The Working Poor in Europe

The Working Poor in Europe

Employment, Poverty and Globalization

Edited by Hans-Jürgen Andreß and Henning Lohmann

For a long time in-work poverty was not associated with European welfare states. Recently, the topic has gained relevance as welfare state retrenchment and international competition in globalized economies has put increasing pressures on individuals and families. This book provides explanations as to why in-work poverty is high in certain countries and low in others.

Chapter 1: The Different Faces of In-Work Poverty Across Welfare State Regimes

Henning Lohmann and Ive Marx

Subjects: development studies, development studies, economics and finance, labour economics, social policy and sociology, comparative social policy, economics of social policy, labour policy


19 Development (OECD) countries. Their study analysed male wage inequality in the USA and in nine other OECD countries (Germany, Britain, Austria, Switzerland, Sweden, Norway, Australia, Hungary, Italy and Norway). They argued and demonstrated that labour market institutions – principally the comparatively decentralized wage-setting mechanisms in the USA – provide the most persuasive explanation for these patterns. Many other studies have tried to demonstrate that wage-setting institutions are associated with pay inequality, particularly changes in the distribution of pay (see, for example, Kahn, 2000; Lucifora, 2000). In addition to earnings, transfers represent a relevant part of the income package in working households. In France, for instance, more than onethird of the income of working poor households consists of transfers (Lagarenne and Legendre, 2000). Furthermore, a number of studies have shown that there are large differences between welfare states in the degree of poverty reduction which is achieved via transfers (see, for example, Atkinson et al., 1995; Moller et al., 2003). There is not as much specific evidence showing to what degree in-work poverty is reduced by transfers, although there is a broad discussion of so-called in-work benefits (see OECD, 2005). However, there is evidence that in-work poverty is not only affected by in-work benefit programmes which are meant to supplement low earned incomes. Even in the UK – which has a long history of paying in-work benefits – other types of transfers are a more important factor for the reduction of poverty among workers with low incomes (Gardiner...

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