From individual earnings to household disposable income: Linking low pay and poverty risks in EU countries

This paper investigates the link between individual low pay and household-level poverty risk in six major EU countries from 2006 to 2022. Drawing on EU-SILC microdata and a three-stage conceptual framework, we explore how low individual earnings relate to market and disposable income poverty, taking into account household composition and the redistributive effects of taxes and transfers. The incidence and the predictors of economic fragility are investigated through descriptive statistics and probit regressions focusing on the association between worker-level and household-level characteristics and low pay and poverty risks. We find that low pay does not necessarily imply poverty: a significant share of low-paid workers are not poor, due to income pooling within households or effective redistribution. However, the strength of these mechanisms varies between countries, depending on the structure of the household and the characteristics of welfare systems. Redistribution seems to be more effective in Ireland and Sweden, while Southern EU countries exhibit weaker protection for low-paid workers and a strong influence of the pension system.