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The main objective of this research is to assess public policies so as to better understand their impact on society and thus help to improve policy-decision making and make better use of public resources.
Chapter 1 assesses the impact of a family-friendly policy implemented in Spain in 1999. It was aimed at granting parents the right to reduce their working hours with an equivalent wage reduction in order to enable parents to afford both to work and to take care of their children. Furthermore, users of the law enjoy greater protection against dismissal than other workers, to avoid layoffs caused by the use of the law. The study obtains several findings: First, the law has increased the probability of part-time working for eligible mothers by around 18%. Second, fathers are not observed to be using the working reduction. Third, based on these first two results, employers have behaved strategically in the sense of offering fewer indefinite contracts to potential users of the law, in this case women of fertile age. Finally, we test the view that eligible workers have used the law during the recent recession mainly to protect themselves against dismissal. The last result shows that the Great Recession reduced the likelihood of resorting to the law by more than 13%, which is not consistent with the aforesaid contention.
From a policy point of view, it can be concluded that the implementation of a well-intentioned family-friendly policy, which in principle is available to both fathers and mothers, may have perverse effects if only a sub-group of workers -in this particular case mothers- makes use of it, given their traditionally greater role in childcare issues. The results obtained highlight the importance of assessing policies, as this is the only way to determine their causal effects on society. As shown, the impact of public policies is sometimes unexpected. This knowledge is essential in the design of future policies.
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Chapter Two assesses the impact of a last resource scheme: The Basque Minimum Income Scheme. The first aim of this study is to measure the extent to which this policy has reduced poverty in the Basque Country, as that is its main objective. The second objective is to quantify the effectiveness and efficiency of the scheme, which is essential with such a costly public policy.
Although poverty is understood in terms of a certain minimum standard of living given the necessities of society at a point in time, there no single threshold that establishes who is poor or not. The literature commonly uses the 60% (poverty line) or the 40% (extreme poverty line) of the median equivalent income in the society. The Basque legislation uses a different threshold, which is lower than the extreme poverty line as per the standard in the literature for 2/3 of MIS recipients and lower than the poverty line in all cases.
Using the FGT family of indexes the impact of the MIS on several dimensions of poverty (incidence, intensity, and inequality) and the poverty lines presented is measured. The results show that the scheme notably reduces poverty for all the indicators presented, especially for the extreme poverty line and the line established in the legislation. In addition, the MIS is a very pro-poor policy as it works well in helping those who are far below the poverty line. However, poverty will never be eradicated as long as there are households that do not meet the requirements for receiving MIS.
Beckerman’s Model is used to analyze the effectiveness and efficiency of the policy. This analysis seeks to determine whether the MIS is properly assigned according to the legislation or whether the same amount distributed differently would reduce poverty by more. The results determine that in terms of effectiveness, i.e. the ability to achieve a desired end, the MIS is very close to eradicating poverty for its recipients. However, when “waste of resources” is taken into account,
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i.e. in terms of efficiency, there is considerable room for improvement. Indeed, the amount of money spent is actually 12 million Euros higher than would be required to eradicate poverty.
In light of the results of these analyses, Chapter 2 ends with a proposal for improvements and presents an alternative MIS design. The recommendation is in line with an international standard of poverty: It uses the OECD modified scale starting from 88% of the minimum wage (the current amount for a one-adult household). This threshold is more egalitarian than the current one as the equivalent income is the same for all MIS recipients, independently of the type of household where they live. Furthermore, it is also recommended that the exact amount needed to reach the poverty limit be paid out, so as to achieve full effectiveness and efficiency. The proposed MIS provides wider coverage and monthly savings of €4.76 million.
Chapter 3 completes this PhD dissertation by assessing the impact of the said Basque MIS on the labor market. If MIS recipients stop actively looking for work, the presence of the policy could cause poverty to become chronic, so the beneficiaries would not reenter employment and would therefore never exit the scheme.
Labor market literature finds that passive policies commonly cause an undesired delay in entry into employment. However, the Basque MIS requires all unemployed recipients who are able to work to be available to do so. In addition, they must participate in activities that increase their employability. The first aim of this chapter is to assess whether the MIS causes the mentioned delay effect. The second objective is to test whether the active policies directed at MIS recipients work.
This study focuses on MIS recipients registered as unemployed. Given the characteristics of a last resource scheme, its recipients are mainly individuals with low education levels and tend to be very long-term
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unemployed. Indeed, their job-finding rate is 3%, while the figure for non-recipients is 9%. The first empirical exercise consists of discerning whether this difference is due to differences in the composition of the unemployed or whether the MIS delays entry into the labor market. Using an Inverse Probability Weighting strategy that enables differences in composition between treated and control groups to be eliminated, the results confirm that on average the MIS does not delay entry into employment. However, the impact differs if the analysis is conducted by population sub-groups. The undesired delay effect prevails among less educated and younger recipients. By contrast the MIS accelerates entry into employment for medium and highly educated unemployed people and for the over 45s.
