Coping Strategies of Economically (Partially) Inactive Households: The Case of Croatia

Introduction

How do households with (long-term) inactive or unemployed members cope in vulnerable economies? The present study examines this problem with a case study on Croatia, a country whose current score of 61.4% puts it at the bottom of the European Union’s (EU) scale of economic activity rate. Although Croatia’s activity rate has further dropped during the recent global economic crisis, this trend is not new. A relatively low rate of economic activity has characterized the Croatian economy for more than twenty years.^[1] Surprisingly, this trend has not increased measured poverty, as one might expect in a country where long-lasting low participation in the formal labour market is coupled with high unemployment rates.^[2] In this paper, we examine what lies behind this puzzle.

The recent crisis has brought about a deterioration in labour market conditions in Croatia. While rises in unemployment, poverty, and inequality have been experienced across the EU, and the chances of entering the labour market have consequently decreased across the board,^[3] Croatia stands out as the country with the strongest cumulative fall in economic activity and the strongest scale of employment destruction.^[4] The Croatian recession was prolonged, and the positive economic trends, which started as late as 2015, were unable to counteract the recession’s negative consequences.^[5] The labour market was already showing a remarkable loss of jobs. The low employment rate of 64.9% in 2008 further declined to 57.2% in 2013,^[6] the year in which Croatia joined the EU. The crisis negatively affected the employment dynamics, leading to successive annual drops in employment, and changed the structure of new employment, increasing hiring based on temporary contracts.^[7] Croatia’s unemployment and long-term unemployment rates, respectively 17.2% and 11% in 2013, are among the highest in the EU.^[8] This particularly affects young people, the elderly, and the low-skilled, all of whom are particularly vulnerable when entering the labour market and at greater risk of being laid off during a crisis.^[9] With the prolonged crisis as a push factor and access to the EU labour market as a pull factor, emigration rates from Croatia intensified, with the crude rate of net migration reaching -4.3 per 1,000 inhabitants in 2015.^[10] These developments, along with the rise in public debt (rise from 50.3% of the GDP in 2006 to 82.2% in 2013) and the corresponding increased deficit (rise from -3.0% of GDP in 2006 to -5.3% in 2013),^[11] resulted in Croatia being placed under the EU’s excessive deficit procedure, which is an additional obstacle to growth and reforms and contributes to further welfare state retrenchment.

Individuals were forced increasingly to rely on their own resources for survival and to face the risk of insecure and fragmented life trajectories due to long-term unemployment, long periods of working for no pay, indebtedness, and so forth.^[12] In these circumstances, how did economically (partially) inactive households cope without succumbing to poverty? We explore this question through the concept of ‘household strategies’. We argue that this criticized concept is relevant in postcommunist and postfordist societies, societies of growing risk and uncertainty in which individuals must draw on various resources. The concept’s analytical strength most notably stems from its ability to capture both formal and informal and domestic resources that are used and combined within a particular household. It thus provides a better understanding of economic behaviour in a given context.^[13] Household strategies develop at the intersections of the labour market, the welfare system, and personal networks^[14] but they are also influenced by other factors, such as household market or culture.^[15]

Previous research in Croatia has examined some aspects of household strategies, particularly how they are influenced by the labour market—specifically, the grey market, the welfare system, or networks of formal and informal support^[16]—but we are aware of no existing study that has focused specifically on the strategies of (partially) inactive households. We use the data collected in the 2014 mixed-methods project ‘Typology of Survival Strategies and Sources of Income of Economically (partially) Inactive Households’, which combined results from a survey of households with unemployed or inactive members with the information obtained from semi-structured interviews conducted on a purposive subsample of such households.^[17]

In the next section, we present the conceptualization of ‘household strategies’. We then detail the research design and methods. Following that, we present the six household strategies identified in the Croatian households with unemployed or inactive members. In the final section, we discuss our main findings and implications for further research and policymaking.

