The social and labour effects of minimum income schemes – evidence from Spain

Abstract

This thesis examines the social and labour market effects of minimum income schemes through the case of the Ingreso Mínimo Vital (IMV), a national policy introduced in Spain in 2020. While minimum income schemes are widely used in high-income countries, there is limited understanding of their impacts beyond narrow poverty metrics, especially in Southern European contexts marked by high unemployment, informality and fragmented welfare provision. The thesis adopts a mixed-methods approach and investigates three critical dimensions: financial wellbeing effects (including both objective material conditions and subjective perceptions), labour market outcomes and recipients' lived experiences of navigating employment decisions under uncertainty generated by the welfare system. The thesis is organised into five chapters. Chapter 1 sets out the contextual and theoretical framework in which the study is situated. Chapters 2, 3, and 4 present the three empirical papers that constitute the core of the research. Chapter 5 reflects on the broader implications of the findings. Chapter 2 uses a Synthetic Control Method to estimate the IMV’s effect on financial wellbeing. While no significant changes are observed in objective measures (poverty rate, poverty gap, mean income) during its first two years of implementation, high-frequency data reveal improvements in households’ perceived financial situation, underscoring the need to integrate subjective wellbeing into policy evaluation. Chapter 3 uses regional variation in pre-existing benefits in difference-in-differences and event study frameworks to analyse IMV’s unemployment effects among single-person households. It finds that increased income support generosity led to higher unemployment – particularly among men, highly educated individuals and those under 50 – while the IMV did not lead recipients to withdraw from the labour force and become inactive. Chapter 4 draws on 31 in-depth interviews with IMV recipients and six additional interviews exploring non-take-up to examine how welfare system uncertainty affects decision-making. It identifies three behavioural responses – “Escapers” who deal with uncertainty by accelerating employment exit, “Diversifiers” who navigate towards alternative benefits and “Stabilisers” who avoid formal work to preserve existing support. These responses are mediated by individual psychological orientations – including risk tolerance, locus of control and time orientation – as well as by certain demographic characteristics. Uncertainty also drives non-take-up among eligible households. This thesis demonstrates that effective social protection requires (1) complementing traditional poverty metrics with subjective financial wellbeing indicators, (2) adopting differentiated activation strategies that recognise heterogeneous employment responses across demographic groups and economic contexts and (3) reducing welfare-induced uncertainty through predictable payments, clearer communication and simplified administration.