Economic Impact of a Minimum Income Guarantee: Analysis of economic theory and policy evidence - Executive Summary

Policy lessons from case study analysis

From the case study assessments, we can draw out the following seven policy lessons.

Minimum Income Guarantee schemes are effective at tackling deep poverty, but challenges exist around the impact on ‘shallower’ forms of poverty: This is largely a result of design challenges including setting appropriate payment levels, applying conditionality regimes, and supporting access to the labour market.

Work incentives for those who can work are important: A lack of sufficient work incentives can limit the impact of Minimum Income Guarantee schemes on overall poverty reduction. Inadequate work incentives may lead to benefits traps or distortions in the labour market that do not meet the needs of those who should benefit most.

Activation within a Minimum Income Guarantee should be understood as not just about labour market activation but broader social inclusion: Helping address issues around social inclusion – such as lack of language, housing challenges, or substance abuse issues – are as importance as helping people seek employment. Some countries emphasise social integration as a vital policy goal in its own terms alongside labour market activation.

Allowing a significant role for local institutions can improve the effectiveness of the Minimum Income Guarantee: While national governments set policy direction, local institutions play a significant role in delivering and administering Minimum Income Guarantee schemes. This allows for tailored support and with consistent delivery fosters trust between individuals and support services. Underdeveloped local networks administered by an overly centralised system can lead to policy failure – even in theoretically well-designed systems such as France.

Ensuring the Minimum Income Guarantee is effectively targeted can make a difference to success: Even if a Minimum Income Guarantee is intended as a more universal policy open to most people, it is still imperative that specific at-risk populations are kept in mind as the policy is designed. Pre-implementation assessments can help identify at-risk populations and optimise the rollout.

Success is contingent on the level of take-up: While strict eligibility and conditionality criteria can play a role in lowering take-up, it was also evident that a lack of strict requirements to individuals accessing support is also not a guarantee of high levels of take-up. Administrative barriers can affect take-up rates, requiring continual reform and adjustment to address these.

The economic climate a Minimum Income Guarantee is operating in should be considered: Favourable economic conditions can reinforce the work incentivising effects of Minimum Income Guarantees, while weak economic conditions may hinder their impact. Implementing a Minimum Income Guarantee should factor in how it can respond to the economic climate around implementation.