Reducing extreme poverty in Greecethe role of a guaranteed minimum income scheme

Manos Matsaganis Athens University of Economics & Business

Chrysa LeventiUniversity of Essex

EUROMOD Research WorkshopLisbon (2 October 2013)

guaranteed minimum income general idea

ultimate safety net covers basic needs in situations of extreme poverty tops up income if below a certain threshold

means-tested funded out of general taxation

aims at reducing extreme poverty may not influence relative poverty reduces poverty gap

guaranteed minimum incomemore than just a benefit

usually requires availability for work

unless the claimants are disabled, unable to work or looking after small children

accompanying actions

social work, training courses, volunteering etc.

active employment policies: incentives for employers and employees

schooling, language courses, participation in rehabilitation programmes etc.

guaranteed minimum income in Europepolitical support

not a politically contested issue

supported by

British liberals

Nordic social democrats

German christian democrats

French socialists

guaranteed minimum income Northern Europe

guaranteed minimum income (€ per month)

single person couple couple + 2 children

UK 324 508 1108

Ireland 806 1347 1605

Sweden 326 589 1123

Denmark 1391 2782 3698

Finland 461 853 1466

Norway 694 1152 1856

Ιceland* 794 1271

* Data for 2010Source: MISSOC (Jan 2012)

guaranteed minimum income Central Europe

guaranteed minimum income (€ per month)

single person couple couple + 2 children

Austria 773 1160 1438

Βelgium 770 1027 1356

France 475 997

Germany 374 674 1176

Netherlands 668 1336

Luxemburg 1283 1925 2158

Source: MISSOC (Jan 2012)

guaranteed minimum income Eastern Europe

guaranteed minimum income (€ per month)

single person couple couple + 2 children

Czech Republic 123 234 388

Slovakia 61 105 158

Hungary* 80 134 134

Poland 94

Slovenia 231 399 565

Εstonia** 77 138 261

Lithuania 101 182 324

Latvia 57 114 242

Romania 29 52 90

Βulgaria 33 44 104

* Max benefit amount ** Data for 2011Source: MISSOC (Jan 2012)

guaranteed minimum income Southern Europe

guaranteed minimum income (€ per month)

single person couple couple + 2 children

Italy*

Spain 426 596 1193

Portugal 195 332 528

Greece

Cyprus 452 678 949

Malta 415 450 521

* Varies by municipalitySource: MISSOC (Jan 2012)

guaranteed minimum income in Greecethe position of international organizations

IMF (Country Report No. 12/57, 2012)

promoted the idea GMI would replace most existing benefits (other than

unemployment benefit) targeted at the bottom 20% of the income distribution

OECD (OECD Review of Greek Social Programmes, 2012)

rejected the idea counter-proposal: consolidate existing family, housing,

unemployment and disability benefits on a means-tested basis

politically contested issue?

guaranteed minimum income (GMI)previous studies

Matsaganis et al. (2001) cost: 0.23% of GDP (ECHP 2000)

Legakis (2005) cost: 0.55% of GDP (EU-SILC 2003)

Flevotomou (2009) cost: 0.45% of GDP (HBS 2004)

Matsaganis & Leventi (2009) cost: 0.92% of GDP (HBS 2005)

guaranteed minimum income (GMI)scenarios

three alternative scenarios

scenario 1 GMI = unemployment insurance benefit = social pension

€360 per month (single person)

scenario 2 GMI= unemployment assistance benefit for older workers

€200 per month (single person)

scenario 3 GMI = 40% of median equivalised HDI

€269 per month (single person)

housing allowance €125 for those with rent / mortgage expenses plus €25 for each each additional family member

