Credit: STATEC

Ahead of International Day for the Eradication of Poverty, which takes place annually on 17 October, STATEC has published an analysis of social cohesion in Luxembourg.

Social cohesion and income distribution are strongly dependent on the situation in the labour market, which is changing rapidly as a result of the COVID-19 pandemic.

Since the lockdown, unemployment has increased significantly, from 5.4% in 2019 to 6.5% in the second quarter of 2020. Employment fell sharply in the second quarter of the year, except for residents, as the state continued to hire. The result is a rather exceptional situation: the growth in the number of employed residents (up 1.4% compared to the second quarter of 2019) was more dynamic than that of cross-border workers (up 1.2%). In general, the growth of cross-border employment is much higher than that of residents.

The coronavirus crisis has fragmented the structure of employment: two-thirds of employees have been considered essential to managing the health crisis. A third of them were particularly exposed and found themselves "on the front line". These workers who are more exposed to contamination by the virus did not take advantage of teleworking unlike the majority of employees.

52% of employed people teleworked during the health crisis, reaching a historic record during confinement in the second quarter of 2020. The duration of teleworking has also exploded. More than half of those with a job (full or part time) worked 32 hours or more through teleworking. This share is 3.3 times higher than in the first quarter of 2020. The trend mainly applied to qualified white collar workers, university graduates and those working in large companies. While in the information and communication and financial and insurance activities sectors, almost everyone was working remotely in the second quarter of the year, the percentage of teleworkers in the health and social work sector remained very low. Public administration stood out with exceptional growth, where the percentage of teleworking has multiplied by 3.7.

In Luxembourg, 4 out of 5 workers are satisfied at work - a situation which has not changed during the health crisis. Whilst IT tools played a decisive role in the implementation of this “crisis teleworking”, certain barriers nevertheless persisted. 

Inequality in sickness

The work of the Work and Social Cohesion Report showed that the most significant variable for people who test positive for coronavirus is the population density in the municipality. During confinement (up to 21 June 2020), a high proportion of the elderly, single people or men may have been more likely to get infected in a given municipality. After this period (June-July 2020), it was population density that remained the main explanatory factor, rather than income or education.

Pre-crisis inequalities and income

Despite a lack of recent data, STATEC observed that before the crisis, income inequalities had widened and had been increasing steadily since 2017. In 2019, the poverty line was €1,804 per month for a single adult. The at-risk-of-monetary poverty rate was 17.5%, which represents everyone who had a monthly standard of living below the threshold of €1,804. When wealth and consumption are taken into account alongside the standard of living, the redefined poverty rate decreases considerably. 2.5% of the Luxembourg population can be considered poor in all three dimensions at the same time. Isolated young people, foreigners, the poorly educated, the unemployed and families were relatively more exposed to the risk of poverty.

In 2019, a quarter of households reported having difficulty making ends meet. For just over three-quarters of households, the perceived financial burden related to housing was worrying and worsened if there were dependent children in the household.

Social transfers

According to STATEC, net social transfers represent on average 26.7% of gross household income. Without state intervention, the household poverty rate would be 26.5% rather than 17.5%. Direct family allowances significantly offset the direct costs of children, especially young children. According to STATEC's simulations, the state financially compensates 95% of the basic needs of a three-year-old and about 67% of those of an eight-year-old.