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The Risk of Poverty by Age-Groups in Romania

The Risk of Poverty by Age-Groups in Romania History, on the verge of repeating itself after ten years

The risk of poverty recorded in Romania for the entire population was higher in 2019 than in 2008, according to data published by Eurostat. Almost one in four Romanians (23.8%) had an equivalent level of disposable income less than 60% of the national median.

It should be noted that this critical indicator for living standards had lower values during the crisis period 2009-2013 than after the return of economic results to the level of 2008 and has stabilized in the last three years at a level similar to that before the previous crisis. However, there were significant changes by age-groups.

Relevant but also surprising for the categories that took the brunt of the shock of the economic crisis (because they were affected without being able to do anything about it), young people up to 18 years of age reached a maximum level of relative poverty in 2014 (6 pp above the level of 2008, when, however, they were the most affected, and only in 2017 did they fall below that level, via (most likely) the salary increases granted to parents.

In the category 18-24 years, the degradation of the material situation was even more pronounced and the situation worsened until 2015, the maximum reached being 35%. The 2018 comeback attempt was cancelled last year. When, still surprising for some (overly concerned about the elderly), they passed the first place in the top of poverty in Romania.

Reducing early school leaving and increasing the employment rate of young people are well-known mitigation measures but have not received the appropriate attention (and funding) from decision-makers. The investment for the future in human capital has been mistimed in favour of a channelled attention to the past, justified by immediate electoral interests.

Those at full employment potential and who brought Romania out of the crisis (age-group 25-49) remained relatively high in poverty for another three years after the economic recovery (2015-2017), to reach the pre-crisis level only after ten years, and only in 2019 they managed to go below the threshold of one in five (19.8%), the best value of the moment.

In the 50-64 age-group, completely unexpected for adults who should have reached, in principle, higher positions towards the end of their activity, the slightly lower poverty rate during the crisis returned to above the level of 2008 and deteriorated systematically since 2015. An aspect which should raise a question mark, especially since the employment rate has increased over this age range.

But the big surprise (generating, certainly, great controversy by contradicting a popular thesis already well established in the collective mentality) is that the most common low values ​​in the table by categories are found in those aged 65 and over, i.e., people who have reached retirement age.

Here, we also find those who went through the period 2011-2013 with the lowest values ​​at national level in terms of poverty risk. Although, for the most part, they did NOT participate in the effort to get out of the crisis. They stayed until 2017 at levels where the employed segments managed to reach only in 2019. Only then did their risk of poverty increase significantly, but in 2018 they were slightly below the national average and in 2019 (when the indexation of the pension point was delayed “strategically” until September 1, then came a sudden substantial increase) rose to 1.3 percentage points above the national average (note, however, 1.4 pp below the 2008 value).

And this as an AVERAGE for 2019 and not as a starting point for 2020. This is the year for which a bizarre 40% increase (in the context of the data presented by Eurostat) of pensions has already been voted. This is despite the fact that this age category is not the most affected, but rather the young people, whether they are at school or able to work, where the relative poverty rates have exceeded 30%.

We reiterate that the most unfortunate evolution over time is found in the age range of 18-24 years, from only 21.9% in 2008 to 31.3% (record value) in 2019. Most likely, for retirees, we are now, after the 15% increase since September last year, below the national average.

Of course, some young people can “get out”, leaving the country, which has even contributed in the short term to the artificial increase in GDP per capita. But what about those who work here and whose decent life expectancy is declining as the support base narrows and the accumulated public debt increases?

Therefore, the allocation of money from taxes and (possibly) loans through the state budget should take into account primarily the living standards indicators and the prospect of convergence with developed countries, not the polls. Otherwise, we will return from 2021 onwards to the redistribution of the risk of poverty on the model of 2011-2014.

 

 
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OEconomica No. 1, 2016