Poverty alleviation in Italy: REI (Income inclusion programme) vs “citizenship income”

Poverty alleviation in Italy: REI (Income inclusion programme) vs “citizenship income”

May 4, 2018

Elizabeth Jane CasabiancaElena Giarda

With both schemes, more than half of the resources is directed to the South of the country

 

In the years following the financial crisis, poverty in Italy – as well as in Europe – has increased and the economic and political debate has focused on how best to respond to the issue. 

In 2017, the Italian Government introduced the Income inclusion programme (REI), a national minimum income scheme [1]. REI is a categorical measure, subject to means-testing  the criterion is based both on income and wealth  and is conditional on participation in a job placement scheme. Our simulations show that REI would ensure support to 45.8% of absolute poor households and 22.5% of households at risk of poverty [2].  

In order to reach a larger proportion of the poor and lift them out of poverty, some are in favour of strengthening the measure, while others have put forward alternative schemes. Currently, the most discussed alternative is the introduction of a "citizenship income", which, according to the economic theory, should be universal, unconditional and not subject to means-testing. 

However, in practice "citizenship income" in the form outlined in a bill submitted by the Five Star Movement in 2013 falls within the category of minimum income [3].  The proposed version of “citizenship income" is selective, i.e. targeted at households with an income below the at-risk-of-poverty threshold. It is conditional on participation in a job placement scheme when the benefit is provided to unemployed people [4]. It is means-tested, even though, in contrast to REI, the means-testing criterion is based only on income (and not on wealth). 

 
Figure 1 The distribution of expenditure by area: with both schemes, more than half is directed to the South of the country %

 
Poverty alleviation in Italy: REI (Income inclusion programme) vs “citizenship income”
Source: Prometeia’s simulations on IT-SILC.
 
 

The amount granted by the "citizenship income" is higher than that of REI because, unlike REI, it aims to fill the gap with the at-risk-of-poverty threshold, which in 2016 amounted to €812 for one person and gradually increased with the number of household components according to the equivalence scale.

We estimate that, when fully operational, REI will cost €2.4 billion, and a beneficiary household would receive, on average, €2500 per year [5]. “Citizenship income" would cost €29 billion and the annual benefit amount would be €5800 per household, on average. If, on the other hand, it were granted only to at-risk-of-poverty households in which at least one member is unemployed, the cost would be €12.8 billion, with an average annual benefit of €8200 per household. The distribution of expenditure by geographical area (Figure 1) shows that both for REI and “citizenship income” more than half of the resources are distributed to the South (52.7% and 57.9%, respectively). 

All simulations are performed on the 2015 Italian module of EU-SILC (European Union Statistics on Income and Living Conditions) survey data (Istat-Eurostat).

 
 
[1] For more details on REI as outlined in Legislative decree no. 147/2017, see: Prometeia (2017), “The introduction of minimum income in Italy: challenges and outcomes”, Prometeia Discussion Note No. 03, available at https://www.prometeia.it/en/research/position-note/archive.
[2] According to Istat, absolute poverty is the share of people whose consumption is below the absolute poverty line, which corresponds to the value of a bundle of goods and services that a given household must consume during a month to obtain a minimally acceptable standard of living. The line varies according to the composition of the household (number and age of family members) and incorporates price level differentials by geographical area and type of municipality. According to Eurostat, the at-risk-of-poverty rate is the share of people with an equivalised income below the at-risk-of-poverty threshold, which is set at 60% of the national median equivalised income. To obtain equivalised income, household disposable income is divided by the equivalence scale and then attributed equally to each household member.
[3] Bill No. 1148 of 29 October 2013.
[4] It seems that for employed individuals, the benefit is conditional on the participation, for a limited number of hours per week, in socio-cultural projects at local level.
[5] The Government estimates an overall expenditure of €2.2 billion (with the exclusion of the resources directed to local services). The discrepancy is possibly due to the use of two different data sources, administrative data for the Government, survey data for Prometeia.
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