Basic Concept of Minimum Income Support

OF MINIMUM INCOME SUPPORT

Unemployment and sickness benefits are supposed to be only a temporary aid with a limited duration. Once the maximum length has been reached, the benefit is exhausted and no further payments can be received. If at this point a former recipient is still jobless or unfit for work, she will be left without financial support unless another type of benefit steps in to prevent a total loss of income. This benefit is usually referred to as social as-sistance or, more generally, minimum income support.

Its founding principle and governing rules differ funda-mentally from insurance based benefits.

Immervoll (2010) identifies two defining criteria both of which must be satisfied by any given cash trans-fer scheme in order to be classified as minimum income.

Most importantly, it has to be needs-based, i.e. eligible are only people lacking access to any other sources of income, whereas insurance-based benefits are available to everyone who has earned an entitlement through pre-vious contributions, no matter whether or not any other income exists. Neither does the definition encompass any benefit that is targeted to specific groups without being needs-based (such as child benefits, orphans’ or widows’ pensions). The second criterion is that mini-mum income must be a replacement or supplement to income from work. Allowances to people beyond work-ing age (e.g. minimum retirement pensions) are thus excluded, as is support to people unable to work (e.g.

disability pensions). It is important to note in this con-text that many people, although de facto they are are unfit to work, are not officially recognised as disabled since their health status is in a midway condition nei-ther bad enough to meet the disability standards nor good enough to fully participate in employment. Such people, despite their delicate health, have nonetheless to rely on minimum income support. The second defining criterion is thus necessarily blurry to a certain degree.

Minimum incomes can be handed out in various forms and can both comprise benefits in kind and in cash. Often, there is a magnitude of various assistance schemes coexisting, all of which covering distinct areas of need such as housing benefits or subsidies to heating costs. Unlike insurance-based benefits, basic incomes are always funded out of global tax revenue and can typ-ically be received without temporal limit. All countries in this study operate some kind of general social assis-tance programme, with Italy being the only exception.

The right to social assistance emerges from the simple fact that one is part of a society (Marshall/Bot-tomore 1992: 8). Requested in order to be allowed to obtain social assistance is merely «...to live the life of a good citizen, giving such service as one can to promote

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the welfare of the community» (Marshall/Bottomore 1992: 26). The basic principle guiding this statement is that recipients are not to take undue advantage of their fellow citizens, but have to abide to the general rules and requirements of the society they live in. What these rules and requirements look like in practice and how draconically they are enforced, varies across countries, yet there is large agreement in that being able to fend for oneself without having to rely on public support is a core value anyone capable of work should try to comply with. Minimum income support, as it exists today, is hence mostly tied to the obligation to make credible at-tempts to abandon the current status by actively seeking employment (Immervoll 2010: 35–38).³

This obligation necessarily induces moral haz-ard. As with unemployment and sickness benefits, the more leisure is valued and the less labour, the higher are recipients’ incentives to put insufficient effort into job search, even more so as social assistance is typically unlimited in time (Pellizzari 2006, Coe/Snower 1997).

To reduce moral hazard, minimum incomes normal-ly come with two strings attached whose objective it is to increase work incentives without compromising the main purpose of income maintenance (Immervoll 2010: 29–31): first, all basic incomes are dependent on a means test, i.e. they can only be received if there are no other sources of income including savings. Second, in most countries social assistance is significantly lower than insurance-based benefits to offset the detrimental

3 This is in stark contrast to Van Parij’s (1997) proposal of an unconditional basic income which can be received even without any willingness to work. He argues that a just society must remove any obligations to work in order to achieve ‹real freedom› for all individuals to do whatever one wants to do.

impact of infinite payments. Additionally, more or less the same behavioural obligations apply as to unemploy-ment benefits. For instance, numerous countries have introduced work duties, either on public or on private positions, to strengthen job seekers’ attachment to the labour market and as a test of their willingness to work.

Social assistance recipients are also often required to re-port regularly on their job search and the steps they have undertaken to find employment. If they refuse to look for jobs or turn down suitable offers, sanctions can be imposed, mostly by suspending or curtailing payments.

The state can also try to enhance recipients’ appeal to employers by offering mandatory training courses.

In combination, these measures render minimum income support–for people able to work–less generous and more restrictive than insurance-based benefits.

This is deemed necessary in order to legitimise it to-wards tax payers, who are carefully watching that their money is handed out only to people considered deserv-ing, and to contain outlays of the public purse. Ideally, social assistance should not serve as a mere safety net for those uncovered by unemployment and sickness benefits, but as a trampoline catapulting people back into employment. With regard to atypical employees, minimum incomes play a pivotal role, since a signifi-cant share of non-standard workers will regularly fail to qualify for insurance-based benefits and has to rely on social assistance instead. This means part-time and fixed term employees find themselves in a less favour-able position compared to their standard peers, not only in terms of remuneration and tenure, but also with respect to benefit entitlements, as they can expect to receive smaller amounts and to be confronted with harsher conditions.