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Monday, 7 March 2016

Long-term poverty in The Netherlands: the effects and consequences and how to fight it?

On March 1st of 2016, the Dutch Social Cultural Planning bureau (SCP) – in cooperation with the Dutch Central Bureau for Statistics – presented its annual report upon poverty and long-term poverty in The Netherlands.

Although the poverty figures were not really extreme, they showed beyond a reasonable doubt that the crisis had deteriorated the financial situation of many Dutch people and families. On top of that, ‘some of the usual suspects’ had indeed a bigger chance of dropping into long-term poverty than other parts of the Dutch population.

Here is a large share of the English summary that the SCP put on its website, accompanied by my comments, where applicable:

The most recent economic recession, which began in the final quarter of 2008 and lasted until the middle of 2013 was accompanied by a substantial rise in poverty in the Netherlands. The number of people living in households with a lower disposable income than the norm amount needed to meet basic needs (such as housing, clothing and food) grew over that period from just over 600,000 to more than 850,000. If that norm amount is increased to allow for (minimal) expenditure on leisure and social participation, the increase is even more pronounced: the number of people with a household income below this ‘modest but adequate’ threshold increased from around 870,000 in 2008 to 1,255,000.

Long-term poverty also rose over that period, though this only became fully apparent from 2011. According to the ‘basic needs’ criterion, there were 169,000 people living in long-term poverty in 2011, and 316,000 according to the ‘modest but adequate’ criterion; by 2013 these figures had risen to 226,000 and 410,000, respectively.

My comments: When these figures are compared with the total Dutch population of 17,000,000, the poverty percentages are 5% (for people not even meeting the minimum threshold, aka the basic needs criterion) and 7% (for the modest, but adequate criterion). According to these same criteria respectively 1% and 2% of the population suffers  from long-term poverty.

Families living below the modest, but adequate criterion might not seem like a big thing to some readers. However, this means that children in such families f.i. cannot participate in school trips and extracurricular activities or cannot be member of one or more sports clubs, as the means for membership and sports clothes are not present.
Especially for young children this can easily lead to social exclusion and to the development of an unhealthy lifestyle: a life behind the television, in combination with poor quality (fat) food, snacks and insufficient mental and physical exercises and trainings.

All too often, such underprivileged families take poor education and underqualification of their children for granted, which causes to these children a bigger chance of leading a life in poverty themselves, or causes them to get quicker access to criminality as an easy way out of misery.

Of course these same effects are even stronger within families that do not even meet the basic needs criterion, especially when it comes to such important things like basical clothing and nourishment.

Subsequently, the SCP summary contains a clarification about the used methods for setting the long-term poverty rates, which I don’t print for reasons of conciseness of this article. The SCP explains that the aforementioned figures in the first paragraphs are at the lower side of the poverty scale and probably too low. They tell about a third method of measuring, the ‘episodic’ method, which yields more accurate results, in their opinion:

We used a third variant which takes this into account and which therefore offers a more reliable measurement of the extent of the problem. We term this the ‘episodic method’. Here, we look for each reference year at both the two preceding and the two ensuing years. We then find that the percentage of people in long-term poverty averages just under 55% of the total poor population. In the most recent reference year (2011), almost 600,000 people (58%) were in this position.

Based on the episodic method, the share of people in long-term poverty dominates among the total poor population. As stated, over half (just under 55% on average) of poor people have been in poverty for three years or more. Those who have been in poverty for only one year account for just a fifth of the total (the remainder are people who have been in poverty for two years). These findings are based on the modest but adequate criterion; if the stricter basic needs criterion is applied, the share of people in long-term poverty is substantially lower (40-45%), while the share of people in short-term poverty goes up slightly (around 25%).

My comments: If this third method of calculating long-term poverty is indeed more reliable, than these results are quite worrisome. It means that 55% of the people, who are living below the modest, but adequate criterion, do that for a number of years in a row (i.e. around 700,000 people) . And although the number for the structural  ‘below basic needs’- poverty is significantly lower, with 40-45%, it is still a considerable number of around 400,000 people.

While a short period of poverty can be overcome by most people, a (much) longer duration of poverty leads to a situation of despair and hopelessness for the people involved. Besides that, it leads to people and families eating into their non-monetary possessions and using their durable consumer goods until they break down in the end, without having proper possibilities to replace them in time.

