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

Economie et Statistique
Paru le : 01/01/2002
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The Combined Effect of three Years of Reform on Unemployment Traps

Cyrille Hagneré et Alain Trannoy

The poor incentive for a supplementary benefits recipient (minimum integration income, lone parent allowance and specific solidarity allowance) to take a part-time job was unanimously criticised before the introduction of the Aubry law. This law combined with other measures (employment premium, reform of housing benefits, calculation of the community charge, etc.) to change the situation of the people concerned. Disposable income is now a growing function of hours worked, regardless of the forecasting period adopted. An analysis of typical scenarios shows, for example, that a single person earning the minimum wage in a full-time or part-time job keeps virtually all the resulting wage gains for one year. He still keeps approximately half if he is in a full-time job that continues after the first year. However, remaining in a part-time job for more than two years is not always encouraged since he keeps only one-fifth of the earned income obtained. The change to housing benefits, which passed by almost unnoticed, is the most important instrument in this revaluation of financial incentives to go back to work. The incentive to work part time in the short run and then full time in the long run, which formed a major feature of minimum integration income, is being supplanted by an ever-stronger incentive to work full time, regardless of the time period. The differences between recipients on different benefits schemes are narrowing considerably. In the short run, the unmarried individuals with the greatest incentive to go back to work are women with a child under three years old.

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