Questions and answers: adequate minimum income

Met dank overgenomen van Europese Commissie (EC) i, gepubliceerd op woensdag 28 september 2022.

What is minimum income?

Minimum income is a monetary benefit of last resort to fill the gap to reach a certain level of income for households that do not have enough resources for a life in dignity. Minimum income benefits are ‘means-tested' which means that they are only accessible to people with insufficient income and resources. They are publicly funded social safety nets and aim to prevent poverty and social exclusion, while promoting labour market integration for those who can work.

To achieve this aim, income support is accompanied with inclusive labour market activation policies and access to quality enabling services, including healthcare, childcare or housing as well as quality essential services, like energy.

Minimum income is different from minimum wage or universal basic income. Minimum wage is the lowest remuneration that employers are permitted to pay their employees. The Commission's proposal for a Directive on adequate minimum wages establishes an EU framework to improve minimum wage protection across the EU. Universal basic income refers to unconditional cash payments provided to people regardless of their financial situation.

What is the Commission proposing today and why?

Ensuring that every person in the EU can enjoy a life in dignity is essential to build fair and resilient economies and societies. Today, the Commission is proposing a Council Recommendation on adequate minimum income ensuring active inclusion. It aims at supporting Member States in modernising their minimum income schemes and making them more effective to strengthen the social and labour market inclusion of people and reduce poverty.

The Recommendation covers the following areas:

  • Improving the adequacy of minimum income;
  • Improving the coverage and take-up of minimum income;
  • Improving access to labour markets for those who can work;
  • Improving access to enabling and essential services;
  • Promoting individualised support; and
  • Increasing the effectiveness of the governance of social safety nets at EU, national, regional and local level, as well as monitoring and reporting mechanisms.

Well-resigned minimum income schemes play a key role during economic downturns, where they can mitigate the impact on household incomes, prevent an increase in poverty and social exclusion, while promoting a sustainable and inclusive recovery. Robust social safety nets are also essential to realise the full potential of the green and digital transitions, through activation and helping people learn new skills so they find jobs more easily.

While minimum income exists in all Member States, there are challenges regarding its adequacy, coverage and take-up, with for instance around 1in 5 jobless people at risk of poverty is not eligible to receive any income support and estimates of around 30% to 50% of the eligible population not seeking the minimum income support they would be entitled to.

To tackle these challenges, the Commission recommends that Member States:

  • use a robust and transparent methodology to set and adjust income support to an adequate level by 2030 in a manner coherent with the overall sustainability of public finances. While safeguarding incentives to work, income support should gradually reflects at least one of the following: (1) national at-risk-of-poverty threshold; (2) monetary value of necessary goods and services like nutrition, housing and healthcare, according to national definitions; or nationally established levels comparable to (1) and (2).
  • apply transparent and non-discriminatory eligibility criteria to receive minimum income, making it easier and more accessible to apply for minimum income, and quicker to receive a decision and review it.

In addition, activation measures to join the labour market are sometimes not available or need to be better coordinated with income support measures. Similarly, enabling and essential services accompanying income support, such as care services, training and education, but also energy and transport, are not always available or accessible.

To tackle these challenges, the Commission recommends that Member States:

  • help those who can work to (re)enter the labour market, for instance through support to improve skills, to search for a job and to keep it, for instance with (post)placement support.
  • accompany income support by improved access to enabling services - such as early childhood education and care, healthcare, long-term care and housing - and essential services - like water, sanitation, energy, transport, financial services and digital communications.

Finally, support should be provided on a more individual basis, taking into account the specific barriers each beneficiary faces. Coordination should be improved between different entities providing minimum income support and the effectiveness of schemes should be monitored and assessed on a regular basis.

To tackle these challenges, the Commission recommends that Member States:

  • provide support packages better targeted to individual needs.
  • avoid gaps, overlaps and fragmentation of various benefits and schemes to provide for a coherent package of income support, activation measures and enabling services, and strengthen the operational capacity of authorities in charge of income support, for instance employment services.

How does this help vulnerable households in the current difficult times?

Following Russia's invasion of Ukraine, sharp increases in energy prices and hikes in inflation affect in particular low- and lower middle-income households, as the share of energy and food consumption in their overall incomes is generally higher. In this context, robust social safety nets can help to mitigate the risk of energy poverty.

The proposed Council Recommendation acknowledges that minimum income support plays an important role in this respect, as it can be specifically targeted to help the most vulnerable households. The Commission also recommends that minimum income should be accompanied by continued access to essential services such as energy and transport.

To ensure that all persons lacking sufficient resources are covered by minimum income, the Commission also recommends that Member States ensure that minimum income is responsive to socio-economic crises, for instance through temporarily relaxing the eligibility criteria or by extending the duration of benefits.

How will this proposal help to reach the European Pillar of Social Rights Action Plan's poverty and employment targets?

The European Pillar of Social Rights Action Plan put forward EU-level headline targets to be reached by 2030, including:

  • to reduce the number of people at risk of poverty of exclusion by at least 15 million people; and that
  • at least 78% of the population aged 20 to 64 should be in employment.

The European Council and Member States have endorsed these targets and have since presented their own national targets to contribute to this joint ambition. While these national commitments show that the EU is on the path to achieving these targets, sustained efforts are needed to uphold this ambition, with 95.4 million people in the EU at risk of poverty and social exclusion and 73.1% of people aged 20 to 64 in employment in 2021.

The proposed Council Recommendation on adequate minimum income contributes to reaching these targets by providing recommendations on well-designed minimum income schemes that (1) firstly, combat poverty and allow for a life in dignity through inclusive income support that is set at an adequate level, and (2) secondly, maintain incentives for employment of those who can work through effective labour market activation measures, such as education, training, mentoring and job-search support.

