the concept of inheritance privilege, like the fact that those who receive an inheritance are more likely to own a home than those who do not (regardless of the size of the inheritance) (Flippem, 2001).

Although inheritances per se are not a primary cause of inequality, they perpetuate a gap in opportunities that is reflected in today’s unequal distribution of wealth – the richest 1% have more wealth that the rest of the world combined, according to Oxfam. The prevalent meritocratic rhetoric idolises the “self-made” man (particularly in the USA, where the people actually elected one for office). Although these magnates are perceived by many as the epitome of meritocracy, a recent study shows that that often isn’t the case. The study estimated that more than 20% of the moguls in the Forbes 400 list had inherited sufficient wealth to make the list without accounting for their current businesses, and almost all had inherited businesses or large amounts of money and assets, with only 30% coming from a lower or middle-class background. This unequal distribution of opportunities allows the heirs of unearned streams of income to collect returns and further accumulate wealth, widening the inheritance disparity.

Thomas Piketty has thoroughly studied the dynamics of wealth and income inequality in the last couple of centuries, often illustrating his ideas with examples from XIX century literature. Balzac’s and Austen’s novels had many things in common – besides being (arguably) tedious, they portrayed inheritance as a central aspect to class stratification in nineteenth century society, when the best route to wealth was by inheritance. That idea had vanished by the 50’s, when meritocracy appeared to have triumphed. However, Mr. Piketty predicts that inheritances will again gain relevance, due to the mitigation of rapid population and economic growth. He estimates the annual bequest flow in France to reach up to 25% of national income by 2050, in comparison with 15% in 2010. Research in the UK confirms that inherited wealth will likely play a more important role in determining the lifetime economic resources of younger generations, due to a higher level of wealth of the elderly generations paired with the increased difficulty younger generations face in accumulating wealth of their own, which creates implications on social mobility and wealth inequality.

Inheriting large sums of wealth and then using them to generate even more unearned wealth is the exact opposite of meritocracy, and it tends to give lasting, disproportionate importance to inequalities created in the past (Piketty, 2013). In democracies, the government is responsible for the redistribution of resources, and inheritance and merit are incompatible ways to do that. Evening out wealth inequality requires breaking up wealth concentrations, which many believe can be solved with higher taxation. Oxfam estimates that $7,6 trillion have been lost in global tax revenues due to tax havens. Unpaid taxes translate in government cuts and reliance on indirect taxation, disproportionally affecting the poorest.

There isn’t a completely reliable evaluation of the impact of inheritance on economic distribution yet, but what is vastly agreed upon is that the opportunity to build wealth in contemporary society is not equally shared by all. With wealth inequality and the importance of inheritance on the rise, a more egalitarian economic system –  where the opportunity to attain economic security is the parameter by which societies are measured, rather than by the great wealth of the top 1% – does not seem to be on the horizon.

Marta Fiolhais


Poverty in Africa: GMO’s and the Gates foundation

For many decades, the African continent has been at the center of analysis when it comes to poverty. The Worldbank established in its 2016 report on “Poverty in Africa” that the share of people living under $1.90 a day (2011 PPP), which is the poverty line calculated by the Worldbank, decreased from 57% in 1990 to 43% in 2012. This figure might seem encouraging, however, the number of poor people has on the contrary increased by more than 100 million over the same period (https://openknowledge.worldbank.org/handle/10986/22575) . Furthermore, 23 African countries are unlikely to meet the millennium development goals by 2015 which aims at eradicating extreme poverty (http://www.economist.com/node/10177981). Those figures are not as optimistic as one would want and this is why international concern has increased.

The $1.90 a day poverty line is here interesting to highlight; indeed people living under this line will not have enough resources to live decently and eat properly. This problem has thus been at the center of attention for many years by the United Nations and private/public Associations. Since the international community has failed to drastically improve the African conditions and avoid malnutrition and famine on the continent, many private and non-profitable organizations have tried to help Africans for basic needs. This is the case of the Bill & Melinda Gates foundation which targets poverty in Africa by trying to improve the agriculture conditions on the continent. This small blog-post analyzes the Gates foundation and assesses its effectiveness on the African Continent.

