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TRANSCRIPT
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o thank Josa and Terrthe contribe usual dinancially suusion of thehe paper throm the Irishe make useSILC) made
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note was rectorate- Gecessarily reneral for Emr any persoormation co
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an Centrech (AT), ISE
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saganis*, A
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se Albuquery Ward f
bution of asclaimer a
upported be Europeanhe estimateh SILC 2008 e of microde availableta for Estoniand for the and Pensio and interpr
financed General for eflect the mployment, on acting oontained in
– Income
for the EuER – Unive
rysa Leven
Alari Paulu
versity of EUniversit
erque, Mike or comme
all past anapplies. Theby the Direcn Commissios for Ireland made avadata from e by Eurostia, Greece UK Family Rns via the retation of t
by and pr Employmenopinion or Social Affan its behalf this publica
Social Situation Obse
distributio
uropean Cersity of Ess
nti*, Horac
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Economicsty
Brewer, Caents, advicnd current e process ctorate Geon [Progressd are from tilable by ththe EU Sta
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on and livi
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Table
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2. Me
3. Sim
4. The
5. Co
Refer
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ember 2011
e of Conte
ract ............
troduction ..
ethodology
mulating the
e effects of
oncluding re
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endix 1: Aus
ents
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e austerity m
austerity m
emarks .......
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sterity meas
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measures ....
measures ......
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sures in 200
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9-11 ............
Social Situation Obse
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Empl
ervatory – Living Cond
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Europealoyment, Social Affairs
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an Commission s and Inclusion
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AbsWe c6 EU financhanand SWITCfiscain spehousaddrhow conspolicconsincomextreand incredistribovera
JEL: C
KeywMicro
ember 2011
stract compare thcountries in
ncial crisis annges presenthe UK, usinCH. The six cl consolidatending on cehold incomressed when to identify “sider, the ascies considesolidation brme is shared
eme, in Greeat the othe
eases in indibutional effall incidenc
C81, H55, I3
words: Austeosimulation.
e distribution the periodnd subsequ
nted as “ausng the EU mcountries hation. We foccash benefime. There isn doing suc“austerity msumptions b
ered. Using arought abod differentlyece, the be
er, in Portugarect taxes infect, increasce of the me
erity measur
onal effects d of large gouent economsterity measicrosimulatiave chosencus on the fiits and redus a range ofch analysis, pmeasures” inbehind the ca set of comut through cy across theetter off loseal, the poornto the pictsing the coseasures mor
res, Europea
of austerityovernment bmic downtusures” in Estoon model E
n different pirst round ef
uctions in puf important particularly
n a consistencounterfac
mmon assumchanges in
e income dise a higher pr lose a highture can altst most for tre regressive
an Union, Fis
Social Situation Obse
y measures tbudget def
urn. We exponia, Ireland
EUROMOD aolicy mixes ffects of incublic sector conceptua in a compant manner, tual scenar
mptions we componenstribution in roportion o
her proportioer conclusiohose with loe.
scal consoli
Empl
ervatory – Living Cond
that have bficits followinlore the effed, Greece,
and the Irish to achieve
creases in per pay acrossal and consiarative settithe relevan
rios and the find that thnts of house the six counf their incomon than theons about thower incom
idation, Pov
Europealoyment, Social Affairs
ditions and Income Dis
been introdung the 2007ects of polic Spain, Portu
h national m varying deersonal taxes the distribuistency issueng. These in
nt time perio scope of the burden ohold disposntries. At onmes than the rich. Bringinhe overall e and mak
verty,
an Commission s and Inclusion
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4
uced in 7-8 cy ugal
model, egrees of es, cuts utions of es to be nclude ods to he f fiscal
sable ne e poor ng
ing the
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Figure
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ember 2011
ntroducteconomic cequent govme poverty on incomes instead on
U countries:
ernment bued in 2007. Ouses in 2007t limit of 3% obudget def (see Figuree in the EU wn the periodchieve naturesses the qor pay have have impae employer me distributefits and pu
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udgets wereOf the six co7 and anothof GDP. By 2ficits much
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e been distrcted on risk costs (sociation and disblic service
ment deficits a
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EU-27
started in 20udget deficality. In this
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et governm
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e consideredone, compce, Spain, P
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d budget destonia had a
n the EU-27 acountries to se in deficitee of deficid the policys to direct poss income y. We also cions) and inallenge of m
age of GDP (
er 2011).
2004 2005
ent lending
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e austerity mely perceivegnore wided for examparing their sortugal and
by the finanis paper, threficits arouna deficit beaverage ananalyse is b and/or redt reduction
y mix chosenpersonal taxgroups andonsider the
ncreases in Vmeasuring t
(2001-2010)
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g (+) /borro
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measures to ed to be haer aspects ople in Jenkinsize and distd the United
ncial and ecree were ru
nd the Stabielow that limnd around obased on thduction in G these six gon to achiev
xes, cash bed types of ho incidence VAT, across the incidenc
2007 20
owing (-)
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counter theving an impf the econo
ns et al. (201tributional ed Kingdom.
conomic crinning budglity and Gro
mit. The otheor above 10eir being am
GDP or emplovernmentse it. Our an
enefits and pousehold, aof changes the househce of cuts in
08 2009
K
an Commission s and Inclusion
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e pact on omic 11) and effects in
isis that get owth er five 0% of mong oyment
s set out alysis public
and how s to hold n in-kind
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1 For Ir
ember 2011
nge of impothese are reterity measumptions behesentative snational ve
SILC) and thay, taxes anOMOD.1
structure of s and briefly
ach countryysis of the d the differencludes by plnomic crisis caveats to b
Methodoe are many cts of auster to measurecularly impoe choices shr hand, the re and timin of data in svalent (com an essentiahodologica
ong the metnt as austerie happenedssed across nt can (andWe conside
ch measure
me countrieerity measuic sector pa
reland this vers
ortant concevealed cleures” in a cohind the coample of e
ersions of thehe Family Rend benefits a
this paper isy describes
y and highligdistributionant policy mixlacing this aas a whole,
be adopted
ology analytical crity measure
e the impacortant whenhould be m most approng of the msome countmparable) aally nationall difference
thodologicaty measure
d to policies the income
d should) inder each in tu
es count a
es, such as Gres. While m
ay, they also
sion of the pap
eptual andearly in a coonsistent ma
ounterfactuaach nationae Europeanesources Surare provide
s as follows. EUROMODghts those ml effects of txes have th
analysis in th, by summad when inte
choices andes on incomct and whatn making coade in eacopriate choeasures taktries, but noassessment il perspectiv
es when inte
al issues to bs? What is ts without thee distributiondirect effecurn.
as austerity
Greece, exmostly involvo include inc
per makes use
d consistencomparative anner, the tal scenariosal populatio Union Statirvey for the
ed using the
. Section 2 d. Section 3 i
modelled in the austerityeir own dist
he context oarising our prpreting the
d assumptiome. There art indicators omparisons h country fo
oice may vaken. In additt in others. Iin each cou
ve in each cerpreting res
be confronthe counterfe austerity mn, with a rea
cts and mac
y measures
plicit packaving tax incrcreases in s
of the nationa
Social Situation Obse
cy issues aris setting. Thetime periods. We exploion, using mistics on Inco UK. Simulat
e EU tax-ben
discusses theintroduces t this analysisy measures tributional imof questionsolicy releva
em.
ons to be me also choicto use. Both across couor valid comary across cotion, possibin this papeuntry. This bcase and cosults (Levent
ed are the factual, i.e.measures? Wasonable dcroeconom
s?
ages of reforeases and ome benef
al tax-benefit m
Empl
ervatory – Living Cond
e when doiey include h to considet informatioicro-data froome and Livtions of the nefit microsi
e various mthe austeritys. Section 4 in the six complications.s about the
ant findings
made when ces to be mh types of cuntries. On thmparisons toountries, deilities may br we attemuilds on preonsidered thti et al., 2010
following: W what do wWhich meaegree of pric changes
orms have bcuts in sociafits or reduc
model, SWITCH
Europealoyment, Social Affairs
ditions and Income Dis
ing such anhow to identr, and the
on from a om the Euroving Conditeffects of cmulation m
methodologiy measures presents anountries and. Section 5 effects of tand by exp
simulating tmade in con
hoice are he one hano be made.epending onbe limited dupt to define
evious work whe implicati0).
