The intergenerational equity debate
Despite growing public concern regarding the evolution of youth unemployment and its impact on this age group’s purchasing power, no comparison is usually made between the economic situation of young people and that of other age groups, such as people over 64 or children. Public opinion and social scientists alike have paid very limited attention to the possibility that poverty rates among young people and among people aged over 64 are diverging in contemporary Europe. Thus, due to a fundamentally philosophical and policy-oriented focus (Myles, 2002; Preston, 1984), the social sciences bibliography on intergenerational equity has inspired few empirical studies (for one exception, see Brady 2004). This means that we have limited knowledge regarding the comparative evolution of child poverty and elderly poverty.
Firstly, to date there has been no empirical examination of possible changes in poverty rates over the course of time. This is important because, even though there may be strong correlation between the poverty levels of different groups, the rates may have evolved in opposite directions, causing a net divergence. Secondly, the socio-political and economic context has varied substantially since the financial crisis of 2008. On the one hand, the economic crisis has eroded the income and financial security of young people and of parents with young children, which may have resulted in an increase in child and youth poverty. On the other, the provisions of public pension systems, the main source of income for people aged over 64 in European countries, have remained stable or have suffered cuts apparently smaller than the fall in income of the active population groups. Therefore, the combination of a harsh employment and wages crisis and the containment of economic costs for people aged over 64 may have led to opposing tendencies in child poverty rates and those of pensioners.
1. Income and poverty
Most studies on poverty share the aim of identifying the population that suffers a high level of financial insecurity understood as objective monetary deprivation, and define the condition of poverty in relative terms (Requena et al., 2013). The aim consists of delimiting which level of income ensures a minimum standard of living necessary for full participation in a given society. Following this approach, here we use the predominant indicator of relative poverty: people with equivalised disposable incomes below 60% of the national median (Eurostat 2016a), i.e., below 60% of those incomes occupying the mid position among all incomes when arranged in order. For equivalised incomes, the income of each household member takes into account lower consumption by children and the reduction in costs per capita in various services (for example, heating) as household size increases.
It is instructive to consider what 60% of the national median equivalised income actually means in value terms. According to data from Eurostat (2016b), in 2015 the median equivalised incomes for Spain and for the entire euro area (EU-18) were 13,352 euros and 17,794 euros respectively. Therefore, the relative poverty threshold (60% of the median) in 2015 stood at 668 euros per month per person. If we take into account the cost of living and the growing range of goods and services considered essential for full social inclusion, it becomes clear that monthly incomes below 670 euros per person are a severe obstacle to their participation in the country’s social and economic life. In fact, Spain’s minimum salary for 2016 was set at 764 euros per month.
The aim of this study consists of contrasting the evolution over the years of rates of child poverty (affecting people aged up to 15 years), youth poverty (the population aged between 16 and 24 years) and elderly poverty (people aged over 64 years), in a comparative and longitudinal perspective over the years. In line with Eurostat operationalisation (2016a), poverty refers to the situation of the population living below the previously-defined threshold. Moreover, due to this article’s interest in analysing differences in the evolution of child poverty¸ youth poverty and elderly poverty, the rest of the study will be based on analysis of two ratios. Both respond to simple calculations: the percentage of child (or youth) population below the relative poverty threshold divided by the percentage of elderly (aged over 64 years) population below the relative poverty threshold. According to this definition, a child poverty ratio lower than 1 indicates that children under 16 are suffering levels of relative monetary deprivation lower than those of older people aged over 64 years, and a value greater than 1 indicates that children under 16 are suffering higher levels of relative monetary deprivation than people aged over 64 years.
2. Intergenerational justice, a long way off
Figure 1 reflects the child and youth poverty ratios in the main European countries using data relating to 2015.
With respect to the child poverty ratio, it is clear that nearly all countries present a value higher than 1. This indicates that in the majority of countries, the poverty rate is higher among minors than among people aged over 64. To put it another way, with the exception of Sweden, the Baltic countries, Slovenia and Bulgaria, financial insecurity is currently much more common among under children under 16 than among retired people.
A similar pattern is appreciated when analysing the youth poverty rate. In the same countries (this time including Sweden), youth poverty is higher than elderly poverty. This evidence suggests that at this stage in history, European welfare systems – which include the labour market, social protection systems and family support networks – are not complying with the basic principle of intergenerational justice, according to which all age groups should enjoy equivalent levels of economic wellbeing.
The maps shown in Figure 1 not only reveal that poverty among children and young people is more widespread than among the elderly, they also indicate substantial differences in the poverty indexes of the different countries. A certain coincidence exists in the values of the two ratios. Countries with greater relative infra-protection of children with respect to elderly people are usually those presenting greater relative infra-protection of young people with respect to elderly people. In this respect, notable cases are those of the Netherlands, Spain, France and, to a lesser extent, Norway. In the Netherlands, child and youth poverty rates are respectively almost three-fold and five-fold the poverty rates among elderly people. In Spain, child poverty and youth poverty are respectively double and triple the elderly poverty rate. At a certain distance, France also stands out for its infra-protection of children and young people. While the Netherlands, Spain and France have economic wellbeing differentials that are a long way off from the principle of intergenerational justice, other countries come closer to complying with this principle. Germany, Austria, Belgium and Rumania achieve similar degrees of economic security between age groups.
If we take into account the fact that (a), in today’s Europe, poverty more often affects children and young people than elderly people, and that (b), significant international differences exist in the protection by age group differential, it becomes essential to examine the recent evolution of relative deprivation indexes. Is the infra-protection of children and young people a purely recent phenomenon, resulting from the major economic crisis that began in 2008? To respond to these questions, it is necessary to analyse the evolution of child and youth poverty ratios since at least 2005.
