News

& Events

The social benefits of minimum income

Dec 7, 2023 | News

Over the last two years, the 4IM project, “Miskolc Shall Be a Place for Everyone,” has been taking steps to initiate change in the city’s social and employment services and subsidy structures. It aims to test an innovative integrated service package that can benefit the citizens of two disadvantaged neighbourhoods. This goal aligns with the EU’s active inclusion approach, outlined in Principle 14 of the European Pillar of Social Rights. This principle asserts that everyone without sufficient resources has the right to adequate minimum income benefits, ensuring a dignified life at all stages and effective access to enabling goods and services.

As stated by Valdis Dombrovskis, the EU’s Head of the Economy that Works for People, “Social protection systems contribute to reducing social inequalities and disparities… This is how we can combat poverty and social exclusion and assist more people in returning to work, particularly in challenging times.”

Poverty is not confined to the impoverished alone. It’s a complex issue that affects regions, countries, and even the entire continent. Recognising this, the European Union has long been addressing the challenges of social inclusion, social integration, poverty reduction, and more by providing guidance, proposals, and tools for Member States.

In Hungary, where the 4IM project is implemented, despite a steady increase in national income over the past few decades, this growth hasn’t uniformly improved the situation for all

. This is particularly evident in the north and east of the country where the proportion of impoverished people has increased rather than decreased.

In the two neighbourhoods involved in the 4IM project, an assessment is currently underway to aim to determine the feasibility of introducing a minimum income scheme and at addressing the specific needs of residents. The project’s long-term goal is to enhance the social inclusion and employability of these people.

Minimum income to fight poverty and exclusion

The concept of a minimum income scheme has gained significant traction worldwide as a means of addressing poverty and inequality.

The purpose of a minimum income scheme is to fill the gaps in a household’s budget to allow for low-income individuals to live decently. It is important to note that the requisite income level varies locally, regionally and nationally. Therefore, to launch the project on solid footing, it was agreed that as a first activity, an assessment of the area’s residents’ needs must be carried out

However, contrary to popular belief, poverty is not solely linked to income, It is a mix of factors. Therefore we refer rather to “income support” as a range of  measures meant to combat poverty. The key component of income support is a means-tested, non-contributory cash benefit. Its primary function is to guarantee access to essential public services. These services include fundamental necessities such as healthcare, as well as access to childcare, housing, energy, transport, and digital communication services.

The minimum income level is complemented by personalised assistance, which can be coupled with incentives to enter the labour market and other measures promoting social inclusion. The minimum income scheme plays a multifaceted role in enhancing social inclusion and employability. It serves not only as a social and societal instrument but also delivers tangible economic benefits.

Minimum income is not an unconditional basic income

Our task is to build an effective support system that supports European-level objectives and can be used locally. We need to find professional and institutional ways to help those who are marginalised find the way back into the labour market, so that they can contribute to poverty reduction by strengthening their self-sufficiency. This can be helped by the minimum income, which is not the same as the unconditional basic income that is commonly perceived by the general public. Indeed, a serious condition for a minimum income is the cooperation of those concerned with the institutional system. Without cooperation, there is no progress ” – said Andrea Varga, Deputy Mayor for Human Services, on behalf of the City of Miskolc, leader of the 4IM consortium.  

Therefore, minimum income differs from unconditional basic income, often used experimentally. The latter entails providing income support to those in need, without means testing or work-related conditions.

A well-known example of unconditional minimum income was tested in Helsinki, Finland: a two-year experiment called “Kela” in 2017. It provided a monthly unconditional basic income of €560 per month for two years to a group of 2,000 randomly selected unemployed individuals.

The results showed that the participants were not tempted to work substantially more. Most worked less and decided to pursue interests that made them happy, such as spending more time with their families, particularly young children, learning new skills, or practicing cultural or sports activities that would improve their general well-being. Although the experiment ended in 2019, it sparked international interest and discussions about the potential benefits of a universal basic income.