Which measwe assume w
sures can brecision? To be accoun
been labelleal benefits ations in taxe
H.
an Commission s and Inclusion
stribution 2011
6
nalysis tify
ostat tions
changes model
cal taken n d shows
he plaining
the nsidering
nd the On the n the ue to e an which ions of
sures would be what nted
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certapackpolictherealongrestruthe gexplichanagenconsusuatempthose
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short‐
ember 2011
ain groups tkage as a wcies would he was a chagside measucturing of tguise of auscitly introdunges implemnda and wosidered. Thel” agenda f
porary fiscae reforms w
cond area ome cases m
es, for instanemented fusing of tax inroeconomied to the loence expecnguishing bethe mediumg implemenugal during ady introducnges becau
counterfac
way in whicpened in thcts. We havinuation of xation is notxation rules t of the policchanged oclar indexatio
of the measu
ge in the index
cing benefits a
‐term simulat
o compenswhole can bhave evolveange of govsures that mthe welfare terity. In ge
uced in ordemented in aould have a
e idea is to dfrom those il stimulus meere original
of considerameasures are
ce in the UKully until mucncreases anc downturn
ong term resctations andetween them term plannted as wel2011).2 For tced (June, 2use this natu
ctual
h we simulae absence e chosen topre-austeritt the same (Sutherlandcies in Estonccasionally on and ad
ures in the UK
x used for ind
and tax‐free in
ions.
sate or allevbe easily ideed in the abvernment in
might have b system thaneral our aper to cut the
a particular also happendistinguish bintroduced easures is nly presented
ation is whae all annouK, measuresch later (e.gnd spendingn and softenstructuring od therefore se three typ
ns that are al as further mthis reason w2011). We d
urally differs
ate the cou of the austeo interpret tty policies, iacross cound et al., 2008nia, Ireland a on an ad hhoc chang
that will have
exation of be
ncome relative
viate the imentified. In obsence of th
mid-2010 abeen introdut arguably approach hae public defperiod thatned in the abetween ch for austerityot considerd as tempo
at referencenced and is announceg. 2014). Theg cuts. One n the blow fof the tax abehaviour,
pes of phasiannounced measures inwe limit the
do not harm across cou
nterfactual erity measuhe “absencndexed acntries. Wher8) which areand Greece
hoc basis. Ines.
e the largest e
nefits and tax
e to income a
Social Situation Obse
pact of othother countrhe budgetaand the poliuced by anare part of
as been to fficit, or stem may be pa
absence of tanges that y reasons. Inred as part o
orary.
e time periontroduced
ed at one pere are seve is to reduceor political fnd welfare particularlying is difficu will be reve
ntroduced (e changes th
monise the rentries.
scenario (i.res”) is critic
ce of the aucording to ureas the UK e changinge are not re Portugal a
effect, but onl
x thresholds. T
s a whole. Th
Empl
ervatory – Living Cond
her measureries it is not sry crisis. In thicy change
ny governma new appfocus on ch
m its growth.art of some the fiscal cr were part on particular of the auste
od to considwithin a singoint (e.g. in
eral differene the risk of feasibility resystem. A th
y in the finanult. Furthermersed or ame.g. in Greehat we anaeference pe
.e. “what wcal to the evusterity meausual practihas long-es
g (Joyce anegularly indend Spain th
ly over time, i
This is likely to
e effect of thi
Europealoyment, Social Affairs
ditions and Income Dis
es. In any caso clear howhe UK, for e
es include, ent, cuts anroach, somanges that . Some of thother policyrisis are not of a “busine the removaerity packag
der for the cgle year. In 2010) may
nt rationales another (or
easons. Anohird might bncial markeore, it is pos
mended befoece, Irelandalyse to thoseriod for the
would have valuation o
asures” as thice (or law)stablished d Levell, 20exed and inere is a mix
s the decision
o have the eff
is is not evide
an Commission s and Inclusion
stribution 2011
7
ase, the w xample,
nd e under were he y
ess as al of ge if
hanges. other not be s for the r further)
other is be to ets. ssible ore
d and e e
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It is imausteincomthe dsize aonce
3 In th
there
ember 2011
hermore, in oe “austerity
ch measure
ost countrieash benefits eases in indihe welfare ollocated toxes that are(vii) cuts in p
eventual effnteractions. nue; increa
es) increasedavioural or mhe direct, fircontributionll countries
come tax anct of increasw, in broad acomprehences, taxes acuts in pubysis in this paons of this p
hermore, somufficient. Wsible approx
croeconom
mportant toerity measumes are adjdata were cand distribue unemploy
he UK, while p
is no figure fo
order to neuy package”
es can be
es austerity m and publicrect taxes; of househol households
e not straighpublic secto
fect on the For exampses in indired indexatiomacro-econrst round, efns. In additiexcept the nd social cosed employand approxnsive first-rouand expendlic sector emaper but we
paper.
me of the cWhere possib
ximations h
mic and sec
o note that ores on popujusted by so
collected antion of the e
yment increa
public sector in
or a specific p
utralise thei are also inc
simulated
measures tac pensions; ((iv) reductiods using thes (e.g. pure
htforward toor employm
public budle, reductio
ect taxes wiln of benefitnomic secofects of chaon to that, t UK.3 The effontributionsyer contribuximate termund analysis
ditures that amploymente return to c
changes areble, and espave been m
cond orde
our simulatioulations withource, in linend the “auseffects of thases and ot
nstitutions ha
pay cut that ca
r effect, pocluded in th
?
ake the form(ii) increasesons in publicem; (v) redu public goo
o allocate toment.
get will be tons in public
l result in incts. The overa
ond and thiranges in cathe effects fect of the p. Where pos
utions and dms, the addit
s would alsoare not strai. These meaconsider the
e difficult to pecially to mmade.
er effects
ons are effeh pre-crisis lae with actuasterity” yearhe austerity ther labour
ve had their b
an be simulate
Social Situation Obse
licy changehe counterfa
m of some cs in direct tac services thuctions in puods like defeo household
the net effec sector paycreased inflall result willrd round effsh paymenof public sepay cut is mssible and re
draw on avational effecto include thightforwardasures are be implicatio
capture exmaintain cro
ectively meaabour markal changes r (see Table policies migmarket cha
budgets cut, a
ed in this exer
Empl
ervatory – Living Cond
es that are nactual scen
combinationaxes and cohat have anublic expenence spendds; (vi) cuts i
ect of these y will serve toation and h also depen
fects. In this ts and direc
ector pay cumeasured neelevant we
ailable prevt of indirect
he effects ofd to allocatebeyond the ons of leavin
xactly becaoss-country c
asuring the ket characte between th 1 below) bght be someanges due t
and pay rises a
rcise.
Europealoyment, Social Affairs
ditions and Income Dis
not considenario.
n of: (i) reduontributions;n indirect imditure that
ding) and incin public se
changes. To reduce tahence (in sond on any analysis wect personal uts are capet of any re also measuious researct tax increasf cuts in pube to househ scope of th
ng them out
ause our datcomparabi
effects of theristics. Marhe period wut nevertheewhat diffeto the crisis,
are certainly r
an Commission s and Inclusion
stribution 2011
8
ered part
uctions ; (iii)
mpact cannot creases ctor
There will ax ome
e focus taxes tured duction ure the ch to ses. A blic olds,
he t in later
ta are lity,
he rket when eless the rent directly
restricted,
8
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or indamp
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8.1%
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SILC a
6 A re
the el
has be
ember 2011
directly, havplified and fo
ssue is distinained abov induce secme losses m adverse chs or increaseng standardction in concope of thise, under thenot). Wider agh the latte
European t
analysis malements for ributory casribution liablable in the not simulatea, along withtal status). Smation.5 Re income co
s analysis, sontries (assummed not to that the co
imulatinocus on the
o mid-2011. rent across
instance, in G
in 2010.
OMOD is curr
as underlying d
cent study by
derly in two o
een thorough
ve been acor tax and c
nct from wheve, we do nocond order amay adapt thanges in ce their labods may retunsumption as paper whie assumptioaspects of t
er may argu
tax-benefi
kes use of E the househsh benefit ebilities on the underlying
ed (e.g. benh informatioSee Sutherlaesults for Irela
ncepts alig
ome adjustmed the sam happen – it
osts of comp
g the aue austerity m However, tcountries d
reece the une
rently subject
data, will be i
y Matsaganis e
of the countrie
ly researched
ccounted focontribution
ether our anot attempt and macrotheir behaviircumstanc
our supply inurn to live wand, potentich focuses
on of other tthe crisis beuably aggra
it model EU
EUROMOD, hold populaentitlementse basis of th datasets. Mnefits which on on other and (2007) aand are basned with th
ments for nme before at is implicitly
pliance are
usterity mmeasures imhe period inepending o
employment r
to a major up
ncluded by 20
et al. (2010) e
es examined h
d in the UK (se
or.4 We mighn increases t
nalysis captto do. More-economic iour in an ates. For insta other waysith their partially, a slow on the first things beingyond the a
avate the fo
UROMOD
which simuations of EU M
and directhe tax-beneMarket incom depend on personal/hoand Lietz ansed on SWITose of EURO
on-take-up and after thy assumed tzero.
measuresmplemented
n which auson many fac
rate for male w
pdating proce
012.
stimated that
here (Greece
ee for example
Social Situation Obse
ht expect thto be damp
tures the fuleover, the a effects. Forttempt to c
ance, those s; young perents; reduc
wer recovery round effecg equal (eveusterity mea
ormer, at lea
lates tax liaMember Sta personal ta
efit rules in pmes and thn contributioousehold ch
nd MantovaTCH, the IrishOMOD (Cal
of certain be austerity m
that legal ru
s d after the 2sterity measctors (includ
workers aged
ss. All EU‐27 c
t the non take
and Spain) co
e Pudney et a
Empl
ervatory – Living Cond
he effects opened some
l effects of tausterity mer example, hompensate able to ma
eople facingctions in incoy. These issucts of the auen when it iasures are igast to some
bilities and ates. EUROMaxes and soplace and ine taxes andon history) aharacteristic
ani (2007) foh tax-beneflan et al., 20
benefits6 aremeasures);
ules are univ
2008 economsures were inding the tim
30‐44 rose fr
countries in E
e‐up of means
ould be very ex
l., 2006).
