The Poverty Persists, but the Structural Problems Remain

The years of rapid economic growth in the second half of the past decade have brought with it a rapid increase in the income. The data [1]on the poverty and social exclusion for 2020 year[2], published this week, however, show a slight increase in the share of the poor, maintaining a high income inequality and changes in the material conditions of the households. In the present text we consider the main changes in the new data and present some explanations.

–          The rapid rise of the national poverty line continues, and within two years it has increased by exactly BGN 100 reaching BGN 451 per month per household member. This is a consequence of the rapid rise in the median income – since the poverty line (according to the EU-SILC definition) is 60% of it, it means that the median income has reached over BGN 750 per household member. The raising of the poverty line also has many practical consequences for the social policies and the social payments, as long as the government chooses to adhere to the poverty line published by the NSI[3] and not to the administrative one set by it (more information on the debate on the poverty line – here).

–          Despite the sharp rise in the poverty line, the number of people below it is not increasing dramatically – the increase is by 74 thousand people between 2019 and 2020 to 24% of the population. It is important to note that the share of the poor before social transfers decreased even before the crisis year, which once again emphasizes their inadequacy to reduce poverty.

–          There is a slight contraction of the income inequality indicators, as between 2019 and 2020 the ratio between the income of the highest and lowest quintile (S80 / S20 index) decreased by 0.1 points to 8, and the Gini coefficient – by 0.8 points to 40. However, this does not reflect improvements in the income of the low-income groups, but rather a decrease in the growth of the salary income. However, despite this slight decline, the income inequality remains high.

–          An increasing share of the poor in 2020 are unemployed – 61.1% of all poor, compared to 58.9% a year earlier. However, the share of the employed poor is also growing (more about the working poor and their peculiarities – here) – 9.6%, as well as of the poor pensioners – 37.7%. This growth mainly reflects the increase in the poverty line, which leaves below it households that rely on an income close to the minimum wage and that of pensioners close to the minimum pension.

–          The education remains the most important factor that determines poverty – in 2020, 66% of people with completed primary or with no education and 32% with completed primary education are poor. This applies to only 8% of those with secondary and 2.4% of those with higher education. This distribution highlights the conclusion that school retention and increasing access and quality of education are the surest policies to combat poverty, especially in the long term.

–          The poverty among the Roma remains very high – just over 2/3 of all Roma are in the group of the poor, and 79.4% are at risk of poverty and social exclusion. It is worrying that 32% of the poor Roma are working, which points to their inability to work in places that offer well above the minimum salary. At the same time, 26% of Roma live in households with low intensity of economic activity. The obvious conclusion is that the fight against poverty necessarily goes through the fuller integration of the Roma into the labor market.

Despite the significant increase in the poverty line, the share of the population that remains below it is stable, which means that the policies that are reducing it at this stage are failing. In addition, the crisis years will in any case have a negative impact on the implementation of policies to combat poverty, integrate the labor market and improve the scope of the education system.

[1] See here – https://www.nsi.bg/sites/default/files/files/pressreleases/SILC2020_FRTG25T.pdf

[2] It is important to note that the reference year of income for the data is 2019 – in other words, they refer to the period before the crisis.

[3] NSI – National Statistics Institute