guaranteed minimum income excl. housing allowance

no expenses for rent or mortgage scenario 1 scenario 2 scenario 3

single person 360 200 269

single parent + one child 540 300 403

couple 612 340 457

couple + 1 child 792 440 592

additional amount for any extra adult 252 140 188

additional amount for any extra child 180 100 134

guaranteed minimum income incl. housing allowance

with expenses for rent or mortgage scenario 1 scenario 2 scenario 3

single person 485 325 394

single parent + one child 690 450 553

couple 762 490 607

couple + 1 child 967 615 767

additional amount for any extra adult 277 165 213

additional amount for any extra child 205 125 159

guaranteed minimum incomebenefit calculation: couple + 2 children with expenses for rent

no GMI scenario 1 scenario 2 scenario 3

household income 744

from employment* 234

from social benefits 360

from rent 150

reference income 698 698 698

guaranteed income 1172 740 926

transfer 475 43 229

* 20% of employment income is not taken into account

guaranteed minimum income participation (2012)

scenario 1 scenario 2 scenario 3

number of recipients1 1 680 688 707 898 1 045 074

as % of population2 15.4% 6.5% 9.6%

1. All household members are considered as recipients if one of them is in receipt2. Population in 2012: 10 928 115 inhabitants Source: EUROMOD (Version F6.43)

guaranteed minimum income cost (2012)

scenario 1 scenario 2 scenario 3

in million € 2 374 798 1 317

as % of GDP1 1.2% 0.4% 0.7%

1. GDP in 2012: €193,7 billionSource: EUROMOD (Version F6.43)

guaranteed minimum incomepoverty effects (2012)

no GMI scenario 1 scenario 2 scenario 3

poverty risk (60% of median)

21.3 15.7 21.3 20.9

change (in pps)

-5.6 0.00 -0.4

poverty risk (40% of median)

10.5 2.2 8.7 5.5

change (in pps)

-8.3 -1.8 -5.0

poverty gap (60% of median)

41.1 19.1 31.2 24.9

change (in pps)

  -22.0 -9.9 -16.2

Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum incomepoverty risk estimates by household type (60% of median)

no GMI scenario 1 scenario 2 scenario 3general population 21.3 15.7 21.3 20.9single or couple (both below 65)

19.9 15.8 19.9 19.8

single or couple (at least one over 65)

18.7 18.3 18.7 18.7

couple with 1 or 2 children

24.2 15.0 24.2 23.7

couple with3+ children

32.1 15.7 32.1 29.4

single parent families

32.4 24.4 32.4 31.6

other household types

17.7 14.4 17.7 17.7

Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum incomepoverty gap estimates by household type (60% of median)

no GMI scenario 1 scenario 2 scenario 3general population 41.1 19.1 31.2 24.9single or couple (both below 65)

54.1 27.3 37.8 31.1

single or couple (at least one over 65)

23.1 17.9 21.7 20.9

couple with 1 or 2 children

49.9 22.0 34.4 25.6

couple with3+ children

35.3 15.6 27.8 21.4

single parent families

41.7 15.9 33.1 24.3

other household types

35.4 15.1 30.0 24.3

Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum incomeprospects (1)

a useful tool for poverty alleviation at (relatively) modest cost for the modernisation of the Greek social protection system

urgent need for strengthening the social safety net the crisis has increased the demand of social protection …but the austerity has reduced its supply

obstacles budgetary practical administrative political

guaranteed minimum incomeprospects (2)

guaranteed minimum income on the spotlight

2013-2014 Spending Review: (further) massive fiscal consolidation 5% of GDP in 2013 + 2.25% in 2014 cuts in social spending: 45% of total savings increases in social contributions: 5% of total savings

some expansionary measures (subject to strict cash limits) new means-tested child benefit (2013) new unemployment insurance benefit for the self-employed (2013) broader eligibility conditions for unemployment assistance benefit minimum income pilot (to be implemented in two localities in 2014)

guaranteed minimum incomeprospects (3)

the pilot: a unique opportunity (not to be missed)

issues political priority? administrative preparedness? careful design? systematic monitoring? ex post evaluation?

watch this space!

Thank you very much for your attention!