Europealoyment, Social Affairs
ditions and Income Dis
f benefit cuewhat.
the crisis, wheasures themhouseholds
e, at least paay work longg drastic redome will leaes too are busterity meais clear thatgnored, eve extent.
benefit MOD simulaocial insurannformation d benefits ware taken frocs (e.g. age
or further fit model, w011).
e made for while tax ev
versally resp
mic downtuntroduced i
ming of the n
rom 3.5% in 20
UROMOD, us
s‐tested benef
xtensive. Non
an Commission s and Inclusion
stribution 2011
9
uts to be
hich, as mselves facing artly, for
ger ductions ad to beyond asures t they en
ates non-nce
which om the e and
which
all vasion is
pected
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fits for
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The cmearevensignifrelatiwas econtlike tthesepubli
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growt
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increa
smalle
leave
ember 2011
roeconomiece, 2010-11
Country Estonia Ireland Greece Spain Portugal UK
ach case thecent, pre-
EU-SILC/natind 2008 inc
ources Survecy simulationest of the creform scen
now providenges are giv
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crisis hit Estosures in ordnues and dficantly incrively small ceven increaributions anhe sale of Ce affect peoic sector inv
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ased by more
er scale increa
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Table 1: Su
Input dataNational SNational SNational SNational SEU-SILC 20FRS 2008/0
e level andcrisis, past. onal SILC, fome data f
ey data. In en year for thountries). Thnarios are si
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reased in 20cuts by the eased furthernd indirect tCO2 quota aople individvestments a
changes th
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ases took plac
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ummary of i
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distributionFor Greeceor Estonia itfrom the naeach case mhe baseline hese incomemulated on
ry of policy endix 1.
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hat are simu
indexation of
creased relativ
ars) – and, add
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n of market i, Portugal a
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9 the governsing budge
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solidation is ly to be expme in eachd pay more
ween 24% (into employeer half of the
ertheless, tht negligible.h contribute
re 3 also shos of the comcuts is concnly pensionme tax cha
e UK, the efbution whilereductions in In Spain, Poss the distrib
are larger fon). In Estonialoyee contrh comes fro
e effects of the
icture relative
owne and Leve
ed to the top
future. Neith.17 On this bassumed by
pected since country, so
e. In particun Spain) ander and credie income d
e contributi. That is espe about 6%
ows a breakmponents shcentrated ins) are more
anges and it
fect of incree the increan the middlortugal andbution, whileor richer deca, where theribution incrom the top
ese changes a
ely straightforw
ell (2010) show
one percent.
her are realibasis, in all cy higher ince the richer
o even if taxular, we findd 54% (in thited contribistribution ra
ion of lowerecially evidof the overa
kdown of thhown in Figun the upper e equally sprt is only in th
eases in conase of income and botto
d Ireland, bee the effectciles (there ae main effereases, incopart of the
are shown at t
ward.
w the large in
This is confirm
stic assumpcountries, a come houser householdxes were lev that the rice UK) of the
butions. The anges from
r income hoent in Portuall burden.
e contributure 2. Here part of incoread. Most
he top decil
ntributions sme tax only om of the denefits and ts of public ware no chan
ect is from pome tax and distribution
the top of the
crease in tax
med by our ow
Social Situation Obse
ptions and Flarger prop
eholds than s have a dis
vied at a unchest 10% ofe overall incshare effec 70% in Port
ouseholds tougal, where
ion made bwe can seeome distribuincome groe group tha
shows up foaffects the
distribution apensions hawage cuts nges to socay related
d public wa. The effect
bars in Figure
in the top dec
wn analysis, n
Empl
ervatory – Living Cond
Figure 3 shouortion of the lower incomsproportion
niform rate, tf the popula
creased burctively paid ugal to 93%
o the fiscal c the poores
by each by e that in Greution, while oups actualat the tax b
r the upper very top of
are almost aave an effeand the incial insurancelements: e
age cuts, a h from benef
e 3, to make f
cile group in t
ot reported h
Europealoyment, Social Affairs
ditions and Income Dis
uld be intere fiscal me househoate share othese houseation accourden includi by those in
% in Greece
consolidatiot three dec
decile groueece, the e cuts in benly benefit frourden rises.
r half of the f the distribuall due to bect at all poi
crease of ince contribut
employer anhigher sharefit cuts is ne
factoring them
he UK is itself
ere.
an Commission s and Inclusion
stribution 2011
1
preted
olds. This of total eholds unts for ing that the .
on effort ciles
up, in ffect of efits om the
ution.18 enefit ints come ions in nd e of
egligible.
m out of
f heavily
7
N
F
Nbios
S
-
November 2011
Figure 3 Relative c
Notes: The austeritybenefit changes (sen employer contribof this Figure. Decilescale to adjust inco
Source: EUROMOD
-2002040
poore
23456789rches
Employ
-10
0
10
20
30
40
50
60
poorest 2 3
-10
0
10
20
30
40
50
60
poorest 2 3
contribution to fis
y measures includedee text) are not incbutions are incidentes are based on eq
omes for household
version F4.19 and S
9riches
yer SIC W
4 5 6 7
Spain
4 5 6 7
Estonia
scal consolidation
d here are limited tcluded. In Estonia ret on the relevant emquivalised disposab size.
SWITCH.
Worker SIC
-10
0
10
20
30
40
50
60
8 9 richest
-1
1
2
3
4
5
6
8 9 richest
n by type of auste
to those that can beductions in creditemployees and redu
ble income in the c
Income taxe
0
0
0
0
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0
0
0
poorest 2 3 4
P
0
0
0
0
0
0
50
0
poorest 2 3 4
erity measure, by
be simulated with Eed contributions areuctions in credited counterfactual (befo
s Benefit
5 6 7 8
Portugal
4 5 6 7 8
Ireland
y income decile g
UROMOD. Increasee included with incrcontributions affecore austerity) scena
ts and pensions
9 richest-10
0
10
20
30
40
50
60
po
-10
0
10
20
30
40
50
60
po9 richest
Social Situation
group
es in indirect tax, cureases in employer t current rather tha
ario and constructe
Public s
oorest 2 3 4
oorest 2 3 4
Gr
Employ
n Observatory – Living Conditi
uts in public servicecontributions. It is a
an future incomes, ped using the modifie
ector pay (net)
5 6 7 8
UK
5 6 7 8
reece
European Commisyment, Social Affairs and Inclu
ions and Income Distribution
es and some minor assumed that increapurely for the purpoed OECD equivale
9 richest
9 richest
ssion usion
2011
18
tax-ases oses nce
Nove
Distri
Althoexpepay iincomequit4 shocauseffecshowdistribincomat thincomconcPortuare cThe ogrou
Figure
Notes:disposto emtax-becountincom
Source
-12
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-8
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-4
-2
0
%
ember 2011
ibutional e
ough better ected, and iis also largeme groups, table or not
ows the avesed by the acts of changw that the rebution in Estme). In the Ue top. The dme is larger centrated inugal is the oconsiderablyopposite is thps and thos
e 4 Percenta
: The austeritysable income ployer or cred
enefit changeterfactual (bef
mes for househo
e: EUROMOD v
2
0
8
6
4
2
0
poorest
effects on h
off househot does not sr. The share therefore, tet. In order torage propo
austerity meges to emploeduction in intonia and SpUK the effecdistribution is at the botto
n the middlenly country y larger in thhe case in Gse at the bo
ge change in
y measures in(changes to d
dited contributes (see text) afore austerity) sold size.
version F4.19 a
2 3
household
olds pay a lasignify that t of the totalells us nothin
o account foortional chanasures that oyer and crncome duepain (i.e. eact is also fairs more unevom as well a
e decile grouwith a clear
he first and sGreece, whttom pay re
n household
ncluded here direct taxes, caions. In additio
are not includescenario and c
and SWITCH.
3 4
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incomes
arger share,he burden o cost of the ng about wor the greatenge in househave a dire
redited conte to the mea
ch decile grly uniform uven in Irelanas, more espups, have hrly regressivesecond decere percent
elatively little
disposable i
are limited tash benefits anon, increases ined. Deciles arconstructed us
5
EL
income de
Social Situation Obse
, as noted aof the meas measures phether the der ability to ehold dispo
ect bearing tributions arasures is relagroups pays
p to the 9th d where thepecially, at tad their ince distribution
cile groups ttages losses
e.
ncome due t
to those that nd public sectn indirect tax, cre based on esing the modif
6 7
ES P
ecile
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ervatory – Living Cond
above this is sures in relatpaid by highdistribution opay of riche
osable incomon househore not includatively flat ac roughly thedecile grou
e proportionthe top. Penome relativn, with perchan higher s are largest
to austerity m
have a director pay). They cuts in public sequivalised disfied OECD equ
8
PT UK
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ditions and Income Dis
only to be tion to their her and loweof the cost iser householdme by decileold income. ded here. Thcross the inc same prop
up, but mucnal reductionsioners, whely well prot
centage lossup the distrit for the top
measures
ct effect on do not includeservices and sosposable incouivalence scale
9 riche
an Commission s and Inclusion
stribution 2011
1
ability to er s ds Figure e group The
he results come
portion of h larger n in o are tected. ses that bution. decile
household e changes ome minor
ome in the e to adjust
est
9
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ember 2011
re 5 distinguhe three macontributioncularly large
ugal, Irelandcating that t
eholds but ct is relativenia and the
pattern of thto a lesser eribution inc
UK but concle group is dirst decile gbution, in Spme distribut
changes, esp, that the
ly, public sebution in allgest effect ction - i.e. tause they eme groups w
also of intererent types ome by decieholds withaining elde
e proportionntries housechildren thancome distrrly is particu
ece childrene distributioparticularlyce a child teholds acro
uishes the prain types of ns, and those effect on d and Spainthe pensionare mainly ly small and UK.
he distributioextent in Poreases are l
centrated indue to the froup and th
pain it desction most afpecially in ttax burden
ector pay cu the countr in Ireland. (hey take acarn less – wwhere taxe
est to underof householdle group on
h children (derly people (nately, regaholds with oat tend to loribution. In Eularly strikingn are relativ
on. These eff affect childtax credit oross the inco
roportional change: thse in public households
n. Interesting cuts do noconcentrat
d similar acr
on of tax anrtugal the rearger in the
n the top defreezing of lohen relativeribes a U-shffected. In Gthe middle o rises.
uts have a lies where th(These are sccount of th
which probas are highe
rstand how d. Figure 6 cn the whole defined as a(defined as
ardless of theolder peopleose more, aEstonia the cg, especiallyvely well-profects are padren or elder a pension.
ome distribut
effect on hoose in bene sector pays in the lowegly, results aot have mucted in the upross the bott
nd contribueductions in
e upper parecile group.ocal tax.) W
ely flat and dape with ho
Greece, moof the distrib
arger effechese apply,shown net ohe fact thatbly explainsr.)
the burdencompares th population
aged under aged 65 oreir position ie lose less th
although in Pcontrast bey towards thotected, espartly due to erly people:. They are ations.
