Economic crisis makes all society less wealthy

10.02.2011

Central Statistical Bureau has compiled provisional results of “Community Survey on Income and Living Conditions” (EU-SILC) on relative poverty and income inequality monetary indicators in 2009. To characterise the poverty and income inequality a group of united indicators is used, and it is calculated in all Member States of the European Union.

The data of the EU-SILC survey show significant changes in volume and structure of household disposable income. In 2009 household disposable income1, calculating per one household member, comprised LVL 214, and it is 16% or LVL 40 per month less than in 2008.

In 2009 household income situation has been more than extraordinary – for most part of the employed households income generally reduced, but in pensioner households (26% of the total number of households) income remained stable or even increased. Compared to 2008, household disposable income in a form of wages and salaries, calculating per each person in household, in 2009 have diminished by 24% or by LVL 46. But compared to 2008, the volume of pensioner disposable income in 2009 has grown by 10%, even considering the deductions of the old-age pensions, which came into force from July 2009.

Due to the decrease of total volume of household disposable income, the difference between richest and poorest members of the society or income inequality has reduced. Income quintile share ratio2 value has reduced from 7.3 times in 2008 to 6.9 times in 2009. But Gini coefficient3 has diminished from 37% to 36%.

At-risk-of-poverty threshold4 and at-risk-of-poverty rate5 derived from it are relative indicators, depending on average income level in households. Due to the reduction of total income volume in the country, at-risk-of-poverty threshold in 2009 has decreased.

At-risk-of-poverty threshold (LVL per month per equivalent consumer)

In 2009 in accordance with the EU-SILC survey data the income of 475.5 thousand or 21% of population were under at-risk-of-poverty threshold (LVL 160 per month, calculating per equivalent consumer6).

Poverty indicators calculated basing on survey results show paradox – the lower is the income of the population, the lower is the number of population having income under the at risk-of-poverty threshold. It should be admitted that society has became equally less wealthy and relative indicator of such condition - at-risk-of-poverty rate has reduced along with the decrease of general average income level.

At-risk-of-poverty rate (in per cent)

To understand this situation it is necessary to study the affiliation of persons subjected to the risk-of-poverty to certain socio-economic groups.

At-risk-of-poverty rate in various socio-economic groups of population (in per cent)

The most significant reduction of the at-risk-of-poverty rate in 2009 was for pensioners. Pensioners were the only social group  whose income during 2009 did not reduce, but on the contrary - slightly increased. In 2009 average volume of old-age pension paid grew by 16%, thus reaching LVL 163 per month, and that, in turn, exceeded the at-risk-of-poverty threshold (LVL 160). On the general background of the growth of paid pensions, at-risk-of-poverty rate for single pensioners aged 65 and over has decreased. It does not mean that persons mentioned have became more wealthy, but in 2009 their disposable income level with stable or even growing income in 65% of cases was above at-risk-of-poverty threshold, and only 35% of single persons in this age group were subjected to the risk of poverty. It is considerably less than in 2008 – 80%.

The dependence of the Latvia population upon social tranfers7 has increased. If in 2008 19% of the income volume were formed by the social transfers, then in 2009 those were already 28%. At-risk-of-poverty rate, which would be calculated excluding all kinds of social expenditure, in 2009 would reach 44%, and it is the highest indicator since 2004.

In the meantime, at-risk-of-poverty indicators calculated show that during 2009 the risk of poverty for several population groups, including young people aged under 25 years, still has increased.

At-risk-of-poverty rate in various age groups of population
(in per cent)

 

2004

2005

2006

2007

2008

2009

Total

19

23

21

26

26

21

of which by age groups (years):

 

 

 

 

 

 

0–17

22

26

21

25

26

27

18–24

17

18

17

17

19

21

25–49

17

19

16

18

19

20

50–64

20

26

23

25

23

21

65+

21

30

33

51

48

19

In 2009 households with children were subjected to risk of poverty more and more.

At-risk-of-poverty rate in selected demographic groups of population in 2004-2009
(in per cent)

 

2004

2005

2006

2007

2008

2009

Total

19

23

21

26

26

21

of which in households :

 

 

 

 

 

 

without dependant children

20

25

26

32

31

20

all households with dependant children

19

22

18

21

21

23

single-parent family

31

40

34

42

39

41

2 adults with 1 dependant child

14

15

12

13

15

18

2 adults with 2 dependant children

18

22

16

21

22

18

2 adults with 3 and more dependant children

39

52

46

38

45

39

3 and more adults with dependant children

13

16

13

17

17

20

All kinds of households with children form more than one third of the total number of households (38% in 2009), and more than a half (57%) of the total number of persons in households lived in such households. Almost every fourth of them in 2009 faced risk of poverty. Single-parent families still have noticeably higher risk of poverty as well as families having 3 and more children.

 

Prepared by Social Statistics Department
Edmunds Vaskis
Tel. 67366908


Methodological explanations

1 Disposable income is cash income from labour; employee income in kind estimated in cash. income or losses received from self-employment, received pensions and benefits; material assistance from other households; profit from interests of deposits, dividends, shares; income received by children under age of 16; income from property rental; amount received from State Revenue Service due to overpaid income tax (foe business activities, eligible costs – education, medical treatment etc.). Of this total amount of income real estate tax is deducted as well as amount of money regularly given to other households, amount paid to State Revenue Service due to unpaid or insufficiently paid income tax.

2 Income quintile share ratio
Ratio of total income received by the 20% of the country’s population with the highest income (top quintile) to that received by the 20% of the country’s population with the lowest income (lowest quintile).

3 Gini coefficient characterises equality of income. It varies from 0 to 100. Gini coefficient is 0, if there is absolute equality of income (that is, all working people have the same income), but the closer it gets to 100, the bigger is inequality of income.

4 At-risk-of-poverty threshold is 60% of equivalent disposable income median.

5 At-risk-of-poverty rate is share of persons (in per cent), whose income is 60% under the national equivalent disposable income median.

6 Equivalent disposable income is household disposable income calculated per equivalent consumer. It is obtained when household disposable income is divided with equivalent size of the households, formed by modified OECD scale – the first adult is equated with weight 1.0, with every following households member from age 14 and older - 0.5, but with every child younger than 14 - 0.3.

7 Social transfers
Pensions and benefits paid by state, municipality or other country, state alimony, scholarships, benefits and compensation covered by social insurance, including other country.

Median is statistical indicator characterising central value (medium point of the breakdown) of the observations grouped from the lowest value to the highest.