Paris, November 22, 2007

Beyond negative integration:towards a EU-wide minimum guaranteed income scheme?

Tito Boeri

Università Bocconi andFondazione Rodolfo Debenedetti

EU Constitutional Treaty

• New draft: reference to “stronger co-ordination” in the social policy area

• What does it mean? What should it mean?

• Can co-ordination help in dealing with the pressures coming from globalisation?

The pressures coming from globalisation

Globalisation increases the risk people losing their jobs

0

10

20

30

40

50

agree not agree dk

Eurobarometer, 2001

Globalisation increases the gap between the rich and the poor

0

10

20

30

40

50

60

agree not agree dk

Hourly gross wage: 0,50€

Gross wage: 108,14€ Taxes and

contributions: 10,32€

Meals 11,39€

Net wage

83,92€

The pay slip of Mr. Huan Guoj

200 hours per month

Globalisation increases the employment costs of redistribution

∆ E

∆ E

w

D0

D1

S

…unless there is increase in efficiency

∆ E

∆ E

w

D0

D1

D’1

S

…or in labor supply

∆ E

wS

S1

D1

D0

∆ E

Policies increasing labor supply

• Activation strategies– Job search assistance and tests– Job counselling– Controls and sanctions

• Financial Incentives– Employment Conditional Incentives (ECI)– Wage Subsidies for low-wage employees (or

social security deductions)

• Selective migration

A EU-wide approach?

No evidence of economies of scale in social

protection

Large differences in the size of

redistributive policies and in values-preferences

Policies decentralised: decided and implemented at national level

…BUT immigration is different: it needs a strong co-ordination at

supranational level!

Moreover problem of migration and welfare access

% of respondents stating that “minority groups exploit the system of social welfare”

EU 12 EU 1542

43

44

45

46

47

48

49

50

51

52

EU12 EU 15

Migrants are over-represented among beneficiaries of several transfers..

Odds Ratios

00.5

11.5

22.5

3

Pensio

n

Unemplo

ymen

t Ben

efits

Family

Allo

wance

s

Sickne

ss B

enef

its

Educatio

n Allo

wance

s

Social

Ass

ista

nce

Housing A

llowan

ces

Note: (MB/M) / (NB/N)

A EU-wide safety net?

• EU-wide minimum welfare floor (Atkinson (1998)) preventing a “race to the bottom” in non-contributory transfers

• The devil is in the details: need to harmonise in absolute levels, adjusted to PPP

• Costs (not too large actually: MGI at 430 Euros for singles costs about 30 billion, ½ of the CAP)

• If provided as citizenship right, necessary to coordinate migration policies as well.

Back to the Constitutional Treaty

• Case for allocating tasks to supra-national authorities in presence of important spillover effects

• Migration is a case in point• Activation and ECIs should be

carried out at the national level; experimentation. Open method of co-ordination

Summarising

• We need co-ompetition across social policy systems. Learning from experiments in policies mobilising labour supply.

• Coordination in migration policies.

• and a European social welfare minima like a citizenship income