Poverty risk among working-age people in Spain

Report

Poverty risk among working-age people in Spain

Aroa Tejero, Fermín López Rodríguez and Rodolfo Gutiérrez, University of Oviedo;
Project selected in the Call to support research projects on social inequality (LL2020_5)

The Great Recession altered the traditional pattern of poverty risk among both working-age and potentially inactive age people in Spain. The former group had a significantly higher poverty risk than the latter throughout the course of the last decade. The subsequent recovery cycle barely corrected this differential, and everything indicates that the pandemic crisis has reinforced it. This paper analyses poverty among all working-age individuals in Spain, distinguishing them by their activity status, and it demonstrates that the level and intensity of poverty are primarily associated with two factors: on the one hand, the lack of work of individuals (especially unemployment) and incomplete work participation of households and, on the other hand, the extent of social transfers and their compatibility with work income. The results provide useful evidence in order to discuss the most appropriate policies to reduce the poverty risk of working-age people (specifically the importance of combining work income with various social transfers), and they also show which are the most effective in achieving this goal.
Key points
  • 1
       The poverty risk among working-age people rose by 20% during the Great Recession, while among people of potentially inactive age it fell by 35%.
  • 2
       The poverty risk among the employed is moderately high in Spain when compared to the rest of Europe (11.5% among wage earners and 22% among the self-employed).
  • 3
       Nonetheless, people without work account for more than 50% of the poverty risk of the working-age population in Spain because of the extent of unemployment.
  • 4
       Having a job involves more than protection against financial risks: it bridges the income poverty gap and also reduces other material and subjective risks.
  • 5
       The poverty risk is concentrated in households with incomplete work participation: almost half of poor households have low work participation, with a rate of 64.3%.
  • 6
       Spain’s social protection system makes it difficult to combine work income and transfers at the level of individuals.
  • 7
       Households with incomplete work participation benefit from a combination of wage income and social transfers, displaying as they do a lower poverty risk and poverty gap than those living on wage income alone.
  • 8
       Social transfers reduce the poverty risk and poverty gap for low work intensity households by 26% and 46.5% respectively.
  • 9
       High work intensity households cannot reduce their poverty risk through increased work participation.
Incomplete work intensity households have lower poverty risk and poverty gap when combining wage income and social transfers
Incomplete work intensity households have lower poverty risk and poverty gap when combining wage income and social transfers

At-risk-of-poverty rate and poverty gap of medium and low work intensity households by income breakdown.
 

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