Benefit levels for working-age people have been falling relative to average living standards in almost every European Union country in recent decades, according to the latest paper from a large-scale research project on poverty and inequality.
The researchers examined trends in minimum income guarantees for able-bodied persons of working age in the EU (together with Norway and three American states). The degree of benefits erosion was measured by three indicators: real benefit trends, benefit trends relative to average wages, and benefit trends relative to median equivalent income.
- Not all EU countries have safety net systems for all those in need – for example, Greece and Hungary have no comprehensive minimum income schemes for able-bodied people of working age.
- Minimum income protection arrangements are inadequate almost everywhere, if measured by the standard set by the European Parliament – that is, 60 per cent of median equivalent income.
- The broad picture over the period examined (1992–2009) is one of eroding benefit levels relative to the general living standard.
- In the 1990s benefit levels declined almost everywhere. The decline since then has continued, though less uniformly.
- In countries where benefits have kept pace with general living standards, this has generally been because of ad hoc increases rather than statutory indexation mechanisms.
The researchers point out that linking benefit levels directly to changes in median household income seems an obvious policy option if measures of relative income poverty are used to assess the adequacy of minimum income protection. Other possible benchmarks include a minimum budget standard, possibly in combination with more regular adjustments on the basis of price or wages indexes. But it is important to ensure that the basket of goods and services accurately reflects underlying views on a decent minimum standard of life: if not, there is a real danger that rebasing might be used to decrease the level of minimum income protection.
Source: Natascha Van Mechelen and Sarah Marchal, Struggle for Life: Social Assistance Benefits, 1992–2009, Discussion Paper 55, GINI Project (European Commission)