The impact of basic income on the propensity to work: Theoretical issues and micro-econometric results (original) (raw)
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The aim of this paper is to suggest an economic modeling of labor force participation microeconomic decisions in an inter-temporal framework characterized by the occurrence of a basic incomes/minimum wage scheme. We use the observed probabilities of transitions between different kind of jobs on the French labor market, for different categories of workers (age, sex, skills etc.), and the observed incomes associated to each kind of job, to identify the categories of workers that face inactivity or poverty trap problems. The results show (i) the occurrence of important inequalities between workers concerning the "inter-temporal" return of work and, consequently, the incentive to work, (ii) no obvious link between the occurrence of a static trap (work does not pay in the short run) and incentive to work problems. Moreover the results stress that unskilled male workers do have interest to accept jobs that do not pay, while skilled male workers do not have interest to accept jobs that do pay.
Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum income
Journal of Public Economics, 2008
This paper uses a representative sample of individuals on France's main welfare program (the Revenu Minimum d'Insertion, or RMI) to estimate monetary incentives for employment among welfare recipients. Based on the estimated joint distribution of wages and hours potentially oered to each individual, we compute potential gains from working in a very detailed manner. Relating these gains to observed employment, we then estimate a simple structural labor supply model. We nd that potential gains are almost always positive but very small on average, especially for single mothers, because of the high implicit marginal tax rates embedded in the system. Employment rates are sensitive to incentives with extensive margin elasticities for both men and women usually below one. Conditional on these elasticities, simulations indicate that existing policies devoted to reducing marginal tax rates at the bottom of the income distribution, such as the intéressement earnings top-up program, have little impact in this population due to their very limited scope. The recently introduced negative income tax (Prime pour l'emploi), seems to be an exception.
Behavioural and welfare effects of basic income policies: a simulation for European countries
U. of Torino Department of Economics Research Paper, 2008
Abstract: We develop and estimate a microeconometric model of household labour supply in four European countries representative of different economies and welfare policy regimes: Denmark, Italy, Portugal and United Kingdom. We then simulate, under the constraint of constant total net tax revenue, the effects of 10 hypothetical tax-transfer reforms which include various alternative versions of a Basic Income policy. We produce various indexes and criteria according to which the reforms can be ranked.
Does Work Pay in France? Monetary Incentives and the Guaranteed Minimum Income
SSRN Electronic Journal, 2005
Most welfare programs generate high marginal tax rates on labor income. This paper uses a representative sample of individuals on France's main welfare program (the Revenu Minimum d'Insertion, or RMI) to estimate monetary gains to employment for welfare recipients. This is based on the distribution of potential monthly earnings faced by each individual, as inferred from the distribution of observed wages and working time. Taking account of the welfare earnings top-up program (intéressement), we find that gains are almost always positive, but that their amount is very low, especially for single mothers. Intéressement is found to have a small impact, because of its provisional nature. Gains are positively related to the probability that a welfare recipient in 1996 will be observed in employment in 1998. Using a simple structural model, we interpret this as a labor supply effect. Résumé Beaucoup de transferts sociaux produisent des taux marginaux d'impositioń elevés sur les revenus du travail. Cet article utilise unéchantillon de bénéficiaires du principal dispositif d'aide sociale (le Revenu minimum d'insertion, RMI) pour estimer les gains monétairesà l'emploi. On s'appuie sur la distribution des revenus mensuels potentielsà laquelle chaque individu fait face et qui est elle-même déduite de la distribution des salaires horaires et des temps de travail observés. En tenant compte des incitations produites par le dispositif d'intéressement, nous trouvons que les gainsà l'emploi sont presque toujours positifs mais que les montants sont très faibles, notamment pour les mères isolées. L'intéressement pèse peu en raison de son caractère provisoire. Les gains potentiels sont positivement corrélés avec la probabilité qu'un bénéficiaire observé en 1996 occupe un emploi en 1998. A partir d'un simple modèle structurel, nous interprétons cette relation comme un effet d'offre de travail.
Basic Income and the Motivation to Work.docx
In response to concerns that new technologies such as robotics and artificial intelligence will have a detrimental impact on jobs and wages for human workers, a growing number of policy analysts have called for consideration of a Basic Income Guarantee (BIG), which involves a tax-free, subsistence-level, income paid directly by a government to individuals or households with few or no conditions. While many opponents of BIG programs believe that receiving guaranteed subsistence income would act as a strong disincentive to work, various areas of empirical research in psychology (studies of intrinsic motivation; non-pecuniary benefits of work on social identity and purpose; and reactions to financial windfalls such as lottery winnings) suggest that a BIG would not lead to meaningful reductions in work. To test these competing predictions, a comprehensive review of BIG outcome studies reporting data on adult labor responses was conducted. The results indicate that 93% of reported outcomes support the prediction of no meaningful work reductions when the criterion for support is set at less than a 5% decrease in either average hours worked per week or the rate of labor participation. Overall, these results indicate that adult labor responses would show no substantial impact following a BIG intervention.
