Minimum income protection in the austerity tide

Marchal, Sarah; Marx, Ive; Van Mechelen, Natascha Article Minimum income protection in the austerity tide IZA Journal of European Labor Studies Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Marchal, Sarah; Marx, Ive; Van Mechelen, Natascha (2016) : Minimum income protection in the austerity tide, IZA Journal of European Labor Studies, ISSN 2193-9012, Springer, Heidelberg, Vol. 5, Iss. 4, pp. 1-20, https://doi.org/10.1186/s40174-016-0052-7 This Version is available at: https://hdl.handle.net/10419/195000 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ ORIGINAL ARTICLE Open Access Minimum income protection in the austerity tide Sarah Marchal 1* , Ive Marx 2 and Natascha Van Mechelen 3 * Correspondence: sarah.marchal@ uantwerpen.be 1 Sint-Jacobstraat 2, M171, 2000 Antwerp, Belgium Full list of author information is available at the end of the article Abstract Scholarly literature is inconclusive on how economic crises impact on minimum income protection. Earlier studies found small increases in the generosity of safety nets at the onset of the crisis. Yet an increased focus on budget austerity substantially altered the social policy context. This paper assesses how minimum income floors weathered the austerity tide following the crisis using purpose-collected data for 23 EU countries. Generally, social assistance benefit trends did not deviate much from pre-crisis growth levels. Yet retrenchment did occur through more technical measures, the combined impact of which was quite significant in some countries. Jel codes: I380 Keywords: Minimum income schemes, Crisis measures, Reforms, EU member states, Social floor 1 Introduction This article looks at what 23 EU countries undertook in the crucial area of minimum income protection (MIP) for able-bodied persons at working age during the first 5 years of what Jenkins et al. (2013) have dubbed the ‘Great Recession’, with a particular focus on the period when austerity started to take hold. This article follows up on Marchal et al. (2014a), in which we assessed how MIP schemes weathered the onset and initial phase of the crisis. That article started from the observation that just prior to the crisis social safety nets were not in the best of shape in Europe. Minimum income provisions had by and large deteriorated during the two decades preceding the crisis, as social policy in many EU countries had come to rest on the idea that work offered the best way out of poverty. Suddenly confronted with unemployment levels not seen in a generation, the relevance of adequate protection arrangements acquired a new level of significance. We did find evidence of efforts to raise the social floor right after the onset of the crisis, a finding also confirmed for other fields of the welfare state (see, e.g. Marchal et al. 2014a; Clasen et al. 2012; Gauthier 2010; International Labour Organization, World Bank 2012; Isik-Dikmelik 2012; Vis et al. 2011). Yet the size of these increases did not point towards a sea change in MIP policies. All in all, these first supportive measures seemed relatively short-lived, as additional efforts became rarer from the end of 2009 onwards. Meanwhile, soaring national debts had harsh impacts on countries’finances and their position on financial markets. A hesitant recovery proved short-lived, a © 2016 Marchal et al. Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 DOI 10.1186/s40174-016-0052-7 double-dip recession ensued and EU countries were confronted with prolonged low, or in some cases negative growth rates. Countries that had to apply for financial support had to follow stringent austerity trajectories. Also elsewhere, European governments were concerned with reducing debts and deficits while EU budgetary control strengthened, through the Excessive Deficit and Macro-Economic Imbalances Procedures. In this paper, we focus on what happened to MIP in the later stage of the crisis, as the austerity tide washed over Europe. In Marchal et al. (2014a), we hypothesized that the changes for the better would be short-lived, as budget austerity was already looming on the horizon. Here, we test that conjecture. This research question is relevant in its own right as social indicators show a continuing need for income replacement and protection benefits (Eurostat 2015). MIP schemes, in the shape of means-tested social assistance benefits, play a key role in preventing severe financial hardship when markets fail and when social security rights are not available, inadequate or depleted. In addition, we know little about changes to MIP schemes and—more generally—social floors. Whereas some authors consider these schemes to be more prone to retrenchment due to their vulnerable target group (Korpi and Palme 1998; Nelson 2007), others hold that given their small budgetary impact and enormous social relevance, social floors will be relatively untouched (Pierson 1994, 1996). Interestingly, this latter position seems to be confirmed by some of the major players within austerity-ridden Europe: the European Commission and the International Monetary Fund (European Commission 2008; International Monetary Fund 2012). The extended time frame of this paper (until 2012, 5 years into the crisis) as well as the relatively large number of countries included (23 EU countries) allow us to assess how