Household Strategies: Conceptualization and Issues

‘Strategy’ has become a widely used concept in sociology as the focus has moved away from the structural approach towards social actors. The growing popularity of ’strategy’ as a social theory concept is partially a response to ‘hard structuralism’,^[18] and it also provides a chance to move beyond the structure/ agency dichotomy. The concept of ‘household strategies’ was first used in household studies in Latin America and Africa in the 1980s.^[19] It was then adopted by the socio-economic paradigms research in the late industrial and post-industrial era in Western countries. These later studies focused on structural changes in working families dealing with, for instance, the consequences of women’s entrance into the labour market.^[20] The concept was initially applied to specific and marginal social groups who had to make a greater effort to survive (e.g. farmers, small business entrepreneurs, and immigrants), but it was later used for all households.^[21] These studies found differences in strategies or ways of coping between working rich and working poor households.^[22] Unlike previous deterministic structural approaches to class/stratification analyses, findings of the household strategies studies highlighted individual action, agency, and its rationality.^[23]

Both Wallace and Crow approach these issues from the bottom up and from a micro-sociological perspective. They define household strategy as ‘a concept that takes into account the motivations and agency of actors in society’,^[24] dealing with what course of action a household decides to follow. It is an inductive concept grounded in empirical research, in which households are asked how they are coping with the consequences of recession, decreasing salaries, and problems paying bills and housing loans.^[25] Although there is no consensus about the concept’s definition, its theoretical usefulness stems from capturing actions that are rational and take place in predictable social situations, which indicates the existence of a choice between alternatives.^[26] Warde^[27] distinguishes between weak and strong strategies, where strong strategies refer to actual planning of activities, and weak strategies to activities that are not necessary planned but can be realised from the income available. However, in an approach critical of the ‘household strategy’ concept, Clark, in his analysis of Russian households in the transition period, argues that we can hardly talk about household strategies in circumstances where the household budget barely meets the basic needs of the household members and in which there is no space for strategic decision-making processes.^[28]

Nevertheless, another strength of the ‘household strategy’ concept is that it reintroduces households as units of analysis into sociological analysis. It draws particular attention to various sources of income, in addition to regular income in the formal economy.^[29] By stressing the significance of informal or shadow and social economy for household sustainability, this opens up new directions in the empirical research on diversity of household subsistence. For example, analyses of transition economies have used models such as ‘multiple economies’ to describe various informal and formal economic practices, such as paid work, informal work paid in cash, unpaid domestic labour, different kinds of assistance in labour, and cash assistance from family, friends, and neighbours.^[30] Smith and Stenning further distinguish between three categories of such practices: 1) market economic practices (formal and informal work and remittance economies); 2) non-market economic practices (e.g. domestic food production and self-provisioning, reciprocity, and the ‘economy of regard’, state benefits, and care work); and 3) alternative economic practices in the black and ‘grey’ economies.^[31]

Several empirical studies have highlighted the diversity of practices and resources the households use in difficult circumstances. According to Clark, Russian households depend on traditional resources such as income from primary and secondary employment, social benefits, and private transfers, but rural households also utilize produce from their garden plots. His analysis emphasizes that individuals do not plan strategies to maximize household income but rather combine different practices at hand to get by.^[32] Another interesting example of practices used in Russian households is that of co-residing with parents, relatives, and other adults, utilized by single mothers in a study by Lokshin and Yemtsov.^[33] These authors have used the concept of ‘human capital’ as the main criterion in their identification of Russian households’ strategies. They have shown that households with higher levels of human capital are more likely to choose active strategies, while households with less human capital (e.g. those of retired and lower educated individuals) are more likely to suffer social exclusion.^[34] Next, a 2002 Serbian study of household strategies underscored the shift from passive and defensive to more active, work oriented strategies, which is a result of the labour market becoming perceived as an important instrument for improving one’s socio-economic position. In fact, this study identified five types of strategic orientations aimed at improving one’s social position: 1) work-related strategies; 2) strategies of capital accumulation (cultural or financial); 3) exit strategies (e.g. emigration); 4) passive optimistic strategies (general reforms, followed by rise of living standards, are expected to improve one’s social position); and 5) passive infirmity strategies (lack of belief in the possibility of improving one’s position).^[35] Finally, a recent Serbian study proposed another interesting typology of life strategies based on two axial factors: individualism/collectivism and reactivity/proactivity.^[36]

Unlike studies in postcommunist/transition countries, Western analyses of coping strategies focused more on specific social groups, such as foreign migrants, single mothers, or the long-term unemployed.^[37] Drawing mostly on surveys and in-depth interviews, these studies identify coping strategies in terms of support networks^[38] or reciprocity networks,^[39] social networks, supplementary employment, and public or private social services.^[40]

