Combating In-Work Poverty in Continental Europe: An Investigation Using the Belgian Case

Recent studies find in-work poverty to be a pan-European phenomenon. Yet in-work poverty has come to the fore as a policy issue only recently in most continental European countries. Policies implemented in the United States and the United Kingdom, most notably in-work benefit schemes, are much discussed. This article argues that if it comes to preventing and alleviating poverty among workers, both the policy options and constraints facing Continental European policymakers are fundamentally different from those facing Anglo-Saxon policymakers. Consequently, policies that work in one setting cannot be simply emulated elsewhere. We present micro-simulation derived results for Belgium to illustrate some of these points. Policy options discussed and simulated include: higher minimum wages, reductions in employee social security contributions, tax relief for low-paid workers, and the implementation of a stylised version of the British Working Tax Credit. The latter measure has the strongest impact on in-work poverty but in settings where wages are compressed, as in Belgium, a severe trade-off between coverage and budgetary cost presents itself. The article concludes that looking beyond targeted measures to universal benefits and support for employment of carers may be important components of an overall policy package to tackle in-work poverty.negative income taxes, in-work poverty, low pay, in-work benefits

A care time benefit as a timely alternative for the non-working spouse compensation in the Belgian tax system

Over the past decades, the growing labour force participation of mothers has rendered the Belgian personal income tax system increasingly outdated. Especially the ‘marital quotient’ system - that allows spouses with monetary income to transfer part of their tax base to a spouse without monetary income - is no longer a tax allowance that compensates childcare efforts. It rather has become a subsidy to older cohorts for their past childcare efforts. As an alternative, we model in this article a system that is geared towards the effective care trajectories of nowadays parents. We thereby follow earlier ideas of Hilde Bojer, Patricia Apps and Ray Rees to reflect care efforts in the tax base of individuals. Following Bojer, we propose a system that incorporates a socially grounded amount of childcare time in household income, and simulate this with the Belgian microsimulation model MISIM. The amount relates to the number and age of children and can either be procured through childcare services or self-provision. In the proposed system both market- and self-provided care result in a similar ubsidy. We elaborate a monetary estimate of self-provided childcare on the basis of the detailed information of time use in the Flemish Family and Care Survey (2004-2005). For discussion we provide an overview of potential drawbacks and advantages and evaluate the redistributive impact of the simulated alternative.ground, childcare, tax system, static simulation

Šeimos išmokų reforma Lietuvoje: mikrosimuliacinė poveikio pajamų pasiskirstymui analizė

The paper explores to what extent the Lithuanian family benefit system is able to reduce inequality and poverty among families with children, with poverty reduction being one of the major aims. Family benefits underwent a major reform in2004, which entailed a shift from means-tested benefits to a more universal system. Due to budget constraints, the implementation of the full reform design has been postponed until 2008. No distributional impact analysis of this reform, either of its initial or of its final designs, has been implemented yet. Furthermore, we analyse whether the gains from the newly designed system of family benefits are not outweighed by respective losses in social assistance benefits. To conduct such an analysis, we develop a partial static microsimulation model based on the EU-SILC (household income and living conditions) survey. The model is programmed in STATA statistical software. Our findings show that, despite small income improvements brought by the reform, its overall child poverty reduction effectiveness is limited. Moreover, the interaction of a family benefit with the social assistance system implies that some household types are relatively “bigger” winners compared to others. For example, our research reveals that single-parent households would obtain income gains comparable to those of large families only when the full reform scenario is implemented. If considering indirect effects (i.e. the loss of social assistance benefits), their relative gains become even smaller.Šiame straipsnyje pristatoma mikrosimuliacinė 2004 m. pradėtos ir 2008 m. baigtos šeimos išmokų reformos poveikio pajamų pasiskirstymui analizė. Be tiesioginio reformos poveikio pradiniu ir galutiniu reformos etapais tiriama ir kaip pasikeitė šeimos išmokų gavėjų teisės į socialinės paramos išmokas. Tyrimui atlikti naudojama statinė mikrosimuliacinė analizė, paremta ES-PGS tyrimo 2005 m. mikroduomenimis. Remiantis pateikta analize galima teigti, kad įgyvendintos reformos galimybės sumažinti skurdą yra labai ribotos. Be to, tyrimas parodė kad, vienišų tėvų namų ūkių pajamos žymiau padidėjo tik iki galo įgyvendinus reformą ir santykinė šių namų ūkių gaunama nauda yra vidutiniškai mažesnė negu kitų namų ūkių dėl dažniau prarandamos socialinės paramos. Atitinkama situacija pastebima ir kaimų namų ūkiuose su vaikais

GINI DP 15: Can higher employment levels bring down poverty in the EU?