The Gates foundation started in 2006 and has since tried to improve conditions of farming on the African continent by helping small farmers who produce Africa’s food by helping them improve the soil quality, the water supply, and the quality of seeds (http://www.gatesfoundation.org/How-We-Work/Resources/Grantee-Profiles/Grantee-Profile-Alliance-for-a-Green-Revolution-in-Africa-AGRA). This organization is called the Alliance for a Green Revolution in Africa (AGRA) and was launched in joint relations with UN secretary-general Koffi Annan in 2006 in order to reduce famines in Africa. However many problems have been raised against this project in its effectivity to help local farmers.

First of all, the AGRA project increased the gap between small and big famers on the continent. Indeed, the promotion of industrial agriculture, the use of chemical fertilizers and expensive patented seeds often harms small farmers that must rely on debt to buy those goods. This has been a major problem of the foundation and has sparked criticism by many influential people such as Vandana Shiva who stated that the Gates foundation was “the biggest threat to farmers in the developing world” (http://www.independent.co.uk/news/world/politics/gates-foundation-accused-of-dangerously-skewing-aid-priorities-by-promoting-big-business-a6822036.html).

Furthermore, the high subsidy given to farmers for pesticides and fertilizers has degraded the ecosystem and land in Africa. This has led to environmental, health and economic problems. Indeed, the use of Genetically Modified Organisms (GMO’s) has caused many environmental and economic problems in Africa. GMO’s are seeds that are modified in order to be resistant to insects, viruses, etc. Their modified DNA improves therefore the conditions of the final product and helps the population get more from the agriculture. However, this also comes at the cost of problems for the environment. Indeed, bees have been highly impacted by GMO’s because of the nectarless flowers in the agriculture and are now considered as an endangered specie. Furthermore, the soil has also been damaged due to the low fertility of GMO seeds. GMO’s have also economic negative impacts for the farmers due to the high reliance of farmers on GMO seeds. One of the problem of GMO’s is that since most of the GMO plants do not give seeds once grown up, farmers need to buy new seeds every year. This high reliance on private companies selling GMO’s might threaten the small farmers. Indeed, the strategy of the Gates’ foundation is to increase the role of multinationals in providing health and agriculture in the world over the long-term (http://www.globaljustice.org.uk/sites/default/files/files/resources/gjn_gates_report_june_2016_web_final_version_2.pdf).

The various problems highlighted here show that the nutrition problem in Africa has had a huge debate over the past decades. Even though the philanthropic will of Bill Gates might be to reduce poverty in Africa, it might in the end not result in the best solution for local people. Other solutions need to be taken and this might as well come from African institutions. The example of India provides an interesting argument in favor of democracy as a solution to end famines. Indeed, India as the biggest democratic country in the world has never experienced a famine since its independence from the United Kingdom in 1947 (http://public.econ.duke.edu/~psarcidi/lunchf08/besburgess.pdf).  In a very influential paper, Besley and Burgess suggest that “there might be an important role of democratic institutions and media in ensuring that preferences of citizens are reflected in policies” (http://public.econ.duke.edu/~psarcidi/lunchf08/besburgess.pdf). This might well be the solution that the international community should try to ensure in Africa where many countries are still under dictatorial ruling.

Robin, Lisboa 14th April 2017


An argument for limiting executive remuneration in South Africa to address income inequality

The remuneration of company directors and Chief Executive Officers (CEOs) has been the subject of much interest and research and has become somewhat of a controversial topic in recent economic discourse. Since the Global Financial Crisis in 2008 and the identification of executive remuneration as a contributing factor, there has been increasing pressure to monitor and limit how CEOs are rewarded. In the South African economy, CEOs in the majority of companies earn considerably higher wages than the average worker. Given the high levels of inequality in South Africa, particularly earnings inequality, the discussion regarding limiting excessive levels of executive salary is especially relevant.

In terms of income distribution, South Africa is one of the most unequal societies in the world with a GINI coefficient of 0.63 according to the World Bank. An analysis of the distribution of income shows that the wealthiest 10% of South Africans have a share of market income of 64%, whereas the poorest 50% have a share of just 3%.

