Working poor in the EU : an exploratory comparative analysis

This article explores the determinants of working poverty in the European Union. At the individual and household level, the factors contributing to working poverty differ in importance across countries. Nonetheless, being a lone parent, having low education, having a temporary contract, working part-time or less than full-year, appear to be the most important risk factors. Low pay, under-employment and family structures combine to explain working poverty. At the national level, the correlation between poverty and in-work poverty is strong: countries with low levels of in-work poverty are also the ones which keep overall poverty low. At this level there does not appear to be a dilemma between fighting in-work poverty and overall poverty. The strongest determinant contribution to low in-work poverty is high social spending as a proportion of GDP. The level of spending is more important than the way the spending is done or financed: both the social democratic and the social assurance regimes have good performances in terms of in-work poverty. Women’s employment rate, which is generally viewed as being a factor in keeping in-work poverty low, is no more significant when level of social spending is taken into account. This underlines the ambiguous effect of employment on in-work poverty: employment can lift households out of poverty but it can also increase the number of poor workers.