We argue that ‘household strategy’ is a useful concept and method of analysis, particularly in postcommunist societies, which have been faced with various risks and uncertainties and in which (welfare state) reforms have responded inadequately to these risks. This has led households to draw on different resources, such as informal and domestic resources, in order to cope. These practices are context-dependent and often guided by informal rules not easily explained by conventional methods of analysis. But using the ‘household strategies’ concept brings them into focus and may indeed prove a more fruitful approach.^[41]Still, because the concept lacks conceptual clarity, we make use also of the accumulated knowledge on various informal and formal economic practices, and consider the particularities of the Croatian context, particularly over-in-debtedness.^[42] Therefore, we used seven hypothetical strategies centred around income sources or cost-reduction strategies to operationalize indicators in this research: 1) reduction of needs and expenses; 2) low monetization (producing own food, firewood, exchange of goods and services, etc.); 3) income without work (e.g. income from property); 4) income from informal work (undeclared work); 5) reliance on social transfers; 6) intra-family solidarity; and 7) financial management (e.g. ‘living on credit’). These initial strategies had a purely heuristic role in the operationalization of the research instruments.

Research Design and Methods

We conducted a mixed-method study, consisting of a quantitative household survey and qualitative semi-structured interviews. The survey was conducted on a national random representative sample of 1,000 households as part of the Ipsos Omnibus survey in early 2014. A two-step stratified multi-cluster sample was used. The sample was stratified by region and settlement size. Its structure is in line with the structure of population with respect to gender, age, educational level, and employment status of the respondent, who was randomly selected in the household through the weighting procedure using the Random Iterative Method. Our research targeted the households in which some of the working-age members were unemployed or inactive in the labour market. Based on the characteristics of all household members, a target group of 453 households (unweighted count) was identified out of the total of 1,000 households encompassed by the survey. These 453 households were included in the further analysis.

Questions for our research were included at the beginning and end of the questionnaire, which also contained blocks of questions on other topics. We collected data on the household structure, formal and informal sources of income, production of food for own consumption, income from property, income from social transfers, costs and housing cost savings, and the level of short-term household debt. Data were collected from a randomly selected household member, who was free to consult with other household members.

Based on these data, we created eleven variables (Table 1) and performed a cluster analysis in order to identify homogeneous strategies with regard to the combination of income sources and/or cost-reduction strategies of households with some economically inactive or (long-term) unemployed members. We used the K-means method of identifying homogeneous groups of households in the IBM SPSS 17.0 software package. In order to select the optimal number of homogeneous household groups, we tested several solutions in regard to the number of output groups, which were determined a priori. The goal was to obtain as many homogeneous groups of households as possible whose profile differed on as many input variables as possible and whose profiles were interpretable. After testing solutions with four, five, six, seven, and eight output groups, we selected the solution with six groups as the one that best meets the set criteria.

Thirty-seven semi-structured interviews were conducted in early 2014 on the purposive sample of households that fitted two criteria: 1) they consisted of at least one inactive or unemployed working-age person; and 2) they relied on at least one of the seven hypothetical strategies centred on income sources or cost-reduction strategies listed in the previous section. For the latter criterion, the initial screening was performed by trained interviewers using a checklist listing sources of income and expenses. We sought to recruit respondents from different regions of Croatia, from both urban and rural settlements and of varied wealth, in order to achieve within-sample variability, although this was not maximum variation sampling in a strict sense.^[43]

At the beginning of the interview, every interviewee completed the same questionnaire used in the household survey. In the interview, they were asked to expand on their responses and more thoroughly explain the structure and the history of their income-producing practices and expenses. In addition, the interviewees were asked to talk about their satisfaction and future plans, the self-evaluation and background of their family situation, expense-reducing practices, and reliance on unpaid housework and care. All interviews were audio recorded and transcribed verbatim. The transcripts were anonymized, and in this paper we use only the pseudonyms of the research participants.

The three team members coded the data in Atlas.ti 7 software using the thematic coding approach.^[44] Coding was approached in an abductive manner, combining a pre-created coding scheme with the inductive formation of codes. Each coder first independently coded a subset of interviews, after which the codes were further discussed and refined by all three coders. After the second round of coding, a further check of intercoder reliability, and the preliminary analysis, the revised codes were grouped into categories of household descriptions.

