The household distribution of jobs: Opening up a new perspective on work and poverty in Europe Wiemer Salverda AIAS and AMCIS, U. of Amsterdam Conference on Dual labour markets, minimum wage and inequalities IBS, Warsaw 8-9 October 2014
Lay out • 1. Background of growing inequality • 2. The concept of in-work poverty • 3. A growing complexity • 4. The distribution of workers over households • 5. Ensuing interhousehold job competition: Combination scenarios • 6. Policy implications
1. Growing inequalities • The top-incomes project, the OECD, and the GINI research project all find growing inequality in many countries • Below the surface of inequality there are also significant tectonics (irrespective of inequality growth): labour incomes are important at the top, and they also seem to be moving upwards over the distribution • Household joblessness needs to be taken into account (drawing zeros in the jobs lottery)
Labour households concentrate towards the top of the income distribution EST Fraction (%) of labour households within income deciles; EU, 2009 LVA 100 SWE SVN LTU BEL 80 SVK DEU FIN DNK 60 BGR ROM POL HUN NLD 40 LUX PRT ESP UK 20 AUT CZE FRA GRC 0 ITA D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 Average Calculations on SILC 2010
Individual employment growth benefits households less Employment rates (%): Individuals versus Households; UK, 1978-2005 80 78 76 74 72 70 68 66 64 62 60 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 household personal Blundell and Etheridge, RED, 2010
2. Concept of in-work poverty • Poverty is leading; it is defined by needs of the worker’s household, depending on household composition • There are different definitions of poverty – here the standard 60% of the median will be used; it is annual, after tax and equivalised • Earnings are before tax and shall be annual and summed over individual household members • Annual earnings result from the level of (hourly) pay times the hours worked during the year • Individual earnings are not necessarily low, and in-work poverty low pay (US max k$52)
3. Growing complexity • Households are changing: Increasing shares of singles in many countries • Tax treatment is (always) subject to change • Individual pre-tax hourly pay gets more unequal • Growth in part-time work affects the distribution of working hours over individuals • The distribution of hours & earners shifts over households: Demise of the single breadwinner and rise of jobless households • Individual (hourly) earnings and household (annual) incomes: A tale of two literatures
Individual low pay is more frequent than in-work poverty, implying low pay in other households Incidence (%) among all employees of low pay and in-work poverty; EU, 2010 30 25 20 15 10 5 0 EU-28 EA-18 BEL BGR CZE DNK DEU EST IRL GRC ESP FRA HRV ITA CYP LVA LTU LUX HUN MLT NLD AUT POL PRT ROM SVN SVK FIN SWE UK Low-wage incidence In-work poverty employees Eurostat, SES 2010 and SILC
4. Workers and households • Workers scatter over single-, dual- and multi- earner households • This distribution is strongly skewed over annual household earnings • Tectonics of (labour in) the income distribution depend on the combining of earnings
Household-earner types distribution is skewed; dual- and multi-earners trump single earners Shares of households within deciles of hh earnings; EU avg., 2009 100% 47% 15% 17% 22% 29% 80% 40% 50% 19% 24% 14% 62% 11% 72% 60% 82% 7% 89% 9% 5% 45% 40% 3% 64% 63% 61% 60% 2% 53% 45% 20% 36% 1% 26% 1% 17% 11% 0% 1 2 3 4 5 6 7 8 9 10 Single earners Multiple earners Dual earners Calculations on SILC 2010 Poland: 11% multi-earners; 22% single-earners at top-10%
Employees distribution by household-earner types is strongly skewed Shares of employees over deciles of hh earnings, EU avg., 2009 13,8 13,1 0,7 12,3 0,8 11,5 1,0 10,4 1,5 9,5 6,1 4,8 3,6 2,2 8,5 2,6 7,7 2,8 6,8 1,6 3,6 5,6 1,0 4,3 0,6 5,0 7,7 7,5 7,4 7,0 6,6 0,3 4,8 5,7 4,4 0,1 3,1 1,7 0,1 0,7 1 2 3 4 5 6 7 8 9 10 Dual earners Multiple earners Single earners Calculations on SILC 2010 Single 27%, dual 52%; multi 21%; Poland very similar