Social Situation Obse
ousehold inefits and pe. Cuts to beer part of th
are different ch effect onpper middletom two thi
tion changen disposablert of the dist. (The reduc
While in Estodeclining inouseholds in
ost people abution, and
ct in the upp but the gra
of taxes andt the emplos why the ef
of the austhe proportio
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etween the he bottom opecially tow decisions a: for examp
also partly d
Empl
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ncome in eansions, thos
enefits and phe income d in the case
n the income part of therds of incom
es is quite de income dribution. The
ction in tax inia, the red the top han the upperactually gai it is only in
per part of tadient varied contributiooyees conceffect is not s
terity measuonal changre 4) with th) people in
Greece this me distributiseholds ands only applieposition of cof the incomwards the mabout tax anle choices oriven by the
Europealoyment, Social Affairs
ditions and Income Dis
ach decile gse in incomepensions hadistribution ie of Greece
me of poorere distributiome distributi
different. In Idue to tax ae same appn the botto
duction is larlf of the r middle pan from the ithe top dec
he income es, with the ons on the erned pay lestronger in t
ures is sharege in disposahat on (a) p households latter groupion. In the od it is househes at the bochildren and
me distributiiddle and bnd benefit cover whethee compositio
an Commission s and Inclusion
stribution 2011
2
group e taxes ave a n
e, r n. The ion in
Ireland nd
plies in m rger in
rt of the ncome cile
ess tax the top
d across able eople in s p loses other five holds ottom of d the on. In
bottom changes er to on of
20
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Figuremeas
Notes:disposto emtax-becountincom
Source
-9%-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%
-9%-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%
-9%-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%
ember 2011
e 5 Percentasure
: The austeritysable income ployer or cred
enefit changeterfactual (bef
mes for househo
e: EUROMOD v
EE
Chan
EE
Changes
EE
Pu
poorest 2
age change i
y measures in(changes to d
dited contributes (see text) afore austerity) sold size.
version F4.19 a
IE EL
nges to benef
IE EL
s to income t
IE EL
ublic sector p
2 3 4
in household
ncluded here direct taxes, caions. In additio
are not includescenario and c
and SWITCH.
ES
fits and pens
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ax and work
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pay cuts (net
5 6 7
d disposable
are limited tash benefits anon, increases ined. Deciles arconstructed us
PT UK
sions
PT UK
er SICs
PT UK
t)
8 9 rich
Social Situation Obse
income due
to those that nd public sectn indirect tax, cre based on esing the modif
est
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e to austerity
have a director pay). They cuts in public sequivalised disfied OECD equ
Europealoyment, Social Affairs
ditions and Income Dis
y measures b
ct effect on do not includeservices and sosposable incouivalence scale
an Commission s and Inclusion
stribution 2011
2
by type of
household e changes ome minor
ome in the e to adjust
21
N
F
Namca
S
November 2011
Figure 6 Percenta
Notes: The austerityand public sector pminor tax-benefit cconstructed using tas all those aged 65
Source: EUROMOD
-400.0
-200.0
0.0
200.0
-6
-5
-4
-3
-2
-1
0
poorest 2 3
-4
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0
poorest 2 3
age change in ho
y measures includedpay). They do not inhanges (see text) a
the modified OECD5 or more. The char
version F4.19 and S
%
%
%
%
4 5 6 7 8
Estonia
4 5 6 7 8
Spain
ousehold disposab
d here are limited tnclude changes toare not included. D
D equivalence scalerts are drawn to diff
SWITCH.
All
9 richest-13-12-11-10-9-8-7-6-5-4-3-2-10123
poores
-10
-9
-8
-7
-6
-5
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0
poores9 richest
ble income due t
to those that have o employer or crediDeciles are based oe to adjust incomesferent scales, but th
UK
With child
st 2 3 4 5 6
Ireland
st 2 3 4 5 6
Portugal
to austerity measu
a direct effect on hited contributions. Ion equivalised disps for household size
he interval between
ren
7 8 9 richest
7 8 9 richest
l
ures: by type of h
household disposabIn addition, increas
posable income in te. Children are definn gridlines on each
With elderly peo
-4
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-2
-1
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1
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-5
-4
-3
-2
-1
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1
poorest 2 3
Social Situation
household
ble income (changses in indirect tax, cthe counterfactual ned as those agedof them is the same
ple
4 5 6 7 8
UK
4 5 6 7 8
Greece
Employ
n Observatory – Living Conditi
ges to direct taxes, cuts in public servic (before austerity) s
d under 18 and “elde.
9 richest
9 richest
European Commisyment, Social Affairs and Inclu
ions and Income Distribution
2
cash benefits ces and some scenario and derly people”
ssion usion
2011
22
Nove
Risk
The e60% oincomrise, iwith reduin terremathresthe sin Irepointchildamoextenmost
Table
Risk Risk Perc ChaPovPerc
Notes:disposto emtax-bepeoplOECDcount
Source
Not saustemealittle i
ember 2011
of poverty
effect of auof the medime at the bif a fixed pomedian incctions in therms of relatiaining the sashold and oame as befland (3.7 pet in the othe
dren at risk ring the worknt in Estoniat in Portugal
e 2: Risk of po
of poverty of poverty centage po
ange in medverty rate afcentage po
: The austeritysable income ployer or cred
enefit changele in the releva
D equivalence terfactual (pre
e: EUROMOD v
surprisingly, erity measusures have in all countr
y
sterity meaian, depend
bottom of thoverty threshcome (i.e. toe middle of ve poverty ame). Tablene that fallsfore, the proercentage per countriesses consideking age po
a and Spainl, Greece a
overty rates b
rate before rate after (foint change
dian equivafter (relativeoint change
y measures in(changes to d
dited contributes (see text) aant group with scale. The fixe-austerity), sce
version F4.19 a
median eqres. If the pobeen impories, except
sures on theds on how the income dhold is usedo decline as the distribu risk after thee 2 shows ths as incomeoportion at points) and. In all coun
erably, espeopulation es. The propond Spain an
before and af
e fixed thresh
e in risk of po
alised income threshold) e in risk of po
ncluded here direct taxes, caions. In additio
are not includh equivalised hed threshold isenario.
and SWITCH.
uivalised incoverty line issed, overal
t Portugal. B
e risk of povthis effect is distributions . However, s median in
ution shown e austerity me change i
e is reduced risk of pove Portugal (2
ntries, excepecially in Irelspecially in
ortion of oldnd actually
fter the introd
old) overty rate
All 0-17
18-64 65+
me (%) overty rate
All 0-17
18-64 65+
are limited tash benefits anon, increases ined. Risk of pohousehold incs calculated u
come declis recalculatl risk of pove
By age grou
Social Situation Obse
verty, define calculated we might eif the povercome decli in Figure 4, measures arn poverty ri
d and confirerty rises in e2.0) but by lept Greece aand. The ris Ireland ander people a falls a little
duction of au
EE IE15.3 12.416.2 16.0
relative to b1.0 3.72.2 5.00.8 3.80.1 -0.7
-2.9 -7.614.9 11.9
relative to b-0.4 -0.51.0 -0.4
-0.1 -0.2-3.2 -1.9
to those that nd public sectn indirect tax, coverty rates a
come below 60using equivalise
ines in all coted on the berty rates ar
up, increase
Empl
ervatory – Living Cond
ed as havingd. Given theexpect the rrty thresholdines), and g it is not cleare introducesk using botrms that keeeach countress than on
and the UK, k of poverty
d Portugal aat risk increa in Ireland.
usterity measu
E EL E4 20.4 180 21.1 19base scena7 0.7 10 0.3 18 0.6 07 1.3 16 -1.2 -29 20.3 18base scena5 -0.1 -04 -0.6 -02 -0.2 -09 0.7 -0
have a director pay). They cuts in public s
are calculated0% of the meded disposable
ountries as abasis of the re broadly u
es in the risk
Europealoyment, Social Affairs
ditions and Income Dis
g income be reduction risk of poved is allowedgiven the incar what to eed (other thth a fixed peping the thry. It does soe percenta the proporty also increaand to a lessases by less,
ures
ES PT .6 18.5 1.6 20.5 1rio by age .0 2.0 .2 3.2 -.9 1.4 .1 2.8 .7 -2.0 -.3 19.6 1rio by age .3 1.1 -.2 2.5 -.1 0.8 -.8 1.0 -ct effect on do not includeservices and so
d as the percdian, using the
e income in th
a result of th median aftunchangedof poverty a
an Commission s and Inclusion
stribution 2011
2
elow in rty to to shift come expect hings overty
hreshold o most
age tion of ases ser but
UK 6.6 6.6
0.0 -0.5 0.0 0.4
-0.8 6.1
-0.4 -1.1 -0.3 -0.2 household e changes ome minor entage of
e modified e base, or
he ter the
d or fall a among
23
Nove
thosein the
Indir
In sommodexpesize a
Usingby inin preprophaveBudg
In Estincrethe inincrefind twhergrouare, ffor th
The c(dire
19 TheUK: B2005/quinti
20 The
2012.
