Fighting Poverty: Assessing the Effect of Guaranteed Minimum Income Proposals in Québec

36 Pages Posted: 23 Mar 2013

See all articles by Nicholas-James Clavet

Nicholas-James Clavet

Laval University, Faculté des Sciences Sociales, Département d'Économique

Jean-Yves Duclos

Laval University; IZA Institute of Labor Economics

Guy Lacroix

Université Laval - Département d'Économique; IZA Institute of Labor Economics

Abstract

This paper analyzes the impact of a recent recommendation made by Quebec's Comité consultatif de lutte contre la pauvreté et l'exclusion sociale to guarantee every individual an income equal to 80% of Statistics Canada's Market Basket Measure (MBM). Workers with earnings at least equivalent to 16 weekly hours at the minimum wage would be entitled to 100% of the MBM. We also investigate the impact of three alternative proposals: 1) a change in the above the hours cut-off from 16 to 30 hours; 2) a guaranteed income equal to 100% of the MBM, irrespective of earnings; 3) a 3$/hour conditional wage subsidy. To do this, we first estimate a structural labor supply model using the existing tax code and predict the labor supply of a representative sample of individuals based upon the parameter estimates of the model.Simulations show that the original recommendation would have strong negative impacts on participation rates of low-earners and that its cost would exceed $ 2 billion. Increasing the hours cut-off is predicted to have little impact beyond those of the original recommendation. Providing a guaranteed income equivalent to 100% of the MBM, on the other hand, would have a large impact. We find that contrary to what is usually assumed, guaranteed income schemes may increase the incidence of low-income rather than decrease it.

Keywords: Guaranteed Minimum Income, ex ante evaluation, labor market effects, financial cost, poverty alleviation, public finance

JEL Classification: C25, D31, D63, H31, I30, J22

Suggested Citation

Clavet, Nicholas-James and Duclos, Jean-Yves and Lacroix, Guy, Fighting Poverty: Assessing the Effect of Guaranteed Minimum Income Proposals in Québec. IZA Discussion Paper No. 7283, Available at SSRN: https://ssrn.com/abstract=2238316

Nicholas-James Clavet (Contact Author)

Laval University, Faculté des Sciences Sociales, Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4
Canada

Jean-Yves Duclos

Laval University ( email )

Quebec G1K 7P4
Canada
418-656-7096 (Phone)
418-656-9727 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Guy Lacroix

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-2024 (Phone)
418-656-7798 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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