Debate: Deterioration of living conditions in the EU
Date: THURSDAY, 14 MARCH 2024
Speaker: Nicolas Schmit
Language: EN

Poverty remains acute in Europe. It has not significantly declined in the EU over the past few years, and citizens are quite rightly concerned. In particular, child poverty, affecting about 20 million children, has even increased over recent years. Some groups remain more at risk than others. This concerns young people women, ethnic minorities and migrants in particular. Obviously, the economic and social strains we face due to the multiple crises have negatively impacted households all over Europe, leading with the increased cost of living and the reduced purchasing power and available income. We know that lower-income households are mostly affected by increases in prices, such as energy and food prices. A rising number of people have fallen into energy poverty. Almost 1 in 10 Europeans is unable to keep their home adequately warm. On top of that, housing affordability is an increasing challenge in the Union in almost all Member States. In 2022, almost 1 in 10 persons lived in a household where total housing costs represented more than 40% of their income, with a significant increase since 2020. Obviously, although housing is not directly an EU competence, there is a strong demand now, also from Member States, for the EU to take a stronger role in tackling the European-wide housing crisis. We cannot turn a blind eye to the problem of the working poor in the EU. This is why wage policies and the legislation on adequate minimum wages that the EU has adopted and Member States have now to implement are of key importance. It’s also about part-time work imposed especially on single parents — and when I say single parents, I mean, in most cases, single mothers — that cannot rely on affordable childcare and therefore cannot have a full-time job and decent pay. We have seen how statutory minimum wage policies have been successful in protecting the purchasing power of workers with lower incomes in many Member States, and that’s why the implementation of the Directive on Adequate Minimum Wages is key. By the way, there are a lot of good examples that increasing minimum wages quite strongly does not destroy jobs. We see that in the European Union now that those countries who have done that, they have even seen their unemployment rate reduce quite dramatically. Real wages significantly dropped in 2022 and to a lesser extent in 2023. Furthermore, upward wage convergence has been stalling. While in 2024 real wages are expected to somewhat rebound, they would remain well below pre-pandemic levels for most countries. And in this context, it is crucial that euro area countries support wage developments that mitigate purchasing power losses, especially for low-income earners. Furthermore, it is essential that Member States promote collective bargaining on wage setting and ensure an effective involvement of social partners. We frequently forget that wages represent a very important part of our internal demand. And precisely this internal demand in the EU has remained rather sluggish in recent years. This also explains why our growth is now quite low. Given the repeated shocks and crises, effective policies and exceptional social transfers have helped prevent a major worsening: job protection during the pandemic, namely through the SURE instrument, resilience of employment, as well as increases in statutory minimum wages and income support measures have helped mitigate the negative social impact of the pandemic, high energy prices and inflation. But no significant progress in reducing poverty and inequalities has been achieved, notwithstanding a recent high employment rate. This is why we need to step up our efforts towards our target of reducing, by 2030, the number of persons at risk of poverty or social exclusion in the EU by at least 15 million, including at least 5 million children. To sustain these efforts, this needs to be complemented by reaching the targets on employment and particularly skills. Technological change creates skills shortages. Companies are complaining about these skills shortages. That is why it is absolutely important and urgent to invest more in human capital and, finally, to give everybody an equal opportunity precisely to get the right skills and the right educational level. We should also further tackle inequalities, not only to ensure better cohesion within our societies, but also because high inequalities have a negative impact on economic growth. We need holistic approaches that combine social and economic policies as well as fair taxation. Wages are generally much more taxed than other sources of income. We must live up to our commitments. Strong welfare systems and quality jobs are needed to fight poverty and address these new challenges. In line with this, we need to put a larger focus on social investment policies and reforms. This has been the spirit of the RF and will also be the spirit of the fiscal structural plans under the revised economic governance framework, as also discussed during Tuesday’s Ecofin Joint Council Meeting. Social investments and reforms, complemented by well-functioning social protection systems, thus have an important role in mitigating social risks and promoting upward social convergence. Tackling poverty and social exclusion is at the centre of the European Pillar of Social Rights and its action plan. I just mentioned the European Child Guarantee, the Directive on Adequate Minimum Wages, the Council recommendation on adequate minimum income, the European Platform on Combatting Homelessness, and so on. These need to be fully implemented now. We also support Member States by providing guidance through the European Semester and with EU funding, especially the ESF which, for example, invests EUR 45.5 billion in social inclusion. The actions we have put in place have set in motion our joint undertaking to make Europe fairer and more inclusive, but we need to be consistent in the implementation and do more to ensure our social cohesion. Social cohesion is essential. Social cohesion is essential also for competitiveness, to strengthen Europe, to make it stronger in a dangerous geopolitical context. We have to have strong solidarity between European Member States as well as inside our Member States. We should leave nobody behind. This is also about jobs, but not just any jobs: good-quality jobs with high productivity, with fair wages and good working conditions. We share a common goal that precariousness, poverty and social exclusion should be eradicated in Europe. And that is, finally, the objective of our social market economy system.