Clothes become just too old or too small for growing children, washing machines, televisions and flat-irons break down and can hardly be replaced by new ones. And so people become more and more encapsulated in a poverty trap from which escaping is hardly possible.

In earlier research, Achterberg and Snel (2008) investigated whether poverty was becoming a more temporary or more entrenched phenomenon. They concluded that the latter was the case, identifying an increase in the proportion of people in long-term poverty (using the foresight method) between 1984 and 2000, while the percentage in short-term poverty remained more or less unchanged. Despite a number of differences compared with the study by Achterberg and Snel, we reach the same conclusion in our study for the period from 2000 onwards. The share of people in long-term poverty increased between 2000 and 2013, while the percentage in short-term poverty remained stable.

On the other hand, the growth in the share of people in long-term poverty appears to be due mainly to the economic recession at the end of our study period; until 2008 there were only slight fluctuations. There was also a visible link to the economic cycle in the 1990s, when the percentage of people in long-term poverty rose during the 1991-1993 recession before falling back again to its original level. Given these findings, we may conclude that long-term poverty has increased temporarily, but that there is also a substantial possibility that it will fall again as the economy picks up.

My comments: It might be that the rate of long-term poverty is indeed correlated to the situation in the economy, as these snippets argue, but the outlook for the coming years is nevertheless quite unfavourable for the long-term unemployeds at this very moment.

A. the economic crisis that started in 2008 is more and more turning into a depression that could stay with us for a long, long time. Apart from being an economic crisis, the current depression is a mood crisis. And as long as the moods of the people in The Netherlands stay bleak, the outlook for the whole consumer economy remains bleak too. This will undoubtedly have a negative effect on consumption and demand for labour.

And B. the automation and robotization of moderately complicated administrative, financial, commercial and manufacturing jobs is a development that is gaining momentum by the day. At this moment more and more of such jobs are at stake, as a consequence of this automation/robotization. while there are few new drivers for new and different jobs.

The fact that in The Netherlands the fixed contract is more and more becoming a thing of the past, in favour of freelancers (i.e. ZZP’ers in Dutch) and workers with (often very unfavourable) flexible or zero-hour contracts – so-called flex-workers – is also an important factor in causing temporary or long-term poverty.

Over the last ten years more and more people (roughly 1,000,000) became ‘independent’ freelancers – quite often in name only, however, as they have often only one principal and one assignment. The hourly rates, as well as the duration of such assignments for these freelancers are both still under fierce pressure from cheap workers from outside The Netherlands (or the European Union).

This will undoubtedly have added to the elevated poverty in The Netherlands since 2008, as “having no assignment” means often “having no source of income” at all, except for welfare eventually (when all else failed and privately owned sources of wealth have been depleted in the meantime).

Particularly as most freelancers – especially the ones with the lower hourly rates and shorter contract periods– don’t have a proper safety net in place to guard them against non-employment for a longer period. The ‘freedom’ of being a freelancer can so easily turn into the worries and despair of being unemployed, without receiving unemployment benefits.

As a consequence of the neoliberal/neoconservative winds that are blowing over The Netherlands and Europe, the patience and compassion with ‘people living at the edge’ have strongly diminished. “People need to be responsible for their own lives and they need to pay for their own mistakes” are some of the platitudes that can be heard in such neoliberal circles.

These neoliberals often conveniently forget that many (now) freelance and flex-workers did not have a proper choice, when they chose for an uncertain life as freelancer or flex-worker,  as they were often forced to become one at gunpoint – in this case job-loss. And on top of that, the same people forget that the poverty trap is extremely difficult to escape from and that poverty in general can become a generational problem, haunting whole families.

All these factors could mean that the current elevated long-term poverty could stay with us for quite a while.

There is currently a debate in the field of sociology, in which one camp argues that poverty today is mainly the result of people’s own choices and personal life events, which means that everyone can on occasion be briefly confronted with poverty. Others counter this by arguing that there is a growing division between the disadvantaged and more privileged sections of society and that certain groups encounter long-term poverty much more often than others. In this study – without wishing to test the veracity of either claim – we explore both sides of this debate.

