Nova workboard

a blog from young economists at Nova SBE


Italy raising Children Poverty

In Italy, there are 10.048.000 people that live in relative poverty conditions (16,6% of the total population). Among them, 6.020.000 are absolute poor, which cannot purchase products and services to guarantee rights to live in dignity (9,9%) (ISTAT report on poverty in Italy, 2014). The rate among the southern families has increased for the 31%, comparing it to the north which remained stable.

Moreover, the 12,6% of the families is in relative poverty condition, and 7,9% in absolute poverty, with a threshold value of €972,52 per two components family, which is €18 lower than (-1,9%) the threshold value in 2012.

The 22,6% of children in Italy is at risk of poverty. Children poverty means that the families have a too low income to guarantee the needs for their adequate physics, physical, intellectual, and social development. The data shows that the percentage of absolute poverty among this segment is the highest in the last 15 years, with an increase of the 3,3% compared to the 2006 data. Moreover, the adult at risk of poverty diverges at 8,2% compared to the underage.

Screenshot (160).png

Italy: percentage of people in absolute poverty ranked per age (ISTAT)

Juvenile poverty increase with the number of underaged within a family. The incidence of poverty is increased from 14,9% to 17,6% for families with one underage child, from 17,5 to 20,7% for families with two underaged, and from 32,3% to 36,3% for families with three or more children, from 2006. However, the average of numerous family is decreased in the last twenty year, yet the southern regions’ incidence is 10% higher the northern regions.

Italy have inner differences in terms of poor concentration, who born in the southern regions have a much higher probability to grow up in a poor family. The data shows that the incidence of poverty is below to the national average in the Northeast (14%), North-west (10,9%) and Centre (13,2%) regions; the south of Italy has a 40% underage poverty rate, and 44,7% in the Islands. Therefore, it can be seen that there is inequality within the country regions.

Facing these preposterous data, Italy outclass Germany (that is the only county with an elder index higher than Italy) in the percentage of the GDP dedicated to the pension fund, yet it is among the bottom positions for public funding to the support of families, youth, and maternity (1,3% of the GDP against the European average of 2,2%)!

In the recent years, Italy’s legislation has launched different initiative directed to the support of families with underage children (such as Bonus Bebé, fiscal deductions, and allowance for numerous families), which have had small-scale and scarce effectiveness. In addition, a Eurostat study displayed that the public intervention has relieved 3,8% of underage at risk of poverty in 2010, but this data is far from countries like UK (14,%), French (13,5%) or Germany (11,1%).

It is not only the family’s income to define the poverty condition of the children, yet it is critical to consider the network of opportunity and services that guarantee a healthy child growth, such as kindergartens, good quality schools, and other elements (for instance, favourable playground in cities). Data to proof the inefficiency of poverty relive to children can be shown by the usage of public Kindergarten by children between 0 and 2 years old, that differs widely by regions: from Emilia Romagna (28,5%), Umbria (27,7%), Valle d’Aosta (25,4%), to Calabria (3,5%), and Campagna (2,7%).

In conclusion, there is an urgency to stop this trend by launching a plan at a national level to fight the underage poverty, focusing more on the southern regions of Italy. Firstly, it will be adequate to adapt to the European trend of public spending dedicated to the youth, from the actual 1,3% to the 2% of the GDP as the goal for 2020. The redirection of the public spending determinates a sustainable source of resources without the necessity to raise taxes to provide more state income. The fiscal resources will be used to implement tax relief for parents with dependent children, vouchers to guarantee the purchase of essential products, develop the services to additionally support parenthood, and a special investment plan for the creation of kindergartens.  Moreover, guarantee funds should be created to support entrepreneur mothers to facilitate the credit access. Finally, any new legislative measure will have to validate also in terms of the childhood impact. These policies aim to improve the life of the families in general and create the most sure-fire route out of poverty for 300.000 kids.

 

Michele Beretta


Universal Basic Income: A Finnish Social and Employment Experiment

In 2017, the Finnish Ministry of Social Affairs and Health is to mandate a pilot project aiming to assess the usefulness of universal basic income (UBI) as a means of radically overhauling the social security system all the while promoting employment and cutting government expenditures (http://stm.fi/artikkeli/-/asset_publisher/sosiaali-ja-terveysministerio-pyytaa-lausuntoja-osittaisen-perustulokokeilun-toteuttamisesta?_101_INSTANCE_yr7QpNmlJmSj_languageId=en_US). But how could an unconditional, tax-free, and non-means-tested grant of €560.-/month to every citizen possibly be financed; let alone be profitable for a country?

It can so in an astoundingly easy fashion, say Swiss Institut Zukunft [Future Institute] researchers, Müller; Renninger; and Straub (http://zukunft.ch/potentialanalyse-grundeinkommen.pdf). Through the contentment and motivation drawn out of the financial treat the authors expect the workforce to reach higher levels of labour productivity, leading to increased economic output and; ultimately; higher government tax income. This effect is amplified by the demand-side effect of increased consumer spending. The authors farther believe the diminishment of financial insecurity to lower the public cost of stress-related psychic and physical ailments whilst, simultaneously, incentivising entrepreneurship; the latter of which is theorised to grow stronger over time. Furthermore, when compared to conventional social benefits, UBI is less prone to benefit fraud, thus circumventing the misallocation of state funds (https://www.thersa.org/discover/publications-and-articles/reports/basic-income).

