Can Higher Employment Levels Bring Lower Poverty in the EU? Regression Based Simulations of the Europe 2020 Target

24 Pages Posted: 6 Nov 2011

See all articles by Ive Marx

Ive Marx

University of Antwerp; IZA Institute of Labor Economics

Pieter Vandenbroucke

affiliation not provided to SSRN

Gerlinde Verbist

University of Antwerp

Abstract

At the European level and in most EU member states, higher employment levels are seen as key to better poverty outcomes. But what can we expect the actual impact to be? Up until now shift-share analysis has been used to estimate the impact of rising employment on relative income poverty. This method has serious limitations. We propose a more sophisticated simulation model that builds on regression based estimates of employment probabilities and wages. We use this model to estimate the impact on relative income poverty of moving towards the Europe 2020 target of 75 percent of the working aged population in work. Two sensitivity checks are included: giving priority in job allocation to jobless households and imputing low instead of estimated wages. This paper shows that employment growth does not necessarily result in lower relative poverty shares, a result that is largely consistent with observed outcomes over the past decade.

Keywords: employment growth, poverty, Europe 2020, household work intensity, low pay

JEL Classification: I32, J21, R28, J68

Suggested Citation

Marx, Ive and Vandenbroucke, Pieter and Verbist, Gerlinde, Can Higher Employment Levels Bring Lower Poverty in the EU? Regression Based Simulations of the Europe 2020 Target. IZA Discussion Paper No. 6068, Available at SSRN: https://ssrn.com/abstract=1955408

Ive Marx (Contact Author)

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Pieter Vandenbroucke

affiliation not provided to SSRN ( email )

Gerlinde Verbist

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

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