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

Recommendations

Bringing together the findings, there are a number of overarching areas for the design of a Minimum Income Guarantee in Scotland to consider:

Setting appropriate targets to monitor the Minimum Income Guarantee’s performance: The introduction of a Minimum Income Guarantee will play a critical role in supporting the Child Poverty Act, which sets out targets to reduce the number of children experiencing the effects of poverty by 2030. When setting further targets for a Scottish Minimum Income Guarantee, it would be beneficial to include objectives focused clearly on deep poverty and on the broader impacts on lived experience that may not be captured in overall rates of poverty in Scotland reducing. In addition, it is important to be mindful of the potential to create ‘poverty traps’ given the experiences in other countries.

The importance of a multifaceted approach to delivering a Minimum Income Guarantee: There is a high degree of uncertainty around whether a Minimum Income Guarantee that only makes use of a single policy lever can lead to the desired outcomes. The case of Malta clearly demonstrates that while one aspect of a Minimum Income Guarantee can have a high level of impact, it often requires the support of other reforms. A blended approach can provide strong policy certainty and make the policy less open to being politicised. A multifaceted approach to implementing a Minimum Income Guarantee allows for it to be monitored and evaluated in terms of which of the various policy areas are having the most impact. This will enable policymakers to more accurately focus future reform and adaption, as needed.

Placing a flexible approach to conditionality at the heart of the Minimum Income Guarantee: For those who can work, it is important that a degree of conditionality and work incentivisation is present within the Minimum Income Guarantee’s design. However, taking a ‘work first’ approach can have negative consequences for individuals who need wider social support to allow them to effectively access the labour market. A flexible approach should be taken to conditionality that only applies work search conditions following a thorough assessment of an individual’s wider social circumstances and prioritises addressing these before job search activity is required. This makes social inclusion activation and labour market activation more tightly integrated as a matter of policy design.

Ensuring the Minimum Income Guarantee recognises and financially supports groups that are currently disadvantaged: A Minimum Income Guarantee has the important role of supporting people to undertake roles (e.g. unpaid carer) that provide social and public good and more accurately compensates them. These roles are mostly carried out by women, and the economic value of this work has frequently been undervalued – for example not being captured in key economic indicators such as GDP. The introduction of a Minimum Income Guarantee would therefore recognise the economic value of these roles with adequate financial renumerations. Here, certain target groups would benefit from no conditionality – in recognition that a Minimum Income Guarantee better supports these individuals in undertaking that role rather than attempting to move them into the ‘formal’ labour market. The Spanish IMV has taken this approach to those living in deep poverty, but given the Scottish Minimum Income Guarantee will be implemented with a higher threshold this same approach can be applied in a more targeted way to specifically disadvantaged groups.

Considering the broader economic climate as a Minimum Income Guarantee is introduced: The economic climate plays a significant role in determining a Minimum Income Guarantee’s success. The latest economic insights from the Scottish Government suggests that there is fragility and downside risks in Scotland’s labour market in terms of permanent job demand, staff shortages and growth in earnings. A Minimum Income Guarantee can play a key role in acting as a corrective to these concerns, but at the same time should be conscious of the impact this context can have on a Minimum Income Guarantee’s potential success. On the other hand, while favourable macroeconomic conditions can accelerate the impact of Minimum Income Guarantee-type policies (such as in Malta) this is by no means a guarantee of success. Ultimately, it will be difficult for a Minimum Income Guarantee to support people into work if there are limited work opportunities.