Poverty persists despite well-developed safety net
The Netherlands is a highly developed welfare state with a wide range of social security provisions, yet roughly one out of ten people lives below the ‘low-income threshold’ or poverty line, and the percentage of low-income households continues to rise, especially among immigrant communities. Many people do not claim their rights to social security, often because of a lack of information. This makes combating poverty a complex task, and demonstrates that greater outreach and client-focused implementation is essential.
Poverty also exists in well-developed welfare states,including the Netherlands. As the new government that took power on 22 February2007 acknowledges: “There are too many people on the fringes of society:people who receive social assistance benefits, long-term unemployment or peoplepartially unfit for work; young people without basic qualifications and olderworkers with little prospect of finding a job.”
In the Netherlands there is an official Poverty Monitor which has appearedperiodically since 1997 as a joint publication of the Social and CulturalPlanning Office of the Netherlands (SCP) and Statistics Netherlands (CBS).This series of publications presents a picture of poverty in the Netherlandsbased on representative national data.
Definitions of poverty in the Netherlands
In the Poverty Monitor, poverty is determined on the basis of two incomethresholds. The first is the low-income threshold, which is calculated on thebasis of the level of social assistance benefits for a single person in 1979, ayear in which purchasing power was relatively high. For households with morethan one person, the low-income threshold is determined by applying equivalencefactors based on the actual extra costs of multiple-person households. Since thelow-income threshold for the years after 1979 is adjusted for price inflation,it is suitable for comparisons over time.
The second poverty threshold is the social policy threshold, set at 105% of thestatutory social policy minimum in accordance with the norms which apply in theWork and Social Assistance Act, the General Child Benefit Act and – for peopleover 65 – the General Old Age Pensions Act. This is a politically determinedthreshold which is of importance mainly for determining the size of the targetgroups for government policy. The social policy threshold is less suitable forcomparisons over time, because the norms applied in social assistance benefitsand state retirement pensions are not always adjusted precisely for inflation.The difference between the low-income threshold and the social policy minimumhas become so small in recent years that the social policy threshold (105% ofthe social policy minimum) now lies above the low-income threshold for specificgroups of households.
In addition to these two thresholds, a number of supplementary indicators forpoverty are also used, including the length of time spent below the incomethreshold applied, possessions and debts, fixed costs, and people’s ownassessment of their financial situation.
Rising percentage of low-incomehouseholds
After falling for many years, the percentage of households with a low incomerose again in 2003. The poverty rate in the Netherlands had reached a low pointin 2002, when 8.8% of all households had a low income, but this figure rose to9.8% in 2003, equivalent to 642,000 households. Moreover, slightly under a thirdof these had been living below the low-income threshold for four years orlonger.
According to estimates, the percentage of low-income households continued torise in 2004 and 2005, reaching 10.5%. Based on forecasts for purchasing powertrends, it is likely that in 2006 the proportion of low incomes will fall backto its 2003 level. However, this does not apply for all groups: the proportionof low incomes among single benefit claimants is expected to increase by almostthree percentage points compared with 2003. On the other hand, among singlepersons aged over 65, the percentage of low incomes is predicted to fall by overthree percentage points. The relative proportion of low incomes among those whoare employed (with and without children) and people over 65 who do not livealone will remain virtually unchanged between 2003 and 2006.
The percentage of households with an income below the social policy thresholdalso increased in 2003, rising to 10.1% compared with 8.8% in 2001. In absoluteterms, this represents an increase of almost 90,000 in the number of householdswith a minimum income. This took the total number of households with a minimumincome in 2003 to 657,000, just above the number of low incomes. More than onein three households with an income below the social policy threshold had been inthis position for at least four years.
The risk of a low income varies with the type of household. The groups athighest risk include single-parent (usually single-mother) families, householdsthat receive social assistance benefits, and households with a non-Westernbackground. Among those who work, the percentage of low incomes is relativelyhigher among the self-employed. The proportion of low incomes among non-Westernhouseholds in particular is increasing. By contrast, the position of pensionershas improved.
Meanwhile, four out of ten households below the low-income threshold reported in2004 that they found it difficult or very difficult to make ends meet from theirincome. This proportion has increased since 2001. Similarly, more and morelow-income households have an income below what they themselves consider to beminimal; this percentage rose from 24% in 1999 to 41% in 2004.
