What are the advantages and disadvantages of the Minimum Living Income?

There are many doubts as to whether the economic policies of the States, among which the Minimum Vital Income stands out in this article, are sufficient to correct inequalities. For this reason, we ask ourselves: Would the Minimum Living Income help to reduce these inequalities? Would it be an effective measure?

One of the main objectives pursued by the economic policies of the different governments is to achieve a fairer distribution of wealth. This is where social transfers come into play.

However, it should be noted that the bulk of social transfers is made up of pension spending. All of this means putting aside groups that are especially vulnerable to major recessions, such as youth and family units.

Difference between Minimum Living Income and Universal Basic Income

It is here where the idea of ​​establishing, as part of the policies of the Welfare State, a Minimum Vital Income arises. Now, it is convenient to clarify the difference between Minimum Living Income and Universal Basic Income, since these concepts are often confused.

Thus, the Minimum Living Income is a social transfer intended for those people who suffer from a situation of special economic vulnerability. To do this, those who receive this aid must have a low income level and must be an active population (working or actively seeking employment), without forgetting another series of strict additional conditions that the beneficiaries must meet. To all this, it must be added that the IMV acts as a complement to the income obtained from work.

On the contrary, the Universal Basic Income would be available to all citizens. In this sense, the conditions to access the basic income are not as specific as in the case of the Minimum Living Income. In other words, any citizen could access the Universal Basic Income despite their economic level and their employment situation.

However, many will wonder: What effects does the implementation of a Minimum Living Income have? And what would be the consequences of a Universal Basic Income? What have been the different experiences in the world? Does it really help reduce inequalities? Does it contribute to eliminating poverty? Does it improve the socio-labor prospects of its beneficiaries?

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To do this, let’s look at some precedents in the world.

The Minimum Vital Income in Europe

There are many countries in Europe where different systems similar to the Minimum Living Income have been established. Thus, we find incomes that are granted unconditionally and incomes that allow combining income from work with the receipt of a minimum income. Although it is true that, in general, in order to receive the minimum income, it is essential to meet a series of requirements in terms of income level.

The Minimum Living Income in France

The French case makes it possible to receive the so-called Active Solidarity Income, while obtaining the corresponding income from work. It is worth mentioning that this income will only be accessible to people with very low income levels and who are over 25 years old.

The Minimum Living Income in Germany

In Germany, the great European economic power, there is a Minimum Subsistence Income that allows to meet the costs of accommodation and heating. To be able to benefit from this benefit, it is necessary to have worked in Germany, to live in the country, to have a low level of income and to have completed the unemployment benefit.

The Minimum Living Income in Austria

The Austrian system is very strict when it comes to accessing this type of minimum income. For this, it will be necessary to prove a low salary level and the amounts received from other benefits. Therefore, the amounts depend on the family and personal situation, without forgetting that this income can allow to cover the cost of accommodation and heating.

The Minimum Living Income in Finland

The Finnish experience is striking. Trying to draw conclusions about the introduction of a basic income, they granted benefits to 2,000 people regardless of their income. Although the stress situation of those who received this income improved, the effects were not clear when it came to getting a job. On the other hand, it must be appreciated that this basic income had a limited duration of two years. And the fact is that the Finnish experiment presents certain questions. What would the income earners have done after two years? Would it take away the incentive to search for a job?

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The protection systems in Eastern Europe are limited if we compare them with the Nordic countries or Western Europe. And it is that, generally, the benefits do not reach 50% of the minimum wage. Thus, in the Czech Republic a low level of income is required, the result of work or, at least, a firm desire to work, while in Poland it is enough to not reach a minimum threshold of need.

The Minimum Living Income in the UK

In the United Kingdom, the minimum income is articulated through the so-called Universal Credit. Thus, tax benefits, benefits for a house, support, among other advantages, are granted to those who receive low incomes and unemployment benefits among many others. It should be noted that the beneficiaries (people with low income levels) of these aids can combine it with the income they obtain, as a result of their respective work.

The Alaska experiment

In studying the impact of these transfers, it would be interesting to analyze what happened in Alaska. Thanks to the income from the oil industry, the entire population of Alaska can earn about $ 2,000 each year. In fact, this policy is nothing new, as it was implemented in 1982.

Regarding its effects, it must be taken into account that it has made it possible to reduce poverty. While it is a significant money transfer to Alaska citizens, $ 2,000 a year is not enough to get by. Therefore, it could be concluded that this help works as a complement that does not discourage the search for a job in this case.

A consequence that can be observed in Alaska, after the application of this measure, is a great importance of part-time work. In this sense, it could be deduced that this type of transfers has a negative influence on working time, promoting an increase in part-time working hours compared to full-time jobs.

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This increase in part-time employment is due to the lack of requirements to access this aid. Therefore, to avoid this kind of impact on work, it would be convenient to establish a series of access requirements in terms of income level, family and social situation.

Reflecting on the Minimum Living Income

There are several considerations that must be made about the Minimum Living Income. It is important to assess its effects on the distribution of wealth, whether it will improve the quality of life of those with low incomes, the cost it will entail for the public coffers and the problems that may arise in the management of these grants.

The establishment of a transfer as a complement to people with low incomes can contribute to the reduction of poverty, allowing them to lead a decent life. However, when implementing this type of measure, it is convenient to establish very clear requirements to be able to access the Minimum Living Income. It is important to allow the Minimum Living Income to be compatible with low-paying jobs. In this way, problems of the black economy will be avoided.

The management of this kind of transfers will mean that the Administration must mobilize a large amount of resources, since, in this type of aid, it is essential to have an important bureaucratic control and management apparatus.

Furthermore, the approval of a Minimum Living Income involves a large outlay of public resources. All of this implies an improvement in the welfare state, bringing with it an increase in public spending that will have to be covered with tax increases.

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