Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311132 
Year of Publication: 
2024
Series/Report no.: 
JRC Working Papers on Taxation and Structural Reforms No. 11/2024
Publisher: 
European Commission, Joint Research Centre (JRC), Seville
Abstract: 
The Ingreso Mínimo Vital (Minimum Vital Income), Spain's nationwide minimum income scheme introduced in 2020, offers beneficiaries a unique national guaranteed income as a last-resort benefit. However, the scheme's design featured a lack of work incentives for low earners, potentially leading to inactivity traps. To address this flaw the Spanish government introduced an earnings disregard in 2022, enabling beneficiaries to keep all or part of the benefit when their earnings increase up to a certain limit. This paper provides an ex ante assessment of this reform, looking into its expected fiscal, distributional and labour market effects using the tax-benefit microsimulation model EUROMOD, and the behavioural labour supply model EUROLAB. Our results show that the reform has the potential to incentivise work for very low earners, particularly lone parents, mainly by promoting part-time employment. The reform and its subsequent employment effects are also expected to slightly reduce inequality and poverty. While this is a step in the right direction, we discuss some avenues for improvement.
Subjects: 
minimum wage
labor market reform
impact analysis
microsimulation
Spain
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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