More than 1 in 10 workers in the grand duchy are at risk of “in-work” poverty, a figure that jumps to 1 in 7 for women.
The term ‘working poor’ has increasingly become a grim reality in the European Union, contradicting the traditional notion that employment is a safeguard against poverty. As Eurostat, the EU statistics bureau, stated, the in-work at-risk-of-poverty rate defines the percentage of individuals, aged 18 and over, who, despite being employed or self-employed, have an equivalised disposable income below the risk-of-poverty threshold. This threshold is set at 60% of the national median equivalised disposable income after social transfers.
Eurostat found that nearly one in ten workers in the EU, or around 8.5%, were at risk of falling into poverty in 2022, although this was a slight improvement from the 8.9% reported in 2021.
Luxembourg’s ‘working poor’
Among EU member states, Luxembourg presents a puzzling scenario. Despite boasting the EU’s highest GDP per capita at 2.6 times the EU average and leading in social minimum wages, the country stands out for its elevated levels of in-work poverty risk, especially among women.
As of 2022, Luxembourg had an in-work at-risk-of-poverty rate of 12.9%, second only to Romania’s 14.5%. While this represented a marginal improvement from the decade-high 13.5% in 2021, the numbers remain elevated.
When it comes to gender disparities, Eurostat figures show that women in Luxembourg faced more dire circumstances. The at-risk-of-poverty rate for male workers was 12.4%, ranking fifth in the EU, but for women, this rate rose to 13.4%, the highest in the union. Luxembourg, Spain with 10.6%, and Latvia at 10.1%, were the lone EU countries where the in-work poverty risk for women exceeded 10%.
Beyond social issues
The higher rates of in-work at-risk-of-poverty carry repercussions that extend far beyond immediate social challenges. Lower net disposable income typically leads to less consumer expenditure, affecting businesses and economic expansion as a result. A higher share of households with working individuals but at risk of poverty necessitates that governments direct more resources towards social welfare initiatives, thereby exerting additional strain on public finances.
In the long run, families vulnerable to poverty may experience reduced educational achievement and work productivity. This not only perpetuates a cycle of poverty for those affected but also compromises the nation’s global competitiveness.