Spain approves the Minimum Living Income. Part II

Spain approves the Minimum Living Income. Part II

The minimum life income (MLI) of Spain: objectives, characteristics, beneficiaries, quantities

 

The main objective of the MLI is: “to prevent the risk of poverty and social exclusion of people living alone or integrated into a unity of cohabitant, when they are in a vulnerability situation due to the lack of sufficient economic resources to cover their basic needs”.

 

The MLI it is considered a subjective right that guarantee a minimum level of wages to vulnerable people.

 

The beneficiaries are people over 25 and under 65, living alone or in cohabitation units. It also covers victims of sexual exploitation, battered women and women victims of gender violence.

 

The main requirement of access is to have “legal and effective residence in Spain or have had residence during the previous year”.

 

The "monthly amount of the minimum living income benefit payable to the individual beneficiary or to the cohabitation unit will be determined by the difference between the amount of the guaranteed income and the total income of all the beneficiaries or members of the cohabitation unit in the previous year".For the financial year 2020 the annual amount of guaranteed income for an individual beneficiary is 5,538 euros and 12,184 euros for four adults and one child. An increase scale will be applied to determine the amounts of the cohabitation units.

The MLI is born with an indefinite duration "while the reasons that gave rise to its concession subsist". It will be financed by Social Security.

 

The Minimum Life Income: justification and critical aspects.

 

Though it is too soon (RD is from 29/8/20) to value its impacts (number of beneficiaries, perks that it will receive, duration of the subsidies, connection with the job or formation market) it is possible to know specialist’s and academic opinions that can be consulted in the wide disposable bibliography.

 

There is a wide consensus to affirm that MLI is a powerful and necessary tool to rescuefrom the poverty and misery a great number of people and vulnerable homes which scarce from sufficient resources to attend its basic needs. The CoVid19 has worsen the social and economic situation of those communities. There is also consensus in that this can improve the territorial cohesion of Spain, what means to reduce the territorial disequilibrium of wages and inequalities, because the MLI will increase the levels of income of people living under the poverty line. Theorical, these guarantee a minimum life income of 5.538 euros/year to a person without children (462 euros/month) and 12.184 euros/year to four adults and 1 child (1.015 euros/month), assuming that if they receive less that that, this will compensate the difference. The expecting result are: more cohesion, less inequalities and less monetary poverty.

 

According to governmental estimations the MLI will benefit 2.3 million people and 850.000 homes in situation of poverty and extreme poverty; 1 million will go out from the extreme poverty and half a million will fall in the high poverty, which altogether will mean a historic conquer. The cost of the first year of the programme will be 3.000 million of euros.

 

When confronting these figures with reality, expectations are cooled both by insufficient demographic coverage and by the low budget allocation: we have already noted that the number of people at risk of poverty in Spain and in Andalusia was 10.0 million and 2.68 million respectively in 2018 and 3.2 million and 831,000 people in severe poverty. In the province of Seville alone, some commentators have estimated the number of people who could aspire to the MLI in Spain at 200,000. In the capital city of Seville there are some of the poorest neighbourhoods - with significant populations - in Spain. Are the 3 billion euros budgeted by the Central Government for the first year of MLI sufficient? The aforementioned 2017 AIReF Report, directed by Jose Luis Escrivá, currently Minister of Social Security, Inclusion and Migration (and head of MLI), estimated that the fiscal cost of the Popular Legislative Initiative in 2017 would be 7 billion euros and even 11 billion in the event of a serious and prolonged crisis. In 2018, the total cost of the minimum insertion income of the Autonomous Communities was, according to the Ministry of Health, 1,519 million euros, according to a very unequal distribution that, except in the Basque Country (the largest budget of an Autonomous Community), has had a significant impact on the reduction of poverty in the respective territories.

 

The arguments about the MLI in the long term are more divided

 

Among the most critics, we can find: negative effects on supply of jobs for the beneficiaries of MLI, negative effects in the underground economy, the call effect, budgetary effect, effect on the social programmes of other administrations.

 

Negative effects on the supply of jobs for the beneficiaries of the MLI

 

Some specialists maintain that social perks and labour insertion present a inverse relation: more incentives, less insertion. Finding a job reasonable well payed in neighbourhood with high tax od unemployment, it is not an easy task for the simple reason os the scarcity on supply of jobs and sometimes even inexistent. People have to emigrate if they want to work or wating for the MLI to pay part of their bills and sustenance. The unknown is to discover if the MLI stop or not the search of work and if the unemployment person accepts the job that the market or the Public Agencies of Colocation propose. It is obvious that these Agencies are to facilitate the search of job to the unemployment, bit its result are very few. The MLIcould be a good argument to improve them. Also, the professional Formation needs to revise its role on the job market. Boosting dual professional formation could be part of the solution.

 

Negative effects of the underground economy

 

The underground economy represents a high percentage of the GDP of the advanced countries (Spain: +/-18%) and the consequences are well known: reduction of tax revenues with the corresponding increase of public deficit and debt; reduction of social security revenues with negative consequences for the unemployed and social benefits. The MLI covers the difference between a low income/wage and the income of 462 euros/1,015 euros guaranteed by the program; it works, therefore, as a supplement. It could happen that workers with a low income but who are legal decide not to continue working or to move to the underground economy, either totally or partially.

 

Call effect

 

The call effect is something like a pandora’s box in which we can find everything, and also the attractive effect of perceiving a subsidy which you have legal right to possess.

 

Budgetary effect

 

The possible budgetary insufficiency (3 billion euros) to meet, by far, the objectives set with the MLI has been commented on above. Social Security will increase its deficit and, indirectly also, the chronic imbalances in the General State Budget.

 

Effects on social programmes of other administrations

 

It has already been mentioned that all Spanish regions and local councils have a complex mosaic of social programmes and, in particular, the regions have exclusive powers over their minimum integration income. The Spanish MLI provides for harmonisation and coordination mechanisms aimed at exchanging information and transparency. Some Autonomous Communities will have to assume additional costs to manage/collect the flood of requests from the State programme.

 

Purpose

 

The main purpose of the minimum living income of the State is to eradicate poverty from households and recipients whose incomes are below the risk of poverty lines.The objective of eliminating severe/extreme poverty seems to be more attainable. In both cases, it is a huge challenge that arises with a probably insufficient budget and in the context of a variety of minimum insertion incomes of the Autonomous Communities that are also underfunded and with modest impacts on poverty reduction. The main threat to minimum living income may be that its beneficiaries become disconnected from labour market insertion, which could lead to the "poverty trap", i.e. a situation in which poverty is maintained.

 

Alfonso Rodriguez Sanchez de Alva

Retired Professor at the University of Seville