Receiving the minimum living wage reduces the likelihood of working, according to Airef.

BarcelonaThe Spanish government promoted the minimum living income (MLI) during the peak of the COVID-19 pandemic in an attempt to "eradicate poverty and promote labor market participation and social inclusion for people in vulnerable situations." Five years later, the Independent Accountability Authority (AIREF) believes that this flagship measure of Pedro Sánchez's administration has failed to fulfill at least one of its objectives. The agency found that the benefit reduces the probability of working by three percentage points (12% less) and decreases the number of days worked to 0.6 per month (11% less). These are the main conclusions of the annual analysis of this benefit published by the AIREF, which, for the first time, focuses on its impact on employment.

The diagnosis is clear: "These effects remain among MLI recipients after the work incentive came into effect in January 2023, demonstrating the persistence of the disincentive impact and the reduced effectiveness of the mechanism." Specifically, Airef warns that the impact is most pronounced among those under 30, single-parent households, and those with higher-than-average benefit amounts, "disincentivizing labor force participation by figures exceeding 20%. However, the agency chaired by Cristina Herrero also admits that, among beneficiaries who remain employed, there is an improvement in job quality and a 3% increase in the likelihood of having a permanent contract.

Faced with this scenario, Airef has proposed a "complete reformulation" of this work incentive, with which the Ministry of Social Security, headed by Elma Saiz, sought precisely to prevent lower labor force participation among beneficiaries. Furthermore, it recommends continuing to promote formulas for the automatic granting of the IMV (Spanish Social Security Income Tax), which the agency mentions in its first opinion on the measure. He also believes that progress should be made in designing mechanisms to ensure that the CAPI (the child benefit supplement, with benefits ranging from €57.5 to €115 per month for families with children) reaches all households eligible for it. In July of last year, the State transferred management of the IMV (Income and Livestock) to the Generalitat (Catalan Government).

60% have been collecting the IMV for more than three years.

The Airef report studies the length of time these vulnerable people receive the benefit and concludes that 90% remain there for more than twelve months, 75% for more than twenty-four months, and approximately 60% for more than three years. "This permanence, together with the identified effects on employment, raises questions about the effectiveness of the transition to employment mechanisms currently included in the benefit." Furthermore, it warns that 55% of households that could receive the IMV have not yet applied for it, while this percentage rises to 72% for those households that could receive the CAPI.

However, Airef notes that there has been progress in the deployment and reach of this benefit, with a 14% increase in the number of IMV beneficiaries and a 34% increase in the CAPI beneficiaries. The average processing time for the benefit has also been reduced by forty-five days. Even so, the institution emphasizes that this progress coexists with results that demonstrate that the measure "has not undergone significant structural changes, retaining a design that has been limited from the outset in achieving its objectives." Therefore, it recommends specifying these objectives through "clearly defined" indicators and levels and strengthening information campaigns and individualized support for recipients.