At the European level and in most EU member states, higher employment levels are seen as key to better poverty outcomes. But what can we expect the actual impact to be? Up until now shift-share analysis has been used to estimate the impact of rising employment on relative income poverty. This method has serious limitations. We propose a more sophisticated simulation model that builds on regression based estimates of employment probabilities and wages. We use this model to estimate the impact on relative income poverty of moving towards the Europe 2020 target of 75 percent of the working aged population in work. Two sensitivity checks are included: giving priority in job allocation to jobless households and imputing low instead of estimated wages. This article shows that employment growth does not necessarily result in lower relative poverty shares, a result that is largely consistent with observed outcomes over the past decade.

EWIGE - European Wealth data InteGration in EUROMOD JRC Working Papers on Taxation and Structural Reforms No 4/2017

The need for more comprehensive and integrated data on individual well-being is widely recognised. In order to identify better measures of economic performance in a complex economy and thus going Beyond GDP, Stiglitz, Sen and Fitoussi (2009) recommend to consider income, consumption and wealth and to give more prominence to their joint distribution. New household surveys as those developed as part of the Luxembourg Wealth Study and the Eurosystem Household Finance and Consumption Network (HFCS) represent a milestone in the ongoing process to better measure individual well-being. We explore the prospects for using the HFCS dataset as an underlying micro-database for the EU tax-benefit model, EUROMOD. The advantages of this process are twofold. On the one hand, as the HFCS only contains gross income amounts which are not suitable for redistributive analysis, we derive net incomes by simulating the gross-to-net transition with EUROMOD taking into account all important details of the social security and personal income system. On the other hand, we discuss the expansion of new policy domains introduced into the EUROMOD simulations such as wealth taxation, incentives for wealth accumulation and asset tests determining benefit eligibility.JRC.B.2-Fiscal Policy Analysi

The labour market position of second‑generation immigrants in Belgium. National Bank of Belgium Working Paper No. 285

Belgium has one of the largest gaps in labour market outcomes between natives and individuals of foreign origin. One might expect that the children of migrants (the so-called second generation) would perform better than the first generation, as they ought to have a better knowledge of the local language, better educational qualifications and greater opportunities for work experience in the domestic labour market. On the basis of data from the ad hoc module of 2008 Labour Force Survey (LFS) we find that employment rates for generation migrants in Belgium are hardly better than those for first generation migrants. This finding stands in marked contrast what is found in neighbouring countries. Using a unique combination of data sources, we examine the labour market position of second-generation migrants in more depth. We find considerable variation in labour market outcomes by country of origin and a Fairlie decomposition yields that education is an important explanatory factor of the employment rate gap. Yet there still remains a large unexplained part

Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits

The systems of direct taxes and cash benefits in the Member States of the European Union vary considerably in size and structure. We explore their direct impacts on cross-sectional income inequality (termed "redistributive effect" for the purpose of this paper) using EUROMOD, a tax-benefit microsimulation model for the European Union. This relies on harmonised household micro-data representative of each national population together with simulations of entitlements to cash benefits and liabilities for taxes and social contributions. It allows us to draw a more comprehensive – and comparable – picture of the combined effects of transfers and taxes than is usually possible. We decompose the redistributive effect of taxbenefit systems to assess and compare the effectiveness of individual policies at reducing income disparities. We derive results for the 15 "old" members of the European Union and present them for each country separately as well as for the EU-15 as a whole.Income inequality, Redistribution, Microsimulation, European Union

Welfare resilience at the onset of the COVID-19 pandemic in a selection of European countries: impact on public finance and household incomes

This paper assesses the impact on household incomes of the COVID-19 pandemic and governments’ policy responses in April 2020 in four large and severely hit EU countries: Belgium, Italy, Spain and the UK. We provide comparative evidence on the level of relative and absolute welfare resilience at the onset of the pandemic, by creating counterfactual scenarios using the European tax-benefit model EUROMOD combined with COVID-19-related household surveys and timely labor market data. We find that income poverty increased in all countries due to the pandemic while inequality remained broadly the same. Differences in the impact of policies across countries arose from four main sources: the asymmetric dimension of the shock by country, the different protection offered by each tax-benefit system, the diverse design of discretionary measures and differences in the household level circumstances and living arrangements of individuals at risk of income loss in each country