Estimating undercoverage and non-take-up of minimum incomes schemes : methodological issues and two national case studies

Alleviating poverty and social exclusion is the most important goal of minimum income (MI) schemes. These schemes provide cash benefits with the aim of guaranteeing a minimum amount of resources to those with insufficient means of subsistence, irrespective of their contribution history. Participation in an MI scheme is subject to a set of conditions on available income and assets. Aside from the issues related to work activation conditionalities, the poverty-reduction effect of a given MI scheme is related to various factors, e.g. a set of the eligibility conditions, the phenomenon of non-take-up (NTU), benefit adequacy and the interplay between MI and other social transfers. The potential for MI to reduce poverty depends on: i) how the poverty definition underlying the eligibility conditions relates to standard poverty concepts, ii) how many of the targeted units actually claim the benefit, and iii) whether the amount received is sufficient to overcome the poverty threshold. Taken together, these dimensions impact on the main output dimensions of the MI scheme, i.e. coverage rate, defined as the share of individuals in need who are entitled and apply to the benefit, and adequacy, defined in terms of a 'decent life' line (e.g. with respect to the at risk of poverty (AROP) line). With respect to eligibility requirements, the coverage of MI relate to where the 'means testing line' is set and the indicators of economic resources used to select beneficiaries. For example, eligibility conditions are very different if they consider income only, or income and wealth in the means test. As for benefit amounts, MI are top-up benefits that complement household resources (incomes) up to a certain threshold. Their adequacy (or generosity) therefore depends on where that threshold is set, i.e. its distance from the AROP line. The focus of this research note is NTU of social benefits, which affects both the coverage and the poverty reduction effects of MI. More specifically, NTU refers to incomplete benefit receipt among those actually eligible for the benefit.