5. Interhousehold job competition • Additional earners in households pursue combination scenario(s), holding part-time and/or low-paid jobs, and competing on different terms • Such jobs are often found at low occupational levels, where low-skilled labour supply needs full- time employment for a living – thus stimulating in-work poverty or joblessness • At same time additional earners also reduce in- work poverty, for their own types
More-earners link to lower individual earnings than single earners (here at the top) Dual- and multiple-earner pay, as % of single earner pay, top 10%; EU, 2009 90 80 70 60 50 40 30 20 10 0 AUT BEL BGR CZE DEU DNK EST ESP FIN FRA GRC HUN IRL ITA LTU LUX LVA NLD POL PRT ROM SWE SVN SVK UK Avg Dual: household average Multiple: household average Dual: main earner Multiple: main earner Calculations on SILC 2010
Low-paid (hourly) workers found up to the top (10-year older figures, unfortunately) Households with low-paid jobs over deciles, by FT/PT; all low-pay hh = 100 20 Total percentage of households with a low-paid worker NLD DEU DNK 17 22 15 15 8 10 3 8 7 8 9 5 9 1 5 5 7 7 8 8 7 9 1 2 7 5 4 1 1 7 9 8 1 5 4 4 5 4 3 3 5 5 5 5 5 2 3 4 1 3 3 1 3 2 2 2 2 3 2 3 1 1 0 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 NLD DEU DNK FT only PT+FT PT only Calculations on ECHP
Part-time employees are found up to the top Shares of employees within deciles of hh earnings, by PT/FT, EU avg., 2009 100% 1% 2% 1% 2% 3% 4% 5% 6% 4% 6% 4% 3% 7% 2% 11% 1% 1% 1% 25% 10% 12% 14% 16% 17% 18% 16% 14% 7% 80% 0% 5% 14% 16% 20% 27% 60% 37% 46% 17% 14% 56% 10% 66% 7% 71% 40% 4% 64% 3% 2% 47% 46% 47% 43% 20% 37% 1% 31% 24% 1% 16% 0% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 Single earner PT Multiple earners PT Dual earners PT Single earners FT Multiple earners FT Dual earners FT PT % employees PT % households Calculations on SILC 2010 Poland less part-time (at bottom) but rest equally spread
Poverty is very high among single earners but much reduced among dual- and multi-earners Poor households (%) among household earner types; EU 2009 24 21 18 15 12 9 6 3 0 AUT BEL BGR CZE DEU DNK EST ESP FIN FRA GRC HUN IRL ITA LTU LUX LTV NLD POL PRT ROM SWE SVN SVK UK AVG Single earners Dual earners Multiple earners Calculations on SILC 2010
6. Policy implications (1) • To the extent that low-paid workers are present all over the income distribution, augmenting the minimum wage or lowering its taxation as a social policy, will not reduce inequality • As taxation is on annual earnings, similar effects may result from part-time employment, even if it is better paid by the hour • This blunts redistributive tools aimed at lowering (in-work) poverty – which may have worked in a single-earner world; money spent will be substantial and largely ineffective
6. Policy implications (2) • ‘Additional’ low -wage /part-time work diminishes employment (hours) chances for low-skilled • To mend this an Earned Income Tax Credit (EITC, USA) is cheaper and more effective, as it focuses directly on households in need that may get a part-time job or a too-low-paid job only • An adequate minimum wage will keep the costs of EITC in check, and can still also serve fairness in the labour market and at the work place. • Now is the chance for EU, with a MW in Germany
Further reading • Eric Crettaz. Fighting Working Poverty in Post-industrial Economies: Causes, Trade-offs and Policy Solutions. Edward Elgar, 2011. • Salverda and Haas. “Earnings , Employment and Income Inequality”. In: Salverda, Nolan et al., editors. Changing Inequalities in Rich Countries: Analytical and Comparative Perspectives. Ch.3. Oxford University Press, 2014. • Salverda and Checchi. “Labour -market Institutions and the Dispersion of Wage Earnings”. In : Atkinson and Bourguignon, editors. Handbook of Income Distribution . Volume 2B, Ch. 18. Elsevier/North Holland (forthcoming). [http://ftp.iza.org/dp8220.pdf] • GINI project: www.gini-research.org
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