Traditional economic theory posits that inequality is not only inevitable but desirable for economic growth due to the ‘saving-enhancing effect’, which means that the rich save more than the poor due to higher levels of disposable income. However, recent theoretical developments challenge this relationship and link higher levels of inequality to reduced growth through various conditions such as political and social instability leading to greater uncertainty and lower investment; insecurity of property rights; and increased transaction costs. A recent study by the IMF cites similar economic consequences of inequality, including a lack of mobility and opportunity for large parts of the population and a suboptimal use of human resources, which can negatively impact growth and macroeconomic stability.

The causes of inequality in South Africa are complex and, to a large extent, historical and structural in nature. One important factor receiving an increasing amount of scrutiny is the contribution of disparities in wages, specifically exorbitant remuneration for executives and CEOs, to overall income inequality within the economy. A comprehensive study of executive remuneration found that 78% of CEOs earned more in a month than the average worker earned in a year, which translates into an annual earnings ratio of thirty-six to one. This significant difference in remuneration between company executives and average workers is even more pronounced when looking at the remuneration for the top-earning CEOs. An article published in the Mail & Guardian revealed that in 2012 the total remuneration package, including salary and dividend pay-out, of the highest paid CEO in South Africa was R1.8 billion, roughly 486 000 times the income of a person receiving a child support grant.

One way in which labour market dynamics can be altered to address the issue of the wage gap, and thus inequality, is through an imposed limitation on the total remuneration package paid to CEOs. The notion of a cap on total salary for executives is certainly not new and has gained popular support internationally, particularly since the Global Financial Crisis of 2008. An example of a policy to cap executive pay is the Minder Initiative, a national referendum approved by voters in Switzerland which called for bans on certain forms of compensation. It is important in the South African context to ensure that any such measures address the issue of income distribution and inequality. One recommendation is limiting bonus payments in the form of share options and dividends to a certain percentage of base salary, as has been proposed in the European Parliament. A comparable amount of shares and/or dividends (which would have been paid to the CEO) can then be distributed amongst the lowest paid employees in the company. Due to the fact that a large portion of CEO remuneration packages are often comprised of shares and dividend payments, this represents a significant amount of income that can be transferred to low-wage employees.

Given the high levels of inequality in the South African economy and the negative consequences for economic growth, redistribution of income is vital. The huge disparity in wage levels between CEOs and average workers is exacerbating income inequality and thus the capping of executive remuneration presents a realistic opportunity for addressing the issues of inequality and redistribution of wealth.

Scott Unwin


Intergenerational Poverty and how to tackle it

According to the Commission on Poverty, intergenerational poverty refers to the poverty induced by the socially and economically background of the parents to the future situation of the child. Evidence suggests that individuals that experience poverty in their childhood are more likely to be poor in their adulthood. As we can see in table 1, few adults, less than 6%, who did not live in poverty during their childhood are poor in early and middle adulthood. However, poverty rates for adults who experience poverty in their childhood depend positively on the length of their exposure to poverty: a person who lived most of his/her childhood (51%-100%) in poverty is more likely to be poorer than a person with low-to-moderate levels (1%-50%) of poverty during childhood. Nevertheless, the difference between the poverty rates of both groups decreases with age, since it accounts for 8.4% to 6.5% at ages 20 and 25 and 6.3% to 5.2% at ages 30 and 35. Moreover, it is remarkable that the exposure to poverty during childhood is more harmful for African-Americans than white adults, since with at least one year of poverty during childhood 15.2% of white adults experience poverty in their 20’s while in the African-American population it increases to 34.6%. However, this might be explained not only by the greater exposure of African-American to poverty during childhood, but also by the discrimination they face when entering the labour market.

grafico poverty

Furthermore, the likelihood of an individual to be poor may be influenced by the private transmission of capital- debt, land, cash and the public transfer of resources between generations-taxing older generations to finance the education system (Moore, 2005), since we can assumed that each working age generation invests in their children and support their parents due to altruism and strategic self-interest (Collard, 2000).

