11:16 p.m.
Wednesday, 22 November 2017

Household incomes have declined and the risk of poverty or exclusion in Europe is on the rise

San Diego, California.- After five years of economic crisis and the return of a recession in 2012, unemployment is hitting new peaks not seen for almost twenty years, household incomes have declined and the risk of poverty or exclusion is on the rise, especially in Member States in Southern and Eastern Europe, according to the 2012 edition of the Employment and Social Developments in Europe Review.

The impact of the crisis on the social situation has now become more acute as the initial protective effects of lower tax receipts and higher levels of spending on social benefits (so-called "automatic stabilisers") have weakened.

A new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes and those that have so far shown good or at least some resilience. The latter tend to have better-functioning labour markets and more robust welfare systems.

"2012 has been another very bad year for Europe in terms of unemployment and the deteriorating social situation", commented European Commissioner for Employment, Social Affairs and Inclusion László Andor.

"But our analysis shows how appropriate labour market reforms and improvements in the design of welfare systems can increase Member States' resilience to economic shocks and facilitate faster exit from the crisis.

Moreover, it is unlikely that Europe will see much socio-economic improvement in 2013 unless it achieves greater progress also on credibly resolving the euro crisis, finding resources for much needed investment, including in people’s skills, employability and social inclusion and making finance work for the real economy."

Growing eurozone divergence

The average EU unemployment rate climbed to almost 11%. The report confirms a new pattern of divergence, which is most striking between the North and the South of the eurozone. The unemployment rate gap between these two areas was 3.5 points in 2000, fell to zero in 2007 but then has widened fast to 7.5 points in 2011. Outside the eurozone the divergence, though also growing, is significantly smaller.

This worrying trend points to an urgent need for finding more effective mechanisms of macroeconomic stabilisation, reflected also by the ongoing debate on a deep and genuine economic and monetary union. The analysis also shows that in Member States which had undergone substantial reforms to make their labour markets more dynamic, the unemployed have maintained much better chances of finding a new job even during the crisis years. Such reforms are called for by the Commission's April 2012 Employment Package, the 2013 Annual Growth Survey and will be looked at in detail as part of the 2013 European Semester and its country-specific recommendations.

Declining household incomes, long-term exclusion risks

Risks of entering and escaping poverty vary greatly across Member States. Some population groups are affected more: young adults, unemployed women and single mothers are among those facing higher risks of persistent poverty. The absence of tangible recovery has put under pressure household incomes in the majority of Member States and increased the risks of long-term exclusion.

Real gross household disposable income declined between 2009 and 2011 in two-thirds of EU countries for which data is available, with the largest drops recorded in Greece (17%), Spain (8%), Cyprus (7%) and Estonia and Ireland (5%). This evolution is in stark contrast with the situation observed in the Nordic countries, Germany, Poland and France where welfare systems and more resilient labour markets have allowed overall incomes to continue increasing during the crisis. The continuing crisis is however increasing the risks of long-term exclusion everywhere.

To prevent rising poverty and long-term exclusion from becoming entrenched, policies need to be tailored to specific country situations and population groups most at risk. In early 2013 the Commission will issue a Social Investment Package with guidance to the Member States for putting in place adequate, sustainable and effective social policies that strengthen human capital and social cohesion in the face of increasing pressure on private and public resources to tackle these challenges.

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