In a European context, the risk of poverty and/or social exclusion is no longer solely based on income, but also on a non-monetary indicator and a labour market-oriented indicator. According to the new criterion, a person is at risk, if their incomes are below the European poverty line and they have only limited access to common goods and services or if they belong to a household with low work intensity.
European poverty line
Income is an important indicator for the risk of poverty and/or social exclusion. In a European context, there is risk of poverty, if the standardised income is below 60 percent of the median income. The standardised income is defined as the disposable income corrected for differences in size and composition of the household.
The poverty line is calculated for each country on the basis of the survey European Union Statistics on Income and Living Conditions (EU-SILC). The level of prosperity is different for each individual country. For the Netherlands, for example, the poverty line, expressed in purchasing power is twice as high as in the Czech Republic. In Luxembourg people living on the poverty line had the highest purchasing power.
Households living on inadequate income resources cannot buy durable consumer goods like cars, colour television sets, telephones or washing machines. Even a hot meal every other day, a week’s holiday every year or being able to heat one’s house properly are not self-evident. It is also possible that their personal financial situation does not allow them to make essential purchases or that they are in arrears with their rent or mortgage payments. In a European context, people are seriously deprived, if at least four of the financial limitations mentioned above apply to them.
Low work intensity
The work intensity of a household is calculated as the relation between (1) the total number of months adult family members (under the age of 60) have worked in the preceding calendar year and (2) the total number of months they could have worked in that same year. In a European context, the work intensity is defined as low, if this factor is equal to or below 0.20.