Since intergenerational poverty involves environmental factors such as educational and employment opportunities and subjective variables like the availability of role models and parents’ aspirations, effective interventions need to be evidence-driven and policies should be developmental and proactive. Thus, the strategies adopted have to be focused on achieving intergenerational economic mobility as a key indicator of the level of equality of opportunity in a society.

Moreover, the earlier the intervention, the less will be the impact of deprivation on the development of a child due to the cumulative life cycle development.

Therefore, the Portuguese educational system developed a set of measures designed to ensure equal opportunities in school access and success for all pupils in primary and secondary education, named Ação Social Escolar (ASE). These measures include food programs, school insurance and transportation, accommodation, textbooks offers and specific subsidies so that students from low-income families can benefit the most from school education. The success of this action might represent an increase in social cohesion and mobility.

Furthermore, in the UK, initiatives like Empowering Parents and Empowering Communities aims at increasing parents’ ability and problem solving skills to help reducing behavioural problems in the child (The Behavioural Insights Team, 2016). These programs use peer-to-peer training model in communities to improve parent-child interactions and regulate their emotions. This is a private measure to tackle variables such as parenting quality and development of role models that might be applicable as a global government initiative.

Another impressive action is Chile Crece Contigo, which is a social protection system for early child development aimed at eliminating socioeconomic differences. This program offers direct action to help the poorest in essential pillars like education, maternity care and health services. A research conducted by LIIS, highlighted the importance of this type of programs by emphasizing the intergenerational transfer, namely low educated parents may invest less on child’s education, which impacts negatively on his/her career opportunities and hence, might limit the access to a high income level and resources position which in fact influences his/her health choices.

In fact, poor health conditions are identified as a factor of downward mobility due to the lost labour of the individual, which increases household dependency ratios (Bird, 2007). Moreover, child nutrition and health status are critical drivers in determining the irreversibility of poverty transfers, which underline policies like Chile Crece Contigo as a way to provide balanced development for children from a low-income background.

To sum up, children growing up in low-income families face several challenges such as low education, poor health care, low life expectancy and household conflict. Thus, the government should intervene by adopting development driven policies which should include anti-discrimination measures and the provision of good quality public services. This might be a way to limit the intergenerational transmission of poverty and to improve the functioning of labour markets so that intergenerational economic mobility may be possible.

 Inês Pedroso


Poverty challenges in the future

The development of technology is rapid and irresistible. We have already seen that humans are being replaced by more efficient machines in basic jobs for which no formal education is required, such as in manufacturing, retail or call centers. In the wake of the advancement of artificial intelligence, even those sectors that still employ the majority of people in our society are in danger. Driverless cars are forecasted to make up 75% of traffic by 2040, rendering millions of taxi, bus or truck drivers obsolete.

What does all this have to do with poverty? The simple answer is that by most scientific consensus today there will be less work in the future, in a world that is still facing a growing population. We have to ask ourselves how we are going to distribute our resources in a world without work. Stephan Hawking noted that “everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine owners successfully lobby against wealth redistribution.”

Thus, a new form of social protection will be an imperative answer to support dislocated workers. This new welfare program could come in the form of a basic income guarantee which works as a single monthly payment to give someone the chance to live reasonably well. It would range somewhere between the official poverty line in each country, which is currently around $25,000 for a family of four in the US up to the minimum wage ($15 an hour or about $30,000 a year).

However, the amount that will be distributed is a crucial factor for which nobody seems to have found a clear answer yet. Just giving out $10,000 to each of 300 million American would almost equal the current federal tax revenues of $3.3 trillion. Health care and defence spending cannot be left out of the equation. In addition, it remains unclear who (and if anyone) will be left out of the program. Therefore, it comes as no surprise that the Swiss largely rejected a referendum last year, with 77% voting against the proposed basic income.

Apart from the unresolved financing issue, we have to alter our opinion about how we think about work in our society. Nowadays, work is not only a source of income but just as important as a source of status. Work organizes people’s life and offers opportunity for progress. Professor Lawrence Katz from Harvard University proposed to expand arts and culture for leisure time to find “a new artisanal economy… an economy geared around self-expression, where people would do artistic things with their time.” An economy based on self expression instead of consumption.