Moredebts than possessions
Over a quarter of households with a low income had negative assets in 2002; inother words, their debts exceeded their possessions. Another third had assets ofno more than EUR 2,500 (USD 3,445), while just under a quarter of low-incomehouseholds had assets of EUR 10,000 or more. The proportion of households withnegative assets increased between 2000 and 2002. The biggest shift was betweenhouseholds with assets of up to EUR 2,500 and households with negative assets.
There are numerous visible signs of this growing indebtedness: increases in debtcollection orders and requests for debt assistance and rescheduling; more rentarrears and evictions; and a rise in the level of assistance provided bychurches and the new ‘food banks’ (places where poor people can obtain freegroceries). However, other factors also play a role: a less lenient debtcollection policy, greater familiarity with debt assistance organizations anddebt restructuring options, a stricter rent and eviction policy by housingassociations, and so on.
Growingpoverty among ‘non-Western’ households
The income position of households with a non-Western background is clearly worsethan that of native households. Among the major groups, the situation ofMoroccans is the worst: in 2003 one third of these households had a low income,while Turkish (29%), Antillean (28%) and Surinamese (23%) households were inonly a slightly better position. The income position of the ‘new’ immigrantgroups is generally even worse: more than half of Somali, Afghan and Iraqihouseholds had a low income in 2003, while this was the case for more than athird of Iranian and Chinese households. The deteriorating labour marketsituation led to a resumption of the upward trend in poverty among non-Westernhouseholds from 2002 onwards, with benefit claimants and older persons beingparticularly susceptible.
Non-Western immigrants who have recently arrived in the Netherlands quite oftenbegin with a low income, though their starting position has improvedconsiderably, largely because of the decreasing proportion of asylum-seekingimmigrants and family reunification immigrants. The income position of newimmigrants improves with the length of their period of residence: more than halfthe non-Western immigrants who came to the Netherlands in 1997 and were on a lowincome in their first post-settlement year managed to pass the low-incomethreshold by 2002. This outflow from poverty was due largely to an improvementin their labour market position.
Favourabletrend among the elderly
On average, the poverty rate among people over 55 is not notably higher or lowerthan among younger people. On the one hand, the percentage of low-incomehouseholds among over-55s has fallen to below that of the younger age groups,and older persons with a low income also have relatively few debts. On the otherhand, a low income often persists longer for older persons. There areconsiderable differences within the older age group, however. Low incomes aremore common among people between 55 and 64 years old than among over-65s. Theyare also more prevalent among single persons than couples, and among (single)women than (single) men. Overall, older people are in no worse a position interms of social exclusion than younger generations, although the degree ofexclusion generally reduces with age but then increases slightly from the age of75. On average, households with a low income are more likely to suffer socialexclusion.
Limitedeffect of the poverty trap
The Poverty Monitor reports that in 2003 just under a quarter of a millionhouseholds were considered to be in a ‘poverty trap’ situation. Bydefinition, poverty-trap households are households with an income below thelow-income threshold which are dependent on social security benefits due tounemployment or an incapacity to work. Single persons must also be in receipt ofa housing benefit in order to fall into the poverty trap category. Almost 45% ofhouseholds in the poverty trap are one-person households, and almost 25% aresingle-parent families. Couples with and without children are both in a clearminority, with each making up an eighth of the total.
At first sight it would seem that the poverty trap influences the job-seekingbehaviour of benefit claimants: people in receipt of an income-related benefithave less frequently found a job, or increased the number of hours worked, thanpeople who do not receive benefits. However, if allowance is made for otherfactors that can explain job-seeking behaviour or changes in labour marketstatus, the role of income-dependent benefits almost disappears. Characteristicssuch as age, sex, education, health and source of income are better predictorsof behaviour and force the role of income-dependent benefits to the background.
Povertydetermined mainly by household-specific characteristics
Studies have been undertaken to determine the proportion of the risk of povertythat can be attributed to individual household characteristics and how much canbe attributed to the neighbourhood and municipality in which that household islocated. The influence of the economic cycle on the risk of poverty was alsoincluded. It was concluded that more than 90% of the difference in the risk ofpoverty can be explained by variations in household characteristics. The keypredictors of the risk of poverty were found to be the age, sex, education andsocioeconomic activity of the head of the household, as well as the householdcomposition.
