Digitalization, inequalities and risk of poverty Report on work and social cohesion 2023

On the occasion of the International Day for the Eradication of Poverty on October 17, STATEC is looking at the country's social cohesion.

Knowledge workers

Luxembourg is well on the way to becoming a digital nation. Digital skills dominate professional tasks. 47% of people in employment apply them constantly or almost constantly (financial sector, ICT, scientists, etc.). This position of digital leadership in Europe contrasts sharply with the low prevalence of manual tasks among resident workers, a situation similar to that in Sweden and the Netherlands.
A series of indicators have been used to classify jobs and tasks according to their cognitive, manual, interactive, uniform nature or degree of autonomy. As far as cognitive tasks are concerned, 45% of people in work or recently in work are constantly or almost constantly applying digital skills in their working environment. In contrast, less than a third of people in work or recently in work perform manual tasks, of which only 6 to 8% do so constantly. Social interaction also plays a significant role, with one in five people communicating constantly, either internally or externally as part of their work, and one in ten carrying out consultancy activities most of the time.

Teleworking has taken hold

Teleworking, which appeared on a massive scale during the pandemic and the containment measures (it reached a peak of 52%, compared with 20% in 2019), has taken root in companies. In the second quarter of 2023, teleworking was a reality for 32% of residents employed in Luxembourg. Teleworking has added a further dividing line between employees who can make use of this facility and those who cannot. In fact, teleworking is more common among skilled white-collar workers, those who carry out tasks of a cognitive and autonomous nature. It concerns 57% of managers and professionals, and 25% of intermediate professions. By contrast, only 11% of low-skilled white-collar workers, and between 1% and 3% of blue-collar workers, who tend to perform manual tasks, are able to telework.
Another dimension of adjustment/disparity is that part-time working is predominantly female in Luxembourg, but it is also the result of a voluntary choice. Almost one woman in three works part-time. Although there has been an increase in the number of men working part-time, their proportion remains significantly lower than that of women: 7.1% compared with 30.9%.

Having a job does not always protect you from the risk of poverty

Not all employees have the privilege of being knowledge workers, with relatively high salaries. In 2022, 12.9% of workers in Luxembourg were at risk of poverty. More than half of workers at risk of poverty operate in four specific sectors of activity, namely construction, hotels and restaurants, health and commerce. Other categories of workers who are relatively more exposed to the risk of poverty are temporary workers, part-time employees, non-European nationals and people with a lower level of education. The presence of dependent children in a household increases the risk of poverty among workers. Social minima (REVIS, minimum social wage) do not always provide sufficient protection against the risk of poverty, particularly for households with children. The high cost of living in Luxembourg, and particularly housing costs, mean that household needs are not always fully covered.

Purchasing power up, risk of poverty down (slightly)

According to STATEC forecasts, the average standard of living of Luxembourg residents will rise by 7.7%, from around EUR 3,745 in 2021 to EUR 4,032/person in 2022. This increase exceeds annual inflation (6.3%). The explanation for this increase lies in the indexation of April 2022 and the measures taken by the Tripartite (tax credit and aid granted in response to rising energy costs, in particular the increase in the cost-of-living allowance and energy-related bonuses), as well as wage increases due to the tight labour market.
The poverty rate is down slightly on the previous year, from 18.1% to 17.4% in 2022! The subjective indicator of "struggling to make ends meet" is moving in the same direction, and is also falling.

The income " remains to live on"

In 2022, nearly 9 in 10 households reported that their housing burden was either significant or moderately significant. This situation affects almost all types of households, including 82% of the wealthiest households and 91% of the most disadvantaged households. For households in the first income quartile, the housing burden, measured using observed monetary data, is particularly worrying, representing 57.9% of their disposable income.
However, households cannot use theoretically available income: certain compulsory expenses such as rent, loan repayments, insurance, etc. are inevitable. The least well-off households see more than 60% of their disposable income absorbed by these expenses, while this proportion decreases to 20% for the most well-off households. In 2022, the “remainder to live” for consumption, calculated by subtracting pre-committed expenses from disposable income, amounted on average to 4,624 EUR per month and per household and only to 1,121 EUR/month for the 10 % of the lowest-income households. Taking into account this truly disposable income, the at-risk-of-poverty rate rises on average to 21%.
On the other hand, the at-risk-of-poverty rate, based solely on disposable income, hides household resources that should be taken into account. STATEC also calculates, to reflect this reality, a multidimensional poverty risk rate which takes into account income, consumption and assets: this rate decreases in 2022 compared to 2021, it goes from 7.3% to 3.9%.