Cantillon, Goedemé and Hills, Decent Incomes for All

Bea Cantillon, Tim Goedemé and John Hills (eds), Decent Incomes for All: Improving policies in Europe, Oxford University Press, 2019, xxiii + 314 pp, 0-19-084969-6, hbk, £48.99

Why have European governments failed to reduce poverty? This is the question underlying a European Union research project that has given birth to a variety of publications, of which this thoroughly evidenced book is the most recent.

The introduction finds globalization and technological change to be largely responsible for increasing inequality and poverty in Europe; the European Union’s agreed social indicators to be useful for mapping poverty and inequality; poverty and inequality to be increasing; and the open method of policy coordination to be partly to blame for the lack of progress in eliminating poverty. The book has been written to make a particular contribution to the policy process by showing what it means for households to live on an income below the EU’s ‘at risk of poverty’ threshold, and by proposing policies to address the problem.

Chapter 1 studies the relationship between the ‘at risk of poverty’ threshold and a set of reference budgets for social participation developed by the researchers to enable comparisons to be made across the EU. They find that the ‘at risk of poverty’ threshold underestimates child poverty and does not promise a decent living standard for low income households. Chapter 2 finds that employment growth needs to benefit job-poor households more than it does if poverty is to be reduced, and that more adequate social protection mechanisms are required. Chapter 3 finds substantial differences between income levels among poorer households in different EU states, suggesting that cross-border redistribution is required.

The second part of the book turns to the effects of social and fiscal policies. Chapter 5 finds that social transfers have a major impact on poverty, and that the effects of social transfers differ between different countries. The authors outline important research that is still needed:

Another challenge, which we could not tackle here, is to test the estimation method in the context of a dynamic simulation model and/or a model that would take account of the interrelationships among the different transfers in a complex tax-transfer system. (p. 104)

One can only agree.

Chapter 6 finds that in the countries on the periphery of Europe, policies implemented since the financial crisis have often exacerbated poverty; and chapter 7 finds that in-work means-tested benefits have increased employment levels and reduced poverty among low-income households.

The third part of the book studies local policy experiments. Chapter 8 finds local social innovation to be a useful complement to the welfare state; and chapter 9 that different social investment policies can have different effects, and recommends an approach that includes redistributive policies.

The final part of the book asks about the traditional trade-off between poverty reduction and employment incentives. Chapter 10 finds that in Belgium, Denmark and the UK it would cost twice as much to raise incomes above poverty thresholds without reducing employment incentives than it would to simply raise all incomes to at least the poverty level. Chapter 11 tests a variety of policy options for in-work benefits in Belgium, and finds that an individualised benefit would reduce employment incentives less than a household-based benefit would, but that a household-based benefit is better at reducing poverty. Linking the benefit to hourly wage rate thresholds would provide the best combination of incentive enhancement and poverty reduction effects. Chapter 12 discusses EU governance; and the concluding chapter suggests that the research results indicate that a range of policies should be followed if an impact is to be made on European poverty levels.

It is a pleasure to see EUROMOD, the EU’s microsimulation programme, put to such good use in the research underlying the chapters of this volume, and to see such a wide range of income-enhancing policies considered. If further research is to be undertaken, then here are two suggestions: First of all, healthcare costs need to be given more than a passing mention. If in one country, such as the UK, healthcare is free at the point of use, and in another country it is not, then the lack of free healthcare will impose additional poverty pressures in the latter country. Secondly, unconditional cash transfers might be given more attention. First of all, existing unconditional cash transfers, such as the UK’s Child Benefit, are a significant buffer against poverty for low income families, because they are completely secure, and because they provide a higher proportion of total disposable income for poor families than they do for wealthier ones. Secondly, Philippe Van Parijs’s suggestion of an unconditional EU-wide Eurodividend could reduce levels of poverty in every EU country and at the same time contribute to convergence between EU economies.

The book under review is an important contribution to what must remain an ongoing debate and research effort.