More tautologically than vindicatorily, various sources (www.economist.com/news/leaders/21699907-proponents-basic-income-underestimate-how-disruptive-it-would-be-basically-flawed, https://www.theguardian.com/world/2016/jun/02/state-handouts-for-all-europe-set-to-pilot-universal-basic-incomes, and many else) stress that UBI is in itself an indispensable concept in light of the speeding automation of work and the underemployment rooting therein.It is widely believed that humans will not be able to make a living from their jobs in conceivable future. The financial safety net spun by UBI, however, would enable them to temporarily leave the workforce to undergo (re-) trainings and qualify themselves for intellectual work that cannot be done by machines, thus forestalling the incomparably higher social expenses of mass underemployment.

So far resembling a utopian vision come true, UBI still has its downsides when it comes to being implemented in policy. One – seemingly simple! – barrier to be broken down in establishing UBI is the design of specific modalities for disbursement. Is UBI to be paid out using existing income tax mechanisms? But if so, what about non-income-tax payers, or those citizens not formally taking part in the economy? In what rota will disbursements be made, and how can sufficient liquidity be ensured at these times? There is also some difficulty in creating and maintaining an encompassing cadaster of recipients and monitoring whether disbursements are actually received by all those entitled. Ultimately, UBI is suspected to miss out on so-called psychological and behavioural feasibility: in societies that value work as a basis of legitimacy of wealth it will be hard to justify UBI to the broad public, and pressure will weigh on those leaving the workforce for living off the others’ pockets (psychological feasibility); and the policy runs the risk of undermining itself through driving people out of the workforce, thus drying up the source of funds used to finance UBI (behavioural feasibility).

Amongst the Finnish, the expectation prevails that UBI will heave up employment by incentivising current recipients of social benefits to take on part-time jobs without having to fear the loss of financial support (http://www.forbes.com/forbes/welcome/?/sites/francescoppola/2016/08/27/&toURL=http://www.forbes.com/sites/francescoppola/2016/08/27/&refURL=&referrer=). In the light of recent research, whatsoever, the pilot is more of a surprise package with manifold possible outcomes.


Brazilian Assistance Program for Low-Income Households: Bolsa Família

In Brazil, there is a government national program that aims to help low-income households and it is called Bolsa Família. According to the government, the purpose of this program is to transfer income to households living in poverty. They need health, nutrition and education assistance. The amount paid varies according to the number of household’s children and is due always to the woman of the family. Children must be less than eighteen years old and the amount varies with age also[1].

As a way of controlling who receives the aid, the government linked the payment to children’s school attendance as well as to vaccination records. For instance, if the children do not enroll in school, the household will not receive the money. In addition, it is necessary to keep personal data up to date in government registering system. Moreover, Bolsa Família groups a lot of poverty assistance national programs, that used to provide resources such as LP gas, food and school supplies. In Bolsa Família, all these aids and incentives were unified[2].

Several studies have shown that Bolsa Família program had been benefical for Brazilian population. Researchers have found that school attendance and the number of children approved in school increased and school abandonment was reduced instead[3].

Besides that, researches recently showed that violence reduction in State of São Paulo could be related to Bolsa Família. The authors point is that this program reduces income inequality and promotes increased low-income children attendance in schools. But critics disagree, because they argue that there are many other variables that interfere in violence[4].

Even though some studies have demonstrated benefits from Bolsa Família, there is a national discussion about the effective impact of this program. Have this program reduced income inequality in Brazil? Ricardo Paes de Barros, who idealized Bolsa Família, highlights the combination of this social program with others in Brazil. Income inequality fall occurred because formal job increased in poorest social layer, as a result of educational programs such as government financing of university tuition[5].

Another critical point is: who should receive this aid? Ricardo Paes de Barros says that government still have to improve in this area. Indeed, households just have to inform their income and there is no double check by the government. This is the main reason why part of Brazilians complains about Bolsa Família. The governemnt do not have a formal validation on income data, which facilitates corruption and income transferring for non-qualifying households. Correcting that is not a difficult task since government have enough data about it. Nowadays, this program is used as a political promotion by politicians. Almost all candidates stand up for this program as if Bolsa Família were the unique way to solve all the country’s problem of inequality.

[1] Bolsa Família is managed by a state-owned bank called Caixa Econômica. All operational guideline about this program was obtained in Caixa Econômica’s website: http://www.caixa.gov.br/programas-sociais/bolsa-familia/Paginas/default.aspx
[2] Source: http://www.mfdr.org/sourcebook/6-1brazil-bolsafamilia.pdf
[3] Source: http://cepea.esalq.usp.br/pdf/Cepea_ImpactoBolsaFamilia_Premio.pdf
[4] Source: http://oglobo.globo.com/brasil/bolsa-familia-reduz-violencia-aponta-estudo-da-puc-rio-5229981
[5] Source: http://exame.abril.com.br/revista-exame/edicoes/1114/noticias/bolsa-familia-sozinho-nao-resolve-problema-dos-mais-pobres

Gabriela Rodrigues

 


The desire of going back to the 70’s – Basic Income in Canada

In 2013, one in seven people in Canada lived in poverty (average gap between the poverty line and actual poor household income is 33%). A deeper analys1is reveals a high child poverty rate (19%, despite it being a priority of policies) and single parent families being largely affected. Additionally, poverty is more pervasive in indigenous communities and immigrants/refugees and neighbourhood effects exist. More people have been resorting to foo3d banks. Duration of poverty
spells
is of almost
two years, with 23% of people exiting to near po2verty.

Consequently, criticism of the social welfare system arose (an example of inadequacy of policies are minimum wages, which were found not to have a statistically significant effect on poverty, although that was the main rationale for its introduction).

Due to technological developments and changing labour force (higher time people take to find a stable job; abundance of short-term contracts), institutions are under pressure to rethink social programs. Hence, precarious work, low wages along with elimination of jobs by technological advances and an uncertain economy boosted the discussion around a minimum guarantee income. Other drivers are demographic pressures on the health-care system and OECD’s research, which states that increasing income for the bottom 40% of the income distribution can decrease income inequality, impacting positively on economic growth. In Canada, the social system is perceived as not protecting the working poor, paving the way for increased support from the public to basic income and a recommendation that the federal government studies it.

