Author:European Union Publications Office

Annex IA - Overarching Indicators - AnnexIB - Data Sources - Specific - Notes


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Annex IA - Overarching indicators

In December 2001, the Laeken European Council endorsed a set of 18 indicators of social exclusion and poverty, organised in a two-level structure of primary indicators – consisting of 10 leading indicators covering the broad fields considered to be the most important elements leading to social exclusion – and 8 secondary indicators – intended to support the leading indicators and describe other dimensions of the problem.

After the Laeken European Council, the Indicators Sub-Group has continued working with a view to refining and consolidating the original list of indicators. It has also worked at developing indicators to support the OMC on adequate and sustainable Pensions and more recently the OMC on health care and long-term care.

In June 2006, the Social Protection Committee adopted the report on indicators to be used in the context of the streamlined OMC on social protection and social inclusion177. The adopted set of indicators consists of a portfolio of 14 overarching indicators (+11 context indicators) meant to reflect the newly adopted overarching objectives (a) "social cohesion" and (b) "interaction with the Lisbon strategy growth and jobs objectives"; and of three strand portfolios for social inclusion, pensions, and health and long-term care.

In this context, the ISG confirmed the Laeken criteria for the selection of indicators and agreed on a new typology of indicators:

– Commonly agreed EU indicators contributing to a comparative assessment of MS's progress towards the common objectives. These indicators might refer to social outcomes, intermediate social outcomes or outputs.

– Commonly agreed national indicators based on commonly agreed definitions and assumptions that provide key information to assess the progress of MS in relation to certain objectives, while not allowing for a direct cross-country comparison, or not necessarily having a clear normative interpretation. These indicators should be interpreted jointly with the relevant background information (exact definition, assumptions, representativeness).

– Context information: Each portfolio will have to be assessed in the light of key context information, and by referring to past, and where relevant, future trends. The list of context information proposed is indicative and leaves room to other background information that would be most relevant to better frame and understand the national context.

The report also contains a streamlined list for each of the individual processes of social inclusion and pensions and a preliminary list for health and long-term care.

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Annex IB - Data sources – specific notes
Indicators of income and living conditions: EU-SILC

For the first time this year, EU-SILC data is available for 25 EU Countries. The newly implemented reference source of statistics on income and social exclusion is the European Survey on Income and Living Conditions (EU-SILC) framework regulation (No.1177/2003). Technical aspects of this instrument are developed through Commission implementing regulations, which are published in the Official Journal. The data for Bulgaria and Romania are still based on the national household budget surveys following the transitional arrangements agreed by the European Statistical System178.

The EU-SILC definition of total household gross and disposable income and the different income components keep as close as possible to the international recommendations of the UN ‘Canberra Manual’. A key objective of EU-SILC is to deliver timely, robust and comparable data on total disposable household income, total disposable household income before transfers, total gross income and gross income at component level (in the ECHP, the income components were recorded net). This objective will be reached in two steps, in that Member States have been allowed to postpone the delivery of gross income at component level and of total household gross income data until after the first year of their operations.

Although certain countries (eg. Denmark) are already able to supply income including imputed rent - i.e. the money that one saves on full (market) rent by living in one’s own accommodation or in accommodation rented at a price that is lower than the market rent -, for reasons of comparability, the income definition underlying the calculation of indicators currently excludes imputed rent. This could have a distorting effect in comparisons between countries, or between population sub-groups, when accommodation tenure status varies. This impact may be particularly apparent for the elderly who may have been able to accumulate wealth in the form of housing assets. In the statistical annex, data for Denmark are therefore shown both with and without imputed rent, as an illustration of the impact of this income component on the results. Once imputed rent is taken into account, the at-risk-of- poverty rate is reduced for people aged 65 and over, the inactive other than pensioners and those living in owner-occupied accommodation.

It should also be noted that the definition of income currently used excludes non monetary income components, which include the value of goods produced for own consumption179 and non-cash employee income. This component will be available for all countries from the SILC(2007) exercise onwards, and therefore included in the indicators that will be published in January 2009.

The reference year for the data is the year to which information on income refers (i.e., the "income year"), which in most cases differs from the survey year in which the data have been collected. Namely, 2004 data refer to the income situation of the population in 2004, even if the information has been collected in 2005. EU aggregates are computed as population- weighted averages of available national values.

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Note on trends

During the transition to EU-SILC income based indicators were calculated on the basis of available national sources (household budget survey, micro-censuses, etc.180) that were not fully compatible with the SILC methodology based on detailed income. Following the implementation of EU-SILC in a given country, the values of all income based indicators (at- risk-of poverty rates, S80/S20, aggregate replacement ratio, etc) cannot be compared to the estimates presented in previous years. This is why no trends in income based indicators are presented in this year's report.


The limited sample size of certain data sources used for the collection of income data and the specific difficulties of collecting accurate information on disposable income directly from households or through administrative registers raise certain concerns as regards data quality. This is particularly the case for information on income at the two ends of the income distribution.

Furthermore, household surveys do not cover persons living in collective households, homeless persons or other difficult-to-reach groups.

It must also be acknowledged that self-employment income is difficult to collect, whatever the data source. It must also be kept in mind that the difficulty in recording income from the informal economy can introduce a bias in the income distribution as measured by surveys.