Guaranteed minimum income and unemployment duration in France
Labour Economics, 2009
In this article, we use data from the European Community Household Panel to evaluate the impact of a French guaranteed income program, the RMI, on the the hazard out of unemployment. Self-selection into the program is corrected using a multivariate duration model developed by Abbring and van den Berg (2003). We find that RMI receipt has a strong negative impact during the first months of program participation, but that this disincentive effect quickly falls to insignificant levels after six months. Household structure also appears to be an important determinant of the importance of the adverse effect of program participation.
Basic Income Studies, 2018
Many opponents of BIG programs believe that receiving guaranteed subsistence income would act as a strong disincentive to work. In contrast, various areas of empirical research in psychology (studies of intrinsic motiva- tion; non-pecuniary benefits of work on social identity and purpose; and reactions to financial windfalls such as lottery winnings) suggest that a BIG would not lead to meaningful reductions in work. To test these compet- ing predictions, a comprehensive review of BIG outcome studies reporting data on adult labor responses was conducted. The results indicate that 93 % of reported outcomes support the prediction of no meaningful work reductions when the criterion for support is set at less than a 5 % decrease in either average hours worked per week or the rate of labor participation. Overall, these results indicate that adult labor responses would show no substantial impact following a BIG intervention.
The Working Poor in the European Union
International Scientific Days 2018. Towards Productive, Sustainable and Resilient Global Agriculture and Food Systems: Proceedings, 2018
The aim of this study was an attempt to identify the working population at risk of poverty in the 28 European Union countries. Also, this paper attempts to define the poor population and to subsequently determine its levels and structures. It was noticed that the size and scope of poverty mostly depend on the intensity of work while the responders' age plays a minor role. As noted in this paper, the greatest risk of poverty affects those who work for up to 20% of their full annual potential working time, as well as representatives of two opposite age brackets: young people aged 15-24 and people over 65. This paper emphasizes the relative nature of the poverty risk, which depends on the location and the socioeconomic development level of the country concerned. In EU countries, the distribution of poverty depends on the position held by individuals on the labor market, including the intensity of work. The EU-SILC studies identify five types of work intensity: very low (0.0-0.2), low (0.2-0.45), medium (0.45-0.55), high (0.55-0.85) and very high (0.85-1), depending on the full annual potential working time. The higher is the intensity of work, the lower is the risk of poverty. Empirical materials are based on EU-SILC (European Union Statistics on Income and Living Conditions) partial studies which provide a reference point for comparing the EU income distribution and social integration statistics.
Low-skilled Jobs: The French Strategy
Open Access publications from Sciences Po, 2007
Since 1995, French governments implemented a specific strategy aiming at lowering unemployment or inactivity of so called unskilled workers, in fact of low wage workers. This strategy used two tools: cuts in employers' social contributions reduce companies' costs for hiring low-wage workers; the Prime Pour l'Emploi, PPE, raises low-wage workers' incomes, and increases the gap between wage and assistance benefits in order to increase incentives for low-wage workers to take a job. The paper provides a description of the situation of unskilled workers in France. It describes the history of measures lowering employers' contributions on low wages, presents and discusses the studies that have tried to assess the impact of such measures on employment. These cuts cost approximately 18 billion euros in 2007. An average estimate of about 550,000 jobs created would have an ex post cost of 9 billion euro, i.e. 176,000 euros per created job. The history and the structure of the PPE are presented. According to existing studies, the PPE would not have a significant effect on labour supply. Should it be concluded from it that there is not inactivity trap? Or, on the contrary, that the trap is very deep? The current debate on the appropriateness to maintain employers' contribution and PPE or to reform them is addressed.
In the 1990’s, France introduced different subsidised contracts to create jobs targeted at long-term unemployment. These programs were supposed to help the beneficiaries to enhance their employability. It is then interesting to use the “capabilities” approach to assess their impact. From the panel of the Research and Statistical Department of the French Ministry of labour and social affairs (Dares) concerning employment policy beneficiaries, an initial analysis explored the beneficiaries’ refined functionings and a second how they subjectively perceive their standard of living. Comparing beneficiaries’ perceptions to those of a control group provided the necessary data to evaluate the real impact of these employment schemes on beneficiaries. Globally, subsidised employment contracts provide beneficiaries’ with an increased number of opportunities or choices that can be achieved and thus can be said to improve their quality of life. Furthermore, the private sector employment contract...