Child poverty vs. pensioner poverty in the EU

Child poverty is on the rise in the European Union while pensioner poverty declines.

Between 2008 and 2013 child poverty increased faster or fell more slowly than pensioner poverty in 26 out of 30 European countries for which Eurostat data are available. This is based on the definition of relative income poverty that holds the poverty line constant at the 2008 level in real terms to allow for a more straightforward comparison over time.

Although the elderly have traditionally been another vulnerable group, they have fared somewhat better than children during the recent economic crisis and the ensuring period of muted and uneven recovery. On the whole, child poverty increased in 18 countries since 2008, while pensioner poverty went up in only seven countries. As of 2013, child poverty is higher than elderly poverty in 22 out of 30 countries.

The figure below plots the percentage point change in the poverty rate of children under 18 (blue bars) and adults aged 65 or over (orange bars) as well as the difference between the two (red dashes).

The biggest differences in the poverty change between children and the elderly were observed in Latvia (22 points), Cyprus (21 points), Malta (15 points), Spain (12 points) and Bulgaria (11 points), where pensioner poverty decreased by at least 10 percentage points even as child poverty was rising.

In contrast, in countries like Greece and Iceland, although both poverty rates increased substantially, child poverty went up more. This pattern also held in Hungary, Ireland, Luxembourg, and Slovenia.

Source: Eurostat (last update 14.11.2014).
Source: Eurostat (last update 14.11.2014).

Why did the recession apparently hit children so much more than the elderly?

Partly it is because old-age pensions tend to be relatively stable (even if they remain ungenerous), while earnings and working-age benefits have often been eroded in real terms. In some countries state pensions are set to rise with (or even above) inflation. For example, in the United Kingdom state pensions are protected by the triple lock:  “increasing each year by whichever is the highest out of prices, average earnings or 2.5%”.

According to the OECD Society at a Glance (2014) report, working-age benefits have been the main target of fiscal consolidation across the industrialized world, although several countries (e.g. Austria, Greece, Italy, Portugal and Slovenia) froze pensions too.

Yet, in many countries where pensioner poverty rates decreased the most, they remain very high. For example, at least one in three pensioners live in poverty in Cyprus (35%), Greece (40%) and Latvia (42%) – the highest levels of elderly poverty (using the anchored measure) in the European Union.

Source: Eurostat (last update 14.11.2014).
Source: Eurostat (last update 14.11.2014).

Disclaimer: the views expressed in this post are the responsibility of the author alone.

Child poverty vs. pensioner poverty in the EU

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