As for the remaining 10% of the difference, half can be attributed todifferences between the neighbourhoods where the households surveyed live, whilethe other half can be explained by differences between municipalities. Poorhouseholds are frequently concentrated in particular neighbourhoods ormunicipalities; the lower the socioeconomic status of a neighbourhood, thegreater the probability that a household in that neighbourhood will experiencepoverty. Finally, and not surprisingly, the risk of poverty was found to risesignificantly in periods of high unemployment.
Social cohesion as an answer topoverty
Social cohesion is one of the six pillars of the new government policy. As thecoalition government stated in an agreement signed shortly before it took power,“The motto must not be ‘everyone for himself’, but ‘look out for eachother’ and ‘treat each other decently.’” The same agreement stresses:“A person’s low productivity potential, distance from the labour market andpersonal work history can stand in the way of finding a job. The poverty trapkeeps some people dependent on benefits. The policy of the government is to giveeveryone fair job opportunities. This is a task that the government and thesocial partners have to tackle together.”
In a recent policy statement issued 14 June 2007, the government madearrangements to offer people who are difficult to employ access to the labourmarket or enable them to be of use to society in another way. Particularemphasis will be placed on implementation of legislation such as the Work andSocial Assistance Act (WWB) and the Sheltered Employment Act. In the context ofthe intended shift from job and benefit security to work and income security,the issues that will need to be examined are labour market policy, education andtraining (employability), and unemployment benefits.
‘Money on the shelf’
Another specific target that will be emphasized is the non-take-up of socialsecurity. Increasing the take-up of income provisions has been one of thepriorities of government policy to combat poverty in the Netherlands for over adecade. These efforts stem from concerns about households potentially facingfinancial difficulties if they do not claim the benefits to which they areentitled. Despite these efforts, however, non-take-up of provisions remains arelatively frequent phenomenon.
In a recent study (Hoff and Schut, 2007), the public’s knowledge of socialsecurity provisions was found to be low. The proportion of non-applicants whohave never heard of available income assistance programmes ranges from 14%(housing benefit) to 48% for benefits under the Fees and Educational Expenses(Allowances) Act. When it comes to the long-term minimum-income allowance, thefigure reaches 86%. Moreover, even when people are aware of the existence of aparticular provision, in many cases their knowledge is ‘sketchy’. A highproportion of both non-applicants and applicants (42% to 85% and 23% to 45%,respectively) report that they barely know anything about the provision.
In the same study, non-applicants were asked whether they thought they would beeligible for a particular provision. Depending on the provision in question, itwas found that between 33% (exemption from local taxes) to 69% (Allowances Act)felt certain that they would not be entitled (Hoff and Schut, 2007). This factorundoubtedly plays a role in non-take-up.
Other significant factors include the subjectively perceived need for aprovision and the anticipated transaction costs. A certain degree of non-take-upappears to be inherent in provisions: people decide not to submit a claimbecause the process is too complex, especially where the amount they stand toreceive is small and they feel that they can manage financially without thebenefit. As long as entitlements to a given grant or benefit continue to bedependent on the claimant’s income and assets, and the initiative for take-upof provisions is left with the client, non-take-up appears to some extent to beinevitable. Transferring a minimum amount to identified clients’ accountscould reduce non-take-up (Hoff and Schut, 2007). At the same time, greateremphasis obviously needs to be placed on informing people of their rights.
Dirven, H., Trimp, R., Soede, A. and Vrooman, C.(2006). Poverty Monitor. The Hague:Social and Cultural Planning Office of the Netherlands (SCP).
Hoff, S. and Schut, J.M. (2007). Money onthe shelf. The Hague: Social and Cultural Planning Office of the Netherlands(SCP).
Hoff, S. and Vrooman, C. (2004). The poorside of the Netherlands. The Hague: Social and Cultural Planning Office ofthe Netherlands (SCP).
Netherlands Goverment (2007). Coalitionagreement 2007. The Hague: Ministry of General Affairs.
 Coalitionagreement between the parliamentary parties of the Christian DemocraticAlliance, Labour Party and Christian Union, adopted 7 February 2007.
 The figures presented in this report have been drawnfrom the latest version of the Poverty Monitor (Dirven et al., 2006).