This follows the increasing momentum of the idea, especially in Europe, with Switzerland having a referendum, Finland planning to set a pilot program and pressure on Italy to introduce it.

An experiment on basic income happened between 1974 and 1979 in Dauphin, Manitoba, in which cheques were delivered to poor people. This program, “Mincome”, had the objective of checking whether giving money to people would reduce their motivation to work. During this period, one thousand families that were below the poverty line started earning a liveable income. Basically, they were given 60% of the low income cut-off determined by Statistics Canada and 50 cents were deducted from every dollar people got from other income sources. This experiment ended when the government changed, without a final report having been drafted. Nevertheless, recent research was able to discover some of its effects. Taking part in the program led to an increase in food security and on the ability to pay expenses. Although there was a slight reduction in the workforce, it happened mainly in the demographic groups of high school student and young mothers – teenagers were able to focus on studying instead of working (increased likelihood of finishing high school, since people could now afford further education) and women could stay longer at home with new-borns. For some people, the possibility of pursuing more stable and suitable jobs emerged. Therefore, people continued to work. This goes against opponents of the program who claimed people would stop working, relying on government given income. On health, rates of hospitalization decreased (for accidents, domestic violence and injuries), mental health of participants improved and hospital visits declined by 8.5%. Summing up, Mincome allowed people to be above the poverty line, easing economic anxiety and letting them make long-term plans.

This program inspired the recently announced basic income pilot in Ontario, which aims at testing its efficiency in giving income support and its impacts on labour supply4, health-care and overall benefits. Other governments also showed interest in the idea. It will replace several benefits into one cheque given to people on welfare and those that have a low paid job (the exact details are not defined yet). Proponents claim the program is more efficient, yields lower costs than having a series of social programs (would streamline government bureaucracies), could reduce health-care costs (as poor people are usually less health) and eliminate poverty. Critics state the hardship of implementation in Canada, not being able to solve discrimination and inequality (won’t impact on relative poverty), giving incentives for employers not to create well-paid and secure jobs, reduction of labor supply (results now could be different from those of 40 years ago) and the potential cost of the program (possible need to raise takes to finance it, leading some to be worse off). Nevertheless, there is consensus on the need to develop a new approach that would prevent poverty and lift people out of it.

Ana Margarida Carvalho (795)


Poverty and terrorism: a (still) missing link

The 13th November 2015 will stay as a permanent stain in the Paris’ citizen memory as well as in the contemporary history: after the 9/11 in the United States and several episodes of bomb attacks around Europe, the Islamic terrorism hit again the Western world in one of its most representative cities. This horrific and heinous action, however, does not have to be considered “surprising”, as Rosa Brooks argued in Foreign Policy, in the aftermath of the event. Even before these tragedies, «we need to stop viewing terrorism as shocking and aberrational, and instead recognize it as an ongoing problem to be managed».

In his recent visit in Kenya, Pope Francis stated that «experience shows that violence, conflict and terrorism feed on fear, mistrust, and the despair born of poverty and frustration». Along the same lines, policymakers have exhibited a consistent tendency to consider poor living condition as a primary motivation for terrorist acts.  The sentence that the U.S. President George W. Bush pronounced in Monterrey (Mexico) in 2002, during the first phases of the War in Afghanistan, is significant for revealing the convictions of that time: «We fight against poverty because hope is an answer to terror».

 

Nevertheless, the evidence from economic research points in the opposite direction: poverty seems to have no direct relationship with terrorism, while civil liberties and political freedom have been found to explain, at least partly, the pattern of terrorism around the world.

The idea that poverty can initiate terrorism has dominated much of the debate for a long period: this notion stems from the results of the research in the field of the economics of conflict. We can recollect, among the most famous and recent contributes, Collier and Hoeffer (2004) who show that economic variables are powerful predictors of civil war, while political variables have low explanatory power.

Originating in the 2000s, however, new disposable data and empirical studies have challenged this view, leading to surprisingly opposite findings. In particular, several studies have failed to find any direct link between education, poverty, and the propensity to participate in terrorism.

The first surprising result was presented in the economic debate by Krueger and Maleĉková in the New Republic. When analysing data on support for attacks against Israeli targets from public opinion polls conducted in the West Bank and Gaza Strip, they found that support for violent attacks did not decrease with higher education and living standards. On the contrary, better living standards and education were positively associated with participation in Hezbollah. Moreover, Israeli Jewish settlers who attacked Palestinians in the West Bank in the early 1980s were overwhelmingly from high-paying occupations. Terror groups seemed to actively select upper class and more educated individuals, instead of recruiting from the poor segments of the population.

The following studies started assuming a global perspective, in attempting to reach general and externally valid results. Among the others, Abadie (AER, 2006) strengthens the previous findings by exploring the determinants of both domestic and transnational terrorism. Furthermore, the implementation of an instrumental variable approach (namely, “landlock” for GDP per capita) corrected for reverse causation, suggesting a causal relationship between terroristic risk and political freedom (but not with economic development).

 

Nonetheless, as Prof. David Sterman argued in a recent article in Time, we should not dismiss poverty’s possible role in terrorism yet. In fact, the results seem to change consistently given the dataset that is used and the explanatory variables that are taken into consideration[1]. Assuming previous studies still explain the dynamics in the cases we face today could lead to misreading of new and potentially different phenomena (e.g. Daesh). The evidence about terrorism needs to be reassessed and updated, in view of recent developments and the collection of novel data.

