The future well-being of older people in southern Europe
The welfare of today's retirees is largely a consequence of the country's development over the past 50 years, and the welfare of future retirees is dependent on the welfare of today's children and young people. At the end of the 20th century, many countries have initiated a policy, this time aimed at reducing the risk of child poverty, but this wave has not yet swept over southern Europe. In Spain, the higher poverty risk of households with dependent children relative to households with the same characteristics but without children has not changed in recent years of economic growth. It remains to be seen whether the social protection measures required by the crisis arising from the pandemic will serve to initiate a new phase of greater child protection that will help improve future pensions.
The risk of poverty for extreme generations is following a common and worrying pattern in all southern European countries. In the recessionary economic cycle between 2008 and 2013, according to data published by Eurostat, poverty among the over-65s fell much more sharply in Italy, Portugal, Spain and Greece than in the EU-18 as a whole. Because it has been accompanied by another, not very encouraging news for future cohorts of older people, namely that poverty among the under-16s has increased in those same countries. The financial crisis of 2008 highlighted, in countries like Spain, a situation of imbalance that could be used as an example of an alleged conflict between generations. At the same time that unemployment has hit families in the reproductive phase hard, central, regional and local governments have reduced their budgets for study grants, pre-school services, canteen grants and other social assistance items from which minors benefit to a large extent. In contrast, retirement pensions have been kept frozen. But in a context of a generalised fall in income from work, the freezing of pensions has meant a loss of consumption for retired people that is less than that which has been borne by a large part of the active population and their children. When macroeconomic indicators have recovered, between 2013 and 2018, poverty trends by age group have been reversed so that, while the risk of child poverty has been reduced somewhat, poverty among the elderly has again increased more. This confirms a trend of reversed cycles in poverty risk, whereby, under current working conditions and pension freezes, periods of economic expansion increase poverty among retirees and decrease poverty among children.
The financial crisis of 2008 highlighted, in countries like Spain, a situation of imbalance that could be used as an example of an alleged conflict between generations
In southern Europe, not only is social spending clearly favourable to retirees, as is the case in many other countries, but the social spending restrictions resulting from the crisis have hardly affected retirees, while earned income has fallen dramatically among the active. As a result, child poverty, which is already very high in Spain, has increased to shocking levels.
Analysis of this period of economic recovery may give us some indication of its possible evolution once the crisis generated by the COVID pandemic is overcome19. Children, together with adolescents, have continued to be the demographic group at greatest risk of poverty in Spain. Moreover, the poor in 2017 were in worse living conditions than the poor before the economic recovery that began in 2013; especially if they were single-parent households. What factors have explained this evolution of child poverty? The increase in the income of households with children has been mainly due to a general increase in employment in the under-45 age cohorts, which are the ones that most often have under-age children. Therefore, we cannot attribute the improvement in child welfare to any specific child support policy, such as improved coverage or protective intensity of cash transfers. Moreover, the effectiveness of public transfers in reducing child poverty has fallen in recent years.
The policy that does seem to have contributed positively has been to increase the public provision of early childhood education places
This increase in supply has allowed some mothers to enter a labour market with greater demand for labour, albeit at lower wages and more precariously than before the financial crisis. The lower pay per hour worked would have reduced the incentive for mothers to work if there had not been greater access to nursery schools.
It is important to note that the higher poverty risk of households with dependent children relative to households with the same characteristics but no children has not changed in these years. Nursery schools have been able to help some mothers seek employment, but their effect has not been sufficient to reduce the income differential that households with children have to households without children. One factor to consider is surely the price that nursery schools charge their users, even if they are public, and which discourages mothers with poorer labour market prospects and whose households have lower incomes from working. This is all the more so as the increase in precarious contracts has led to a rise in the proportion of the working poor. The other factor is the persistent absence of a policy of cash transfers to families with dependent children, which are so common in the more developed countries of the European Union.
Many political analysts see this situation as the logical result of an imbalance of power between the elderly who vote and the children who do not have the right to vote. However, it is false that, strictly speaking, there should be a universal conflict of interest between generations. In fact, whether or not there is a conflict depends on the political system of each country and how institutionalized the channels through which civic interests flow to political parties. It is in societies with less coordination of civic entities that the bias in favour of current generations of retirees is highest, as is the case in Southern Europe.
