CURRENT EXPERIENCES AND TRENDS IN THE REFORM OF MINIMUM INCOME

SCHEMES IN THE EU

Anne Van LanckerWorkshop 6-7 October 2016 Madrid

1. COMPARING PERFORMANCES OF EU MEMBER STATES WITH REGARDS TO EFFECTIVENESS AND

EFFICIENCY OF MISS

CAPACITY TO LIFT PEOPLE OUT OF POVERTY OR TO REDUCE POVERTY

CAPACITY TO LIFT PEOPLE OUT OF POVERTY OR TO REDUCE POVERTY

CAPACITY TO LIFT PEOPLE OUT OF POVERTY OR TO REDUCE POVERTY

• Only a few countries provide minimum income and related benefits above 60% AROP threshold, and only for some household types (IE, DK, NL, UK)

• In most countries with low rates of poverty risk for jobless households, the effectiveness of social transfers is high (IE, NL, DK, AT, UK, LU); but not always (BE, SE, MT high poverty reduction impact but high poverty risk for jobless hh)

• In only few countries MI has strong impact on reducing poverty: AT, DK, IE, NL, FI, UK – 50% or more

• ESPN - 5 types of MIS: simple and comprehensive, open to all; idem but restricted eligibility and coverage; general schemes with additional categorial benefits; complex networks of categorial schemes; partial, restricted to narrow categories

• But not always relation with impact on AROP rate or reduction of poverty, although simple and comprehensive schemes tend to score better

ADEQUACY OF MINIMUM INCOME IN-AND OUT-WORK

• Cantillon: comparing performances adequacy MI jobless and working (raise MI and fight unemployment traps)

• 3 types of countries: high (where minimum wage as well as minimum income are above AROP: IE, DK), middle (where only minimum wage is above AROP: UK, CZ, PL, NL, DE, FI) and low road (where no minimum income guarantee is above AROP: all rest)

• Different trajectories: Decent minimum wages, high gross-net efforts, substancial financial

incentives to take up work (IE) Decent minimum wages, moderate gross-net efforts, low work incentives

(DK)

ASSESSING EFFICIENCY AND EFFECTIVENESS IN MULTI-DIMENSIONAL PROCESSES

• Joint report SPC-EC 2015: use of radar charts to identify best practices on double outcome standard: poverty reduction and employment friendliness.

• Combination of several social indicators: AROP rate, severe material deprivation, social expenditure, expenditure family, childcare use, employment rate, work intensity…

• Comparison of country performance with EU average and with 3 best performing countries

• ESDE 2015: country clusters on poverty risk and employment friendliness: SE, DK, NL and SI do well; AT, LU, CY, FR, BE, DE and FI OK but lower labour market attachment of mothers

COMPARING PERFORMANCES OF EU MEMBER STATES: EFFECTIVENESS AND EFFICIENCY OF

MISS

• Conclusions:• Different choices in reference lead to different outcomes in

terms of best performing countries• A few countries score well in all categories: IE, DK, NL, UK• Best performing countries can not be characterised by design

of MIS, although simple and comprehensive schemes mostly do well

• To have successful social policies, adequate MIS must be combined with decent minimum wages, inclusive labour market practices as well as generous child and family policies

2. AUSTRIA: EXAMPLE OF A COUNTRY WITH DECENTRALISED LEVEL OF GOVERNANCE

• Competence to regulate MI at regional level; national level concluded agreement with federal provinces to coordinate and streamline regional MIS

• No harmonisation of MIS, but definition of minimum standards: minimum benefits levels based on monthly equalisation supplement reference rate, eligibility conditions

• Federal provinces may set higher standards, especially with regards to child benefits

3. SIMPLIFICATION OF BENEFIT SYSTEMS AND INTEGRATED SERVICE

DELIVERY

• Study Budapest Institute on one-stop-shops: political constellations that can successfully carry through reform: centralised governance with few veto players (ex.UK) or federal system with wide consensus over goals and policy solutions (ex.AT). Changes should be gradual, limited to selected areas. Need for administrative and financial incentives, quality of planning, capacity building for main actors, monitoring of process and outcomes in all phases.