In particular, research needs to integrate an alternative approach in the investigation of the roots of terrorism, assuming a “social” point of view. In my opinion, welfare policies are likely to reduce terrorism because they help social cohesion, by reducing economic insecurity, inequality, and religious-political extremism. Thus, countries where there exists a more advanced and generous welfare system should experience fewer terrorist attacks on their soil and see less of their citizens perpetrating terrorism abroad. I believe that this line of research has not been explored appropriately in the past literature and more studies might shed new light on the fundamental roots of terrorism.

By Matteo Ruzzante (#855)

 

[1] Some – less renowned – papers that reached diverging results are Derin-Güre (2009), Freytag et al. (2009) and Burgoon (2006). The latter one, in particular, indicates that a country’s welfare efforts negatively correlate with transnational or total terrorist incidents on its soil, as well as transnational terrorism perpetrated by its citizens. Such findings suggest that strengthening social policies at home and abroad may not only serve redistributive or development goals but also help combat terrorist violence.


WHAT ARE THE DRIVERS OF THE ITALIAN POVERTY?

Up there, on the roof of Palazzo Fuga, in Naples, in the hideouts obtained from old abandoned launderettes, 60 families have lived since decades. Those families live in a very miserable way, among dirt, degradation, isolation and diseases (G.A. Stella, S.Rizzo, 2013). They are only 60 of the over 4 million Italian families that live in conditions of absolute poverty, which according to ISTAT represent 6.8% of the resident population in Italy (2014). The corresponding numbers are even more impressive in the South, where the incidence of poverty is 10% and its intensity is 20%. Worrisome are also the data on relative poverty, which show that almost 8 million Italians live in a condition of relative poverty, which constitutes 10.3% of the resident population. Again, these data are worse for the Southern regions (23.6% of the southern population is poor against the 6.8% in the northern regions), displaying the huge gap between the North and the South. Families with three (minor) children or more are the ones most afflicted by poverty, and in the South they represent over 40% of the families.

This situation is reflected in another dramatic phenomenon which is still present in Italy according to the European observatory of working life: the child labour.

A report produced by the association Bruno Trentini and Save the Children, shows that child labour involves about 5.2% of the population between 7 and 15 years old in Italy. This number represents about 260.000 children, where 30.000 of them are involved in jobs which can threaten their health, security and moral integrity, as they have to work full time and/or during the night. And this for a weekly salary which ranges between 20 and 50 euros.
The regions which show the highest risk of child labour are indeed the ones in the South, because of their low GDP per-capita and of the phenomenon of Early school leavers. Indeed, 18.2% of students drop out of school between the age of 14 and 15, and the data are worse for the Southern regions and above the average of the EU27 countries, which is 15%. A dramatic case of child labour is evident in province of Naples, where 54.000 kids left school between 2005 and 2009 to find jobs to feed their families (Le Monde, 27/06/2012).

This picture of the Italian situation raises lots of questions about how such a discrepancy can exist in a highly developed country and what are the main drivers of poverty in the southern part of Italy.

There are several factors that should be addressed. A strong determinant is certainly the level of unemployment, which was 11.3% in Italy in 2015 – 7.3% in the north and 19.4% in the south (Istat data). The situation is worse for women, who show the highest unemployment rates and the lowest participation rates (over 50% of women are inactive in southern regions). The situation is also dramatic for young people (15-29 years old), whose unemployment rate is 30% in Italy (21% in the north and 44% in the south), with peaks of 53% in Calabria and 46% in Sicily.
Such a level of poverty is also a result of those austerity measures and financial reforms introduced by a succession of Italian governments. Politicians also tend to blame the little size and productivity of southern firms and the fact that access to credit in the south is much costlier than in the north (SVIMEZ report, 2015).

Finally, there is another driver of poverty and inequalities which is often “forgotten” by policy makers and that I believe still plays a relevant role in the Italian economy: the organized crime. It is not a coincidence indeed that the regions with the highest poverty rates are Sicily, Campania, Puglia and Calabria, which are also the ones mostly hit by Mafia. A study by Paolo Pinotti (Banca d’Italia – Working papers) points out that organized crime is responsible for at least a 20% fall in the regions’ economic output and according to Giovanni Falcone more than one-fifth of Mafia profits come from public investment.

All in all, I believe that policy makers should intervene on different fronts, implementing policies to create job positions and reforming the education system in order to prevent the phenomenon of child labour and Early school leavers. But I also believe that as long as there will be omertà, weak and corrupted institutions and a population with a strong behaviour of compliance, typical of southern people, the future of the South does not seem to be as bright as some hope.  In fact, it is through a combination of people’s behavior and corruption that Mafia has been able to penetrate the political system and to obstacle judicial investigations, becoming a strong determinant of the discrepancies between the two Italies.

Stefania Sellitti


Can new evidence concerning the long-term economic effects of moving out of bad neighbourhoods be used to mitigate long-term economic effects of the current migration movements towards Europe?

