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

Author

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  • Nicholas-James Clavet
  • Jean-Yves Duclos
  • Guy Lacroix

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 percent of Statistics Canada's Market Basket Measure (MBM). Workers with earnings at least equivalent to 16 hours at the minimum wage would be entitled to 100 percent of the MBM. We also investigate the impact of three alternative proposals: (a) a change in the above hours cut-off from 16 to 30 hours; (b) a guaranteed income equal to 100 percent of the MBM, irrespective of earnings; and (c) a $3/hour conditional wage subsidy. To do this, we first estimate a structural labour supply model using the existing tax code and predict the labour 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 that of the original recommendation. Providing a guaranteed income equivalent to 100 percent 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.

Suggested Citation

  • Nicholas-James Clavet & Jean-Yves Duclos & Guy Lacroix, 2013. "Fighting Poverty: Assessing the Effect of Guaranteed Minimum Income Proposals in Quebec," Canadian Public Policy, University of Toronto Press, vol. 39(4), pages 491-516, December.
  • Handle: RePEc:cpp:issued:v:39:y:2013:i:4:p:491-516
    DOI: 10.3138/CPP.39.4.491
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    Cited by:

    1. Ugo Colombino, 2019. "Is unconditional basic income a viable alternative to other social welfare measures?," IZA World of Labor, Institute of Labor Economics (IZA), pages 128-128, March.
    2. Rolf Aaberge & Ugo Colombino, 2018. "Structural Labour Supply Models and Microsimulation," International Journal of Microsimulation, International Microsimulation Association, vol. 11(1), pages 162-197.
    3. Islam, Nizamul & Colombino, Ugo, 2018. "The case for NIT+FT in Europe. An empirical optimal taxation exercise," Economic Modelling, Elsevier, vol. 75(C), pages 38-69.
    4. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis, in: Cathal O’Donoghue (ed.), Handbook of Microsimulation Modelling, volume 127, pages 167-221, Emerald Publishing Ltd.
    5. de Boer, Henk-Wim & Jongen, Egbert L. W., 2020. "Analysing Tax-Benefit Reforms in the Netherlands: Using Structural Models and Natural Experiments," IZA Discussion Papers 12892, Institute of Labor Economics (IZA).
    6. Nizamul Islam & Ugo Colombino, 2018. "The case for negative income tax with flat tax in Europe. An empirical optimal taxation exercise," Working Papers 454, ECINEQ, Society for the Study of Economic Inequality.
    7. Marjan Petreski & Nikica Mojsoska-Blazevski, 2017. "Overhaul of the social assistance system in Macedonia: Simulating the effects of introducing Guaranteed Minimum Income (GMI) scheme," Finance Think Policy Studies 2017-11, Finance Think - Economic Research and Policy Institute.
    8. Ugo Colombino, 2015. "Five Crossroads on the Way to Basic Income. An Italian Tour," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(3), pages 353-389, November.
    9. Magnani, Riccardo & Piccoli, Luca, 2020. "Universal basic income with flat tax reform in France," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 235-249.
    10. Sara Rica & Lucía Gorjón, 2019. "Assessing the impact of a minimum income scheme: the Basque Country case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 251-280, November.
    11. Marjan Petreski & Nikica Mojsoska-Blazevski, 2017. "Overhaul of the social assistance system in Macedonia: Simulating the effects of introducing Guaranteed Minimum Income (GMI) scheme," Finance Think Policy Studies 2017-11/11, Finance Think - Economic Research and Policy Institute.

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    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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