Poverty, the Social Safety Net and the Great Recession

Hilary Hoynes (UC Berkeley)

Discussion: Paolo Pinotti (Bocconi)

October 15, 2014

Summary

• Great Recession (GR) unemployment, by group– stronger effect on black males, low-skilled, youth

• the safety net in the US1. 1996 reform from ‘out-of-work’ to ‘in-work’ assistance

• incentives to labor market participation and employmentduring expansionary periods

• holes during recessions?

2. policy adjustments during GR: extendedunemployment benefits, food stamps

• the GR compared to previous recessions– stronger increase in extreme poverty (because of 1.)

– weaker increase in poverty (because of 2.)

Outline of discussion

• GR unemployment– the evidence from the US: age or education effects?

– comparison US vs. Italy/Europe

• GR poverty in Italy and Europe– differential effects by age and education

• the safety net across countries– the «holes» in (some) European countries: dualism

and the generation gap

GR unemploymentage effects in the US

Age or education effects?

GR unemploymentage effects in Italy vs. US

01

23

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59Age category

United States Italy

Notes: data from harmonized OECD-LFS, methodology as in Hoynes et al. (2012)

GR unemploymentage effects across countries

0.5

11

.52

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Anglo-Saxon countries (USA, UK, AUS, CAN)

0.5

11

.52

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Continental Europe (DEU, FRA, BEL, NLD)0

.51

1.5

2

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Southern Europe (POR, ITA, ESP, GRE)

0.5

11

.52

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Scandinavian countries (SWE, DNK, NOR, FIN)

Notes: data from harmonized OECD-LFS, methodology as in Hoynes et al. (2012)

Unemployment ratescross country evidence, 2001-2013

0.1

.2.3

2001 2003 2005 2007 2009 2011 2013

15-34 35-44 45-54 55-64

Anglo-Saxon countries

0.1

.2.3

2001 2003 2005 2007 2009 2011 2013

15-34 35-44 45-54 55-64

Continental Europe

0.1

.2.3

2001 2003 2005 2007 2009 2011 2013

15-34 35-44 45-54 55-64

Southern Europe

0.1

.2.3

2001 2003 2005 2007 2009 2011 2013

15-34 35-44 45-54 55-64

Scandinavian countries

Notes: data from harmonized OECD-LFS

The safety net in OECD countriesbefore GR (2005)

Notes: data from OECD Social Expenditure Database (SOCX)

0

5

10

15

20

25

30

35

Social Expenditure in OECD countries (%GDP)

social security health active labor market policies unemployment benefits other programs

The safety net in OECD countriesduring GR (change 2005-2009)

-1

-0,5

0

0,5

1

1,5

2

2,5

Change in Social Expenditure in OECD countries (% GDP), period 2005-2009

unemployment + active labour market programmes pensions

Notes: data from OECD Social Expenditure Database (SOCX)

The safety net, age profileyear 2012

Notes: EU-SILC microdata

200

400

600

800

100

0

une

mpl. b

en

efits

.02

.04

.06

.08

.1

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Austria

02

00

400

600

800

100

0

une

mpl. b

en

efits

.02

.04

.06

.08

.1

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Germany

05

00

100

01

50

0

une

mpl. b

en

efits

0

.05

.1.1

5

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

France

02

00

400

600

800

une

mpl. b

en

efits

0

.05

.1.1

5.2

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Italy

05

01

00

150

200

250

une

mpl. b

en

efits

0.1

.2.3

.4

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Greece

01

00

200

300

400

une

mpl. b

en

efits

.05

.1.1

5.2

.25

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Portugal

02

00

400

600

800

une

mpl. b

en

efits

.05

.1.1

5.2

.25

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

Spain

02

04

06

08

01

00

une

mpl. b

en

efits

.04

.06

.08

.1.1

2

une

mpl. r

ate

15-1920-2425-2930-3435-3940-4445-4950-5455-5960-64

unempl. rate unempl. benefits

Sweden

The safety net, age profilechange 2005-2012

Notes: EU-SILC microdata

0

10

00

20

00

30

00

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Continental, 2005 Continental, 2012

Southern, 2005 Southern, 2012

GR absolute povertythe Italian case

Notes: official (absolute) poverty rate, as computed by the Italian National Statistical Institute (ISTAT)

0

1

2

3

4

5

6

7

8

9

10

2005 2006 2007 2008 2009 2010 2011 2012 2013

Absolute poverty in Italy, by age of the head of household

under 35 35-44 years 45-54 years 55-64 years 65 years

GR poverty (unmet needs)cross country evidence, 2005-2012

Notes: EU-SIL microdata, % people unable to afford a complete meal every second day and/or unexpected expenses (=1 in 2007)

.6.8

11.2

1.4

1.6

2005 2006 2007 2008 2009 2010 2011 2012

under 35 35-44 45-54 55-64 over 65

United Kingdom

.6.8

11.2

1.4

1.6

2005 2006 2007 2008 2009 2010 2011 2012

under 35 35-44 45-54 55-64 over 65

Continental Europe (AUT,DEU,FRA,NLD)

.6.8

11.2

1.4

1.6

2005 2006 2007 2008 2009 2010 2011 2012

under 35 35-44 45-54 55-64 over 65

Southern Europe (ESP,PRT,ITA,GRC)

.6.8

11.2

1.4

1.6

2005 2006 2007 2008 2009 2010 2011 2012

under 35 35-44 45-54 55-64 over 65

Scandinavian countries (SWE,NOR,DNK,FIN)

Conclusions

• dualism systematic holes in the safety net of many European countries

– combined effect of lower employmentprotection and lesser access to social benefits

• scars of GR on younger generations?

– health?

– family formation?

– fertility?