The outcomes of the crisis for pensioners and children
When the final review is written on the impact of the global financial crisis that began in 2007 it will conclude that the main beneficiaries were pensioners and the main victims have been children. That final review is still some way off: economic growth is still tentative; most European Union countries are mired in deficit; austerity (or in the words preferred by the European Commission “fiscal consolidation”) rules. We are not the first to point to this phenomenon.
A study of the short-term impact of the Great Recession (up to 2011) on household incomes by Jenkins et al (2013) using six country case studies (Germany, Ireland, Italy, Sweden, the UK and the USA) found greater increases or slower declines in poverty among children than among the elderly. Hills et al. (2014) analysed the distributional impact of tax and benefit reforms over the period 2001-2011 in seven diverse EU countries: (Hills et al., 2014). The study showed that, on the whole, policy changes tended to be more favourable to pensioners than children.
But it is worth pointing out that very little attention has been paid to this evident unfairness. Analysts of social policy seem reluctant to trade the interest of children against the interest of pensioners. After all, they might argue, both groups are vulnerable and may take the view that more important than horizontal equity is vertical equity – inequality has also been increasing. Even NGOs with interests in children and child poverty seem reluctant to draw the contrast. An honourable exception was the UNICEF (2014) Innocenti Report Card 12 which compared changes in the under 18 and 65-plus anchored poverty rates 2008-2012 and found that the difference in difference had moved in favour of pensioners in every country of the EU except Poland, Switzerland and Germany. We shall repeat and update that analysis. It is particularly surprising that the European Commission has not paid more attention to this trend given its emphasis on social investment. Protecting pensioners more than children seems the reverse of what one might expect from a social investment strategy, especially given the proven costs of child poverty (Hirsch 2014).
Publication date: 2015
Journal: Belgian Journal of Social Security / Belgisch Tijdschrift voor Sociale Zekerheid
Peer reviewed: YES