Finally, whilst it is considered to be the best basis for such analyses, current income is acknowledged to be an imperfect measure of consumption capabilities and welfare, as, among other things, it does not reflect access to credit, access to accumulated savings or ability to liquidate accumulated assets, informal community support arrangements, aspects of non monetary deprivation, differential pricing, etc. These factors may be of particular relevance for persons at the lower end of the income distribution. The bottom 10 per cent of the income distribution should not, therefore, necessarily be interpreted as having the bottom 10 per cent of living standards. This is why reference is made to the "at-risk-of-poverty" rate rather than simply the poverty rate.

Confidence intervals

Indicators are estimated values based on a sample drawn from the target population and thus are affected by sampling error. Statistical theory provides us with tools for calculating confidence intervals in which the population value lies with a high probability. The confidence intervals are centred around the estimated values reported and their length is a measure of the precision of these estimates. The precision depends on the design of the survey and can thus vary between the countries. However, the EU-SILC regulation provides for national samples to be designed so as to achieve a confidence interval of +/- 1% around the estimated value of the total at-risk- of-poverty rate. Eurostat is computing these intervals for a number of indicators and exact values will be reported in EU quality reports. First computations show that the confidence intervals around total at risk of poverty rate are of the order of +/- 0.8%. For S80/S20 income quintile share ratio, the confidence intervals are of the order of +/- 0.2. For the relative median at risk of poverty gap, they are of the order of +/- 1.7. For the Gini-coefficient, they are of the order of +/- 0.9. These indications of precision must be taken into account when interpreting the data.

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Age-related expenditure projections

Long-term budgetary projections were prepared in 2006 by the Economic Policy Committee and the European Commission (DG ECFIN) - see European Policy Committee and European Commission (2006), "The impact of ageing on public expenditure: projections for the EU25 Member States on pensions, health care, long-term care, education and unemployment transfers (2004-2050)", European Economy, Special Report No.1/2006.

The projections are made on the basis of a common population projection and agreed common underlying economic assumptions that have been endorsed by the EPC. The projections are made on the basis of “no policy change”, i.e. only reflecting enacted legislation but not possible future policy changes (although account is taken of provisions in enacted legislation that enter into force over time). The pension projections are made on the basis of legislation enacted by mid-2005. They are also made on the basis of the current behaviour of economic agents, without assuming any future changes in behaviour over time: for example, this is reflected in the assumptions on participation rates, which are based on the most recently observed trends by age and gender. While the underlying assumptions have been made by applying a common methodology uniformly to all Member States, for several countries adjustments have been made to avoid an overly mechanical approach that leads to economically unsound outcomes and to take due account of significant country-specific circumstances. The pension projections were made using the models of national authorities, and thus reflect the current institutional features of national pension systems. In contrast, the projections for health care, long-term care, education and unemployment transfers were made using common models developed by the European Commission in close cooperation with the EPC and its Working Group on Ageing Populations. The projection results show the combined impact of expected changes in size and demographic structure of the population, projected macroeconomic developments and assumed neutral evolution in health status of the population in each Member State of the European Union.

Pension expenditure

The "pension expenditure" aggregate according to the ESSPROS definition, goes beyond that of public expenditure and also includes expenditure by private social protection schemes. "Pension expenditure" is the sum of seven different categories of benefits, as defined in the 1996 ESSPROS Manual: disability pension, early retirement benefit due to reduced capacity to work, old-age pension, anticipated old-age pension, partial pension, survivors' pension and early retirement benefit for labour market reasons. Some of these benefits (for example, disability pensions) may be paid to people who have not reached the standard retirement age.

Replacement rates

The figures for current and prospective pension replacement rates are based on the methodology developed by the Indicators Sub-Group of the Social Protection Committee. The results are based on the baseline assumption of a hypothetical person (male if gender matters), retiring at the age of 65 after a 40 years full-time work career with a flat earnings profile at average earnings with contributions to the most general public pension scheme as well as to occupational and private pension schemes for some Member States.

The replacement rate represents the individual pension income during the first year of retirement relative to the individual income received during the year preceding retirement. Calculations were conducted by the Member States.

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Healthcare expenditure – who-health for all database (www\nha)

This information is based on national health accounts (NHA) collected within an internationally recognised framework. NHA are a synthesis of the financing and spending flows recorded in the operation of a health system. In the future the System of health accounts (SHA) will contain uniform data for Eurostat, the OECD and the WHO. In the meantime, the WHO database is the only one to cover all Member States.

About 100 countries either have produced full national health accounts or report expenditure on health to the OECD. Standard accounting estimation and extrapolation techniques have been used to provide time series (1998-2004). Ministries of Health have responded to the draft updates sent for their inputs and comments. The principal international references used are the International Monetary Fund (IMF), Government Finance Statistics and International Financial Statistics; OECD health data; and the United Nations National Accounts Statistics. National sources include: national health accounts reports, public expenditure reports, statistical yearbooks and other periodicals, budgetary documents, national accounts reports, central bank reports, non-governmental organisation reports, academic studies, reports and data provided by central statistical offices and ministries and statistical data on official websites.


[178] National data sources are adjusted ex-post and as far as possible with the EU-SILC methodology. Whilst the maximum effort is made to maximise consistency of definitions and concepts, the resulting indicators cannot be considered to be fully comparable to the EU-SILC based indicators.

[179] Before the introduction of EU-SILC in the New Member States, the value of goods produced for own consumption was included in the calculation of the EU indicators estimated on the basis of national sources. This transitory agreement was made to take account of the potentially significant impact of this component on the income distribution in these countries.

[180] See specific footnotes in each country profile