IZA DP No. 6067: Combating In-Work Poverty in Continental Europe: An Investigation Using the Belgian Case
published in: Journal of Social Policy, 2012, 41 (1) 19-41
Recent studies find in-work poverty to be a pan-European phenomenon. Yet in-work poverty has come to the fore as a policy issue only recently in most continental European countries. Policies implemented in the United States and the United Kingdom, most notably in-work benefit schemes, are much discussed. This article argues that if it comes to preventing and alleviating poverty among workers, both the policy options and constraints facing Continental European policymakers are fundamentally different from those facing Anglo-Saxon policymakers. Consequently, policies that work in one setting cannot be simply emulated elsewhere. We present micro-simulation derived results for Belgium to illustrate some of these points. Policy options discussed and simulated include: higher minimum wages, reductions in employee social security contributions, tax relief for low-paid workers, and the implementation of a stylised version of the British Working Tax Credit. The latter measure has the strongest impact on in-work poverty but in settings where wages are compressed, as in Belgium, a severe trade-off between coverage and budgetary cost presents itself. The article concludes that looking beyond targeted measures to universal benefits and support for employment of carers may be important components of an overall policy package to tackle in-work poverty.