The neighbourhood in which children grow up is believed to influence economic success later in life. However, selection biases in efforts to measure the effects of bad neighbourhoods on poverty or economic success later in life led to difficulties in proving the causality for these disadvantages. Recent research by Eric Chyn reveals that the positive impact on the long run economic success of children moving out of disadvantaged neighbourhoods might have been underestimated in the past due to selection biases of participants in previous research. Thereby in previous research, the ‘Moving to Opportunity’ experiment, the participants were selected through a lottery in which prospective participants from disadvantaged neighbourhoods could voluntarily sign up to. However, whilst the experiment gave evidence to the positive effects of moving out of disadvantaged neighbourhoods at an early age, it is assumed to underestimate the effect. Thereby Mr Chyn and others argue that the participants that signed up might have had higher aspirations and were more concerned about moving out of bad neighbourhoods compared to people who did not sign up for the lottery, thus they might have done better even without taking part in the program. However, these selection biases can be countered if the participants would be selected randomly. The research by Eric Chyn achieves that as it is based on a sample of participants that were randomly selected. From 1995 to 1998 the Chicago Housing Authority demolished several public housing buildings due to structural damage but other public housing buildings in the area were left standing, thus people from the demolished buildings were relocated and families in the remaining buildings remained living in them. The people who remained living in the public housing are therefore constituting the control group. The relocated families received housing vouchers to find accommodation on the private housing market. These vouchers are a subsidy to cover the difference between rents on the private market and the family’s required rent contribution (30 percent of adjusted income). Since the people were selected based on whether their house was to be demolished or not it can be viewed as a random selection of participants, thus avoiding the selection bias problem of previous research. The results of Mr Chyn’s research are “that children displaced by public housing demolition have notably better adult labor market outcomes compared to their non-displaced peers”. Furthermore, these findings contrast the findings from the Moving to Opportunity project in such a way that the positive effects were observable irrespective of the age when the child moved.

Since Europe is currently faced with a vast influx of migrants coming to the European Union these recent findings might be helpful when thinking about possible ways to accommodate migrants within the European countries to achieve mutual economic gains for the migrants as well as for the receiving countries too._88578067_europe_migrant_numbers_mar2016

 

Whilst currently challenges still resolve around solving the humanitarian emergencies on a short-term basis it might be important to also develop plans for the long-run. Given the potential positive impact of migration for the receiving countries in the long-run, a successful integration and transition process will be important. Thereby the insights gathered from Mr. Chyn’s research regarding the positive impact of dispersing poorer households among less poor mixed neighbourhoods might also be applicable to placing migrants within less poor neighbourhoods. This could help to aid the integration process as well as help migrants to economically fair better in the long-run, thus reducing costs on social systems as well as generating tax revenues. Furthermore, if migrants are more dispersed within society this could also help to increase acceptance of migrants among the population of the receiving countries. However, this hypothesis concerning altered acceptance among residents in the receiving population might need further investigation and might also vary among different countries.

by Jonas Weber


Poverty & Food: Children

“Portugal was one of the countries in which inequality among children has grown”

According to the Innocenti Report Card 13, one of the largest increases in inequality occurred in the PIGS countries – Portugal, Italy, Greece and Spain. These inequality changes between 2008 and 2013 are mostly driven by labor markets, since as the rates of unemployment and underemployment rise, less income enters the households with children. However, social transfers can help to reduce the relative income gaps. For example, in the United Kingdom, social transfers cover for almost half of the relative income gap. On the other hand, countries like Portugal, with very similar pre- and post-transfer income gaps, have one of the highest levels of bottom-end inequality.

poverty 1

As the relative income gap is associated with child poverty, the countries with highest relative income gaps have the highest rates of child poverty, having the lower levels of overall child well-being. poverty 2However, relative statistics are not sufficient to conclude about child poverty (since the poorest people in a rich country cannot be compared to the poorest people in a poor country). Thus, it is necessary to analyze children deprivation, considering that if their household cannot afford three or more of the following nine items, the child is deprived: 1) to face unexpected expenses; 2) to afford a one-week annual holiday away from home; 3) to avoid arrears in rent, mortgage and utility bills; 4) to have a meal with meat or proteins every second day; 5) to keep the home adequately heated; 6) to have a washing machine; 7) to have a color TV; 8) to have a telephone; 9) to have a personal car.

Even though the high amount of social transfers in the UK, in 2013, about 20 million meals were distributed, an increase of 54% in just one year, meaning that the number of people that cannot afford to feed themselves increased. According to the Centre for Food Policy, 35% of the poorest households’ income are spent on food in comparison to 11.6% with regards to the budget of households with an average income. This will have negative consequences on children: poor children will suffer from hunger, difficulty in having a meal outside school, bad dietary patterns and eat low amounts of fruit and vegetables, since food is a “flexible” item in the household budget when compared to fixed costs, such as rent and utility bills. With regards to the topic, it is important to explain that, according to the Food Ethics Council, food poverty means that an individual or household is not able to obtain nutritious food, or they cannot have access to the food they want to eat – even if we persuade people to adopt new pattern to maintain nutritional adequacy in time of hardship, if they cannot choose the foods they want, they will consider themselves to be poor: they have been deprived (John McKenzie, 1974). Thus, it is hard to compute numbers according to food poverty, since it is a qualitative concept without quantitative metrics. Moreover, food choices can be seen as a means of demonstrating group acceptance, mood and personality (John McKenzie, 1974). Therefore, it is not an applicable concept to this post.

Surprisingly (for me), children poverty is also linked to obesity: about 22% of poor children suffer from obesity against only 7% of rich children (UK, 2015), since diets of lower income households provide cheap, concentrated energy from fat, sugar, cereals, potatoes and meat products, offering little quantities of whole grains, vegetables and fruit (Adam Drewnoski, 2012).

poverty 3

United Kingdom Data

In addition, low-income consumers usually live in regions where it is difficult to have access to healthy foods, and the fast-food restaurants predominate, in comparison with full-service restaurants (Adam Drewnoski, 2012). According to the Healthy Eating Index (HEI), higher HEI scores are related with higher diet costs, higher incomes, more education and lower rates of obesity (Adam Drewnoski, 2012).

poverty 6

United Kingdom Data

Returning to the PIGS countries, all this discussion can be proven by looking at the trends in overweight or by comparing the percentages (above the OECD-33) for measured overweight between the ages of 5 and 17 (2013) – Greece tops with 44% and 38%, Italy with 36% and 34%, Portugal 27% and 29% and then, Spain 26% and 24% (boys and girls, respectively). All in all, it is another argument that goes hand-in-hand with the problematic of school menus not providing the right dietary choices to poor children that otherwise will not have access to it.