In the next stage of analysis, we compared the data from the household survey and the interviews. This comparison revealed a consistency between quantitative household clusters and qualitative household categories, so a coder further linked each interview with the best corresponding household cluster. This classification was double-checked by a second coder, and the differences resolved by discussion. After this procedure, thirty-five interviews were classified as belonging to one of the clusters; two were labelled ‘untypical’. The comparison also resulted in a minor redefinition of variables in the cluster analysis, which led to the final cluster solution. The structure of the final cluster solution was very similar to the first one but allowed a somewhat clearer and more meaningful interpretation.

Results: Six Household Strategies

In this section we present the results of the survey of 453 Croatian households with unemployed or inactive working-age members combined with the results of semi-structured interviews on the purposive sample of thirty-seven households. Since the clusters identified in the household survey data correspond closely to the household categories identified in the interview data, the presentation of each household cluster and its strategies is followed by an in-depth presentation of the interview case we consider representative of that group.

The cluster analysis of the household survey data identified six types of households, which were statistically significantly different on eight out of eleven output variables: regular income, occasional work, income from agriculture, income from social transfers, help from family members, savings, consumer debt, and housing costs reduction. On the remaining three variables (income from rental property, income from property sale, and gains from extraordinary income), no statistically significant differences were found (Table 2).

Discussion and Conclusion

Our study identified six strategies that Croatian households with unemployed or inactive working-age members used to cope with their difficult circumstances. Based on the characteristics of these strategies, and the main resources they utilized, we labelled them: 1) struggle for independence (occasional work, help from family, regular income, savings); 2) strenuous self-reliance (regular income, social transfers); 3) successful pooling of resources (income from agriculture, low housing costs, regular income); 4) reliance on social transfers (social transfers, low housing costs); 5) reliance on consumer debt (regular income, consumer debt); and 6) low monetization (low housing costs). Judging by the scores on the material deprivation index, the most successful strategies were strategies three (successful pooling of resources) and five (reliance on consumer debt), which were used by the majority of the households studied. Both are strategies in which the regular income of some household members plays an important role, while other resources mainly are an additional buffer rather than a source of coping.

With households employing strategy three (successful pooling of resources), this buffer to the regular income is possible because these types of households often own land from which they can get produce to use for their own needs or for small-scale sale on the green market. In addition, they mostly own houses in which they live, which, interviews suggest, were often inherited or built/financed during socialist times. Thus, these households are able to keep their housing costs at a minimum or even save on utility bills. Indeed, these characteristics of strategy three, which is most prevalent in rural areas, throw into sharp relief the differences between the resources of those dwelling in houses (which, in Croatia, typically come with a garden plot) and urban dwellers living in flats, who have limited access to homegrown food and limited possibilities to use alternative cost-saving utilities (such as using wood for heating). Iva, the representative of households in cluster three, summarizes this situation quite succinctly by noting that, despite all the difficulties of her own household, it is those people ‘in flats’ who are in a bad situation, so it is to them they sometimes give the surplus of their home-grown food (§ 99). Combining income from regular work and agricultural production has a long tradition in Croatia, as well as in other ex-Yugoslav countries, established during the socialist period. In that period, it was quite common for workers from rural areas (often labelled ‘workers-peasants’^[49]) to travel to a nearby town to work in a factory and to perform agricultural work on their own land in the afternoons and during weekends, together with other family members.

The other most successful type of households, those employing strategy five (reliance on consumer debt), can also be seen as urban counterparts to mostly rural households in cluster three. For both of them, regular income is the most important factor of successful coping, but access to agricultural produce and low-cost housing that buffer regular income for households in cluster three are not available to these mostly urban households in cluster five (indeed, their housing costs are high, and they rarely rely on agricultural production). Instead, what act as additional buffers to regular income to these households are, primarily, consumer loans, credit drafts, and overdraft. Therefore, here we have a rather fragile strategy of coping that directly depends on the continuity of some source of regular income.

When households cannot rely on any source of regular income and depend primarily on alternative resources, it becomes much more difficult to cope.

Specifically, if we look at the households with the worst scores on the material deprivation index, the households utilizing strategies four (reliance on social transfers) and six (low monetization), we can see that these are the only types of households where regular income plays no role as a resource.

