No one-size-fits-all solution: effects of social policies on in-work poverty

Abstract

The article studies effects of social policies on in-work poverty risks, distinguishing between measures that either intervene in labour market processes—that is, pre-distribution policies—or redistribute towards those with low incomes. The analyses use data from EU-SILC and macro-level indicators from various sources to estimate general as well as household-type-specific effects using longitudinal methods. Results reveal important differences between specific policies: Increasing minimum wages contributes to reducing low-wage risks but has no significant effect on in-work poverty risks. In contrast, there is a negative effect of strict employment protection legislation across almost all household types on in-work poverty, which is consistent with the positive role this measure plays in supporting earnings that are sufficient to provide not only for one person but also for potential dependants in the household. With respect to redistribution policies, both unemployment benefits and benefits to low earners reduce poverty due to their contribution to public poverty reduction. However, whereas unemployment benefits reduce in-work poverty only among couple households, benefits to low earners mainly contribute to lower poverty risks among employed single parents. Overall, the results underscore that pre-distribution and redistribution as well as universal and targeted interventions cannot easily substitute for each other.