The last analysis in Chapter 3 examines the impact of activation policies on MIS recipients. This analysis is conducted using the Inverse Probability Weighting methodology along with a Propensity Score Matching method, according to the characteristics of the sample. The results show that all types of intervention work in accelerating labor market entry. Specifically, training schemes are the most effective programs (doubling the probability of finding a job), followed by guidance services (which increase the probability by around 20%). However, although the spirit of the law is that every recipient should search actively for a job only around 40% are observed to receive any activating interventions from the public employment service.
From a policy point of view, it is essential to emphasize the importance of linking passive policies with active policies, because those MIS recipients who use active policies enhance their chances of finding a job compared to similar unemployed people. Furthermore, the study supports the conclusion that training programs for MIS recipients should be reinforced.
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For future research it would be important to conduct a duration analysis to determine time exits from employment instead of instantaneous finding rates. A deeper analysis of the types of job that the beneficiaries of the MIS get is also needed, so as to ensure a successful, decent entry into employment and subsequent emancipation from the MIS. This is not possible at the moment because of data limitations. More precise information on training programs for MIS recipients would be also valuable to reveal more about what types are more successful in job- finding terms for MIS beneficiaries. As a more general recommendation, the usefulness of evaluating activation programs for all unemployed individuals should be highlighted, so as to facilitate their re-entry into employment.
As a final conclusion, I would like to highlight the importance of assessing social and economic policies in society. This is not a widespread custom in Spain, but fortunately it is making headway, albeit very slowly. It is especially important in a situation such as the present one: a deep crisis that has left many long-term unemployed people, at risk of social exclusion or in situations of poverty. Effective policies are key to making the best use of public resources and, among other things, helping that part of society to re-enter more decent, equitable, egalitarian employment and thus reintegrate into a society with the same characteristics. Therefore, achieving an economic recovery in which the economic and social policies implemented are based on solid research outcomes is essential if successful results are to be achieved.
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Annex
Calculation of the Total Household Income
Household income includes own income, income from social security benefits, income from social assistance, and income from supplementary civil society assistance. The total income received includes the following items: monthly salaries or wages from salaried or similar employment, monthly income as a maintenance allowance, extraordinary payments for wages, salaries, unemployment benefits or pensions, income from the operation of a business of their own or from courses, conferences or similar activities, income from urban rentals, rural leases, annuities or income derived from pension funds or similar, income from real estate, prizes, tax rebates or labor indemnities. In the case of wages and salaries and of the proceeds of alimony, the different monthly incomes received by the different members of the household are aggregated. In the other cases, the income obtained by the household as a whole in the last 12 months for the items indicated is calculated and a monthly average is apportioned. Income from Social Security benefits includes the total monthly income received by individual household members from benefits or unemployment benefits, pensions or Social Security benefits (including non-contributory benefits and family benefits). Income from social assistance includes the following: monthly income from MIS, social emergency aid, scholarship income, aid to minors and other public welfare assistance. In the case of MIS the different monthly incomes received by the different household members are aggregated. In the other cases the income obtained by the household as a whole in the last 12 months for the items indicated is calculated and a monthly average is apportioned. Finally, income from supplementary civil society assistance includes the income of the household in the reference month from direct support from relatives, friends, neighbors or private welfare institutions.
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Simulation of new MIS perceivers
Theoretically, to receive MIS households must have an income below the poverty line and must meet further requirements. As mentioned, it is not possible to control here for who meets the requirements and who does not, so the simulation is conducted as follows:
-For households where the BC poverty line is higher than or equal to the simulated line it is already known which meet the non-income requirements, because they are or are not already recipients. This is the case of households of types 1, 4 and 6.
-For the other households, by type according to the legislation:
1) The percentage of MIS recipients out of the total poor households is calculated, i.e. the weight of the households that meet the requirements as a proportion of the total
2) This percentage is assumed to be constant with income. That is, when the poverty line is moved the weight of households that meet requirements other than income remains the same.
3) For households whose income before the transfer is between the old and new poverty lines, some MIS beneficiaries are found (those who receive payments from area C), so it is known that they are eligible. Then, by type of household, I randomly add new households until the percentage of receiving households calculated in point 2 is reached. 4) 100% efficiency is assumed, so all households whose pre-MIS income is above the new poverty line will not be recipients in the scenario simulated, even if they meet the other requirements.
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