• Best practices from AT (transformation of public employment services into one-stop-shop offices), FI (establishment of labour force services as integrated services), NO (integration of employment and social services as ‘whole system working’), IE (social welfare and public employment services merged), NL (simplification of different schemes of social assistance for people with some employability)

4. CURRENT DEBATES ON MIS IN THE EU

1) Adequacy of minimum income: which references?2) Use of reference budgets3) Complementing benefits and the role of family benefits4) Coverage and take-up

REFERENCES FOR ADEQUACY OF MI

• Most MS have no clear definition of adequacy of MIS in sense of 1992 Council Recommendation on decent income; some countries use concept of subsistence level or absolute poverty lines

• Most MS have mechanism for level of payments based on set of indicators and that takes account of household composition; common approach is through minimum living standards (priced basket of goods and services, reference budgets)

• Setting benefit levels often based on political decision• Most benefit adjustment systems are insufficient to keep benefit

levels in line with general living standard.

USE OF REFERENCE BUDGETS

• Some countries use reference budgets as basis to determine level of minimum income; but baskets often don’t cover all regular expenses

• In many countries reference budgets were developed to assess adequacy of standards of living and social benefits

• Study: Storms et al, Pilot project on common reference budgets methodology EU

• In poorer countries, MI often hardly allow families to live on healthy diet; if other essential needs are taken into account, MIS would not be adequate in other countries. Using complete reference budgets as benchmark would sometimes be too ambitious in short term

• But reference budgets can not only be used to increase the level of benefits, but also to reduce the cost of essential goods and services, define priorities, formulate intermediate targets, facilitate cross-national learning

COMPLEMENTING BENEFITS AND THE ROLE OF FAMILY BENEFITS

• In many countries beneficiaries of MI can receive additional benefits for other needs: most common are benefits related to housing costs, energy costs, costs to raise children, health care costs, long term care costs

• Extra allowances mostly depend on assessment of needs by social workers; some benefits have been reduced as consequence of budgetary constraints during crisis

• Child and family benefits play an important role in fighting povery and form a considerable part of income at bottom part of income distribution

COMPLEMENTING BENEFITS AND THE ROLE OF FAMILY BENEFITS

• Size of poverty reduction effet is strongly correlated with volume of family benefits; but also design is important: pro-poor distribution of family benefits (NL) versus equal distribution (DK); same impact with less budget

• Trade-off between fiscal cost and poverty reduction: more generous universal child benefit systems have stronger impact on poverty reduction at higher fiscal cost

• Best results are delivered by child benefit schemes that combine universal benefits with targeting toward families most in need.

COVERAGE AND TAKE-UP

• In half of EU countries eligibility conditions ensure comprehensive coverage; in other countries coverage is limited

• Most countries that have fair coverage have simple and comprehensive schemes open to all with insufficient income

• Eurofound study: non-take-up is important problem in EU: estimates between 10 and 40%, persistent in time, issue for various benefits.

• Reasons for non-take-up are related to different levels: the benefit scheme, administration of benefits, the individual, the broader social and legal context.

• Strong arguments to address the gap between take-up and entitlements

COVERAGE AND TAKE-UP

• Stigma of benefits• Stigma of conditions• Bad access to bank accounts• Internet penetration• Legal restrictions to connect databases

• Complex• Instable• Stigmatising• Small benefits• Lack of dissemination

• Unawareness of benefit• Unawareness of entitlement• Unawareness of application procedure• Perceived stigma• Lack of time to apply• Lack of interest in applying (too low, independence, principle)

• Inaccessible procedure• Complex procedure• Erroneous assessment or procedure• Resource-intensive• Slow assessment• Lack of staff

Administration Individual

SocietyScheme

COVERAGE AND TAKE-UP

• Recommendations to improve coverage and take-up (ESPN, EMIN, Eurofound):

• Review conditions of access, guaranteeing individual right, ensuring simple and transparent entitlement criteria, elimination of requirements related to residence period, ensure portability of right to inimum income benefits

• Non-take-up can be reduced by automatic granting of benefits or pro-active procedures, connection of databases, use of ICT and on-line applications, outreaching to potential beneficiaries, clear information and effective assessments of applications