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Minimum income proposed November 5, 2007

Posted by grhomeboy in Business & Economy.
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Think-tank study puts initial cost of measure at around 500 million euros a year

Greece is the only country among the 15 European Union member states before enlargement that does not have a minimum guaranteed income (MGI), viewed as the most effective way of battling extreme poverty, although this is perfectly feasible, a think-tank report unveiled yesterday said.

The independent Centre for Planning and Economic Research (KEPE) is proposing the introduction of minimum guaranteed incomes of 330 euros for single people, which will rise to 990 euros for a family of four, as a basic tool of supporting the estimated 575,000 Greeks, or 5.4 percent of the population, who live under conditions of dire poverty.

“There is no doubt that the application of a minimum guaranteed income program is fully feasible in this country, possibly with limited cover and at a relatively low level initially,” said the report authored by Athanassios Balfousias and Constantinos Kotsis.

KEPE proposes that the basis for calculating MGI should be the basic pension for farmers, which will be 330 euros in 2008, called reference income. A couple will receive 660 euros, a family of three 835 euros and a family of four 990 euros.

In order for MGI not to work as a disincentive for work, the authors propose that 20 percent of income from work should not be calculated in the reference income. For instance, if the total income from work of a four-member family is 800 euros, for the purposes of granting the MGI supplement, it would be calculated as 20 percent lower, that is 640 euros, requiring an addition of 350 euros to reach the reference income of 990 euros.

The authors note that there is a problem in calculating real incomes because of extensive tax evasion, but also due to the fact that the people for whom such a program is designed do not submit annual income declarations to tax authorities. This applies to the majority of farmers, for instance.

The report proposes that initially those entitled to the MGI supplement should be permanent residents of Greece and be citizens of an EU member country. Immigrants with residence and work permits may be included later.

Those receiving the MGI supplement should be available to work whenever asked, if the place of work is reasonably near their residence and the type of work compatible with their skills. If for any reason it is not possible for recipients to be absorbed in some type of occupation or a training program, they would be placed in social work programs run by municipal authorities or other agencies.

The cost of the MGI program to the state budget is estimated at about 450 to 550 million, at 2006 prices. The sources of funding would include the state budget and European Union funds, but it could also be financed from a partial restructuring of social spending, the abolition of tax privileges and exemptions, and the imposition of some other levy on high incomes.

The two researchers argue that the MGI program would strengthen the social safety net which is currently full of holes, should be combined with active employment policies and aim at the eventual financial independence of the recipients.

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