Économie et Statistique n° 429-430 - Low wages and labour market

Economie et Statistique
Paru le : 26/08/2010

Local Welfare Assistance, “Active Solidarity Benefit” (Revenu de Solidarité Active: RSA), and Gains from Return to Employment

Denis Anne et Yannick L’Horty

Taking local welfare assistance into account can significantly modify assessments of the impact of social transfers to low-income households. Thanks to an inventory of local benefits and/or benefits offered outside the basic legislative provisions in 13 French cities including Paris, Lyon, and Marseille in 2007, we can measure potential gains from return to employment for recipients of basic social benefits (“Minimum Guaranteed Income” [RMI] and “Single-Parent Allowance” [API]). A widespread effect of benefit-eligibility mechanisms and brackets is that persons in the lowest wage group may find themselves worse off if they are employed. The many reforms in national and “legally guaranteed” benefits in the past ten years—most notably the changes in the earned income allowance— have not sufficed to ensure that the return to employment generates gains for recipients of basic social benefits. In most localities and for most family configurations, a half-time job paid at the minimum wage (SMIC) entails an earnings loss by comparison with a situation where welfare benefits are the only source of income. Similarly, a full-time job does not always raise earnings for its holder. The positive effects of the reforms have been offset by those of other measures such as the generalization of transport allowances distributed by regional authorities, the introduction of “social” (i.e., subsidized) telephone and electricity tariffs, and exemption from the television licence fee. While the earnings-matching mechanism (intéressement) allows RMI recipients to compensate these effects, it is only a provisional arrangement that does not apply to all family configurations or in all localities. In the second part of our study, we simulate the effects of the implementation of the “Active Solidarity Benefit” (Revenu de Solidarité Active: RSA) as a substitute for the RMI and API. The RSA provides an incentive for returning to employment in nearly all cities and family configurations. The RM

Economie et Statistique
No 429-430
Paru le : 20/08/2010