Another resource that deserves further discussion is help from family members. Although not as crucial for coping as regular income from wages or pensions, the relevance of this informal resource has been particularly emphasized in the interviews, where it became clear that help from family members is a safety net for many members of these vulnerable households. In this respect, an interesting finding is the differentiation that the individuals use between who belongs to their household and who does not. For example, it was quite common for family members who no longer lived in the same household to be still perceived as household members. Far from being just a matter of affective affiliations, these relations mattered in terms of family finances, as both financial and non-financial help was given to and received from such ‘dislocated< members without that necessarily being defined as giving and receiving external assistance. Therefore, we believe it probable that ‘help from family members not living in the same household’ may have been under-reported in the household survey. As it is, in the survey such help was emphasized as an important resource only for households struggling for independence (strategy one), that is, mostly urban and small households primarily consisting of a single member or a couple without children or with only one child, often young or middle-aged. It was also found above average in the households that primarily rely on social transfers (strategy four), these being mostly large households (multigenerational or with a large number of young children) from small towns or larger rural settlements.

Household strategies two (strenuous self-reliance) and four (reliance on social transfers) also highlight some policy implications of our findings. Namely, these strategies are mostly used by large households (multigenerational or with a large number of young children), where the pensions and child allowances are an important source of income. If we consider the material deprivation index of these two types of households, these findings question both the efficiency and the real function of these transfers. This is especially true of child allowances, which are a ‘poverty alleviation’ of limited duration. Thereby, child allowances are losing their primary function and are becoming instrumentalised by the social assistance system. Moreover, as their levels remain low and do not follow the living standard changes, they do not decrease the poverty risk of these households.

In conclusion, the findings of our study confirm that practices that households use to ensure their coping in difficult economic circumstances are indeed diverse. Similar to other studies using the concept of ‘household strategies’, we have demonstrated that these practices include the utilization of various resources in diverse combinations, from those considered more traditional (income from regular or occasional employment or pensions, social benefits, and transfers) to those considered more alternative (domestic food production, reliance on consumer debt, help from family members), as well as resources that are often the ‘remnants’ of ‘better times’ (ownership of land/housing, savings). Our study confirms that a steady low labour market participation rate is sustained by the existence of relatively successful strategies which combine regular income from work with other income sources and/or costs reductions. Around 60% of households with at least one inactive or unemployed member belong to one of the two types of households with relatively successful strategies (three and five), whose material deprivation index score is similar to the score of households where all working-age members are employed in the formal labour market. This finding suggests that passivity in the labour market can be, for some groups, a voluntary choice, or at least an acceptable second-best option when the labour market fails to provide good incentives in terms of salary and/or job security and quality. The policy implication of this finding suggests a need for development of quality job opportunities, not any job opportunities, the latter being the dominant implicit policy orientation of Croatian policymakers.

We would also like to address Clark’s criticism that strategic decision-making has no place where individuals struggle for their existence by any means available.^[50] While, in some circumstances, individuals might indeed have little choice as to what practices or resources are at their disposal, we believe that the diversity of these practices and the various combinations in which they are used, even by similar types of households in similar circumstances, as suggested by our rich interview data, allows the space for creativity and agency that goes beyond reducing the discussion of ‘household strategies’ to the discussion of ‘strategic action’ in its strictest sense. Instead, for the purpose of analysis and understanding of vulnerable households’ income-producing and cost-reducing practices, we find Warde’s distinction between strong and weak (weakly or not planned) strategies^[51] much more useful. Applied to our results, we consider the two most successful strategies, strategies three (successful pooling of resources) and five (reliance on consumer debt), to belong to strong or planned strategies, while households relying on other types of strategies depend more on ad hoc solutions.

Finally, although we have emphasized the importance of regular income for those households with unemployed or inactive members that we consider most successful in terms of their material deprivation index scores, in this study we have additionally shown exactly how regular income interacts with other (and which) possible resources in order to increase households’ chances of coping with difficult economic circumstances. Specifically, we have shown the importance of owning a garden plot or house for rural dwellers or strong reliance on ‘life on credit’ for urban dwellers. This provides additional complexity to the understanding of household subsistence and it is, indeed, a point that illustrates that using ‘household strategy’ as a concept and method of analysis is fruitful in postcommunist societies such as Croatia.