MIP fared after the initial crisis shock wore off. We focus explicitly on minimum income schemes, an area that arguably offers a clear indication of the changes at the floor of the welfare state. Moreover, the declined generosity of unemployment insurance arrangements (Clasen and Clegg 2011) and the surge in nonstandard work may have increased the potential significance of minimum income schemes (Immervoll 2012). We build on purpose-collected policy data, capturing in a systematic way and in significant detail policy changes in the area of MIP as these affect generosity, accessibility and obligations. In the next section, we provide a brief overview of the existing literature on crisis measures and social policy change, particularly in the area of MIP. The third section presents the data on which this paper is based and the analytical framework used. We proceed by presenting the measures taken in the countries of our sample and assessing these measures in a cross-temporal and cross-sectional light. Next, we discuss the overall pattern of crisis responses and assess whether some countries distinguish themselves by the type of measures they have enacted. Finally, we conclude. 2 Theory: crisis pressures and crisis constraints This paper sets out to assess changes to MIP taken in the immediate aftermath of the crisis and the austerity years that followed. In the two decades prior to the crisis, minimum income provisions had by and large eroded. By the start of the crisis, minimum income provisions were largely inadequate in nearly all EU Member States (Van Mechelen and Marchal 2013). Confronted with soaring unemployment levels, the relevance of adequate protection arrangements acquired a new level of significance and Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 2 of 20 urgency. The crisis abruptly changed the context which had allowed policy makers to either neglect or ‘activate’minimum income schemes over the preceding decades. Also, it critically undermined the notion that well-functioning labour markets could be relied on to provide adequate incomes for all those capable and willing to work. Yet the literature is not clear on the effects of crisis on social protection, and MIP in particular. The compensation hypothesis holds that as demand for social protection increases in times of crisis, more resources will be directed towards adequate protection (Shahidi 2015). Indeed, empirical studies confirm that in the wake of the crisis, discretionary support was ubiquitous: countries initially turned towards Keynesian measures in the immediate aftermath of the crisis (Marchal et al. 2014a; Vis et al. 2011; Chung and Thewissen 2011). The European Commission and the IMF advocated fiscal stimuli and explicitly mentioned income support as a valid crisis strategy, as increases in transfers to the poor were deemed more likely to feed through in aggregate demand (European Commission 2008; Spilimbergo et al. 2008). In addition, Dolls et al. (2012) argue that discretionary support was relatively more substantial in countries where social protection was less well developed to start with. Yet the challenges posed by the crisis varied greatly across Europe and over time. The crisis morphed from a financial crisis into a recession and then a fiscal crisis between 2007 and 2010, afterwards culminated in a Eurozone crisis (Hemerijck 2012) and, for some states, a crisis of the welfare state (Gough 2011). In a review of initial labour market policy responses in six countries, Clasen et al. (2012) stress that reactions were enacted in two phases. Initially, labour market policy was used to cushion the effects of the crisis on labour markets and workers, albeit with varying intensity. Then, generally from 2010 onwards, fiscal concerns came to the fore, although, again, to a varying extent in the six countries of their analysis. It is worth noting, however, that governments were faced with multiple challenges from the start, competing to some extent for attention and financial resources. Cost containment concerns must have played an important role even during these first years although there was not yet the acute pressure from financial markets which took centre-stage after mid-2010. Indeed, there can be little doubt that austerity later became the main theme, as it became clear that a double-dip scenario was unfolding and a prolonged period of low growth and by implication budgetary restraint would ensue. That is not to say that austerity hit the continent in equal measure. The initial effect of the crisis had been varied, but public finances were also in much better shape in some countries as opposed to others (Farnsworth and Irving 2011). The impact of this austerity shift in more recent years is unclear. Some authors posit that small, residual schemes will survive austerity rounds relatively unscathed, given their small impact on general expenses and important social consequences (Pierson 1994). Alternatively, Korpi and Palme (1998) point towards the importance of political alliances in protecting income replacement schemes from retrenchment. In this regard, social floors are especially vulnerable, as there are no clear organized interest group alliances protecting MIP provisions. It is therefore interesting to ask how austerity might have affected minimum income schemes in particular. These schemes