The distribution of resources between generations should not be a zero-sum game in which one age group improves its well-being at the expense of the quality of life of another zero-sum age group in which one age group improves its well-being at the expense of the quality of life of another age group
If a perspective of dynamic analysis of the generations is adopted The well-being of retirees depends on their past work histories, on the wealth-generating capacity of the assets and on the policy rationale behind social protection systems. Following the same reasoning, the current well-being of children conditions the life chances they will have in their adulthood and their accumulated resources when they reach retirement age. Moreover, the resources they generate, and productivity in their adulthood, will condition the sustainability of the social protection system for the elderly. If a significant proportion of the active population has to be in precarious employment and suffer long periods of unemployment, due to the consequences of poor development in their childhood, their net contribution to the social protection system will be low, since their low wages will not allow for high tax contributions, and their risk of unemployment will make them recurrent users of unemployment benefits and social assistance services, reducing the system's capacity to care for the elderly.
The welfare of future pensioners is dependent on the welfare of today's children and young people
The welfare of today's retirees is largely a consequence of the country's development over the past 50 years, and the welfare of future retirees is dependent on the welfare of today's children and young people. Many of today's retirees have had splendid work histories, with stable jobs and good salaries, but the next cohorts of retirees will have increasingly poorer histories, especially the demographic cohorts born from the 1960s onwards. These demographic cohorts have been affected by the destruction of jobs in the 2008 financial crisis at the age when their labour activity is crucial for determining the amount of the retirement pension, and the jobs they have been able to obtain thereafter have been of poorer quality, easily degraded in the COVID crisis.19 Although it remains to be seen how effective the new institutionalized social protection policy may have been through the expansion of spending on ERTEs and minimum living income.
In the 1960s almost all developed countries carried out reforms to their pension systems that led to a significant reduction in the risk of poverty among retirees. By the end of the 20th century, many countries had initiated a policy aimed, this time, at reducing the risk of child poverty, but this wave has not yet engulfed southern Europe. The interest in child welfare responds to social pressure, largely from the feminist movement, and to the interest of political and economic elites in improving human capital and making national economies more competitive, but it has also been the response to an increase in child poverty induced by the rise in family instability and the growth of single-parent families, which is increasingly common in the less advantaged social strata.
It is a fact that high child poverty is associated with lower productivity and lower wages of future workers High child poverty is associated with lower productivity and lower wages of future workers
It is a fact that high child poverty is associated with lower productivity and lower wages of future workers. High child poverty is associated with lower productivity and lower wages of future workers, which will affect the ability of social security systems and health and social service systems to meet the needs of an ageing population. In sum, it is a matter of concern that the containment of social security spending on pensions is not accompanied by a greater effort to improve equality of opportunity for the younger generations.
* The content of this paper is based on works previously published by the author. Especially in the articles by G. Esping-Andersen and S. Sarasa (2002), 'The generational conflict reconsidered'; Journal of European Social Policy, 12(1): 5-22; S. Sarasa (2013), 'Demographic changes, social protection and poverty', in Presupuesto y gasto público, 71: 127-142, and S. Sarasa (2012), 'Crisis económica y pobreza infantil en algunos países de la Unión Europea', in V. Navarro and M. Clua-Losada (eds.) El impacto de la crisis en las familias y en la infancia; Barcelona: Ariel, pp. 17-56; and S. Sarasa (2020), Pobreza, ocupación de las madres y educación infantil en un contexto de crecimiento económico.
Pregunta
Respuestas de los expertos
Firstly, I have to say that there is still some scepticism, and even denial, about the real problem of child poverty in Spain. From some sectors, it is understood that it is exaggerated and that there are really not 2.5 million poor children in our country. It is clear, therefore, that many people do not understand the disadvantages of being a poor child in a northern country like Spain, which is very different from what it is to be poor in a developing country, although it also has very negative consequences both for the individual who suffers that situation and for society as a whole.
On the other hand, on the political level, it can be said that, in Spain, no political party, neither on the right nor on the left, has so far clearly taken up the banner of the fight against child poverty. It is something on which there is generally a broad consensus among almost all political forces, but no one has made a decisive commitment to prioritise it and combat it in a forceful way.
In Spain, to date, no political party, neither right nor left, has clearly taken up the banner of the fight against child poverty
And in this connection we must stress that, in the face of the development of pensions and other monetary benefits throughout history in our welfare state, family policy has always been the great forgotten area. Perhaps, to a certain extent, behind this lies the belief that children are the responsibility of the parents, who are of working age and that, beyond specific benefits designed to cover specific needs (unemployment, incapacity, etc.), it is not a priority to further develop family benefits aimed especially at children.
