TWN Info Service on UN Sustainable Development (Jul21/04)
8 July 2021
Third World Network

United Nations: A European Union-wide strategy needed to eradicate poverty
Published in SUNS #9382 dated 7 July 2021

Geneva, 6 Jul (Kanaga Raja) – The European Union should develop a European Union-wide anti-poverty strategy that ensures a structural, broad approach to poverty eradication, including quality jobs and living wages, universal social protection incorporating harmonization of minimum income schemes, well-funded public services and tax justice.

This is one of the main conclusions highlighted by Mr Olivier De Schutter, the Special Rapporteur on extreme poverty and human rights, in a report presented to the United Nations Human Rights Council.

The Human Rights Council is currently holding its forty-seventh regular session from 21 June to 13 July.

The report is based on a visit made by the Special Rapporteur to the institutions of the European Union from 25 November 2020 to 29 January 2021.

During his visit, the Special Rapporteur met with representatives of over 20 institutions, including the European Commission, the Council of the European Union, the European Parliament, the European Labour Authority, the European Economic and Social Committee, the European Union Agency for Fundamental Rights, the European Central Bank and the European Investment Bank.

He also met with over 40 civil society and social partner organizations.

In his report (A/HRC/47/36/Add.1) to the Human Rights Council, the Special Rapporteur said that since the end of his visit on 29 January 2021, the European Union had taken important actions.

It increased the funding allocated to combating child poverty, and it proposed a directive on pay transparency to strengthen the requirement of equal pay for women and men.

According to the Special Rapporteur, in March 2021, the European Commission announced an action plan for the European Pillar of Social Rights, adopted the European Union Strategy on the Rights of the Child and issued a proposal for a Council recommendation for a European Child Guarantee.

“These are laudable advances and commitments,” said Mr De Schutter. “The question, however, is whether they can compensate for macroeconomic policy frameworks and rules that restrict member State action towards poverty eradication and lead to cuts in public services in the name of balanced budgets, affecting the most vulnerable first,” he added.

An institutionalized race to the bottom among member States, leading to lower wages and lower worker protections in the name of competitiveness, hurts businesses and workers alike, but precarious and low-income earners suffer the most, said the rights expert.

He said the organized powerlessness towards damaging tax competition among member States all but ensures that progressive, re-distributive tax rules – including taxes on wealth, corporations or financial transactions – remain relegated to the few countries who can afford the loss resulting from tax defection.

“The European Union can, if it so decides, change the rules of the game,” said Mr De Schutter.

The COVID-19 crisis and the remarkable reaction of European Union institutions provide a unique opportunity to address the structural constraints that have thwarted its anti-poverty efforts thus far, he added.

POVERTY AND SOCIAL RIGHTS

According to the report by the Special Rapporteur, the European Union was enjoying steady economic growth before the COVID-19 pandemic, and unemployment rates have decreased in all member States since 2013.

He said that the undeniable improvement in living standards that the European Union has spearheaded since its inception – and more recently since social objectives became a binding consideration under all other policy areas with the entry into force of the Treaty of Lisbon in 2009 – has positioned its member States at the top of the Human Development Index values, and the European Union as a whole enjoys relatively low levels of inequality and income concentration.

A closer look at poverty in the European Union, however, reveals a more troubling picture, said Mr De Schutter.

One in five people – totaling 91.4 million people, or 20.9 per cent of the population – are still at risk of poverty or social exclusion in the European Union. Inequality levels have remained virtually static or even worsened in some cases since the 2008 crisis.

A total of 17.9 million children, or 22.2 per cent, are at risk of poverty or social exclusion across the European Union, an exceedingly high number for developed country standards, he said.

Rates of persistent risk of poverty – households at risk of poverty for at least three years in a row – have increased 3.6 percentage points since 2008, as have the number of working poor in the majority of member States, with overall trends at levels of 10 years ago, he added.

These numbers suggest that the current approach to poverty eradication in the European Union is too narrow to be deemed appropriate for the scale of the problem, said the rights expert.