In conclusion, the concept of a universal basic income still needs better public policy calibration in order to make it work. Further field experiments in cities will bring evidence how it can be implemented most effectively. We may not be able to alter the speed of technology, but history has shown time and again that we are able to alter the way we are organized as a society.

Alexander Wisse


Taking a look at Poverty evolution in Portugal

naom_5781815cec040.jpg

Portugal, one of the tourists’ favorite destination, known, among other reasons, for its good weather, nice food and caring people, is a country with 10.5 million people, 11% of unemployment (more than 55% of which corresponding to long-term unemployment) and whose household and Government debt surpass 134% and 149%, respectively. In fact, despite being one of the countries where people work more, the labor compensation per hour worked is among the lowest in Europe, being this a crucial factor when analyzing the overall country’s condition.

If one looks at the most recent data, it is possible to confirm that, among the European Union, Portugal appears as a leading country regarding both the poverty rate (corresponding to a 0.18 ratio) and the poverty gap (0.355 ratio), solemnly behind Estonia, Spain, Greece and Latvia. In order to tackle this and other issues on the society spectrum, the Portuguese Government allocates more than 24% of the national GDP to social purposes.

Poverty is considered a precarious situation of scarcity, which most of the times arises due to economic and financial circumstances. Has this concept been impacting the Portuguese society the same way in the past decades?

Taking a look at the national history data, one can see that, during the conservative dictatorship period (Estado Novo), which lasted from 1933 to 1974, although poverty was widespread, affecting almost 40% of the Portuguese population, it was not a great reason for policy concern. However, with the democratic Revolution of 1974, a modern welfare state was introduced, creating a set of important social rights. In 1980, more than 15 million of European households and 49 million individuals lived under the poverty line – the majority were elderly people and children. At the time, all European Union countries presented some degree of poverty and social exclusion, according to the European Commission criterion used (household that had a monthly income correspondent to 50% or less than the average monthly national household income, weighted for the household size). The Southern countries were the worst in terms of poverty rates and, from 1980 to 1985, some showed no poverty reduction – one of these was Portugal, that had almost one third of the national citizens and households living in such circumstances. After Portugal’s entry to the European Union (1986), the country assisted to a boost in anti-poverty measures, aimed at specific groups. In 1991, a shift in the poverty risk occurred, aimed at large families, isolated people and poorly qualified individuals. Despite the efforts, in 1993, Portugal was still remaining above the EU poverty rate average.

Captura de ecrã 2017-04-13, às 10.41.39.png

From 1980 to 2000, a great increase in the level of social spending was verified and, during the nineties, with the introduction of more significant measures and policies on integration (mainly aimed at employment, income redistribution, professional training), the country assisted to a decrease in poverty. This topic was put at the center of the national agenda, having been created the Rendimento Mínimo Garantido, a minimum income scheme, in order to ensure an acceptable living standard. Still, Portugal was considered, in 2002, the country with the highest poverty rate among EU countries (with 23% of poor people), at a time when the Eastern countries were not yet part of the EU.

Nowadays, traditional forms of poverty, associated to isolation and aging, have been stabilizing and decreasing in Portugal, due, among other reasons, to the decline of retired people without any career contributions to Social Security – who used to receive little pensions. A relevant indicator of the social changes that occurred in the last few decades is the decrease in elderly poverty (with more than 65 years old), which dropped by 31%, between 2003 and 2010. However, a new poverty phenomenon has been challenging the society, associated to labor market changes, such as temporary work, and demographic and social changes, from which the longer life expectancy is an example.

In my opinion, it is urgent to fight poverty in order to attain a fairer and better society and, for that purpose, several policies and measures should continue to be carried on, creating solutions that fit the needs. In developed countries, as the case of Portugal, those issues can be addressed via, for instance, provision of benefits in kind, further increase of the national minimum wage, better implementation of progressive taxes and investment in employment conditions. Particular attention should be given to the increase of the national minimum wage, as it must be sustainably supported by healthy organizations and companies, able to pay their employees that higher amount.