Jessica Martins 2555


Paradoxes In Developing Countries

Bureaucratic Accountability & Effective Corruption
 

Political accountability, a trending fashion in the world politics, has not yet come to fruition despite attempts at holding politicians responsible and fighting corruption throughout developing countries. All over the world, the implementation of responsibility has brought a lot of contradictions. Ironically, one of the most noted contradictions is the U.S. Capitol building, a major symbol of freedom in America. Built by slave labour, the U.S. Capitol was constructed by the very process of which it does not represent.

Paradoxes are found in various studies about the public sector in developing countries but they have a common assumption; Corruption and low levels of representativeness in the government directly undermine the social contract.

According to a report by World Bank (2012), developing countries are facing difficulties related with their institutions. In general, the developing countries’ public sector is inefficient, over-staffed and confused by a complex net of legal frameworks. The report mentioned paradoxes as the inverse relationship between responsibility and authority and the fact that competent and efficient employees tend to perform easier jobs. Also suggested the tendency for short tenures in higher hierarchical positions and the fragile institutional memory that reproduces mistakes.

From a research point of view, it is really interesting to analyse how developing countries can fight corrupt practices and introduce accountable systems promoting institutional transparency. As a result, countries will learn how to combat discretionary decisions and to avoid external influences such as interest groups leading to further or increased continuous corrupt choices in the public sector.

In spite of benevolent intents beyond accountable reforms, bureaucracy may not be the best response because it has adverse results in inefficient institutions. This is the Paradox of Bureaucratic Accountability, studied by Shamsul Haque who proved that it brings corruptive incentives.

The main problem is that in developing countries, corruption may be an efficient response to a bureaucratic accountability system. There’s a lot of literature about this strange concept of efficient corruption (see the paper by Pierre-Guillaume Meon and Laurent Weill), nevertheless, it can be easily explained: If a country has a complex and bureaucratic system, corruptive practices can be the only way to make decisions happen. Even though it undermines the credibility of governments, corruption may increase the social welfare by comparison with normal procedures.

Question: If bureaucratic accountability in developing countries creates corruptive incentives, how then can we promote transparency and avoid discretionary decisions in developing public sectors?

 

By Dino Alves


Poverty and Social Exclusion in the UK

The 10th October 2012,

Each year, the New Policy Institute monitors poverty and social exclusion in the UK. Thanks to that, they were able to make a great estimation of the impacts of the crisis of 2008 and 2009 on poverty in the UK. In order to implement their survey, they analysed several predefined indicators: income, the unemployment rate, education,  health, and fear of crime. Statistics on these indicators are computed every year which allowed them to establish a good follow up of the evolution of poverty.

Let’s start by analyzing the number of people who are considered low income earners, that is, the people that earn less that 60% of the median income of the UK. Actually, if we compare to the situation at the beginning of the century, there are less people living in poverty. Unfortunately, the New Policy Institute also notices that since 2005, the situation has gone worst. Indeed from 2005 until 2010 the number of low-income households has increased. Therefore, at the end of 2009, 13.1 million people were living in poverty in the UK.

As far as the unemployment is concerned, the figures are also not good at all. In 2009, 2.5 million people were unemployed: the highest level since 1995. However even if the crisis emphasized the growth, we can notice that the increase in unemployment started in 2004: four years before the crisis.

Now let’s have a look at the place of child poverty in the UK. As the number of low-income households has increased, so did the number of children living in low-income households. Nevertheless, the number of children living in a non working family has decreased  continuously since 2004.

Regarding education, the figures are better. Indeed, the number of pupils not achieving 5 GCSEs (the equivalent of high school) has dropped by one third since 2004. Besides, we can also notice a decrease in children who do not have the basic knowledge in Mathematics and English at the age of 11.

Besides, as far as heath is concerned, we can also see some regular improvement, the number of premature deaths before age 65 has also reduced inthe last decades. The numbers of mental illnesses, infant mortality, babies born with low birth weight have also dropped.

People feel also more secure. Indeed, the percentage of people who feel worried about being victim of violent crime has gone from 17% to 14% since 2005. We observe the same thing for the people worried of being burgled.

To conclude, I think the crisis had a really bad effect on poverty. Indeed, the priorities of governments changed and poverty became a secondary issue. However, the report published by the New Policy Institute shows that some indicators started to get worst way before the recession. That is why I think that we should maybe look further in the past to find what problems are at the origin of the increase in poverty.

Jérôme Lucchese

Source:            http://www.poverty.org.uk/summary/reports.shtml


 [SP1]realise = se rendre compte


The lucky ones

On the 31st of October2011, the population of the earth reached seven billion people. According to The United Nations, one billion of these are today living in extreme poverty, which means that they have to survive for less than one American dollar a day.  In Africa, south of Sahara, approximately 41 % of the population lives in such extreme poverty (www.fn.no).  Facts like that can easily make me think that I am one of the lucky ones.

Where you are born can highly affect how your life is going to be, and where you are born is just a coincidence. It is good luck or bad luck.  Also in the rich countries there are people who are born in areas where the probability of being poor is higher than in other parts of a city or a country. So this does not only apply on a country level, but within a country as well. Either way, it’s important for the lucky ones to remember that lucky is exactly what they are. Then the awareness of poverty in rich countries may be raised, while the focus on poverty in poor countries may be increased. We have to remember the unlucky ones, and do something more about it. Of course it is not always easy to know what to do, but every contribution can help.

