ECONOMY

Impact of Greek welfare benefits is found wanting

A European Commission report released this week highlights the serious problem of poverty in Greece, the unequal distribution of income and the related inefficiency of the country’s welfare state, which shows an inability to improve the position of the most vulnerable strata of society. The report shows that 20 percent of Greece’s population, or more than 2 million people, have a family income equal to or less than 60 percent of the mean per capita income (the mean differs from the average mainly in that it does not take into account the most extreme cases, thus giving a more realistic picture of the situation). This is the third-highest rate in the European Union after Portugal and Ireland. The poverty line is, of course, a relative concept, different in every country and depending, among other things, on the level of prices in addition to that of income. In other words, there are significant differences as to who is regarded as poor in Greece as compared with Germany, for instance. Greece’s mean income is not particularly high; in 2001, the last year for which there is complete data, the mean income was 4,264 euros per person and 8,955 per family with two children, much lower than that of most other European Union member states. As regards Greece in particular, Eurostat, the EU statistics service which processed the data, found that the «borderline» zone of 60 percent of mean income, which includes those nearer «exiting» poverty line, is very sparsely «populated,» while the majority of those below the mean income are actually well below it and, therefore, correspondingly worse off than the common poor in other member states. However, Greece is not only marked by a high degree of poverty but also by a very inequitable distribution of income, as expressed by the number of times that the income of the wealthiest 20 percent of the population is greater than the poorest 20 percent. In Greece, this ratio is 1 to 5.7, in other words, the wealthiest 20 percent has an income of nearly six times that of the poorest 20 percent. This is the second to last in the EU after Portugal and the same as Spain’s, but higher than that of the UK, the bastion of Thatcherism. The EU average is 4.4, while in the most advanced welfare systems, such as those of Denmark, Sweden, Austria, Germany and the Netherlands, it is lower than 4. So the pertinent question arises as to what is the role of the welfare state in fighting poverty and inequality in Greece? The answer is «minimal.» Indeed, as is apparent in the report, the difference that the various forms of social benefits make to income is almost negligible; if there were no benefits of any kind (outside pensions), the percentage of poor in Greece would have been 23 percent. With benefits, it is 20 percent. By contrast, in most other EU member states, social benefits constitute a real and effective instrument for improving citizens’ incomes, reducing by up to half the number of those below the poverty line. So, it is not surprising that Greece also ranks in one of the worst positions regarding the index of protracted poverty, that is, the percentage of the population that remains below the mean 60 percent of income for long periods.