Developments in minimum income benefits levels in Europe

Abstract

This paper examines changes over time in minimum income benefit levels and their effects on the risk of poverty, as well as on unemployment (or poverty) traps. The analysis is carried out for different household types (single person, single parent with two children, couple, and couple with two children), during and after the Great Recession, in EU member states as well as the UK, Iceland, Switzerland and Norway. We use data from two sources, from the CSB Minimum Income Protection Indicators database (CSB-MIPI) based on the Hypothetical Household Tool (HHoT) of EUROMOD and from TaxBEN, the OECD tax-benefit simulation model.
We find - across all household types - that the guaranteed minimum income of out-of-work households does not reach the 60% national poverty threshold in almost any European country. Countries with a guaranteed minimum income below the 40% threshold are mostly Central, Eastern and Southern European ones. The trends over time for guaranteed minimum income benefits show a decline in relative benefit levels for most countries. The effect of the Great Recession is not really detectable in most European countries. Rather, changes around 2009-2013 seem to constitute a part of an overall trend of decline in benefit levels which already started before the crisis, and which might be related to the policies implemented in the social investment era.
Based on the CSB-MIPI data, in the aftermaths of the crisis, we find a general growth in minimum wage, net disposable income and financial incentive levels. When it comes to households without children, disposable income on social assistance and the welfare efforts were stagnating in most countries. For households with children, however, both social assistance and welfare efforts increased in several countries.
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