Norad, the Norwegian Agency for Development Cooperation, offers a special and interesting service on their webpage (www.norad.no). By entering some personal data, you can be “reborn”. This means that you’re offered a timeline of your “new life” and some enlightening comparisons between your old and new country. I was reborn in South-Africa, without the same possibilities for education, work life and health care as in Norway. As a Norwegian I am able to study abroad in Lisbon. If I had been born into my “other life”, I would not have had any higher education. To sum up, the point of this comment is not to claim that people don’t take higher education in South-Africa, because many people do. I am simply trying to remind many readers of this blog how lucky they are.

Solveig Lillebø

References:
Fn.no, (2012) Fattigdom [online] Available at: <http://www.fn.no/Tema/OEkonomisk-og-sosial-utvikling/Fattigdom/Fattigdom  > [Accessed 08 October 2012]

Norad.no, (2012) Norad [online] Available at: < http://www.norad.no/en/front-page > [Accessed 08 October 2012]


Poverty: between child exploitation and child illeteracy

Filippo Galli

1192

Every year six million children under five starve to death or die of curable illnesses such as dysentery, pneumonia or malaria. FAO reports that malnutrition – still 143 million children in the developing Countries suffer it – causes almost half of about five millions of deaths reported in the world every year among children under five.

Child exploitation is a cause and consequence of poverty and grows when people must face without any help its poverty without free schools and health, and families are compelled to ask  each of its members to work to survive. As far as this situation is concerned, an Unicef research in Latin America points out how the purchasing power of the family increases of 10-20% maximum with the works of little children: poverty still remains.

 Child exploitation in the working places involves 218 million children (default estimation, as we talk about illicit situations) who are obliged to work deprived of education, health and play: 126 million of them carry on dangerous activities risking their lives.

One child among five, for example, has no free admittance to drinkable water; this causes the death of 2,5 millions of children every year. 143 millions of children suffer from malnutrition ,which is the cause of the 40% of the total infant mortality.  

Another important problem is the plague of the child soldiers and the prostitution: over 250.000 children under 15 are recruited and used in the state armed forces and in non-state armed groups (in the Democratic Republic of Congo at present about 11.000 children have been kidnapped by the guerrillas), and one million of children every are led to prostitution, often by their parents themselves to pay their debts.

Unicef is trying to solve the present situation with two kinds of interventions: programs to sustain the domestic household to make the children’s work unnecessary and intervention in favour of children workers to grant them the possibility to attend school and to get an education.

Another problem for children is the illiteracy. Over 130 million of children of age of primary school grow up, in the developing Countries, without any chance to get  basic education. If we add to this number the other 20 millions of children that do not complete the four years of school (minimum period to grant a minimum ‘learned’ child), we obtain a total of 150 millions. Moreover 77 millions of boys and girls in the South of the world cannot write or read. The greater part of these are girls, condemned to an uncertain future. The 57% of girls of age of primary school are deprived of education due to cultural, economic, and  discrimination reasons.

However Child labour and children illiteracy  are only two of the several problems that children are compelled to face, and they are only two of the several problems concerning poverty, that everyone in the world should try to face and solve.

 

 www.unicef.it


Poverty in developed countries

 

When we think of poverty, it is usually the kind of poverty we see in third world countries that come to mind. Starvation, famine and homeless children and families are “common” images we are faced with on a regular basis in every media channel. However, poverty also exists in developed countries, even in the richest countries in the world. In wealthy countries, though, poverty rarely takes the form of famine or starvation. Homelessness is more common, and is widespread in many countries, but this is a multifaceted phenomenon that can have many different causes other than poverty. People who are poor in wealthy countries may still have full-time jobs and earn a decent income every month. It is mostly their life situations that determine whether they are poor or not.

 

Poverty in developed countries can be relative or absolute. Relative poverty refers to a standard defined by the society in which an individual lives. It differs between countries and over time, an example being that you are poor if you are living on less than for example 60% of a country’s average equivalized income. Absolute poverty refers to state of being where a person does not have enough resources to afford a basic consumption basket (of food, housing, clothing etc.).

 

There are many different reasons why there are poor people in industrialized countries. For example, there may be stagnating wages, long-term unemployment and rising prices of essential goods. Other reasons that are more complex may be racism, immigration and an increasing number of single parent households. If the social safety nets are absent or low, poverty may become even more widespread. Proper day care facilities, care for the elderly and health care are important factors to prevent poverty increases. These last factors are evident when we look at growth in poverty in the developed world. In Scandinavia, where the countries are known for their extensive welfare benefits and high safety nets, the trend is notably different from other industrialized countries. While almost all other countries have increased amount and depth of poverty, the Scandinavian countries have shown a stagnating or decreasing development[1].

 

In a way, we can say that poverty reflects failures in the systems for redistributing resources and opportunities in a fair and equitable manner.  These lead to deep-seated inequalities and thus to the contrast of excessive wealth concentrated in the hands of a few while others are forced to live restricted and marginalised lives, even though they are living in a rich economic area[2].

 

We see that poverty is a complex issue, and there is no clear answer as to how to prevent it or eradicate it. But better social safety nets, clear redistribution of resources and opportunities, better arrangements for unemployment, and more focus on racism, immigration and divorce may help to improve the poverty rates in many industrialized countries. With a clear focus, maybe it is actually possible to overcome these challenges!

 

Lene Didriksen

 


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Yielding social profit

When we think of financial innovation we do not automatically associate it with humanitarianism. However a financial product has been designed to make that connection.

The aim of this post is to present Social Bonds. I will explain what these bonds are and how they work, showing some real cases. In addition to that I will demonstrate how, in my opinion, they can be used to fight several social problems, including poverty.

A social bond represents a loan between an investor who buys the bond (the lender) and usually the state who sells the bond (the borrower). What distinguishes this bond from conventional government bonds is that the lent capital shall be used to finance a specific activity with positive social impact and the payback (of the initial amount and interest) will depend on the success of this activity. What’s more, the main difference between these bonds and most funding for social projects is that while the latter’s funding tend to pay for inputs, the former’s rely on results. 

