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

Methodology and approach

The primary research method for analysing the economic theory and the existing policy evidence was a desk-based review of existing literature.

In order to locate all the necessary sources to complete the evidence review, we took a systematic review approach to accessible published sources, prioritising: more recent publications; reports authored or commissioned by governments or international organisations; academic reports published by leading experts in the field and in major journals; robust quantitative evaluations; and high-quality qualitative assessments. We also used bibliographies from the most relevant sources as a reference point for other additional sources.

Taking this approach to the evidence review had the benefit of allowing us to have sight of a large number of initial sources that met a pre-set search criteria, while our assessment criteria ensured we only reviewed the most relevant and highest-quality evidence, mitigating the risks of both a potential oversized and poor sample.

Once sources were located, they were reviewed to identify the presence of key words, themes and concepts within the sources in line with the following research questions:

• What does economic theory tell us about the expected economic impacts of a Minimum Income Guarantee policy (e.g. on economic performance metrics at the micro or macro level)?
• What types of Minimum Income Guarantee policy have been implemented elsewhere?
• What forms of Market Failure (e.g. to reduce inequality) have similar types of policies implemented in practice elsewhere sought to address?
• Who did these policies target, over what time frame and scale of delivery?
• To what extent have these policies been successful in addressing their aims?
• What evidence is available of measures that demonstrate this success?
• What economic impacts were observed at a macro level (e.g. on overall unemployment, inflation, GDP, etc.)?
• What evidence is available of unintended negative consequences on individuals or the economy from these types of policies? Including assessment of mistakes made/lessons learned from previous policies.
• Have these types of policies delivered value for money to taxpayers?
• Have these policies proved sustainable over time? Do they have a limited shelf life or evidence of diminishing impact?

Using this assessment of economic theory and evaluations of similar policies, combined with the potential design of a Minimum Income Guarantee delivery in Scotland, have the implications for Scotland's economy on delivery of a Minimum Income Guarantee been considered? Summaries of key findings in line with these key research questions were systematically captured in a reading matrix.

Approach to economic theory

For the economic theory literature, we assessed around 30 sources that included evidence from academics, research consultancies, third-sector organisations and international organisations. What became apparent in our process of locating sources is that much of the theoretical literature is more heavily focused on assessing the impacts of introducing a Universal Basic Income-style income guarantee. As a result, we have had to infer where there is similarity and comparability to a Minimum Income Guarantee-type policy.

In our assessment of the sources, we recorded findings in six key areas:

• Market/policy ‘failures’;
• Groups targeted;
• Expected microeconomic impacts;
• Expected macroeconomic impacts;
• Expected wellbeing impacts; and
• Expected impacts on a Just Transition to Net Zero.

Approach to reviewing existing policy implementation

For the reviews of existing policy, we first reviewed how academic research and international organisations had categorised and grouped Minimum Income Guarantee-type policies in order to create our own typology model based on shared characteristics and common country groupings. From this, we selected a series of countries that are exemplar or novel approaches within a Minimum Income Guarantee typology grouping to conduct a deep-dive case study analysis.

The assessment of each case study is based upon two complementing methods:

• A desk-based review of accessible (English language) evaluations of the Minimum Income Guarantee-type scheme. We primarily consulted evaluations conducted by the Government department responsible for administering the policy, other public bodies, government-commissioned independent studies, and academic assessments. These sources were assessed for: 1) key policy design and implementation considerations (including cost and funding); 2) the social and economic impact of the scheme; and 3) evaluations of the scheme in terms of success against aims, anticipated/unexpected consequences and lessons learned.
• Semi-structured interviews with civil servants in six of the eight case study countries.^[7] These short interviews focused on understanding issues around the design, implementation and monitoring, and evaluation of these policies that may not have been formally reported in published documents. They also discussed any major policy developments not captured within the literature we reviewed, as well as prospective future reforms. A thematic analysis of the interview notes was carried out, drawing out the key insights that supplement the desk-based policy evaluations.