Why are Europe Workers Increasing in Poverty? (See the Charts)

The strongest economic growth in a decade, the highest unemployment on record — yet the latest data suggest that the share of EU workers in poverty has kept rising steadily since the financial crisis.

Eurostat data, fully updated only last week, showed that in 2017 one in 10 workers lived in a household below the poverty line, a figure unchanged since 2016 and the highest level recorded.

With EU jobs, wages and economic growth expected to slow next year, the prospects of creating higher-paying and stable jobs becomes more uncertain, potentially fuelling anti-establishment and populist protests such as the “yellow vest” demonstrations in France.

Many factors contribute to the inability of EU workers to achieve decent family income: not working enough hours, having a sole breadwinner, low pay, rising prices, and cuts in benefits by many governments.

Poverty has risen across most forms of job contracts, even among employees with good access to benefits and social protection.

But things are far worse for people not in standard full-time positions, who are three times as likely to be poor. In the EU, almost one in six workers in temporary and part-time jobs were at risk of poverty in 2017. The proportion rises to one in four for people with non-standard contracts, such as those who are self-employed.

“Very often self-employed people have only their own labour to sell and they are forced to sell [this] in conditions outside the protection a worker normally has,” said Esther Lynch, confederal secretary of the European Trade Union Confederation.

Not surprisingly, poverty among workers is higher in countries that were badly hit by the financial crisis. In 2017, about 13 per cent of workers in Spain and 12 per cent in Italy were at risk of poverty, largely as a result of underemployment.

Last year almost two-thirds of part-timers in Italy and Spain wanted a full-time job but could not find one. France also has an above EU average share of these “involuntary part-timers”. In all three countries, temporary work is more common than the EU average.

Even in wealthy Germany the share of workers at risk of poverty has almost doubled since 2005, to 9.1 per cent — a similar figure to the EU average and the fastest increase of all major EU economies.

Henning Lohmann, of the University of Hamburg, links the in-work poverty rise to the increase of German part-timers, largely associated with a 2003 labour market reform introduced for greater flexibility.

Christian Odendahl, chief economist at the Centre for European Reform, points to Germany having the highest share of low-paying jobs among the EU’s larger economies, resulting from a process of contracting out production processes and weakened trade union membership.

In the UK, 8.9 per cent of workers were at risk of poverty in 2017, a level that has been largely stable during the past decade. Experts say the figure is down to factors including wage stagnation, the post-financial crisis rise in self-employment, high childcare and housing costs.

Childcare “remains a significant barrier to employment”, said Professor Rod Hick at Cardiff University. “It is no surprise that families with children are among those who struggle to exit poverty as they enter work.”

The ratio of UK house prices to earnings is close to its highest level since 1983.

Article source: https://www.ft.com/content/a8d292e0-e8d9-11e8-a34c-663b3f553b35

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