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European austerity fails to address social impacts

Austerity policies in the EU have contributed to intense economic suffering, particularly for young people and other vulnerable social groups, a new report has found. 123 million EU citizens – one in every four – are at risk of poverty or social exclusion – an increase of 7 million in the six years up to 2013.  An extra 8.4 million people became unemployed in the same period and almost one quarter of economically active young people in the EU are unemployed.  Young people constitute the largest group in the EU that is underemployed and feels discouraged in looking for work.

These numbers are highlighted in a new study entitled ‘Poverty and Inequalities on the Rise – Just social models needed as the solution!’ This is the third in a series of annual reports written by Social Justice Ireland for Caritas Europa, a European-wide advocacy organisation. The latest report compares economic indicators across the EU-28 and seven member states in particular - Ireland, Italy, Portugal, Cyprus, Greece, Spain and Romania.

The report found that 7.3 million young Europeans (aged 15-24 years) were classified as NEETs, that is ‘Not in Employment, Education or Training’ in 2013.  In Ireland, 16.1% of young adults (or one in six) were termed as NEETs, compared to an EU-28 average of 13%. Italy had the highest NEET rate (22%), followed by Bulgaria (21.6%) and Greece (20.6%).  

Other key findings:

  • At 58.3%, Greece had the highest unemployment rate in the EU-28 countries in 2013 for young people aged under 25, followed by Spain with 55.5%.  Ireland’s rate was 26.8%, compared to an EU average of 23.4%.
  • Long-term unemployment is an entrenched problem, with 5.1% of the labour force in the EU-28 unemployed for one year-plus. Almost 3% had been unemployed for more than two years. 
  • Nearly two-thirds (62%) of unemployed people in Ireland were “long-term unemployed” in 2013, not far behind Greece (70.9%) and ahead of Italy (58.6%) and Portugal (57.8%).  This number has fallen in Ireland in recent months but structural unemployment remains a problem.

The report confirms the harsh impact of unemployment, underemployment and low wages on the vulnerable, including children. Greece had the second-highest child poverty rate in the EU-28 countries (28.8%), with Spain and Italy close behind (27.5% and 24.8%, respectively). In Ireland the figure was 18% (for 2012), or over one in every six children.  Society, not just individuals and their families, pays a high long-term cost for youth unemployment, the report also reveals.

A 2012 report by the European Foundation for the Improvement of Living and Working Conditions estimated that the disengagement of young people from the labour market resulted in an economic loss of €158bn, or 1.2% of European GDP.  This level of young people not in education, employment or training across Europe is extremely worrying, especially in the context of the long-term ‘scarring effects‘ of early unemployment. The negative impact on lifetime earnings is most pronounced for young people who experience periods of unemployment. 

The report offers clear recommendations for policymakers and stakeholders which, if followed, would ensure that the social impact of policies were considered and addressed from the outset. These include:

  • Ensure a guaranteed minimum income for all, particularly in countries where social supports are weak and under-funded;
  • Tackle tax evasion and implement a fair taxation system for all sectors of society, including large corporations;
  • Respect the targets set out in the Europe 2020 Strategy report, and establish sub-targets for poverty reduction for vulnerable social groups, including young people, immigrants, the elderly and disabled.

Social Justice Ireland urges Government to act on the evidence provided by this report, and adopt policies to meet Ireland’s own national targets for education, poverty and social inclusion under the Europe 2020 Strategy.

The report notes that a key role of social policy is to help individuals and families cope with the consequences of economic shocks and to prevent temporary problems from turning into long-term disadvantage. Social welfare supports in Ireland provide a minimum floor to protect families against poverty. However, these supports do not allow people to live in dignity, let alone flourish and participate actively in the economy.  One in six children in Ireland, over one in four children in Greece and almost one in three children in Romania are ‘at risk of poverty’.  This is totally unacceptable in modern democratic societies.

The Caritas report presents the impact of austerity, but also offers a way forward. With Europe at a crossroads on the Greek debt issue and countries still struggling with anti-austerity programmes, the report is a reminder that governments have an essential duty to make choices that benefit both the most vulnerable, and society as a whole.