The European Union uses several indicators to assess the risk of poverty and social exclusion. This article will show, by means of the two most relevant indicators, how the risk of poverty and social exclusion among older people is divided between the EU Member States.
About the author
Karel Van den Bosch obtained a Master’s degree in Sociology at the University of Nijmegen and acquired a PhD in Political and Social Sciences at the Antwerp University. He works as a socioeconomic researcher at the Federal Belgian Planning Bureau and is also affiliated with the Herman Deleeck Centre for Social Policy (CSB) at the University of Antwerp. His research work concerns empirical studies on poverty, long term care and social policy. This article was written as part of his work at CSB and falls outside the area of responsibility of the Federal Belgian Planning Bureau.
Translation: Angelique van Vondelen
What is poverty in the EU?
Poverty is a delicate notion, also within the European Union (EU), and a multi-faceted phenomenon that exists in various forms. The European Commission, therefore, rather speaks of “the risk of poverty and social exclusion”. This concept however, which is broader but also more vague, is linked to a very concrete goal, namely to reduce the number of people who are, or tend to become, “at risk of poverty and social exclusion” within the Union by 20 million. This is a decline of nearly 17,5%. Unfortunately, since 2010 poverty levels have risen instead of decreased, by which it becomes clear that the target will not be reached.
An important advantage of the EU2020-target with regard to the risk of poverty and social exclusion is that it is based on three concrete indicators, two of which are relevant for older people (the third concerns low work intensity).
The risk of monetary poverty, that is to say, a disposable household income which is less than 60% of the national median income per country. These incomes are corrected for the number of people within the household.
Severe material deprivation: this refers to households that cannot afford at least four out of the following nine items: unexpected financial expenses, one week’s holiday away from home, household bills (rent, mortgage, utilities), a meal containing meat/fish every second day, heating to keep the home sufficiently warm, a washing machine, a colour TV, a telephone, a personal car.
The data for these calculations are derived from the EU Study of Income and Living Conditions (EU-SILC), which are annually collected by means of randomized surveys in all EU Member States. An important deficiency in the EU-SILC data, however, is that people who live in collective households, such as care homes or residential homes for older people, are not included in the surveys.
Countries in which people are largely at risk of monetary poverty
First of all, we take a look at the first indicator, the risk of monetary poverty. Figure 1 (blue bars) shows that of the Dutch older population hardly 6% is at risk of poverty, whereas for their Belgian contemporaries this percentage is no less than 18%. The Netherlands belongs, together with Luxembourg, Czech Republic, Slovakia and Hungary, to the countries in the EU with the lowest risk of poverty among the older generation. In Belgium, on the other hand, the risk is higher than the average for the EU28. This is also the case in several South- and Central-European Member States, the Baltic countries and Bulgaria, but - perhaps surprisingly - we see this as well in welfare states such as Germany, Austria, Sweden and Finland. We should not forget, however, that the poverty threshold – the specific income level below which people live in poverty – varies strongly between the countries in the EU: From € 12,900 for a single person in Belgium, and similar or higher amounts in the Netherlands and surrounding countries as well as in Scandinavia, to € 5,000 in Greece, € 2,800 in Latvia and Lithuania and only € 1,800 in Bulgaria and € 1,200 in Romania. In other words, the reality below the poverty threshold is totally different in the rich North-Western European countries from that in the much poorer countries in the South and, especially, the East. According to some people, it would therefore be better in this respect not to speak of (a risk of ) poverty, but rather of the extent to which countries succeed to lift households with the lowest incomes to a level that is not too far below the average national income. Or, in other words, the percentages in figure 1 indicate to which extent older people with the lowest incomes can share in the general prosperity of their country.
The red line in figure 1 indicates whether the risk of poverty for older people is higher or lower in comparison with the population under 65. In the Netherlands, roughly within the EU and in most countries the latter is the case. Because of extensive pension systems (private or by the government), the era in which the older generation was automatically at risk of poverty is far behind us. In the Netherlands, because of the AOW (Dutch government pension scheme), there are not many older people with an income below the poverty threshold. Belgium, however, belongs with Austria, Sweden, Finland, the UK, Cyprus, Slovenia, Croatia, Estonia and Bulgaria to a minority group of countries that show a higher risk of poverty for older people than for those under 65. The older generation in Belgium has, on average, a relatively low income when compared to the Netherlands and other neighbouring countries. In some respects, the pension system in Belgium has not been adapted to the demands of society today: the Belgian Committee on Pension reforms has therefore recently published a series of propositions to modernise the pension system.
Alternative forms of cohabitation also play an important part in explaining the differences between the countries: whereas most older people in North- and West-Europe live alone or as couples without children, in South- and East-Europe many older people live together with their adult children. In those countries, this probably has a mitigating effect on the percentage of older people that are at risk of poverty. However, the solidarity between adult children and their parents could work both ways: many employed children support their retired parents but, the other way round, we also see that many unemployed youngsters live with their parents because they are unable to start an independent household.
Severe material deprivation dominant in the new EU countries
The percentage of older people at risk of severe material deprivation is very small, both in the Netherlands and in Belgium (figure 2); this is also true for the other rich countries in North- and West-Europe. A much higher percentage can be found in South- and East-Europe, especially in Latvia, Romania and Bulgaria; in the latter country more than half of the older population is living in severely deprived conditions. Whereas the risk of monetary poverty for older people refers to the relative income position of people over 65 in a country, material deprivation is influenced by absolute purchasing power and depends strongly on the average living standards in a country. Because of this, older people in countries such as Hungary and Slovakia show a low risk of monetary poverty and a relatively high risk of severe material deprivation at the same time. These two indicators are therefore complementary. We can see that in almost all EU-countries (with the exception of a few countries in East-Europe) older people are less susceptible to material deprivation than people under 65. This is also true for several countries where the risk of monetary poverty is higher for the older generation than for the younger, as is the case in Belgium. Various aspects play a role. In the first place, many older people - also those who have a low income – have paid off the mortgage on their house. As a result, their spending power is in fact higher than that of younger families with a similar income that pay rent or still have to pay off their mortgage. Secondly, it appears that the number of older people that do not own a car or do not take a week’s holiday away from home is more or less the same as that of the under 65s. The older people claim, however, that this has nothing to do with financial difficulties but is rather based on other reasons. A decline in health could be a possible factor.
Poverty and deprivation among older people in Europe: a summary
It has become clear that the poverty circumstances among the older generation in the EU differ considerably between countries. They also differ among countries that are situated within the same European region, or countries that share a similar socioeconomic system and level of prosperity. Even so, it is possible to describe a general outline. Firstly, in most countries the risk of poverty among the older generation is lower than for the population under 65. This is even more so for the risk of severe material deprivation. Secondly, whichever indicator is used, the situation of older people in Bulgaria and some of the Baltic states is most precarious.