The minimum income scheme in Hungary and other European countries

In Hungary, local initiatives have already been taken to supplement the income of the means-tested part of the population in Budapest districts I and XIV. As a co-benefit of these limited-term programmes, the willingness to volunteer for social work increased among the stakeholders in District I during the Covid period, and the number of people turning to and cooperating with family support services in district XIV increased dramatically.

In September 2022, the European Commission published “The 2022 Minimum Income” (Volume I)”, which stated that the primary objective of the minimum income scheme is to provide a safety net for individuals and families at risk of poverty. While minimum income schemes are in place in all Member States, their adequacy varies considerably. This adequacy can be measured by comparing the income of beneficiaries with the national poverty threshold and with the income of a low-wage earner. According to the report, adequacy was highest in the Netherlands, Ireland, and Italy, and lowest in Hungary, Romania and Bulgaria. 

Hungary’s minimum income scheme eligibility criteria includes various factors such as income, assets, family composition, and employment status. To qualify for the scheme, applicants must demonstrate low income and assets below a certain threshold. Additionally, individuals facing vulnerabilities, such as single-parent households, persons with disabilities, and the elderly, may receive additional support. In Hungary, eligibility is reviewed regularly especially when the personal circumstances of the beneficiary change. 

In relation to engaging in employment, Hungary is one of the few countries in the EU where there is no possibility to continue receiving minimum income benefits once a recipient becomes employed. However, minimum income recipients may instead receive a separate in-work benefit once they take up work. The report emphasises the importance of effective implementation and administration to ensure the scheme’s success. The responsibility for implementing the minimum income scheme lies with the Hungarian government. Local municipalities play a vital role in determining eligibility and delivering the benefits. The administration of the scheme involves processes such as application processing, assessment, and periodic reviews to ensure continued eligibility. 

The report reveals that the scheme has contributed to a reduction in poverty rates in Hungary. However, challenges remain, including adequate funding, targeting the most vulnerable groups effectively, and facilitating smooth transitions into employment.

At the time of the report’s publishing, the EU Commission proposed the Council recommendation on minimum income, calling on member states to make sure they have adequate benefit schemes in place by 2030, coupled with labour market reintegration mechanisms. The recommendation asks member states to put in place more accessible application procedures and speed up the process.

Moreover, member states are obligated review annually the level of income support provided and adjust it to match the country’s economic situation. “The level of minimum income in a period of high inflation, if not adapted, will not protect against poverty,” Commissioner Schmit said, commenting on the current situation. The income support adjustment review needs to be flexible and consider cases of crisis.

Several cities in Europe have implemented minimum income schemes or similar social welfare programmes to address poverty; they provide a safety net for their residents. Below we offer some insights of different EU-funded initiatives implementing minimum income or similar schemes.

Barcelona, Spain

The city of Barcelona introduced the “B-MINCOME: Combining a guaranteed minimum income and active social policies in disadvantaged urban areas of Barcelona” pilot project in 2017. The project targeted low-income households in certain neighbourhoods, providing them with a guaranteed monthly income. The initiative aimed to alleviate poverty, promote social inclusion, and test the impact of the minimum income scheme on participants’ well-being.

The project received funding of 4.9 million euros from the European Union through the Urban Innovative Actions (UIA) programme. Barcelona City Council invested a total of 10.9 million euros in this project to combat poverty and social exclusion. In total, 952 family units from 10 neighbourhoods in the Eix Besòs area participated. In 84% of cases, the head of the family unit was a woman, and a total of 3,700 people were included. The B-MINCOME programme received recognition from the World Health Organization (WHO) as one of the most outstanding initiatives on the European continent to reduce inequalities and improve the health and well-being of society.

The project aimed to test the effectiveness (results achieved) and efficiency (relative to the cost) of an innovative and comprehensive policy that combined a monetary transfer scheme(the Municipal Inclusion Support), with four socio-economic inclusion policies in the areas of: 1) training and employment, 2) entrepreneurship, 3) housing, and 4) community participation. The experiment divided the households into four “modalities” of participation: conditional (participants receive cash, but must participate in certain social programs), unconditional (participants receive cash with no participation requirements), limited (the amount of cash received depends on the income earned), and non-limited (extra income has no bearing on the amount of cash received). There was also a control group of 383 households.