This instrument has a huge potential, since it is broadly known that governments could save much money if they invest in prevention rather than just financing correction. Two main examples of this may be the prevention of diseases by stimulating health instead of spending huge amounts on healing, or preventing what causes people to become criminals instead of paying their caging. It is much preferable to prevent the continuous rollercoaster trail of prisons, courts, homeless shelters and hospital emergency rooms. Besides it is known that there are interventions that are proven to help and to save money, thus unburdening the taxpayer.

Despite the potential savings, cash-strapped public authorities cannot just relocate its expenses from correction to prevention activities. This would mean cancelling health treatments or freeing criminals… Social Bonds may help to solve this situation by financing the prevention which will increase public savings. These savings will then be used to repay the initial investment and interest. Therefore, the Social Bond’s buyer will face the following risk: if the prevention activity is successful, which means that public savings will rise, he will win; if the activity fails, this investor will lose money (which mean that it is not technically a bond).

This instrument was first proposed by the economist Ronnie Horesh in the year of 2000 and its first implementation was made in 2010 in Peterborough, a town in Britain. The city issued bonds raising £5 million to finance a project that aimed at preventing recidivism, managed by the group Social Finance. Over 6 years recidivism rate will be compared between Peterborough and other similar towns. If, in 2016, its rate is 7.5% lower than the control group, the British government will repay the bond holders with interest. If that threshold is not met, investors will lose their money. The main outcomes will just be published in 2014. However Tina Rosenberg at the New York Times argues that according to local police the program looks like being paying off through a decrease in crimes.

In the US a similar project is being developed, but instead of being financed by philanthropic organizations, it is being financed with $9.6 million by the bank Goldman Sachs, a Wall Street institution. Alicia Glen, head of Goldman’s Urban Investment Group, said to The Economist that it is a real loan. Furthermore, she stated to the Financial Times that this bank would get involved in more transactions of this type in 2013.

If this proves to work there is a huge market to be explored. For instance Jannet Currie from UCLA shows that early childhood education programs to disadvantaged children may increase future earnings, reducing welfare dependence and crime. This would then be a good candidate to be financed by Social Bonds.

Improving poor neighbourhood’s environment, encouraging civic participation and promoting social activities, could be a next stage aspirant. The only need is for independent monitoring and consulting organizations that are capable of estimating social as well as financial returns.

In conclusion, Social Bonds are a veil of promoting social value in a sustainable and profiting way. This, besides leading to a better society, helps governments to be more efficient, sharing its extra savings with the lenders of these investments, which leads to the right incentives. These projects are just being launched, though we may be starting to watch a new form of social oriented financial innovation that may radically change the way we face social problems.

 

Diogo Silva Pereira Teles Machado, nº546


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In the past 25 years, Portugal has made significant progress since it joined the EU and seemed to have a promising future (IPS, 2011). Portugal received billions in structural funds from the EU and almost automatically credit was offered to finance mobile phones, cable television, freeways, cars and houses for the population. Moreover consumerism increased rapidly, creating a huge sector of new riches. Moreover, the boom of the construction sector gave the country a greatest number of freeways and the biggest shopping malls in Europe, as well modern football stadiums and other new constructions (IPS, 2011).

Nevertheless, “economists are now saying that its economic development was more illusory than real and the moment had come for Portuguese society to pay the bill for excessive consumerism” (IPS, 2011)Clearly, the economy felt in the 2009 crisis. The consequences soon appeared: “cut off from credit, hundreds of companies declared bankruptcy, ruining the owners of small businesses and tossing thousands of workers into the rank of the jobless” (IPS, 2011).

Up until 2009, Food Bank Against Hunger (Banco Alimentar Contra a Fome) only served the poorest families. But now middle class families are coming forward to ask for food, medical assistance and spiritual support. Similarly, the non-profit Portuguese Association for Consumer Protection (DECO) receives daily requests for help from people who cannot keep up payments on their debts to the banks and other financial institutions.

The middle class reality in Portugal is now different. Apparently, families have good cars and live in decent houses, but for example, since both adults are now unemployed, their family welfare shift to another reality. Now, these middle class families are losing their independent life and are returning to their parent’s houses.

The numbers show that Cáritas receives 15 new help requests per hour, which give a total of more than 64 500 cases of people who have used services in the space of six months (Cáritas, 2012). Until when will Portuguese NGO be able to support the increasing requests every day?

Portugal’s economic indicators are now terrible: unemployment stands at 15.9%, the highest level in 30 years (Eurostat, 2012). Inevitably, thousands of middle class people became the “new poor”, as they were hit hardest by taxes, wage cuts, the loss of the holiday bonuses and layoffs without notice.

Briefly, middle class is disappearing, which leads to a growing inequality in Portugal and to a rising disparity between classes. Would these “new poor” be able to recover some day and back to their previous good life conditions?

by Rita Almeida

References:

iOnline Newspaper: http://www.ionline.pt/portugal/novos-pobres-classe-media-portuguesa-passa-fome

TSF: http://www.tsf.pt/paginainicial/interior.aspx?content_id=880508&page=-1

Dinheiro Vivo Newspaper: http://www.dinheirovivo.pt/Economia/Artigo/CIECO036858.html

CNBC: http://www.cnbc.com/id/47555137/A_New_Look_at_the_New_Poor

IPS: http://www.ipsnews.net/2011/08/portugal-food-aid-for-new-poor-extra-wealth-for-nouveau-riche/

Sol Newspaper: http://sol.sapo.pt/inicio/Economia/Interior.aspx?content_id=60141

Diário Digital: http://diariodigital.sapo.pt/news.asp?id_news=592078