“Spain structurally has an income inequality problem that is well-identified, and what it basically shows is that the public policies that should be aimed at reducing this inequality, like many other policies, suffer from a lack of efficiency,” says the Governor of the Bank of Spain, José Luis Escrivá, who, as Minister of Inclusion and Social Security, was responsible for designing the Minimum Living Income (IMV) in 2020. Today, the IMV is received by fewer people than those who previously received minimum income benefits from the regional governments. The number of requirements placed on people in need is so great that, according to data from AIReF (Independent Authority for Fiscal Responsibility), 55% of eligible households do not apply for it (and 72% of those who could apply for the so-called Childcare Assistance Supplement also do not). Furthermore, 44% of those who do receive the Minimum Living Income (488,031 households last August) are asked to repay amounts for various reasons. In short, it’s an absurdity.
In Spain, according to Eurostat data, the Gini coefficient (which measures inequality) is 1.8 points higher than the European Union average, with only 6 countries in a worse situation. The striking thing is that, according to Escrivá, when inequality in Spain is measured before accounting for the effect of public policies, the result “does not differ much from that of countries around us.” It is after the effect of public policies is taken into account “when Spain’s imbalance increases.”
When Escrivá himself launched the Minimum Living Income as a minister in the Sánchez government, he estimated that 850,000 households were eligible to receive it. AIReF raised that figure to 939,000 last year. This means that the actual recipients of the IMV are less than half of those who could have received it. Furthermore, according to AIReF, 60% of the households that receive it do so for more than 3 years, and the design of the IMV is such that it “…decreases the probability of working by 3 percentage points (a 12% drop). These negative effects on labor participation persist even in the cohorts that began receiving the IMV after the employment incentive came into effect in January 2023, which demonstrates the persistent disincentivizing impact and the reduced effectiveness of this mechanism.”