“Employment is important. It can provide stability, social connections and a sense of purpose. But a narrow focus on increasing employment rates as a recipe against poverty is doomed to fail unless it is accompanied by far- reaching changes in the broader macroeconomic framework of the European Union,” he added.

Empirical data analyzing the post-2008 crisis have shown that employment growth and poverty alleviation do not necessarily go hand-in-hand, said the report.

Job growth has generally benefited households where one or more members are already in employment: workless households benefited only marginally.

The share of workers at risk of poverty increased in 17 member States by an average of 1.4 percentage points between 2010 and 2019.

In short, the fact that a fifth of the population of the European Union lives at risk of poverty or social exclusion, and that there are 20.5 million workers in households at risk of poverty despite pre-pandemic record employment levels, makes clear that employment alone does not keep people out of poverty, said the Special Rapporteur.

However, he added, problematically, it has often been recommended that member States focus on increasing overall employment rates without also referring to wage adequacy and decent working conditions, or to the improvement of their minimum income schemes.

In 2010, as part of the “Europe 2020” strategy, the European Union set the target of reducing the number of people at risk of poverty or social exclusion by 20 million by 2020 or a 25 per cent reduction, from 18 per cent of the total population to 13.5 per cent.

Although progress was achieved by some accounts, the target was largely missed, he said, adding that the official picture provided tends to underestimate the reality.

Using a measurement that Eurostat considers more reliable for monitoring developments over time – known as the “anchored” rate – the rate of people at risk of poverty was in fact 2.3 percentage points higher in 2019 than in 2008, with great variations among member States.

The Special Rapporteur cautioned that unless the European Union designs a Union-wide anti-poverty strategy, with ambitious targets, coherent measurements and accountability mechanisms, it is bound to repeat the same mistakes.

He also noted that the faces behind the poverty numbers are markedly gendered: women experience higher poverty rates than men (21.8 per cent versus 20 per cent), and the gap grows wider with old age (20.9 per cent versus 15.5 per cent) as a result of inadequate pensions deriving from career interruptions to assume care responsibilities, gender pay gaps and gender gaps in part-time work.

The gender gap in pensions ranges between 1.8 per cent and 48.7 per cent across member States, but it is estimated to be a staggering 37.2 per cent on average, according to the most recent report.

Women are also disproportionately represented among lone-parent families (85 per cent), 40 per cent of whom are at risk of poverty or social exclusion.

Women do more unpaid work, and as a result become dependent on other adults for their social protection. A total of 29.4 per cent of women worked on a part-time basis in 2019, compared with 7.8 per cent of men.

According to the Special Rapporteur, the European Institute for Gender Equality calculates that the European Union is still 60 years away from achieving gender equality, if it continues at the current pace.

Other figures are equally a source of concern, owing both to the high numbers and to their unreliability, he added.

He said that a total of 28.4 per cent of people with disabilities in the European Union were at risk of poverty or social exclusion, which is 10 percentage points higher than the general population.

Poverty remains prevalent among the Roma, which is the largest minority in the European Union, with an estimated 6 million to 8 million members.

Mr De Schutter also drew attention to the weak status of social rights in the European Union’s constitutional framework.

The European Union Charter of Fundamental Rights, which plays an important role in introducing a fundamental rights culture within European Union institutions, presents significant gaps in comparison, for instance, to the Council of Europe’s European Social Charter, he said.

In areas including the right to health care, the right to social assistance as a means of combating social exclusion or the right to housing, the Charter of Fundamental Rights guarantees no enforceable entitlements, he added.

CONSTRAINTS FACED BY EU IN FIGHTING POVERTY

According to the Special Rapporteur, the European Union’s constitution is ill-suited to combat poverty.

“While it increasingly encourages economic policy convergence, it still fails to ensure proper social and fiscal convergence, thereby institutionalizing unhealthy competition among European Union member States.”