21 Loo
house
effect
22 The
how it
by tho
spend
other
ember 2011
e of workinge risk of pov
rect taxes
me of the cel in detail
enditure). Hoand inciden
g external income decie-tax relativ
portion of dise been estimget survey (D
tonia and Sease was 2.5ncrease in t
eases to thethat in eachre the extrap and 2.7% for Estonia:
he UK: 2.2%
combined ect taxes, be
e studies usedBarnard (2010/06 Householile group. VAT
ere were no su
oking at the ef
ehold income
t at the bottom
e relative degr
t relates to co
ose on low inc
ding is much h
countries, bu
g age and tverty among
countries the(because Eowever, drance of the e
nformation fle group an
ve prices, wesposable incmated fromDecoster et
pain the ma5 percentagthe main rat reduced rah of the cou tax represe in the top q 1.5% and 1and 1.2%.22
effect of theenefits and
d are, respect0). For Portugd Budget SurT was calculat
ubstantial cha
ffect of taxes p
can distort th
m of the incom
ree of regress
onsumption p
comes) and (b
higher than inc
ut to a letter e
the elderly ag the elderly
ere have alsUROMOD’s
awing on oteffect of inc
for Estonia, Pnd assuminge have estimcome.19 For a previous t al., 2010; M
ain VAT ratege points; inte was 4 peates. Assumuntries, the eents almost quintile grou.1%; for Spa
2
e VAT increapensions, a
tively, for Estoal we carriedrvey on the ded based on t
anges to VAT i
paid on the ba
he view of the
me distributio
ivity across co
atterns (i.e. th
b) the effectiv
come in the lo
extent.
are notabley in Estonia
so been ch input data
ther researcreases in VA
Portugal, Spg that theremated the ir Greece, th study using
Matsaganis
e increasedn Portugal itercentage ping the increffect is reg5.6% of houup. The corr
ain: 1.4% and
ase and of tnd public se
onia: Vork et out our owndistribution othe most usua
n Ireland in th
asis of record
regressivity o
on. See Brown
ountries is due
he extent to w
e savings rate
ower income
Social Situation Obse
e in Portuga and Ireland
anges to inbase (EU-SI
ch, it is possiAT across th
pain and the was no chaincrease in he effects og micro-dataand Levent
by two pert was 3 percpoints, plus 1reases havegressive.21 Thusehold incoresponding d 1.1%, for P
the changeector pay) i
al. (2008), fon approximatiof expenditural VAT rate ap
he relevant pe
ed spending p
or otherwise o
ne and Levell (
e to (a) differe
which goods w
e across the in
decile groups
Empl
ervatory – Living Cond
l as is the sud.
direct taxesLC) does noble give an
he income d
e UK on theange in prestandard ra
of changes ia from a Grti, 2011).20
rcentage pcentage po1 and 2 pere a proportiohis is most clome in the b figures for tPortugal: 1.4
es simulatedis shown in F
or Spain: Serraons based one by COICOPplying to each
eriod, althoug
patterns as a p
of indirect tax
(2010).
ences in the st
with lower tax
ncome distribu
. The same te
Europealoyment, Social Affairs
ditions and Income Dis
ubstantial re
s that we caot include d indication
distribution.
e incidence e-tax expenate VAT as ain all rates oreek Househ
oints; in theoints and in Grcentage poonal incideearly so in Gbottom quinthe other co4% and 1.0%
d with EUROFigure 7 (da
ano (2001) ann informationP categories bh spending ca
gh it is due to
proportion of
xes, and espec
tructure of VA
rates are con
ution. For Gre
ends to apply i
an Commission s and Inclusion
stribution 2011
2
eduction
annot data on of the
of VAT diture or
a of VAT hold
e UK the Greece oint nce, we Greece ntile ountries % and
OMOD ashed
nd for the from the by income tegory.
rise in
recorded
cially the
AT and
nsumed
eece,
in the
24
Nove
line),Givefirm cregrewe mand low invery rises igrousimilaincre
In a tcontof thempreduempcomespepropuppe
On thon homakeOn thwhilequitethe Vare apublithe e
23 Not
two d
incom
are bo
indire
theref
24 Bro
ember 2011
contrastedn the approconclusionsessiveness omight draw the UK the pncomes is n strongly prois transformps in particu
ar in scale toeases).
third step wribution creese effects hasised is octions in creloyees in qubined mea
ecially in Estoportion of hoer incomes.
he one hanow comprees definitivehe other hae EUROMODe precisely, oVAT changeable to carric sector pa
effects of cu
te that by com
data sources a
me and the sam
ound to be so
ect taxes that
fore.
owne and Leve
d with the efoximations a. Neverthele
of the increaabout the dproportion o
now increasogressive naed into a U-ular. The peo those for t
we add the eedits (dotted (see above
open to queedits to futuuestion wousures in the onia where ousehold inc
nd the fact tehensively the statementand, our estiD simulates tour assump
es are necery out on theay. Even mouts in public
mbining the re
re the same B
me equivalenc
me difference
we use for Sp
ell (2010) also
ffect of the and the assess, in all fiv
ased VAT acdistributionaof income ced relative
ature of the -shaped pic
ercentage lothe Irish low
effects of ind lines), make). If these aestion – addure pensionsuld have the two countr the size of tcome, to a
that the sizehe analysis its about themates of ththe size of t
ptions aboutssarily quitee incidenceore tentativec services, w
esults in this w
Both sets of ca
ce scale. How
es in the comp
pain is more th
o find these ef
income chumptions ae countries cross the incal effects of contributed to the cont Greek meacture involviosses amon
w income po
creased emking further,assumptionsing these in
s to the othee effect of inries where ththe effect islevel similar
e and distribis able to co
e relative effhe effects ofhe changet the inciden
e tentative ce of changee would be
which are dis
way we assum
alculations use
wever, the fact
position of the
han 10 years o
ffects for the U
Social Situation Obse
hanges alonbout incide where VATcome distrib the austerit
d to the austtribution by asures beforing large los
ng the low inopulation (w
mployer con, strong assus are valid – ncreases to er current loncreasing thhey apply (s large, bringr to that in Ir
bution of theover all the fects of ausf VAT increas to employnce of thescompared wes to direct t an analysisscussed in t
e that the com
e a very simila
t that differen
e income dec
old. Our result
UK changes in
Empl
ervatory – Living Cond
ne (as in Figuence madeT rates werebution affecty measuresterity measu those on hire includingsses for the ncome Greewhere there
ntributions aumptions ab and this, it employer c
osses experiehe progressEstonia andging the “loreland for th
e combined relevant austerity acrosases are apyer and crede, as well awith the pretaxes, cash s that attemhe next sec
mposition of t
ar concept of
t surveys are
iles. In particu
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n indirect taxe
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and reducebout the incshould be
costs and enced by thsivity of the d the UK) anoss”, in termshose on mid
d effect depusterity meas countries proximate. dited contris the incide
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mpted to incction.
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d cidence
he
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ence of sis we nd clude
ups in the
sposable
that there
in
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25
N
Fc
Npiteh
S
November 2011
Figure 7 Austeritychanges to emplo
Notes: The austeritypublic sector pay), ndirect tax, cuts in the relevant emploequivalised disposahousehold size. Source: EUROMOD
-11%-10%
-9%-8%-7%-6%-5%-4%-3%-2%-1%0%
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y measures as a oyer contribution
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osable income
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Spain
percentage of hns
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ons in credited cone counterfactual (
SWITCH.
chest
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chest
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ted to those that han employer contribubenefit changes (sentributions affect c(before austerity) s
me + VAT increase
est 2 3
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est 2 3
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ave a direct effectutions (in UK and Estee text) are not inc
current rather than scenario and cons
fall in disposable
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-11%-10%
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quintile group: c
t on household disptonia) and reductiocluded. . It is assum future incomes, pustructed using the
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changes to incom
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ce
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Employ
n Observatory – Living Conditi
me components,
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oses of this Figure Qequivalence scale
European Commisyment, Social Affairs and Inclu
ions and Income Distribution
, VAT increases a
axes, cash benefits aonly). Other increasebutions are incidenQuintiles are basedto adjust incomes
ssion usion
2011
26
and
and es in t on
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25 See
ember 2011
s in public s
fiscal squeecting essentces have ancient incomeffects of suparable pic
ntry. While th publicly-fun
been addreprehensiveler research
dence of redt be made aton, 2011). Inernment dere these cha
UK governmexpenditureracteristics. roportionatece provisiongly on wheic expenditexample) thertheless, it i
wn to be largerity measupublic pay
Concludieffects of thvance, not o, but also bepects for maeptability ofeffects on innomic welfames, leavingket developualities mormpting to e
also Horton a
services
ze has undetial public sen impact one to replacch cuts wo
cture of the he issue of inded healt
essed in recely for all typ and some ductions in sabout who n addition, partment aanges to se
ment’s own ae cuts that cO’Dea andely on the sen. Overall, thther one asure have th
heir value is is worth notger than thares on living measures in
ing remahe economionly becausecause howacroeconof pathways nequality of are. Insteadg aside the
pments and e generallyxplore some
and Reed (201
ermined theervices andn living stane the publiculd provide consequenncorporatinh care, childent work (sees of service strong assuspending wbenefits frolittle is know
are being traervice provis
analysis (H.Mcan plausibld Preston (20econd and he distributiossumes that he same val in proportioing that theat of taxes a
g standards n this paper
arks c crisis and se inequalit
w the cost omic recovein this direc the crisis as it focuses o potentially financial, m
y from cuts ine of these c
10).