Beatriz Jesus, Master in Management student at Nova SBE

 

Figure 1 – pobreza portugal – (2017). Google.pt. Retrieved 12 April 2017

Figure 2 – Poverty, social exclusion and health in Portugal. (2017). Sciencedirect.com. Retrieved 13 April 2017

 


2016 European films: poverty and its leading role

i daniel blakeFigure 1- “I, Daniel Blake”(2016), Drama film

Independent European films have been voicing a myriad of social problems that follow the tone of EU’s political agenda. In 2016, poverty plays a prominent performance in most of them, extending its role from setting towards the storyline of the characters. “I, Daniel Blake” is heart-rending film about a man of 55 years old that after having been employed most of his life in England, suffers an illness that restrains him form work. For the first-time Daniel Blake needs income support from the State, and he is on the Kafkian welfare bureaucracy played out against the discourse of “striver and skiver” that is now part of political debate in several European countries. “I, Daniel Blake” was nominated for several awards, and it was the winner of the Cannes 2016 top filmmaking prize, the Palme d’Or. Furthermore, “Sao Jorge” is a 2016 fierce Portuguese film on European troika bailout measures in Portugal after the 2008 world financial crisis. This film raises awareness about the effect of the 2008 crisis on unemployment, social instability, and at-work poverty. The bottom line is the following: is poverty in Europe only an artistic trend in film industry or also a striking reality check?

Eurostat figures suggest that the 2008 financial crisis had a substantial impact on poverty indicators across Europe. According to this agency, the number of people at risk of poverty or social exclusion in the EU grew from with about 114.5 million in the EU-27 in 2009 to about 122.5 million people at risk in the EU-27 in 2012. The following graph shows that despite the pre-crisis years represented a period of catch-up in poverty figures, this trend was significantly reversed when the financial crisis hit EU members in 2010.

People_at_risk_of_poverty_or_social_exclusion,_EU-27_and_EU-28,_2005-14

Figure 2 – People at risk of poverty or social exclusion, EU-27 and EU-28, 2005-14, Source: Eurostat

In spite of the subtle improvement in poverty figures between 2012 and 2014, a little over 122 million people — 24.1 % of the EU populationwere still at risk of poverty or social exclusion in 2014, on the report of Eurostat. In other words, nearly one in four people in the EU came across at least one of the three forms of poverty – monetary poverty, material deprivation, or low work intensity – or social exclusion.

One should point that Europe’s recession did not impact EU member states alike. In the immediate years that followed the financial crisis, from 2008 to 2011, poverty increased almost all member states. The largest increases were in Greece, Latvia, Lithuania and Ireland. However, between 2011 and 2013, the crisis’ impact across European countries is less homogeneous. While ten EU member states registered slight reductions in poverty indicators, Greece, Portugal, Spain, manifested a steady rise in poverty figures. Figure 2 depicts the change in poverty statistics from 2008 to 2014 across EU member states.

 

People_at_risk_of_poverty_or_social_exclusion,_by_country,_2008_and_2014

Figure 3 – People at risk of poverty or social exclusion, by country, 2008 and 2014

 

Additional evidence of the effect of the crisis in European countries’ poverty levels is provided by economic research.  Hick (2016) analysed the impact of 2008 financial crisis on European levels of material poverty and multiple deprivation. The author concludes that in 2013 Greece, Italy, Cyprus, Spain and Portugal combined together exhibited higher levels of poverty and deprivation than the average of Slovenia, Slovakia, Czech Republic, Poland and Hungary by the time they joined the European Union in 2004.

The analysis of poverty figures for the after-crisis years in EU member states seems to suggest that the film industry’s interest in poverty in 2016 is more than just an artistic trend or an intellectual mania. In fact, it appears that the film industry has tried to give a face to the 24.1 % of the EU population that were at risk of poverty or social exclusion in 2014.  Perhaps audiences will assume that these plots are fiction and propaganda. But as Bertolt Brecht stated: “Art is not a mirror held up to reality but a hammer with which to shape it”.

 

Mónica Barreiros