Simulating the Impact of Employment Growth on Poverty: Implications for the European Social Targets

Abstract

The European Pillar of Social Rights Action Plan sets ambitious targets to be achieved by 2030, including reducing the number of people at risk of poverty or social exclusion (AROPE) by 15 million and raising the employment rate to 78% among the working‐age population. This article investigates the extent to which employment growth to the level of the 2030 employment rate target can deliver on the EU's 2030 social target. Departing from key theoretical perspectives, we explore five mediating mechanisms that shape the relationship between employment and poverty, including job distribution across households, job quality, and social protection effectiveness. Our twofold analytical strategy first assesses past trends between employment and poverty indicators and then employs shift‐share and regression‐based simulations to estimate how different employment growth scenarios may affect the active‐age population's at‐risk‐of‐poverty (AROP(a)) and the total population's at‐risk‐of‐poverty and social exclusion (AROPE) outcomes by 2030. The analysis confirms that employment growth, though it has a strong effect on poverty, is unlikely to deliver the EU's poverty reduction target without further policy intervention. The full potential of employment growth to reduce poverty depends on, among other things, the distribution of jobs across households. While the EU has long promoted employment as the cornerstone of social inclusion, this article underscores the limits of such employment‐focused poverty reduction strategies in the absence of supporting institutional configurations. Policy recommendations align with the European Pillar of Social Rights and call for coordinated action across employment, wage setting, and social protection domains.