e proper fun the “socialdards eithe
c service wie a more conces of austng the distribd care, socee Paulus ete is not possmptions. Ind
would be com the non-c
wn about hoanslated intsion will be e
M. Treasury,y be alloca011; Figure 8 third quintilonal effect cuts in spenlue to eachon to income scale of thand benefit that is suggr is not the e
austerity onty, and any of the crisis isery and fina
tion. The ans a whole, non the effec larger effec
macroeconn spending
complex issu
Social Situation Obse
nding of thel wage”. Cu
er directly, oth private c
omprehensivterity measubutional effial care, edt al., 2010), sible withoudeed, the c
onsiderable,cash service
ow cuts mado cuts in speexperienced
2010; Anneated to hous8.2) show thles of the di of expendinding on th
h member ome (Joyce ahe effect of ts (in the UKgested by thend of the s
n inequality driver of gros distributedncial stabilitnalysis presenor does it ccts of austercts on incomomic and p on public sues at the n
Empl
ervatory – Living Cond
e public secuts in spendor indirectly consumptionve and therures for houects of soci
ducation etcapplying th
ut a substanchallenges o given the ae in the first de at the leecific servicd.
ex B) selectsseholds acchat these faistribution ofture cuts ase remaining
of the populnd Sibieta, 2 spending c). Clearly th
he analysis otory.
y are of greaowth in it, m
d has implicty as well asented in thisconsider all arity packagme inequalipolitical disaervices. Othational leve
Europealoyment, Social Affairs
ditions and Income Dis
ctor, adverseing on publfor those whn. Accountirefore more seholds in eial benefits ic.) into EURO
hese methodntial amountof modellingassumptions place (O’D
evel of a ces, and wh
s about a thcording to tll f income ins a whole deg two-thirdsation of wh2011).25
cuts has beehe effect of of the tax, b
at current matters in its
ations for ths the politicas paper is noaspects of es on houseity from labo
array and onher studies ael (for exam
an Commission s and Inclusion
stribution 2011
2
ely lic ho have ing for
each in-kind OMOD ds t of g the s that
Dea and
hen and
hird of heir
cluding epends of ether
en benefit
own he al ot about
ehold our n are
mple see
27
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Mats(2011
It is imevenfrom budgdirecbluntworseover and incidimpatell uwhicauste
Eabaamloth
Athd
Inocina
Incacmpda
26 Rais
But th
ember 2011
saganis and1) for Ireland
mportant ton though the the overall getary retrect control ant instrumentening living the distribubenefit cha
dence is cleaacts of tax-bs who is suffh any such erity measu
Except in Poa larger probenefit cutsausterity on across incommuch biggeower middlhose in the
Adding the he burden
distribution (n all countrion older peocase in Irelancomes in Pat each poinn all countrichildren thaat low incomchildren in measures apayments fodisposable iare better o
sing VAT and
hese too are r
d Leventi (20d and Joyc
o assess andeir effects m impact of t
enchment pnd can makts in terms o standards
utional propanges as wear (assumin
benefit chanfering most pain may hres. With tha
ortugal and oportion of t
than the b disposableme decile ger effect rige income bottom decapproximanow largerFig. 7). The ies that we ople than ond and in EPortugal. In nt in the incies, except n those with
mes) and alsthe bottom
as a wholeor children.ncome thaff than befo
cutting spend
elatively blun
011) for Gree and Sibie
d compare tmay in somethe crisis. Throcess are oke choices.f their distriband growinerties of the
ell as publicg no evasionges can b because ohave been at in mind w
Estonia, higtheir incombottom dec
e income is groups in Esht at the togroups, whcile group),te effect o
r at the botregressive e analyse, ex
on the popuEstonia but d Greece, p
come distrib Greece, thhout (Fig. 6)so in Portug
m 20% of te because In Greece
an others, riore in the th
ding on service
t instruments
eece, Brandta (2011) an
the effects oe cases be shis is becausone arena i Macro-eco
butional effeng budget de austerity m pay cuts a
on or avoidae fine-tunedf the crisis, itexacerbate
we can con
gh income e to publiccile group clearly and
stonia and Sop, also prohere pensio and clearlyf VAT increttom and theffect is simixcept Greeulation in gedoes not ap
pensions arebution. he measures). This applie
gal at low lethe distribu of counte
e householdght across
hird and fou
es may be see
s in terms of t
Social Situation Obse
olini et al. (2nd Brewer e
of austerity small and/ose the policiin which goonomic andects. In the deficits, govmeasures thre sharp ins
ance take pd.26 Therefot does allowed or mitigaclude the fo
householdsc pay cuts, (Fig. 4). The
d strongly reSpain, mildl
ogressive in oners are cy and strongases changhe top thanilar but less sce, the aus
eneral (Fig. 6pply at low
e not protec
s have a laes particulaevels of inco
tion on aver-balancinds with childthe incomerth decile g
en as necessar
heir incidence
Empl
ervatory – Living Cond
2011) for Itaet al. (2011)
measures aor differ in diies put in pl
overnments d labour maface of risin
vernments stat they introtruments in
place) and ore while ouw us to assesated by poliollowing fro
s (top deciledirect tax i
e distributioegressive in y progressivIreland (alt
concentrategly progressges the shan in the midstrong in thesterity meas6). This is pa incomes incted and fa
rger effect rly in Estonia
ome. In the verage do g increasedren tend e distributio
groups.
ry to generate
e.
Europealoyment, Social Affairs
ditions and Income Dis
aly, Nolan et for UK).
across counistributional ace as partcan exert s
arket policieng unemplotill have chooduce. Dire the sense t the distribur analysis doss the extency choices
om our analy
e group) concreases an of the bu Portugal, qve in the UKthough losseed, are lowsive in Gree
ape in Greeddle of the e UK and Spsures fall lessrticularly cle the UK or aace particu
on househoa (and dramUK, househonot lose f
es in meanto lose less
on and on a
e the required
an Commission s and Inclusion
stribution 2011
2
t al.
ntries, terms t of the ome
es are oyment, oices ct tax hat their tional oes not nt to over ysis:
ontribute nd cash urden of quite flat K, with a es in the
wer than ece. ece, with income
pain. s heavily early the at higher ular cuts,
olds with matically olds with rom the
ns-tested s of their average
d revenue.
28
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Chwcamm
Inin(iad
Upapapa
In int
Simurepretheir demusuaundeassesmeawoulunemdemincreexten
We hcounhad
As exand com
27 Res
(Calla
ember 2011
Changes to hardest (Fig.where the lcontributionand the UK middle of thmiddle thann Greece tnvolves cutincluding a
and 5) has distribution dUsing a fixepoverty incrausterity meparticularly additional pparticular baverage (Ta
terpreting o
lating the eesented by effect in a ographic ally true, it is
erlying distribssed – for exns that the d have a b
mployment and for soc
eases and unt of this un
have not tantries the sizebeen able
xplained abservices on parable an
sults for Irelan
n et al., 2010)
benefits an. 5). This is stargest effes tend to af and but lehe distributio at the top.the choicets in taxes small cut i served to due to the ced poverty reases, espeeasures on in Estonia aprotection urden, risk
able 2).
ur analysis t
effects of thedata collecmid- (or pond labour mfar less so abution of incxample, if tha further re
bigger propo among prim
cial support.nder-estimader- and ov
ken accoune and distribto do this.
bove our an householdsalysis of six
nd which are c
) are broadly s
nd/or pensiotrongest in I
ect is in theffect those ess strongly on in Spain.
e of a progfor those oin revenue, mitigate tcrisis as a whthreshold t
ecially in Irehouseholdsand Portugat low incof poverty
there are so
e austerity mcted in 2007st-) recessio
market chanat times of ccome agaihey reduceduction resortional effemary earne This might m
ate the effever-estimati
nt of tax evabution of th
nalysis does s. This is for tcountries ar
calibrated to p
similar to tho
ons and bereland and
e middle ofon high inc so in Portu while in Es
gressive refoon middle even if the
the fall in ihole (Matsathe effect eland and Ps with child
gal (and facomes). In y among o
ome caveat
measures on7 and 2008 on world. Ounges are norisis. To the enst which th income at ulting from
ect than shors has serioumean that w
ects of beneon might no
asion. In Gree tax chang
not includetwo reasonsre considera
post‐recession
se reported h
Social Situation Obse
nefits tend in Portugalf the distribome the mo
ugal. The estonia it is g
orm to theincomes a
ere had bencomes fo
aganis and Lof the austPortugal. In ren, risk of lls a little in Greece, wlder people
ts to be bor
n the pre-re(Table 1) maur methodoot dramaticextent that he effects o the lower ethe impositi
own here. Fuus implicatiowe over-est
efit cuts in thot be large.
eece particges would b
e the impacs. First, the inable. Secon
n levels of em
ere.