In short, in line with Professor Sarasa's argument, in terms of monetary benefits, the blame for the high rates of child poverty in Spain should not be sought in an extravagant development of pensions, which is not the case, since it could be similar to that of other countries in our environment, but rather to a large extent to the almost non-existent policies of specific transfers to combat child poverty, as well as other reasons outside our benefit system (dysfunctions in the labour market, deficiencies in the education system, etc.).
In Spain, child poverty risk rates have been very high for more than three decades and the increase in unemployment and underemployment in the last recessionary cycle prior to the COVID-19 led to a significant worsening in the economic and material well-being of the youngest people and their families due to the absence of public income protection policies to sustain minimum income levels when unemployment was high.
In most of the countries around us, the upbringing of children is conceived as a task shared by families and the State, because it seems clear that the survival of the welfare States must be based on intergenerational solidarity. Consequently, states provide a safety net capable of ensuring population growth and reducing the proportion of children growing up in poverty, in order to maintain the investment necessary to ensure the future quality of human capital. Broadly speaking, cash transfer policies can be divided into two types according to their design: universal policies and policies conditional on low income. The former are cash transfers to the entire population and do not require economic capacity requirements from potential recipients. The latter are cash transfers to a part of the population and require that the household does not exceed a certain level of income or wealth in order to receive them.
In most countries around us, child rearing is conceived as a task shared by families and the state, because it seems clear that the survival of the welfare state must be based on intergenerational solidarity
Various studies have tried to discern which of these two designs is more effective in reducing poverty and inequality in different institutional contexts. The key question is whether we should choose or can make the two options compatible. In countries such as Austria, Belgium, France, Germany or the United Kingdom, universal assistance is combined with various targeted benefits as additional support for families with fewer resources. In France and Austria, targeted benefits are concentrated on the groups most vulnerable to poverty, such as large or single-parent families, and in the Netherlands and Finland they have targeted benefits to cover certain key expenses, such as medical or childcare costs. In Spain, we do not have a universal child benefit and the compensation of child-rearing expenses operates through non-refundable tax deductions for families who are not obliged to pay taxes. In addition, the targeted benefit is low and reaches a very limited number of families. This makes our system very weak in combating the economic vulnerability of families with child dependents.
It is known that child poverty rates are particularly high in our country. In 2005 they were above 25% and the crisis soon made them grow even more, rapidly reaching 30%, a figure almost 10 points higher than that of the EU27 as a whole, which placed Spain at the top of the European poverty ranking. Professor Sarasa's article combines this phenomenon with another also of interest, the imbalance between the rates of children and young people and the population over 65 years of age and, even more so, their respective evolution throughout the recent economic cycle. From this decompensation some deduce a potential generational conflict, a question of important implications, both at the societal level and in terms of social expenditure management.
Does the unequal evolution of poverty rates for children and adults in our society mean that we are first in a conflict of interest between the two? As the author points out, what has happened during the crisis is that while the purchasing power of assets was reduced by the collapse of employment, that of pensioners remained stable. Some went through harder times than others, but this does not imply that there is a zero-sum game between the two.
Children and young people do not count unless they have their own income, depending on that of their parents. Their poverty is therefore a symptom of their parents' poverty. In times of economic turbulence, falling activity and wage devaluation, it is logical that their incomes should fall and thus the proportion of those below the poverty line should increase. Also, although this has little to do with the situation of relative poverty, their living standards will worsen and their objective situation will deteriorate.
It seems logical that this should happen with greater intensity precisely in those countries where the impact of the Great Recession was greater, as is the case of Spain and some of its neighbours on the southern flank of the EU where the crisis was not only longer but more destructive in terms of employment and wealth. For their part, retired people have the state as their main provider of income through retirement (and, to a lesser extent, widowhood) pensions. This being so, their respective situations of relative deprivation should not be attributable to the same forces or factors. Claiming that the poverty of the elderly is equal to that of children would also require an explanation as to whether the former is intended to increase or decrease.
Would the children's situation have been better if their grandparents' pensions had deteriorated at the same rate and with the same intensity as the income of their active parents during the crisis?
To answer this question we should also take into account that both children and older people live and live together in households, within which income from capital, labour and the state is combined, whether in the form of pensions, allowances, grants or benefits of various kinds. Poverty rates are in fact calculated on the income of households adjusted for their size and age composition, that is, recognizing that within households there is a combination of the economic resources of different members, resources potentially coming from different sources. The structure of households thus becomes the key element: if children were evenly distributed among households, their poverty would be the same as that of adults; but being concentrated in specific households reduces the income of their peers more than that of adults in general and those over 65.
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