Sticky Poverty

Portugal has a level of intergenerational poverty persistence which, although not among the worst in Europe, should not leave us at ease. Special attention should be given to the quality of education provided to the most disadvantaged communities, many of them migrants. However, no significant improvements are expected anytime soon.

The Survey on Income and Living Conditions (ICOR), carried out by Statistics Portugal (INE), is one of the most powerful tools for assessing the country’s social situation. The June Economic Bulletin of the Bank of Portugal used this data to analyze “The intergenerational transmission of poverty and material and social deprivation in Portugal,” in a study by Nuno Alves and Cristina Manteu.

The analysis compares the current situation of people aged 39 to 49 with the one they reported having experienced at the age of 14. This makes it possible to assess their position in adolescence in relation to the one held when participation in the labor market becomes more mature. The most striking figure is that “intergenerational poverty persistence amounts to 6.7 percentage points.” What does this mean? “An individual with a good financial situation at age 14 has a 12.5% probability of currently [aged 39 to 49] being at risk of poverty. If their financial situation was poor at 14, that probability rises to 19.2%.” The difference between these two values gives the 6.7 percentage point indicator of persistence.

This reveals something painful but unsurprising: poverty is sticky and tends to persist from youth into what is typically the most financially stable period of life, the middle of a person’s professional career. Naturally, there are several technical details involved, but what matters most is whether this level is high or low, worrying or encouraging. The only way to respond is through comparisons. A number on its own means very little.

The text does not describe the evolution of the indicator over time, so the only way to assess the seriousness of the situation is through a geographical comparison. To that end, the study includes equivalent figures from other European countries. Focusing only on Western EU member states, with which Portugal often compares itself, we see that the Portuguese level is lower than those recorded in Germany, Belgium, Greece and Italy, the latter with more than triple the national figure. On the other hand, Portugal’s level is higher than those of Denmark (which has a null value), Austria, France, Sweden, Finland, the Netherlands, and Ireland, and equal to that of Spain. This places Portugal at the more favorable end of the lower third of the table. We are not the worst, but we are among the lowest in ranking.

Significantly, this is also Portugal’s position when considering the level of the indicator itself, and not just its persistence. The percentage of people living at risk of poverty in Portugal stood at 16.6% in 2024, lower than the figures for Luxembourg (18.1%), Italy (18.9%), Greece (19.6%) and Spain (19.7%), but higher than the other nine countries. The lowest figure, in Belgium, is 11.5%. Once again, Portugal is close to the less favorable third of the EU.

Among the various possible causes of this situation, the study highlights education, stating that “Investment in education is one of the most effective ways to improve a child’s economic and social prospects.” However, this is also one of the most persistent factors, as “parents’ qualifications influence the educational attainment of their children, and this intergenerational transmission of education is further reinforced by the family’s financial situation.”

It is therefore not surprising that education is one of the main reasons for the stickiness of poverty in Portugal. At the same time, the country’s education sector, constrained by powerful corporate interests, has been unable to overcome the natural difficulties faced by its most disadvantaged students.

Professor João César das Neves