To test the claim that everyone in the Netherlands today could occasionally be confronted with a (short) period of poverty, we investigated whether different sections of the population are at equal risk of being in poverty for just one year. A distinction was made by household type, main source of household income and ethnic background. The outcomes suggest that the risk of short-term poverty is greater for people without children or with grown-up children, people in households where paid work (salaried or self-employed) is the main source of income, and persons with a native Dutch background. The probability is much smaller for single people and single-parent families or couples with young children, who relatively often encounter periods of poverty lasting more than a year. This also applies for benefit recipients and non-Western migrants.

To answer the opposing question, i.e. whether there is a concentration of long-term poverty in certain sections of the population, we performed similar analyses and looked at the chance of being poor for at least three years. In line with the foregoing results, couples without (young) children, households living mainly on income from employment and Dutch natives much less often face a period of long-term poverty than households with young children, benefit recipients and pensioners and non-Western migrants.

Closer analysis reveals an interaction between family composition and ethnic origin: as stated, the presence of young children is associated with a higher risk of long-term poverty, but this effect is much stronger for non-Western migrants than for Dutch natives or Western migrants. Non-Western migrants with children face long-term poverty significantly more often than Dutch natives or Western migrants with children, and also than non-Western migrants without children. Finally, a caveat needs to be applied for pensioners: although they are at heightened risk of long-term poverty, the chance that they will fall into poverty in the first place is relatively small.

It can hardly be a surprise that especially people from ethnic groups are more vulnerable for long-term poverty than native Dutch people. Although (in my conviction) straightforward racism is seldomly the cause for unemployment and poverty among ethnic groups in The Netherlands, these ethnic groups have often more difficulties in finding a job at their level of education. On top of that, their education itself is also quite often below their capabilities.  Also general unemployment is much higher among ethnic groups in The Netherlands than among native Dutch people.

One cause could lie in a combination of latent racism and undisputed prejudice, which dictates that people and children from ethnic groups are less smart and/or less talented and/or less reliable and/or less energetic (strike where applicable) than children of native groups.

This leads to the phenomenon that in case of two equal candidates for a certain job (one native Dutch and one ethnic candidate), both with the same skill-set, the one with the native Dutch name is chosen at the expense of the ethnic candidate.

A comparable thing happens often at the preliminary school or the secondary school: when an ethnic child by itself is qualified for a higher grade secondary or vocational education, teachers in many occasions tend to chose for a lower grade education “to be at the safe side”. By doing such thing, they deny such a talented child the education that would suit him best and bring his talents to the forefront.

Both situations are of course strong catalysts for a trip towards long-term poverty; especially in tough economic times.

If we look at the trend in long-term poverty in different sections of the population, we find that some groups have faced poverty more often than others over time. Couples with children living below the poverty line are an example: the share of long-term poverty in this group rose between 2005 and 2011 from just over half to almost two-thirds. This group have therefore easily surpassed single-parent families, traditionally the group at greatest risk of long-term poverty. As regards main source of income, the figures show that people in paid work are less often long-term poor than benefit recipients or pensioners. However, the share of long-term working poor has increased sharply: in 2005, 40-45% of all working poor had been poor for at least three years; in the 2011 reference year, this had increased by around ten percentage points. Finally, the extent of long-term poverty has also increased among poor non-Western migrants, from just under 60% in the 2005-2006 reference years to around 67% in 2010-2011. This increase was relatively limited among Dutch natives and Western migrants, in both cases rising from around 50% to just under 55% of the total group of poor.

My comments: I think that these data speak for themselves, in support of my aforementioned comments.

This is a not very surprising, but nevertheless alarming report from the Social-Cultural Planning bureau. The fact that we are now in the midst of the strongest economic crisis since eighty years is not very comforting either. The outlook will remain bleak, in my humble opinion, for the people that are currently in a situation of longterm unemployment and poverty.

I think that the only way to fight this longterm poverty, is by spurring real innovation and really improved secondary and vocational education and by stimulating a Dutch manufacturing industry.

Not just innovation to enhance the introduction of more cheap commercial and financial services and cheap exports of bulky goods or agricultural produce, but innovation to find new drivers for high quality jobs in innovative industries.

One other very important thing is that the people in The Netherlands refind their trust in their fellow countrymen and in the European Union. The chill populist winds blowing through Europe cause distrust and dividedness between groups of people and between the leading religions and political factions in our country. 

Only when our hearts and minds are cleared from our ubiquitous depression and our mutual distrust in each other, the economy can find a stable way towards new prosperity. When that happens indeed, I think that the long-term poverty will diminish strongly again.

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