Fighting Poverty in Québec : Guaranteed Minimum Income versus Wage Subsidies Nicholas-James Clavet, Jean-Yves Duclos, Guy Lacroix CIRPÉE, CIRANO, Université Laval IRPP-CLSRN Conference Inequality in Canada : Driving Forces, Outcomes and Policy Ottawa, 24–25 February 2014 1/15
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Fighting Poverty in Québec - Guaranteed Minimum Income versus Wage Subsidies
Guy Lacroix (Université Laval) discusses the future of income security in Canada.
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Fighting Poverty in Québec :
Guaranteed Minimum Income versus Wage Subsidies
Nicholas-James Clavet, Jean-Yves Duclos, Guy Lacroix
CIRPÉE, CIRANO, Université Laval
IRPP-CLSRN ConferenceInequality in Canada : Driving Forces, Outcomes and Policy
Ottawa, 24–25 February 2014
1/15
Political Context
Bill 112, 2007 "An Act to Combat Poverty and Social Exclusion"
«The object of this Act is to guide the Government of Québec andsociety as a whole towards a process of planning and implementingactions to combat poverty, prevent its causes, reduce its effects onindividuals and families, counter social exclusion, and strive towards apoverty-free Québec.»
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Political Context
Bill 112, 2007 "An Act to Combat Poverty and Social Exclusion"
«The object of this Act is to guide the Government of Québec andsociety as a whole towards a process of planning and implementingactions to combat poverty, prevent its causes, reduce its effects onindividuals and families, counter social exclusion, and strive towards apoverty-free Québec.»
Comité consultatif de lutte contre la pauvreté et l’exclusion sociale
«The CCLP is a public agency whose main mission is to advise theMinister responsible for application of the Act . . . and to present theMinister with its comments and recommendations. »
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CCLP Report 2009
Recommandation # 1 :
The CCLP recommends that, as a first step, baseline financial support be set at80% of (Statistics Canada’s) Market Basket Measure (MBM) for every adult (18and over).
Recommandation # 2 :
The CCLP recommends that individuals who work an average of 16 weekly hoursat the minimum wage have a disposable income that is no lower than the MarketBasket Measure.
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CCLP Report 2009
Recommandation # 1 :
The CCLP recommends that, as a first step, baseline financial support be set at80% of (Statistics Canada’s) Market Basket Measure (MBM) for every adult (18and over).
Recommandation # 2 :
The CCLP recommends that individuals who work an average of 16 weekly hoursat the minimum wage have a disposable income that is no lower than the MarketBasket Measure.
3/15
Goals
Ex ante evaluation written for the Ministère de la solidarité sociale.Estimate a structural discrete choice labour supply model ;Simulate the impact of Recommendations #2 and # 13 ;Simulate other more or less generous potential policies ;Compute the cost of each scenario.
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Scenarios :
1 CCLP :Baseline support at 80% of Market Basket Measure.Individuals who work an average of 16 weekly hours at the minimum wagehave a disposable income equivalent to the Market Basket Measure.
2 Change the 80%-100% MBM cut-off from 16 hours per week to30.
3 Raise the financial support to 100% of the MBM to everyone,irrespective of hours of work.
4 Provide a 3$/hour subsidy to individuals who find a job and workat least 30 hours per week (SSP, Action Emploi 2002).
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Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
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Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
CC
LP T
hres
hold
= 1
6
CCLP with Threshold at 16 hours
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Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
CC
LP T
hres
hold
= 1
6
CC
LP T
hres
hold
= 3
0
CCLP with Threshold at 16 hours
CCLP with Threshold at 30 hours
16967
13573
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Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
CC
LP T
hres
hold
= 1
6
CC
LP T
hres
hold
= 3
0
CCLP with Threshold at 16 hours
CCLP with Threshold at 30 hours
CCLP with 100% MBM16967
13573
5/15
Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
CC
LP T
hres
hold
= 1
6
CC
LP T
hres
hold
= 3
0
CCLP with Threshold at 16 hours
CCLP with Threshold at 30 hours
CCLP with 100% MBM16967
13573
3$/hour subsid
y
5/15
Scenarios :
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
CC
LP T
hres
hold
= 1
6
CC
LP T
hres
hold
= 3
0
CCLP with Threshold at 16 hours
CCLP with Threshold at 30 hours
CCLP with 100% MBM16967
13573
3$/hour subsid
y
5/15
Estimation Strategy
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Estimation Strategy
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Estimation Strategy
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Estimation Strategy
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Estimation Strategy
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Estimation Strategy
0
4000
8000
12000
16000
20000
5 10 15 20 25 30 35 40 45 50
Net
Ear
ning
s
Weekly Hours of Work
16967
13573
6/15
Estimation Strategy
Empirical approach1 Compute net earnings at each discrete interval for each individual using the
Canadian Tax and Credit Simulator (CTaCS), Milligan (2008)2 Estimate a discrete choice model based on individual budget sets3 Compute net earnings at each discrete interval for every individual under each
scenario4 Compute optimal choice for each individual
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Data : Statistics Canada’s Social Policy Simulation Database (SPSD/M), 2004
Descriptive StatisticsVariables Single men Single women Single mothers
1 Different variants of guaranteed minimum income (GMI) schemes have beenproposed to fight poverty ;
2 Assessment of such schemes must be made within a rigorous framework ;Assuming no labour supply adjustments, CCLP is estimated to cost $ 460million ;With labour adjustment, it would cost approximately $ 2 billion.
3 Importantly, a generous GMI may make some low-earners poorer ;4 A conditional wage subsidy has a positive impact on both the income and the
labor supply of inactive individuals.5 Financing the GMI must also be taken into consideration. Taxation may lead