Results

The evaluations conducted at the end of the program confirm that B-MINCOME has significantly contributed to the reduction of severe material deprivation and food insecurity among participants. It has reduced financial uncertainty and the associated stress. The project generated positive results in that there was high community involvement of the and the participants’ perceptions of their neighbourhoods was improved.

The internally obtained results from the entity responsible for implementing the training and employment policy show a positive impact on labour market integration and personal satisfaction.

The project proved effective in improving the material conditions of households. Regarding efficiency (i.e.. cost-effectiveness), the 23-month time frame did not allow for definitive conclusions as such a short time-frame cannot measure the long-term effects. As regards efficiency, there here were significant cost differences depending on the type of policy invoked. This

Malmö, Sweden

From 2017 to 2019, the City of Malmö implemented the Entire Family (Hela Familjen) project with a total funding of EUR 3.09 million, including EUR 1.45 million from the European Social Fund (ESF). The project aimed to enhance families’ financial independence by providing education and employment opportunities for children, young people, and adults. This initiative built upon the success of the previous three-year-long Entire Family project, which had shown positive outcomes for families who had received long-term public welfare benefits. In 2019, Entire Family became an integral part of the regular social services provided by the City of Malmö, specifically the Department of Housing and Income Support. It primarily targeted parents who had been receiving welfare benefits for an extended period and were excluded from the labour market.

 The innovation in the Entire Family project lies in its comprehensive and coordinated approach. Instead of focusing solely on adults, case workers engaged with the entire family, considering their life situations and factors that hindered their self-sufficiency. They maintained frequent interactions with the family as a whole and with individual family members.

The project primarily used interviews, beginning with exploratory meetings to assess the family’s situation, such as the number of children, school attendance, housing, plans for financial self-reliance, health challenges, and more. Through close collaboration with the family and other stakeholders, needs were identified, and realistic plans were developed to assist parents in finding employment. The simultaneous focus on all family members and their unique needs, coupled with cooperation with the municipality’s health and care administration, ensured that each family member made progress towards greater self-sufficiency.

The holistic approach strengthened the entire family rather than just one individual. Maintaining this comprehensive perspective was made possible by assigning case workers a reduced caseload, typically around 30 cases each. This allowed them to dedicate more time and resources to each family.

Entire Family is overseen by the Department of Housing and Income Support of the City of Malmö, which also funds the project. It is led by a director responsible for the program’s implementation and development. The department employs project managers across the city’s five social service districts, responsible for continually enhancing services and guiding the work of the Entire Family operational teams. These teams work directly with the families.

Key Results and Benefits

The Department of Housing and Income Support continually monitored the project. Social workers reported monthly on several key performance indicators (KPIs):

  • Number of families no longer requiring income support after program participation.
  • Number of families partially self-sufficient after the program.
  • Number of meetings held between families and social workers, including those with additional services and other departments.

Steps taken by families toward self-sufficiency, such as language training, establishing contact with healthcare providers, organizing healthcare treatment, signing rental agreements, managing debt payments, organizing daycare, or completing high school.

During the ESF-funded phase of the Entire Family project from 2017 to 2019, 817 families were reached, surpassing the planned target of 600 by 36%. Among these families, 167 found employment, 30 began studies, and 187 achieved self-sufficiency after the programme, despite having received income support for over a decade. Additionally, children’s school performance improved. Of the families, 62% were single-parent households led by women. It was more common for women than men to attain self-sufficiency through education or employment. The final evaluation report suggested that approximately EUR 15,000 could be saved annually by Malmö municipality for each family that successfully transitioned from income support to financial self-sufficiency. Due to its success, the project has been integrated into the city services provided by Malmö.

Social Safety Net in Greece

Description of the programme

In 2012 the Greek government created a means-tested income support programme, for the first time combining income support (first pillar) with fostering social inclusion (second pillar) and labour activation measures (third pillar). While the labour activation measures are still a work in progress, various supplementary social services and benefits have been gradually offered to Social Security Income (SSI) beneficiaries to enhance their social inclusion.