Empl
ervatory – Living Cond
to hit those but does n
bution. Chaost. This is cffect is gre
greater in th
e income tand increaseen no othe
or those in Leventi, 201terity meas line with th poverty amn the UK wwhere oldee also rises
rne in mind.
ecession poay not accu
ology implic in the short these chan
of the austerend of the dion of austeurthermore,ons for the ttimate the ehe analysis h. 27
cularly and be somewh
ct of cuts in nformation rndly, given t
ployment and
Europealoyment, Social Affairs
ditions and Income Dis
on low inconot apply in anges to talearly true inatest in thehe bottom
ax schedules only at
er changes the middle1).
sures on thhe larger bumong childhere there er people by more
pulation as urately descitly assumest term. Whilenges alter thrity measuredistribution –erity measur, a sharp riseax base aneffects of tahere, thoug
in principle hat different
in-kind benrequirementhe present
d unemploym
an Commission s and Inclusion
stribution 2011
2
ome the Greece
axes and n Ireland e upper-and the
e which the top
– Figs. 3 e of the
e risk of urden of
dren rises is some face a
than on
cribe s that e this is he es are – it res e in d
ax gh the
in all six t if we
efits nts for a t state of
ent
29
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Finalcuts analypolicannopackacconeceprovechanmucnumb
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arch and knmptions abo
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being discusnger period the same d
gressive relaUK announcressive pictuple at risk of
n this area, aon and incid
al consolidaot yet compe already be some counementationssed and/ord of changedistributionaative to the 2ced up to 2ure than indf poverty is s
any distribudence that
ation througplete. For coeen implem
ntries – parti. This is becar may be intes is likely to al pattern. In2010 packa
2015 (rather dicated hereset to rise (B
Social Situation Obse
tional result would need
h public secomparabilit
mented andcularly Greeause in othetroduced a show a larg
n Greece thages analyse than 2011 ae (Browne a
Brewer et al,
Empl
ervatory – Living Cond
ts would be d to be ma
ctor pay anty reasons wd not to incluece and theer countriest some poinger aggregahe 2011 paced here. Anas in this anand Levell, 2, 2011 ).
Europealoyment, Social Affairs
ditions and Income Dis
driven by tde.
nd cash benwe have choude the effee UK– alreas new austent in time. Taate effect a
ckage is likenalysis of thealysis) show2010) in whi
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ember 2011
pendix 1
nia
tax-benefit pss otherwise
ct taxes an
he increase June 2009 he increasehe suspens
pension pilla
efits and ta
he narrowinhe abolitionhe narrowinhe increase
lic sector p
Public secto
rect taxes (
tandard rat
ddition there
Changes recompensatieduced, anhe abolitionoans, donatreezing of m
Reduced raAlcohol, tob
and
following tax
te that together
ures increasing
: Austeri
policy chane specified,
nd contribu
e in employ and 1 Augue in the minision of cre
ar (between
ax credits
ng of eligibin of child scng of eligibie in minimum
pay
or pay cuts (
(in Figure 7
te of VAT in
e were the f
elated to on of study
nd the eligibn of tax detions and traminimum pete of VAT in
bacco and f
x-benefit po
r with the suspe
rather than dec
ity meas
nges simulatfrom 1 Janu
utions
yer and empust 2009) imum levelsedited conn 1 June 200
lity conditiochool allowality conditiom levels of u
(about 3.5%
7 only)
creased for
following ch
minor beny loans was bility for deneduction forade union mension (in 20creased frofuel excise i
olicy chang
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creasing dispos
sures in 2
ted in our auary 2009):
ployee une
s of pensiontributions a
09 and 31 D
ons for incomance ons for childcunemploym
% on averag
r 18% to 20%
hanges in 20
efits: addit abolished,
ntal care ber the followmembership010) om 5% to 9%increases (J
ges in 2009-1
oyee contribut
sable income in
Social Situation Obse
2009-11
analysis are t
employment
and healthand emploecember 2
me tax child
care allowament insuran
ge in 2009).
% (in June 20
009-10 whic
tional child sickness be
enefit was nwing expensp fees (from
% (in June 20July 2009 an
11 are cove
ions to the 2nd
n Estonia.
Empl
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the followin
t insurance
h insurance yee contri010)
d allowance
ance nce benefit
010)
ch are not si
dcare leavenefit and sarrowed. es: interest
m 1 January
010) nd January 2
ered in our a
pension pillar,
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contributiobutions to
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imulated:
e for fathseverance p
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2010)
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these are the o
an Commission s and Inclusion
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3
ffect,
ons (from
ns the 2nd
y 2009)28
ers and pay was
of study
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33
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ember 2011
ct taxes an
he tranchewas reducedtandard rat
married couhe basic p
Precisely thethe “PAYE” pecial tax educed fro
65 were redunitially, a tembeen replacemporary le
on gross incor from depno allowancocial Char
balance.29 he ceiling
Related Soche rate of pncreased frohere were pension) co
purposes ancontributionnumber of re
efits and ta
he universao €172 per
being paid tWelfare payn subseque2010 and a fPayments toeduced. obseeker’s harply redu
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ose aged 70 or
ds €100,000 in
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o those of pe
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for the eld€245 while t€20,000 to €come levy wnew Univere pre-existinre pension c
e on which romes below % on the fir
yee and emce) was abod social insu% changes i. Until 2008,
y excluded per ceiling on the exten
nefit payme 3rd and higecipients as were increayments to n 2011. ension age
payment bout 25% f
% for those on lo
a surcharge of 3
ess of age.
the standa800. There wnts and for
eive a doubas reducedied to tax c
derly were the income€18,000 was introdursal Social Cg Health Ccontributionretention ta €4,004 per rst €10,036,
mployer socolished. urance cont
in the tax these had for the pon this reli
nt of the imp
ent was redgher order s part of the
eased in the those of wo
benefited f
rates for unfor those ag
ow incomes, wh
3% on individua
Social Situation Obse
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bled standad from €1,8credits for lo
scaled bae tax exemp
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cial insuran
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treatment been excluurposes of ef from tax
plied tax reli
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eir welfare pe October 2orking age
from the ini
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ho qualify for th
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Empl
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te (the “stauivalent €2,6er married card rate ban830 in 2008 one parents
ack: the aption limits f
hen increaseSC) which The new U from socias been paid
e exempt. The next €5,9
nce contrib
PRSI) for the
of employeuded from g calculatinxation wasief were intr
€166 to €14with a compayment. 2008 Budget were reduc
tial increase
people agand by 50%
he means‐teste
come from self
Europealoyment, Social Affairs
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andard rate600 reductiocouples. Twond. to €1,650 and for em
ge tax creor those ag
ed. By 2011 replaced bSC is a tax
al welfare pad is exempthe rates of U80 and 7%
butions (PRS
self-employ
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40 per monpensating i
t by a little ced by abo
e but were t
ged under % for the y
ed full medical c
f‐employment t
an Commission s and Inclusion
stribution 2011
3
e band”) on in the o-earner
in 2011. mployees
edit was ged over
this had both this payable ayments . There is Universal
% on the
SI – Pay-
yed was
nnuation e for tax
nsurance high. A
nth (€203 increase
over 3%. out 4% in
then not
25 were youngest
card, and
that
34
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amily Incomof the rate oA cash benannum, wasplaces in ea
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and 10% on
produced ories up to €1ries up to €2
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A new carbndirect taxehe tax on d
period by ab
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ct taxes an
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and contribyear.
me Supplemof wage gronefit entitleds abolished
arly child ca
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overall reduc25,000. Red
200,000 and
e are the foeen simulate
bon tax waes. deposit interbout 5 perc
changes th
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of a one-o00. e of personpersonal all
ncomes ove of ‘Pensionng from 3%ceeding €3,e was exteutory disab
ment (FIS – aowth. d the Early and replacre for childr
ncy legislatipay relateded to as th7-8 per centome was zeat 10.5%. Th
eduction in
ced late inon the first €55,000 of sal
ctions in salductions ran 15% on sala
llowing chaed in the pr
as introduce
rest (DIRT – dcentage poi
hat are simu
utions
off (retrospe
nal income lowance of
er €100,000. ners’ Solida
% for pension,500 per mo
ended to inbility benefit
an in-work b
Childcare ced by a nren aged 3
ion was end deductione public set of salary, b
ero-rated, thhis was widnominal sal
n 2009, im€30,000 of sary.
aries ranginnging from 8aries of €200
anges that hesent exerc
ed, and th
deposit inteints up to 27
ulated in thi
ective) tax a
tax was maf €12,000 pe rity Contribns between
onth. Pensioclude unems for individ
Social Situation Obse
benefit) wa
Supplemennew, non-cayears of ag
nacted requn” in respeervice pensibut the struhe next €5,0ely seen aslary levels, a
plemented salary, 7.5%
ng from 5% t8% on salari0,000 or mo
have taken cise becaus
ere were s
erest retentio7 per cent.
s paper we
at 1% of pe
ade more per year, and
ution’, i.e. an €1,400 anons below €1mployment duals with ta
Empl
ervatory – Living Cond
as increased
nt, with a vash schemee.
uiring publicct of their ion levy). Thcture was s000 at 5%, as an attempand is frequ
reductions% on the ne
to just undees of up to
ore were als
place in the of data lim
ome minor
on tax) was
ere as follow
ersonal annu
progressived an increas
a special tad €1,700 pe1,400 per m benefits, laaxable inco
Europealoyment, Social Affairs
ditions and Income Dis
d somewha
value of €1e of subsidis
c sector wopensions (Phe averagestrongly proa further €2pt to reducuently treate
s in publicext €40,000 o
er 8% in the c€165,000, 12o implemen
e period 20mitations:
r changes
increased
ws:
ual incomes
: nine tax bsed top rate
ax on pensioer month toonth are ex
arge family ome over €3
an Commission s and Inclusion
stribution 2011
3
t ahead
,100 per sation of
orkers to PRD, but e rate of gressive:
20,000 at e public ed as an
service of salary
case of 2% on nted.
