Four EUROMOD working papers

The Institute for Social and Economic Research at the University of Essex has published four EUROMOD working papers relevant to the Citizen’s Basic Income Debate.

1. Diego Collado has written Financial work incentives and the long-term unemployed: The case of Belgium.

Although many of the household incomes of long-term unemployed (LTU) people in Belgium are below the at-risk-of-poverty threshold, their potential in-work incomes may limit the room for increasing their often inadequate out-of-work benefits. The reason is that in the presence of substitution effects, changes in the difference between the incomes obtained when working and not working may affect the likelihood of taking up work. To study whether this is the case, we analysed the effect of changes in participation tax-rates (PTRs) on the likelihood of transitioning from long-term unemployment to more than half a year of employment during the seven two-year episodes that took place between 2005 and 2012. PTRs operationalise substitution incentives by measuring the proportion of household earnings taken in (effective) tax and withdrawn benefits when a household member moves from unemployment to employment. We found that a 10 percentage point increase in the PTR (e.g. due to an equivalent decrease in replacement rates or increase in tax rates) decreased the likelihood of transitioning by around four percentage points. This effect is sizable taking into account that the baseline probability of taking up work for more than half a year was nine per cent (it was 13 per cent when including transitions to six or less months). (p.24)

The paper does not find a similarly significant effect for marginal effective tax rates (METRs):  the total withdrawal rate due to income taxation and the withdrawal of benefits for individuals in employment.

2. Miko Tammik has written Baseline results from the EU28 EUROMOD: 2014-2017.

The research finds that of all the EU countries the UK has the highest proportion of METRs due to the benefits system (figure 4 on p.38 and table 8 on p.39).

3. James Browne and Herwig Immervoll have written Mechanics of replacing benefit systems with a basic income: comparative results from a microsimulation approach.

This is a longer description of the research behind the OECD paper, Basic Income as a policy option: Can it add up? The Basic Income scheme tested in both the OECD paper and the EUROMOD working paper abolishes most means-tested benefits, rather than retaining them and recalculating them, and finds some disadvantages of doing that. To read our review of the OECD paper, click here. A similar critique would apply to the EUROMOD working paper.

4. To read updated microsimulation research on an illustrative revenue neutral Citizen’s Basic Income scheme that leaves the means-tested benefits system in place, and that reduces inequality, reduces poverty, avoids significant losses for low-income households, takes a lot of households off means-tested benefits, and brings a significant number of households within striking distance of coming off means-tested benefits, click here.