He said that Member States’ decisions when setting wages and levels of social contributions are still driven by the perception that any increases in wages or social contributions could negatively affect their external cost competitiveness and reduce their attractiveness to potential investors in the most labour-intensive segments of the industry, leading to the misguided view that better wages and protections could result in unemployment.

“Yet there is little to no evidence of a negative impact of minimum wages on unemployment. On the contrary, ILO has shown that minimum wages can in fact contribute to higher labour productivity, both at the enterprise level and across the economy, which can in turn strengthen competitiveness.”

Despite this, said the Special Rapporteur, member States continue the unhelpful practice of competing by lowering workers’ wages and protections.

He noted that some action has been taken to combat the worst instances of social dumping, including the revision of the Posted Workers Directive 2018, the establishment of the European Labour Authority to support enforcement efforts at domestic level, and the proposal for a directive on adequate minimum wages in the European Union.

“These are commendable improvements, but they remain short of what would be required to protect the bargaining position of workers in the internal market,” he said.

“States still compete on wages and especially on social contributions paid by employers, and this race to the bottom in the field of wage-setting and worker protections damages enterprises, workers and member States alike.”

Mr De Schutter noted that the difference in average wages between countries, including Germany, Luxembourg and the Netherlands, and Bulgaria, Latvia and Slovakia, is on the order of 20,000 euros per year.

In-work poverty and part-time and precarious work have increased in the majority of member States, with 20.5 million workers living in households at risk of poverty in 2017 alone.

Similarly, tax competition has deprived member States of public revenues necessary to provide public services and to finance social protection, he said.

He noted that over the past 20 years, statutory corporate income tax rates have declined by an average of 11 per cent, and competition among States to attract particularly mobile profits has been magnified by arrangements such as patent boxes, tax rulings and “special purpose entity” statuses.

In 2015, the losses in public revenue for States were estimated at around 50 billion to 70 billion euros per year, merely as a result of corporate tax avoidance, i.e., profit-shifting by companies within the European Union.

Once other tax regime issues are included, such as special tax arrangements and inefficiencies in collection, the losses amount to around 160 billion to 190 billion euros – an estimate that is provided in a study prepared for the European Parliament and that is considered by the authors themselves to be conservative, said Mr De Schutter.

All member States end up losing out from such competition. They now face the choice between lowering the levels of public services provided in areas such as health care or education, or shifting the tax service onto less mobile tax bases, such as labour or consumption, he added.

Given the strong interdependence of the European Union member States in the internal market, the requirement of unanimity in the area of taxation does not protect national sovereignty, said Mr De Schutter, adding that it does rather the opposite: it impedes their ability to act collectively and thus more effectively.

In addition, it operates to the detriment of workers and consumers, as well as of local businesses, who cannot, as multinational corporations do, rely on aggressive tax avoidance strategies through base erosion and profit-shifting.

The unanimity requirement also means that taxes such as the financial transactions tax or the digital services tax cannot be adopted at the European Union level, said the rights expert.

According to estimates made prior to the departure of the United Kingdom of Great Britain and Northern Ireland from the European Union, the financial transactions tax and the digital services tax could raise 57 billion and 5 billion euros per year, respectively.

Macroeconomic policy convergence rules in the European Union, and in the euro-zone in particular, still represent an obstacle in the fight against poverty at member State level, said Mr De Schutter.

The Stability and Growth Pact, initially adopted in 1997 as part of the pathway to the monetary union, in effect has prohibited member States that have joined the single currency from relying on demand-driven growth.

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union further strengthened the constraints, he added.

Member States that are parties to the Treaty committed in principle to adopt balanced budgets, with a maximum deviation of 0.5 per cent.

They further committed to reducing the public debt exceeding the 60 per cent of GDP limit by 1/20 each year and to include such disciplines in rules of a constitutional rank in the domestic legal order.

The Special Rapporteur said that the current economic and social crisis provides a unique opportunity to rethink the balance between the social and the economic dimensions of the European Union’s socioeconomic governance. “The opportunity should be seized,” he added.