Économie et Statistique n° 346-347 - The RMI: between redistribution and incentives

Economie et Statistique
Paru le : 01/01/2002
Consulter

Minimum Integration Income and Earned Income: an Evaluation of the Financial Gains of Employment

Marc Gurgand et David Margolis

The disposable income of households on minimum integration income is compared with their long-run disposable income if one of the members were to make his potential wage in January 1998. To this end, we estimate the structure of monthly wages that could be offered to minimum integration income recipients if they had a job. The distributions of potential monetary gains are then described and broken down for households with different characteristics (these gains do not take account of opportunity costs such as child minding, transport costs, etc.) The estimates and simulations are based on a representative survey of minimum integration income recipients in December 1996. The wages observed in this survey are very low, due mainly to part-time work. This observation also holds true for the men. The wage distribution suggests that three-quarters of the households would gain financially from having a job, with the median increase in income being approximately 202 euros. However, there are many very small gains. Moreover, less than half of the lone mothers would see their income rise. Allocating a wage to both members of the couples shows that 96% of this household category would gain from working on these terms. Since the wage distribution observed for this population is highly atypical, we allocate it the wage structure observed for all wage earners with the same objective characteristics in the 1998 Employment survey. This is tantamount to considering that minimum integration income recipients' unobservable characteristics are not systematically different to the rest of the population, which is a lofty assumption. The long-term income of nine in ten households on minimum integration income would therefore rise (and the median would increase to 433 euros). Lone mothers remain in the worst position in terms of monetary gains.

Economie et Statistique
No 346-347
Paru le : 01/01/2002