Transcript Diapositiva 1

The pro-poor impact of an in-work benefit on low
income earners in Spain
European Meeting of the International Microsimulation Association,
Dublin, May 17-19 2012
María Milagros Paniagua
Luis Ayala
1. Introduction
2. In-work benefits
1. Definition
2. Previous experiences
3. Methodology
1. Model
2. Data
3. Simulation
4. Measurement
4. Conclusions
1. Introduction
 Spain is one of the European countries with a higher proportion of lowincome workers 25,000.00
20,000.00
15,000.00
European Union (27 countries)
European Union (15 countries)
Euro area (15 countries)
10,000.00
Spain
5,000.00
0.00
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Statistics database on line. Earnings (labour market)
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
1. Introduction
Tax-benefit system and government budget
Total general
government revenue
% of GDP
Social
Social
Total tax receipts Total tax receipts
Social benefits
Social
Total general
protection
%
protection
%
% of GDP (sin
% of GDP con
(other than social protection
government
of
GDP
of
GDP
impuestos s/ el
impuestos s/ el
transfers in kind) % % of GDP
expenditure % of GDP
(Prestaciones (Prestaciones
(TOTAL)
capital)
capital)
of GDP
dinerarias)
en especie)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
2005
39,7
36,32
36,8
38,44
11,61
20,07
13,00
7,07
2006
40,72
37,19
37,68
38,35
11,45
19,98
12,82
7,16
2007
41,13
37,58
38,08
39,21
11,65
20,17
12,91
7,26
2008
36,96
33,67
34,12
41,45
12,56
21,62
13,83
7,79
2009
35,09
31,84
32,24
46,26
14,67
24,64
16,16
8,48
2010
36,23
33,15
33,54
45,58
15,31
--
 Trade-off between out-of-work and IN-WORK support
 Can in-work benefits help the Spanish low income earners
be better off?
2. In-work benefits
1. Definition
 Employment conditional benefits
 Dependent children also considered
 Aim at low income families – low wage earners
 Target: increase labour supply and redistribute income
towards low income families (poverty reduction)
 Different ways of designing IWBs – depending on the target group
2. In-work benefits
1. Definition
 According to Saez (2002) the optimal IWB has the following form:
2. In-work benefits
2. Previous experiences
 Long tradition in Anglo-saxon countries
 Other OECD countries start to implement IWB
 Spain has little history regarding IWBs and we want to apply the
experience of US and UK
 Implementation of an IWB similar to the EITC in terms of
design and for same individuals as the Spanish working
mother tax credit (child age requirements enlarge to 16 years
of age)
3. Methodology: model and data
 EUROMOD v4.26 as the microsimulation tool to calculate disposable
income, before and after the new in-work benefit.
 Data from EU_SILC 2006 (income from 2005)
3. Methodology: simulation
 New biw_s calculated for parents (female or male without partner) with
children under 16 with positive income from work (employee or selfemployed)
150
100
150
400
450
3. Methodology: results
Not many changes in terms of poverty reduction. What if we analyse severe poverty?
Before IWB
After IWB
GE(2) (all values)
0,17131
0,17076
Gini (all values)
0,30013
0,29954
p90/p10 (all values)
4,233
4,203
p90/p50 (all values)
1,9
1,9
p50/p10 (all values)
2,227171492
2,212389381
A(0,5) (positive values)
0,07458
0,07416
A(1) (positive values)
0,15512
0,1539
A(2) (positive values)
0,54988
0,54754
Poverty line
558,13
558,13
At-risk-of poverty rate (FGT 0)
0,1947
0,194408
At-risk-of poverty rate (FGT 1)
0,060573
0,059821
3. Methodology: results
Better results
60% median
Before IWB
30% median
After IWB
558,13
Before IWB
279,07
After IWB
Poverty line
558,13
279,07
At-risk-of poverty rate (FGT 0)
0,1947
0,194408 -0,149974319
0,038076
0,036958 -2,936232798
At-risk-of poverty rate (FGT 1)
0,060573
0,059821 -1,241477226
0,018452
0,01769 -4,129633644
3. Methodology: results
Gainers by income decile
350000
300000
250000
200000
150000
100000
50000
0
1
2
3
4
5
6
Gainers by income decile
7
8
9
10
3. Methodology: results
Gainers by hh type
300000
250000
200000
150000
100000
50000
0
Gainers by hh type
3. Methodology: results
Increment of income (%) by decile
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1
2
3
4
5
6
7
Increment of income (%) by decile
8
9
10
3. Methodology: results
Differences between income percentiles (percentil after reform percentil before reform)
6
5
4
3
2
1
0
d1 d4 d7 d10 d13 d16 d19 d22 d25 d28 d31 d34 d37 d40 d43 d46 d49 d52 d55 d58 d61 d64 d67 d70 d73 d76 d79 d82 d85 d88 d91 d94 d97
Differences between income percentiles (percentil after reform - percentil before reform)
3. Methodology: results
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1
2
3
recipients of in-work benefit by income decile
4
5
6
7
recipients of working mother tax credit by income decile
8
9
10
recipients of both by income decile
4. Conclusions
 The new benefit apparently doesn’t have high distributive effects BUT
can be very progressive within the first income decile.
 When benefits are means-tested, low-income families are the most
favoured by the reform.
 The cost of the program is 182 million euros – if severe poverty is
alleviated it can be worthwhile.
 Will this new IWB encourage low-income earners to work?
Thank you for attending this session.
Comments are welcome !
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