Work

Escaping the inactivity trap? The work incentive of the Spanish minimum income

Year: 2025

Type: article

Abstract: The Spanish 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.

Source: Journal of Policy Modeling

DOI: 10.1016/j.jpolmod.2025.09.010

Authors: Hugo Cruces, Adrián Hernández, Edlira Narazani

Institutions: Joint Research Centre, Joint Research Centre, Joint Research Centre, Universidade de Vigo

Language: English

Topic: Gender, Labor, and Family Dynamics

Subfield: Gender Studies

Field: Social Sciences

Domain: Social Sciences

SDGs: No poverty, Decent work and economic growth, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $1,500