Poverty beats laziness in different ways // IMF sees no common ground in European minimum guaranteed income schemes

Economists from the International Monetary Fund (IMF) in their work on European social protection systems demonstrate that the idea of ​​a minimum guaranteed income (MIR), which has been spreading in EU political systems since 1990, is implemented in Europe without a single scenario and is extremely diverse. The point is not only in the different wealth of European countries and in different attitudes towards the idea of ​​political communities. Apparently, the nature of the problem of refusal from labor, provoked by the implementation of MHD, strongly depends on the national culture – and because of this, even in a Europe that is culturally unified from this point of view, it differs in each country. This apparently implies the impossibility of direct import of “European” MHD schemes to Russia, where this idea is gradually being adopted by the state.

The work of four IMF economists (David Coadi, Samir Jahan, Riki Matsumoto, and Baoping Zhen) “MHD Schemes in Europe: Landscape and Design”, published in a series of IMF preprints in June 2021, is formally purely descriptive: the authors set out to classify and describe the most common MHD schemes in the EU countries. In fact, everything is somewhat more complicated. MHD as an idea, expressed explicitly or implicitly, in post-war Europe almost always exists – when it comes to the fact that society through state institutions should in one way or another support financially households temporarily deprived of income (due to unemployment of one of the household members, illness , other circumstances beyond his control), and such institutions operate in European countries in the second half of the 20th century everywhere. The problem is that MHD as the main idea of ​​the “welfare state” can be implemented in different ways for different groups of the population, but the high “density of the safety net” leads to an exponential increase in the costs of its operation, including due to the effect of refusal to work when receiving “Substitute” income from society. Much of the work of Coady and his colleagues is devoted to a relatively new implementation of the idea of ​​MHD – support provided not on a categorical basis (all disabled people, all unemployed people with children, all cancer patients), but on the basis of need, taking into account the assets in the household.

Recall that the MHD is implicitly mentioned in the speeches of representatives of the social bloc of the Russian government since 2020 in unsettled terminology (for example, with the adjectives “universal”), while we are not talking about any parallels with the “unconditional basic income”: MHD – it is the principle that, ideally, every household that is below the poverty line for whatever reason should be the beneficiary of tax redistribution to reduce the risk of extreme poverty and its social effects.

The most significant conclusion of the IMF authors: even in Europe, from the Russian Federation that looks monolithic in terms of social policy, MHD is being implemented to varying degrees, and we are not talking only about the “old” EU members, in this capacity only Bulgaria can be distinguished, where the scheme does not apply. in fact, on the solution of large social problems and the real fight against poverty (although it costs 2.4% of GDP – more than, for example, Malta with its 1.5% of GDP or Portugal with 2.2%). There are four groups of European countries with a more or less similar implemented principle of MHD. The first is a simple scheme with minimal means testing: Belgium, Cyprus, Switzerland, Estonia, Italy, Iceland, Luxembourg, Netherlands, Norway, Sweden, Slovenia and Slovakia. The second group differs from the first in the large scale of restrictions. It includes Austria, Greece, Croatia, Hungary, Lithuania, Portugal and Serbia. Both groups do not claim full coverage of the income shortfall. The third group is characterized by the fact that it considers the state as the “last resort”. Germany, Great Britain, Poland, Latvia and Macedonia compensate for the lost income to the few who meet the conditions, but supplement this with “categorical” support that covers a significant part of the population. Finally, in the fourth group (Malta, France, Ireland, Romania), MHD is a very difficultly implemented idea that combines many approaches. It is impossible to find any correlation between the scale of expenditures on MHD and being in a group – for example, Denmark with its 7% of GDP spending on these purposes and Finland with 6.8% spend only 30% of means tested, the Netherlands (4.2% GDP) – about 60%, Portugal (2.2% of GDP) – 50%, Estonia (2.7% of GDP) – only 7.4%.

It is all the more difficult to find “common European” principles in the IMF’s assessments of the population’s response to the generosity of the state – the degree of reluctance of the population receiving benefits from society to work depends little on the design of the system (although the authors analyze all known schemes of the state’s struggle against this effect, on the gradual reduction of payments to analogs of the Russian “social contract” and payments tied to the occupation of a workplace) – and, apparently, is a derivative of the local culture, political and social situation. This, in any case, makes it impossible to directly import MHD schemes from Europe – the risks of making a mistake with the design of the system and stimulating a reduction in the labor force under the pretext of fighting poverty will always be high. It should be noted that the authors assess the European “safety net”, for all its comparative generosity, as limited: in general, the maximum transfers within the framework of the IHD in most EU countries are below 40% of the median income and are always obviously lower than the income from 40-hour work per week for the minimum rate.

Dmitry Butrin

Leave a Reply

Your email address will not be published. Required fields are marked *