Figure 2, which considers the six most populated countries of the European Union and cases representative of different welfare systems (Esping-Andersen, 1999), sheds some light on these questions. For the entire EU-27, childhood and youth poverty ratios have increased, which creates a divergence in poverty rates. In fact, for many countries, the level of infra-protection has been inverted, so now young people and children are the most affected by economic insecurity. If we analyse the poverty ratios in more detail, three groups of countries can be discerned.
In the first group, the ratios have doubled, or nearly so. This is the case in France, the United Kingdom, Greece and, very especially, Spain. In all these countries, the clear impact of the economic crisis can be discerned: since 2008, the differential in poverty rates among children and young people has increased considerably with respect to that of elderly people. In a second group of countries, the ratios have increased moderately. This is the case in Poland and Italy, where the impact of the economic crisis is less clear. In a third group of countries, child and youth poverty rates have fallen. This is the situation for Germany and Sweden.
What specific patterns of poverty rates by age group might have led to such pronounced international variations in poverty ratios? The evolution of poverty rates and the median equivalised income by age groups offer preliminary indications in this respect.
Figure 3 reflects the series used for the construction of the poverty ratios: the poverty rates for children, young people and people aged over 64. With respect to those countries with a clear divergence in poverty levels (Spain, France, Greece, United Kingdom and Italy), the origin is clear: an important increase in child and youth poverty, with a substantial decrease in elderly poverty. The stability in the poverty ratio in another group of countries (Germany, Poland and Sweden) stems from a stable differential in the economic insecurity of children, young people and people aged over 64. Although a net divergence is not appreciable in all the European countries, in those mentioned in the first group the tendency is so intense that it produces divergence in the whole of the European Union.
If we examine the evolution of median incomes, both nominal (those received at a given time and that include inflation) and equivalised incomes of the three age groups, we can see that the crisis and institutional responses to it have not had uniform consequences for the purchasing power of the three age groups. Thus, incomes of young people and adults in age groups with a higher probability of young children living in the household have increased less than those of people aged over 64. On the one hand, increased unemployment and the internal devaluation associated with falls in real salaries have produced real falls in the incomes of young people and parents with young children in countries such as Spain and Greece, or very modest increases in their incomes in the United Kingdom and Italy (Figure 4).
On the other, there are indications that the main reforms in pensions systems approved in Europe since 2008 have not, in the short term, significantly reduced the coverage of these provisions or the value of the average pension. Thus, the incomes of people aged over 64 have not decreased substantially since 2008. Furthermore, in at least eight major European economies, and in the European Union as a whole, median incomes for the population aged over 64 years have increased more than the incomes of young people and those of people at an age of having young children in the household (Figure 4).
The principle of equity in rights and opportunities, widely shared among Western societies, says that the major economically dependent population groups should enjoy equivalent levels of economic and social protection. Few citizens would question the assumption that children, young people and the elderly are economic dependents and, therefore, that their economic security deserves support. However, this study demonstrates that, since 2008, European societies have not been distributing economic risks in a way consistent with the principle of intergenerational equity.
The analysis performed leads us to three major conclusions. The first, that currently and in the majority of European countries, the probability of having a purchasing power that prevents full participation in society is greater among children and young people than among pensioners. The degree of infra-protection of minors and young people is especially pronounced in the Netherlands, Spain and France. The second conclusion is that, when a longitudinal perspective is adopted, we can confirm that the infra-protection of minors and young people has increased over the course of the last decade. In other words, in Europe the relative poverty of the young and of people aged over 64 is diverging. This divergence was already appreciable in 2005, but it has accelerated since the start of the global economic crisis in 2008. And thirdly, an exploration of poverty rates by age groups indicates that the divergence mentioned stems from opposing tendencies according to age group. Since 2005, child and youth poverty has increased in various countries, whereas the poverty of people aged over 64 shows the opposite tendency, having decreased in the majority of countries.
The results of this strictly descriptive study have clear collective implications: European societies should pay more attention to the problem of child and youth poverty. Although voices have emerged since 2008 and efforts have been made to improve quality of life for young adults, as yet little awareness exists in European countries regarding the increase in poverty in the particularly vulnerable group represented by children. It is a collective duty to highlight how increased child and youth poverty in Europe is severely jeopardising life opportunities and the quality of human capital of future generations. Furthermore, if (and only if) the divergence in poverty rates by age groups is prolonged over time, intergenerational inequity could become a new structural problem in European societies.
Juan J. Fernández
Associate Professor, Department of Social Sciences, Carlos III University, Madrid.
Brady, D. (2004): “Reconsidering the Divergence between Elderly, Child, and Overall Poverty”, Research on Aging, 26.
Esping-Andersen, G. (1999): The Social Foundations of Post-industrial Economies, Oxford: Oxford University Press.
Eurostat (2016a): “People at Risk of Poverty or Social Exclusion by Age and Sex”, Eurostat.
Eurostat (2016b): “Mean and Median Income by Household Type – EU-SILC Survey”, Eurostat.
Myles, J. (2002): “A New Social Contract for the Elderly?”, in G. Esping-Andersen (ed.): Why We Need a New Welfare State, Oxford: Oxford University Press.
Preston, S. (1984): “Children and the Elderly: Divergent Paths for America’s Dependents”, Demography, 21.
Requena, M., L. Salazar and J. Radl (2013): Estratificación social, Madrid: McGraw-Hill.
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