On Minimum Income, Qualification Structure and Salary Scale

The consequences of imposing a minimum real income are studied within the framework of a general equilibrium model in which unemployment is compensated by transfers. With a disaggregated labor market, the equilibrium distribution of employment and real wages is characterized, depending on th existing qualification structure. The case of a rigid qualification structure in which there is no mobility between categories is first considered. Some flexibility is then introduced by assuming that the qualification structure is pyramidal in the sense that the workers in a given category have access to categories corresponding to lower qualification levels. If a budget deficit results the existence of an equilibrium is however not guaranteed. While there is no general condition ensuring the absence of a deficit, the alternative offered by employment subsidies is shown to be compatible with full employment and a balanced budget under minimal assumptions.