Reducing extreme poverty in Greece the role of a guaranteed minimum income scheme Manos Matsaganis Athens University of Economics & Business Chrysa Leventi University of Essex EUROMOD Research Workshop Lisbon (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 income more 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 Europe political 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 personcouplecouple + 2 children UK Ireland Sweden Denmark Finland Norway Ιceland* * Data for 2010 Source: MISSOC (Jan 2012)

guaranteed minimum income Central Europe guaranteed minimum income (€ per month) single personcouplecouple + 2 children Austria Βelgium France Germany Netherlands Luxemburg Source: MISSOC (Jan 2012)

guaranteed minimum income Eastern Europe guaranteed minimum income (€ per month) single personcouplecouple + 2 children Czech Republic Slovakia Hungary*80134 Poland94 Slovenia Εstonia** Lithuania Latvia Romania Βulgaria * Max benefit amount ** Data for 2011 Source: MISSOC (Jan 2012)

guaranteed minimum income Southern Europe guaranteed minimum income (€ per month) single personcouplecouple + 2 children Italy* Spain Portugal Greece Cyprus Malta * Varies by municipality Source: MISSOC (Jan 2012)

guaranteed minimum income in Greece the 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 mortgagescenario 1scenario 2scenario 3 single person single parent + one child couple couple + 1 child additional amount for any extra adult additional amount for any extra child

guaranteed minimum income incl. housing allowance with expenses for rent or mortgagescenario 1scenario 2scenario 3 single person single parent + one child couple couple + 1 child additional amount for any extra adult additional amount for any extra child

guaranteed minimum income benefit calculation: couple + 2 children with expenses for rent no GMIscenario 1scenario 2scenario 3 household income 744 from employment* 234 from social benefits 360 from rent 150 reference income 698 guaranteed income transfer * 20% of employment income is not taken into account

guaranteed minimum income participation (2012) scenario 1scenario 2scenario 3 number of recipients as % of population %6.5%9.6% 1. All household members are considered as recipients if one of them is in receipt 2. Population in 2012: inhabitants Source: EUROMOD (Version F6.43)

guaranteed minimum income cost (2012) scenario 1scenario 2scenario 3 in million € as % of GDP 1 1.2%0.4%0.7% 1. GDP in 2012: €193,7 billion Source: EUROMOD (Version F6.43)

guaranteed minimum income poverty effects (2012) no GMIscenario 1scenario 2scenario 3 poverty risk (60% of median) change (in pps) poverty risk (40% of median) change (in pps) poverty gap (60% of median) change (in pps) Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum income poverty risk estimates by household type (60% of median) no GMIscenario 1scenario 2scenario 3 general population single or couple (both below 65) single or couple (at least one over 65) couple with 1 or 2 children couple with 3+ children single parent families other household types Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum income poverty gap estimates by household type (60% of median) no GMIscenario 1scenario 2scenario 3 general population single or couple (both below 65) single or couple (at least one over 65) couple with 1 or 2 children couple with 3+ children single parent families other household types Source: EUROMOD (Version F6.43). Underlying dataset: EU-SILC 2007, adjusted for unemployment

guaranteed minimum income prospects (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 income prospects (2)  guaranteed minimum income on the spotlight  Spending Review: (further) massive fiscal consolidation  5% of GDP in % 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 income prospects (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!