What are the best policies for fighting poverty? Learning from the recent European experience

Abstract

Contrary to all expectations and policy goals, poverty is on the rise in the European Union (EU). In fact, one of the headline targets of the current Europe 2020 strategy is precisely to lift at least 20 million people out of the risk of poverty or social exclusion. This setback can be largely explained by the crisis. Eventually, cohesion and political legitimacy may be put in jeopardy. Therefore, the growth in poverty calls for the adoption of adequate policies at the European and domestic levels, taking into account past experience and the diversity of national contexts. However, the inability to tackle poverty was already evident between 2000 and 2010. During this period, European social policy underwent a paradigm shift that emphasized activation measures rather than just income redistribution. This article explains this change by arguing that the deepening of the internal market, European diversity and the goal of sustaining the core European acquis were the underlying reasons behind this transition. The impact of this change on poverty and inequality during the last decade is also assessed. Econometric estimations show that the drivers of poverty and the drivers of inequality are different, suggesting that distinct approaches are required for each of these problems. We claim that the traditional redistributive policies remain the most effective way of fighting poverty and that although activation policies have had a positive impact on reducing inequality, they have not been able to combat poverty effectively.