What support should those who can work receive to (re)enter the labour market?

Supporting those who can work but face serious difficulties in finding a job and keeping it, is essential for their social and economic inclusion and participation.

The proposed Recommendation on minimum income asks Member States to remove barriers to (re)enter and stay in employment by:

  • Providing sufficient incentives to re(enter) the labour market;
  • Investing into skills and education to help people find a new job;
  • Allowing for a progressive phase-out of benefits, for instance by making it possible to combine income support with job earnings;
  • Ensuring that work pays by reviewing possible (dis)incentives stemming from tax and benefits systems;
  • Supporting jobs in the social economy, which can be a stepping stone towards further opportunities; and
  • Providing support for employers and workers to facilitate the transition to work, such as incentives to hire people, (post)placement support and mentoring.

People that find themselves furthest away from the labour market should also receive individual support through social inclusion services such as social work, counselling, coaching, mentoring, psychological support and rehabilitation, to address their specific needs and support integration.

How does the proposal especially help women and young adults?

Women are at higher risk of poverty and social exclusion than men. Women have also been disproportionately impacted by the containment measures to fight the COVID-19 pandemic by for instance taking on a higher burden of informal care work. To address this, the proposed Recommendation asks Member States to accompany income support by quality enabling services, such as childcare and long-term care, which is especially relevant for women to access the labour market, as also addressed in the Commission's European Care Strategy.

Means-testing to receive minimum income support is usually done at household level, but this often does not take into account the position of individuals within that household. This particularly affects the economic independence of young adults and women, with the latter being more likely to have lower incomes, lower pay and greater caring responsibilities. This is why the Commission recommends to Member States to make it easier to receive income support per individual instead of per household, without necessarily increasing the overall level of benefits per household.

In addition, further measures are needed to ensure the take-up of minimum income by single-parent households, predominantly headed by women. Therefore, the Commission recommends that Member States proactively reach out to persons lacking sufficient resources to raise awareness and encourage the take-up, particularly of single-parent households.

The Commission also ask Member States to pay particular attention to young adults that are outside of the labour market and at risk of poverty or social exclusion. To allow them to return to education, training or work as quickly as possible, income support should be linked to particularly strong support measures, helping them to gain work experience and develop skills.

In terms of coverage, young adults often face difficulties in accessing minimum income because they fall below the eligible age limit. This is why the Commission recommends that Member States review their eligibility criteria to ensure this age group has effective access to minimum income support.

How should Member States finance minimum income schemes?

Robust social safety nets deliver important social and economic benefits, by supporting employment and demand, economic, social and territorial cohesion as well as fairer and more resilient societies.

The overall sustainability of public finances and the adequate funding of minimum income are essential for their resilience, efficiency and effectiveness. This is why well-designed minimum income schemes should strike the right balance between poverty alleviation, work incentives and sustainable budgetary costs.

As part of today's proposal, the Commission asks Member States to ensure that social protection systems are fiscally sustainable. The implementation of the proposed Council Recommendation on minimum income should not significantly affect the financial balance of Member States' social protection systems.

What EU funds are available to support Member States?

Member States can receive EU funding and technical support for their investments and reforms related to minimum income schemes:

  • With a budget of almost €99.3 billion for the period 2021-2027, the European Social Fund Plus (ESF+) maintains a strong focus on social inclusion, earmarking a dedicated allocation of at least 25% for this purpose, and at least 3% for addressing material deprivation - that is a situation, where people cannot afford the goods and services they need.
  • The Employment and Social Innovation (EaSI) Programme, which will be integrated in the ESF+, supports innovative pilot projects on minimum income through with nearly €10 million. Examples include:
  • In France, the project ‘A roof, a job' (‘Un toît sur la tête : un job dans la poche') of the Lyon region is testing a minimum income scheme for young people between 18 and 25 years. This projects takes steps towards equality among generations, coupled with innovative solutions to combine housing and job programmes for young people at risk of poverty and social exclusion.
  • In Germany, Hungary, and Slovakia, the ‘Cooperate, Reach Out, Integrate Services (CRIS)' project develops a model for the integrated delivery of enabling services such as housing and health services to support the social and labour market integration of vulnerable groups.
  • The European Regional Development Fund promotes equal access to inclusive and quality services, particularly for vulnerable groups.
  • The Technical Support Instrument provides tailor-made technical expertise to Member States to design and implement necessary reforms, including in the area of social benefits and services.
  • The national plans under the Recovery and Resilience Facility cover a broad range of reforms and investments to strengthen Member States' social protection systems in relation to their effectiveness, quality and resilience. Investments also focus on fighting energy poverty and on improving access to essential services.

What is a distributional impact assessment, and what is the Commission proposing?

Evidence-based policymaking is needed for the success and transparency of policy actions. Distributional impact assessments are a useful tool to capture the impact of policies and investments on different population groups, including on the most disadvantaged. Such assessments can help to better target policies, making sure that they contribute to social inclusion and do not exacerbate existing inequalities.

The Commission's Communication on better assessing the distributional impact of Member States' reforms provides guidance to Member States on the policy areas, tools, indicators, timing, data and dissemination of this assessment. This Communication can also offer useful indications for Member States when designing their minimum income schemes.

For More Information

Proposal for a Council Recommendation on adequate minimum income ensuring active inclusion

Communication on better assessing the distributional impact of Member States' reforms

Press release: Minimum income: more effective support needed to fight poverty and promote employment

Factsheet: Adequate minimum income