Économie et Statistique n° 346-347 - The RMI: between redistribution and incentives
The Reservation Wage, Degressive Unemployment Benefit and Minimum Integration Income
Although the wages offered are not the only possible reason for refusing a job, a poorly paid job is harder to accept. The «reservation wage» concept explains this fact. A jobseeker's reservation wage, defined as the minimum wage below which he will refuse a job offer, plays an important role in leaving unemployment. Yet it is rare to find direct information on reservation wages. In France, there are only two INSEE surveys that ask jobseekers about the minimum hourly wage they would require to accept a job. Jobseekers receiving minimum integration income have a lower reservation wage than other jobseekers. Two-thirds of them would ask for at most the minimum wage to work, whereas two-thirds of the other jobseekers would ask for at least the minimum wage. Similarly, minimum integration income recipients who find a job accept much lower wages than other jobseekers. The reservation wage decreases with the length of the period of unemployment. Yet this decrease is limited, more so for minimum integration income recipients than for other jobseekers. Lastly, the effect of the length of unemployment on the reservation wage does not markedly differentiate jobseekers who find a job from those who remain unemployed. The former do not drop their reservation wage much more than the latter.