009-2011
to other
over the
s in 2009
brackets, e of 45%
ons, with o 10% for xempt. benefits 30,000 a
35
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ember 2011
efits and ta
he 13th andvacation alloeceiving a armers’ basax allowanaised (to €1espectivelynstallation oof the relevnsurance celevant exp
persons and
lic sector p
he 13th andwere abolishbe paid to pPublic sectopecial allow
graduate stuutilities emplbase pay, ha
rect taxes (
ncreases in increased fr
ddition there
ct taxes an
Charitable dmade a taxaxable inco
rect taxes
Excise duty oaxes on luxu
in
2010-11 aus
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ax credits
d 14th montowances topension be
sic pensionsces and ta
1,500, €3,00.
of eco-friendvant expencontributionspenditure u
d €480 for m
pay
d 14th salarihed. In theirpublic sectoor wages cawances paiudies and hloyees, whoad the latte
(in Figure 7
the standarom 4.4% to
e were the f
nd contribu
donations tx credit at 2ome. The ho
on tobaccoury items up
terity measu
excepted. This e
thly pensionotalling €800elow €2,500s are excludax credits (f0 and €11,5
dly energy sditure up ts tax allowup to a maarried coup
es hitherto r place, flator workers eaapped at €5id to civil sehard & arduose special er cut by 10%
7 only)
ard rate of o 5.5% and 9
following m
utions
tax allowan20% of the
ousehold ex
o, alcohol ap by 20%.
ures that ar
exception is no
n payments0 a year wil
0 per monthded (i.e. confrom 1 Janu500 per ann
systems tax to a maxim
wance was aximum tax
ples.
paid to civ-rate vacatarning less t
5,981 a monervants weruous occupallowances%.
VAT from 19% to 11%).
easures tha
nce, previo relevant expenses tax
nd fuel incr
e simulated
ot simulated.
Social Situation Obse
s were abol be paid to
h. Invalidity ntinue to beuary 2010). num for tax
allowancemum tax cr
also madex credit of
vil servants tion allowanthan €3,000
nth30. e reduced pation allows other than
9% to 23%
at are not sim
usly availabxpenditure, credit was
reased by 3
d include:
Empl
ervatory – Living Cond
olished. In tho pensioners pensions, se paid 14 tim The child x units with
was madeedit of €60e a tax cre €240 annu
and publicnces totallin per month
by 20%. Fawances wern family allo
and in the
mulated he
ble at the , and cappabolished.
30%.
Europealoyment, Social Affairs
ditions and Income Dis
heir place, s aged 60 asocial pensimes a year)tax allowan1, 2 and 3
e a tax cred00 annuallyedit at 20%ually for un
c utilities emng €1,000 a .
mily, seniorire excluded
owances are
reduced ra
ere:
marginal raped at 10%
an Commission s and Inclusion
stribution 2011
3
flat-rate and over ons and . nce was children
it at 20% . Private
% of the nmarried
mployees year will
ity, post-d. Public e part of
ates also
ate, was of total
36
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Program (ProReduction oMeans-testin
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Civil servants
rect taxes (
rom July 20
ddition there
rom July 2maintained ome region
and tax cred
ugal
2009-11 aus
ct taxes an
ncreasing taAdding a neax rate from
Replacing t2011) to the n 2010 (€47eference in
Reducing th
efits and ta
reezing, bewhich is the reezing, beincluding pe
nd contribu
two tax brd €175,000,
e on capitaar and 21%
ax credits
of universal eze for 2011,dicator for sloyment insof the eligiograma Tem
of child beneng of the €4
pay
s’ pay cut u
(in Figure 7
10, the stan
e were the f
2010, reducat 4%.
nal governmdits.
terity measu
nd contribu
ax rates by ew bracket
m 42% to 46.he referenc social bene75), whatevdicator.
he pension t
ax credits
etween 2009 base for mo
etween 2010ensions).
utions
rackets for and at 45%
al income (above that
birth grant f, except for social beneurance andibility condmporal de Pefit for child
400 persona
up to 9.7% (5
7 only)
ndard rate o
following m
ced VAT ra
ments have
ures that ar
utions
1 and 1.5 pt for income.5%. ce indicatoefit index (€ver is large
tax allowan
9 and 2011ost social be0 and 2011
top earne% for annual18%) replact limit.
from Janua minimum a
efits (IPREM) d assistanceitions to th
Protección dren aged 0
l tax credit
5% in avera
of VAT incre
easures tha
ate also inc
eliminated
e simulated
ercentage es above €
or for tax c€419.22 in 20er, while m
ce.
, the nominenefits. , the nomin
Social Situation Obse
rs (at 44% l incomes oced with tw
ry 2011. and non-co in 2011. The
e benefits arhe Temporapor Desemp
0 to 2 from €from 2010.
age) in 2010
eased from
at are not sim
creased fro
or reforme
d include:
points depe€ 153,300 pe
credits from011) or the a
maintaining
nal value o
nal value o
Empl
ervatory – Living Cond
for annual ver €175,00
wo tax ban
ntributory pe income tere based in ary Unemplpleo e Inser€500 to €291
; pay freeze
16% to 18%.
mulated he
om 7% to 8
ed (scaled-d
ending on ier year, inc
the minimamount of the same
f the socia
f benefits n
Europealoyment, Social Affairs
ditions and Income Dis
incomes b0). ds 19% up
pensions. ests of child this indicatloyment Prrción) 1, in 2011.
e in 2011.
.
ere:
8%. Base ra
down) their
ncome levecreasing the
mum wage the minimuproportions
l benefit ind
not linked to
an Commission s and Inclusion
stribution 2011
3
between
to 6,000
d benefit or. otection
ate was
benefits
el. e highest
(€485 in m wage s of the
dex (SBI)
o the SBI
37
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Cutting the p
rect taxes (
rom Januar
ddition there
rom Janua6% (before t
ed Kingdom
2009-11 aus
ct taxes an
An increasepercentagentroductionAbatement £100,000 perreezing of C
austerity me
efits and ta
Withdrawingamilies at ancreasing thRemoving thWorking Taxnominal term30-hours addax benefit (
Basic amounChildcare adChild BenefitReal increasmitigate somreezing of s
Deductions by the CPI inNon-continugovernment
he amount aetween 201e generosity
pay
pay of civil
(Figure 7 o
ry 2011, the
e were the f
ry 2011, thehe austerity
m
terity measu
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of a 50% ta of the per year from Council Tax
easures.
ax credits
g the family faster rate he rate at whe baby elex Credit (WTms dition in WT(CTB) also frnt of WTC/Cddition to Wt rates frozeses in the c
me of the cusavings credfrom benef
n 2011 (prevuation of tht.
and tighten10 and 20y of the imp
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only)
standard ra
following m
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ures that ar
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in all emp
ax band on rsonal allow2010.
x (local taxa
y element and from a
which tax crement of theTC)/CTC firs
C frozen; 30rozen in 201CTC frozen iWTC reduceen in 2011. child elemeuts in suppodit maximumfit (Income viously frozee Winter Fu
ing the elig11, the no
plicit equiva
p to 10%.
ate of VAT w
easures tha
VAT rate wathese were
e simulated
ployees’ an
incomes ovwance by
ation) in 201
of the Chia lower thresredits are wie CTC in 20st threshold
0-hours disre1. n 2011.
ed from 80%
nt of the Cort for childrem payments Support, Hn in nomina
uel Allowan
Social Situation Obse
ibility condiominal valu
lence scale
was raised f
at are not sim
as increased 12% and 5%
d include:
nd employe
ver £150,000£1 in every
1, intended
ld Tax Credshold than pithdrawn in 11. frozen and
egard in Ho
% of costs to
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from 20% to
mulated he
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d to mitigat
dit (CTC) frpreviously (i 2011 from 3
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ousing Bene
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assistance.
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ere:
nd the basevely).
ution rates
n 2011. xable incom
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39% to 41%.
hreshold red
fit (HB) and
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ed by the
an Commission s and Inclusion
stribution 2011
3
unt and
e rate to
of one
me over
cts of the
r-income
duced in
Council
nded to
uprated
previous
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rect taxes (
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more than Lworking ageo single-roo
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some chanres. These aow, togethe
to the inco2011. This am
by a reductin contribut
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ble to peope inflation in2010; an inc6000 to £10,es for pensiothere are thve not been
ax credits
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ome tax pemounted toion in the thtions, to targpolitical parimits for em
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ple aged 60ncreases to crease in th,000 in 2010oners).
he followingn simulated
n which in-ymore than nd falls in i
mants will uickly.
m: Local Honts rather ththe total am
at the 4-bedwill be remocial housinr single peo
eased from earlier stimucrease from
uced in the d in both thejustification
rsonal allowo a 10.4% rehreshold to get the taxties forming
mployee anand social c
ent of the Co reduce ch0+ if they wthe Pension
he lower ca0 for pensio
g changes t in the prese
ear change£10,000 (ratincome of have to i
using Allowhan the 50mount of redroom rateoved. Hous
ng that is unple aged 2
Social Situation Obse
15% to 20%ulus measure 17.5% to 20
period 2009e base and for not cou
wance for theal increase
the higher x cut on stag the coalitiod employercontributionChild Tax Crhild poverty)work more tn Credit guaapital threshon-age peo
hat have taent exercise
es are madther than £2up to £2,50inform HM
wance (LHAth percenti
ent that ca. The existinsing benefitnder-occup5-35.
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%. This followes so acco
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unting them
hose aged over the twrate of inco
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aken place e because o
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A) rates will ile. Irrespecn be claim
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Europealoyment, Social Affairs
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wed a VAT rerding to theered as an
re judged to in our simul as austerity
under 65 bwo year perome tax ane taxpayers ment in 2010ons (part of). ril 2010 (pa
urs per weedit and Basion Credit,of a restruct
in the perioof data limit
edit awardspril 2011 wilincrease ta changes
be set at tctive of loc
med under Ld of rent upduced for , LHA will be
an Commission s and Inclusion
stribution 2011
3
eduction e criteria austerity
o be not lations. y
by £1,000 riod and
nd upper (part of
0). f a long-
rt of the
ek, from sic State HB and turing of
od 2009-tations.
s so that l reduce
ax credit in their
the 30th cal rents, LHA and p to 15% those of e limited
39