2024-03-26 16:45:20
“I don’t know anything more effective than work in the fight against poverty. »
This is what declared Olivier Dussopt, then Minister of Labor, at the end of October Telegram, commenting on the Full Employment law finally promulgated on December 18. The political discourse is paradoxical in that it continues to advocate fighting poverty through work while at the same time deploring the existence of poor workers.
Being hardworking and poor is not a paradoxical situation. From a statistical point of view, a worker is considered to be an individual who has worked for pay for at least one hour. Poor is defined as the individual in the household whose annual resources are less than the equivalent of 13,890 euros annually for a single person (20,850 euros for a couple without children), or 60% of the median standard of living. So there is no mystery: if you work, but only a little, then you will be working poor, unless the resources of a potential spouse are sufficient. In a world where the social minimum is low and there is poverty and part-time jobs, there will always be poor workers.
The solution generally proposed is to pay income supplements for the working poor, which makes it possible to fight both in-work poverty and to provide additional incentives to recipients of assistance income to escape the “poverty trap”. In France, the question of incentives to return to employment has arisen at least since the establishment of the minimum integration income (RMI) in 1989 and then its replacement by the active solidarity income (RSA) in 2009. According to a certain discourse, the beneficiaries of social minimums would be prisoners of this poverty trap because they have little incentive to make the effort to find a job for additional income ultimately not so far from what they already receive. The idea of the RSA was to continue to receive part of your basic income in addition to your salary to encourage you to take a job.
But the poverty trap is probably not what we think. This is one of the objects of my work recent, How to give money to the poor? Overcoming social justice dilemmaspublished by Presses Universitaires de France.
Extreme solutions
Let’s start with a thought experiment. There are theoretically two ways to eradicate working poverty. The simplest on paper, and the most expensive, would be to guarantee a standard of living equal to the poverty line for all. This solution eradicates monetary poverty and therefore working poverty: if there are no poor people, there are no working poor!
However, this would be a disincentive to return to employment.
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A second theoretical solution would be for society to only accept jobs paid at least at the full-time minimum wage, to refuse that jobs at the minimum wage can be offered part-time and to combine these with sufficient family benefits in order to to systematically exceed the poverty line. For example, with a monthly net minimum wage of 1,398 euros, 339 euros monthly “activity bonus” would have to be paid to an individual on the minimum wage with a spouse without income, so that the couple exceeds the poverty threshold. This solution does not eradicate poverty but at least the workers are not poor. If the poor don’t work, there are no working poor!
However, banning part-time work at the minimum wage reduces freedoms and is not the best solution. This example, however, shows that the objective of reducing the working poor should probably not be given weight beyond that given to the objective of reducing poverty. The ban on precarious work reduces working poverty but not poverty: it is not coherent to refuse this solution and at the same time to give proper weight to the objective of reducing working poverty.
By applying solutions less radical than these two extremes, society necessarily accepts a certain level of working poverty. However, what is true for eradicating it is also true if it is a question of reducing it: by construction the fewer poor people there are, the less the intensity of poverty, the fewer jobs there are part-time work and there will be fewer poor workers.
Continue on the same path?
For seven years, unemployment has fallen but not poverty. Despite this, the executive continues to make employment and work incentives its main axis in the fight against poverty, including working poverty.
Should we go further in this logic? To show that “the incentives to escape from this situation of suffered working poverty are weak”, Gilbert Cet, former president of the Group of experts on the minimum wage and author of the book Hardworking (but) poortake the following example in a interview published in Les Echos:
“Increasing the net disposable income of an employee, single and without children, paid at the minimum wage by 100 euros leads to an increase in labor costs of 483 euros.”
This ratio seems excessive, a consequence of the fact that by increasing their salary, an individual will be entitled to fewer benefits, which will have to be compensated by a larger salary increase. The calculation nevertheless poses three problems.
Firstly, it is carried out for an individual on full-time minimum wage. However, a single person on full-time minimum wage is not poor. The ratio here is partly due to the fact that the activity bonus is maximum at the full-time minimum wage, a bonus that the Group of Experts on the minimum wage has long defended. Furthermore, it is the household level that is most relevant in terms of poverty: this individual can become poor if their spouse is inactive or unemployed without compensation.
Second, the calculation assumes that individuals take into account in the same way, when making their decisions on the labor market, a reduction in benefits and an increase in wages. This is not verified empirically: individuals react more to an increase in wages.
Third, the calculation aggregates the reduction in social benefits received by the employee and the reduction in employer social security contributions above the minimum wage. This is not the same thing in a context where workers and employers cannot easily coordinate.
The question also deserves to be asked by looking at real situations in their context. François-Xavier Devetter and Julie Valentin, economists respectively at the University of Lille and the University of Paris 1, cast a another look on working poverty, starting from the reality of the work carried out by poor and low-wage workers. They show that “low wages” (maintenance workers, home helpers, retail or catering employees) are victims of fragmented working days with the arduousness associated with them. This is the direct consequence of the outsourcing of certain activities such as reception, security, collective catering:
“Wages are significantly lower due to more restrictive control of working hours, precariousness is greater due to multiple employment situations and frequent changes of employers. »
Another collective choice
The discourse on incentives has had the effect of a drop in the relative level of the social minimum towards the active, the RSA, in relation to the old age minimum, the disabled adult allowance, the minimum wage and wages ? Widening the income gaps between social minima and the minimum wage certainly accentuates incentives but increases the intensity of poverty. This strategy is unsurprisingly ineffective against working poverty: it increases the distance between the social minimum and the poverty line.
In How to give money to the poor?, I propose to reverse the logic of the last twenty years and return to the spirit of the RMI. At the time, it was the income that added value and not the activity. The poverty trap was poverty itself to the extent that it does not allow the investments necessary for employability: training, health, housing, mobility. In a very classic liberal logic, paying money to the poor means first of all allowing them to make these investments. Note also that it is in the countries where social minima are the most generous that the employment rates of the low-skilled are also the highest, which suggests at least that incentives are not the main problem.
Today the net RSA housing package is today equal to 534 euros for a single person, or 38% of the full-time minimum wage (1,398 euros): the gap can be reduced without fear of making the incentives disappear. Of course, paying a monetary income is not enough and the relationship between social minima and employment rate should not be interpreted causally. The effective strategy for reducing poverty involves a high level of public service for all: education, health, early childhood.
The paradox of redistribution is that inequalities are lowest where attention is not focused only on the poor or the working poor but on a quality public service for all. This reasoning also applies to employment: working poverty would be lower by aiming for 35 hours for all, on the one hand by promoting the transition from part-time to full-time, but on the other hand by also stopping encouraging overtime.
All this suggests firstly that the fight against poverty is from a certain point of view “costly” for the most well-off. By construction, with unchanged national income, reducing poverty means reducing the income of the non-poor. Second, fighting poverty may also be synonymous with (small) efficiency losses if the efficiency gains currently achieved are achieved by placing the burden disproportionately on precarious workers. But is it taking the objective of fighting poverty seriously to want to achieve it only if it only results in winners? The problem is not that we have not yet found the innovative technical solution to reduce working poverty. The brake is political: collectively, we prefer not to.
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