The second pillar of this program was implemented both nationally and locally. It included tangible assistance from the Fund for European Aid to the Most Deprived (FEAD), adjusted rates for electricity and water, discounts on or exemptions from municipal taxes, access to counselling, and referrals to support structures like social grocery shops and pharmacies. Additionally, it provided free access to museums and more.

Results

An impact assessment conducted by the World Bank in January 2019 highlighted the strengths and innovative aspects of the Greek program. It also identified some specific weaknesses. The assessment revealed that the program’s budget was effectively allocated, with nearly 85% of funding reaching impoverished households. While the program did not have a significant impact on reducing poverty rates or inequality, it did notably decrease the severity of poverty.

There were also some challenges. Despite the eligibility threshold aligning closely with the poorest decile, less than 40% of the households in this group received the benefits. This indicated issues related to accessibility and adequacy. Furthermore, the limited implementation of the third pillar, focusing on labour activation measures, was seen as a major obstacle to achieving a more substantial overall impact.

In addition to these three case studies, other initiatives have been explored across Europe and worldwide with partial success:

France:

In France, the EASI-funded project, ‘A roof, a job’ (‘Un toit sur la tête, un job dans la poche’), in the Lyon region, is testing a minimum income scheme for young people aged 18 to 25. This project takes steps towards generational equality by providing innovative solutions that combine housing and employment programs for young people at risk of poverty and social exclusion.

The Netherlands:

In the Netherlands, the city of Utrecht initiated a pilot in 2017 known as the “Utrecht Basic Income Experiment” to examine the effects of a basic income on participants’ lives. The program has targeted welfare recipients, offering them a basic income to assess its impact on employment, well-being, and other factors. The results of this experiment are under close observation and study for potential future implementation. Another Dutch city, Nijmegen, has successfully implemented an anti-poverty strategy, the “Nijmegen Approach,” since the early 2000s. This approach combines measures like a minimum income scheme, debt relief programs, and employment support, resulting in positive outcomes including reduced poverty rates and improved well-being among its residents. Over time, this approach has evolved and expanded, incorporating various initiatives, policies, and programs to address poverty comprehensively.

Slovenia:

In Slovenia, the city of Ljubljana launched the “Active Living Income” project in 2020, which aimed to assist low-income households and individuals at risk of poverty. The project provided them with a regular income supplement to improve social inclusion, reduce inequality, and enhance the quality of life for vulnerable residents.

Germany, Hungary, and Slovakia:

The ‘Cooperate, Reach Out, Integrate Services (CRIS)’ project in Germany, Hungary, and Slovakia is developing a model for the integrated delivery of enabling services like housing and health services to support the social and labour market integration of vulnerable groups. Partners of the 4IM had the opportunity to visit this notable example in June 2023. The 2-day study visit included presentations on Germany’s employment and social security system, a walking tour of the nearby Nordend district, and a visit to the office of Caritas, one of the town council’s key partners.

Matthias Schulze-Boeing, CRIS Transnational coordinator and host of the visit, highlighted the importance of the minimum income. It has enabled individuals to cover the full cost of housing and has provided a livelihood wage, although on a very low scale. Therefore, there should always be an incentive to seek employment and earn more money. Despite the positive results, there is still room for improvement in integrating these different services in a coordinated manner, especially for the most vulnerable, to enhance effectiveness and efficiency.

In conclusion, the article highlights the diverse approaches and efforts across Europe aimed at addressing poverty, social inclusion, and minimum income schemes. These initiatives, ranging from Spain to Sweden, demonstrate the multifaceted nature of poverty reduction and the importance of targeted interventions. While each programme has its unique strengths and challenges, they collectively emphasise the vital role minimum income schemes play in providing a safety net for individuals and families at risk of poverty.

The European Union’s active inclusion approach, as outlined in the European Pillar of Social Rights, underscores the right to adequate minimum income benefits for all, promoting dignified lives and access to essential goods and services. The continued commitment to enhancing these schemes and promoting social inclusion is a testament to the shared goal of reducing inequalities and improving the well-being of society’s most vulnerable members.