act as a crucial final safety net against poverty but in budgetary terms their cost is relatively limited. Countries typically only spend a Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 3 of 20 small percentage of GDP on final safety net provisions. Outlays on social insurance, education and health generally dwarf outlays on social assistance. Moreover, the institutions making up the infamous Troika, particularly the IMF, strongly favour ‘cost-efficient’means-tested benefits, over more expensive social insurance, let alone universal provisions. It is not unthinkable that even in a context of austerity, and especially in countries under Troika pressure, social assistance was strengthened, possibly at the cost of spending on other social items, or elsewhere. A 2012 IMF Country Report on Greece did not mince words (International Monetary Fund 2012, pp. 19–20): Left unreformed, social benefit settings could also contribute to high reservation wages, frustrating efforts to move workers out of unemployment spells. In this context, the authorities are to identify 1–2 percent of GDP in additional savings, with the focus on discontinuing non-essential programs and improving the targeting of core programs. The largest potential savings would be possible through replacing most existing programs with a single, income-tested minimum income scheme targeted at the bottom 20 percent of the income distribution (with presumptive income also used to control for evasion) However, while strongly targeted means-tested social safety nets make up a relatively small portion of government spending and play a key role as a protection against extreme poverty, there is a political science literature line arguing that such programs are particularly vulnerable to governments under cost cutting pressures because they generally cater to particular, fragmented sections of the electorate, far removed from the all-powerful median voter (Korpi 1980; Korpi and Palme 1998). Programs most in danger of retrenchment are those where interests are least organized or articulated, as opposed to say social insurance programs with stable constituencies represented by powerful stakeholders, for example trade unions. By contrast, the populations living on social assistance tend to be fluid and geographically fragmented. Finally, in a context of a prolonged collapse in labour demand, governments may become more strongly concerned about additional inflows into the system which not only bring additional pressures on tight budgets, but also the risk of chronic dependency and scarring further down the line. 3 Data and analytical framework 3.1 Data In this paper, we track changes to MIP in the aftermath of the crisis. We take a broad approach to MIP: we look at the combination of benefits that guarantee the absolute social floor in each country in order to compare functional equivalent income protection benefit packages. Minimum income benefits are beyond doubt the most important component, but a substantial number of countries complement minimum income benefits with cost-compensating benefits, such as housing or heating allowances and child benefits. To this end, this paper builds on the CSB-MIPI dataset, an expert-sourced dataset that covers in detail the institutional arrangements relating to different MIP schemes. The present paper focuses on the MIP arrangements catering for able-bodied unemployed falling outside the scope of the insurance scheme. Information is available Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 4 of 20 for 23 EU countries, 1 since 2001. The data set includes annual time series on gross benefits as well as detailed model family simulations that grasp the interplay of various schemes and measures in providing a minimum income package to various types of households. 2 It furthermore includes information on activity requirements for minimum income recipients. Most importantly for our present purposes, the 2010 and 2012 waves inquired after policy changes impacting on the minimum income benefit packages that were implemented since the onset of the crisis, gathering information on the crisis measures taken in the period 2008–January 2012. The data is provided by national experts on the basis of detailed questionnaires and instructions. Many have participated in earlier studies on social benefit packages (Bradshaw and Finch 2002; Eardley et al. 1996), or currently participate in EUROMOD. More information on the methodology and content of CSB-MIPI, as well as a list of the national experts contributing to this data set, can be found in Van Mechelen et al. (2011). By first defining the group at risk (here the working-aged able-bodied who fall outside the social insurance scheme and are without a job), equivalent schemes are compared across countries, instead of schemes that merely have a similar name. In most European countries, this target group is catered for by the general final safety net, i.e. the minimum income scheme that provides support to all those who have passed the means test. In the United Kingdom, Ireland, Germany, Finland and Hungary however, this target group receives support from a categorical income support scheme (see Bahle et al. 2011). 3 In Austria (until September 2010), Italy and Spain, the minimum income scheme is a subnational responsibility, whereas in Sweden municipalities have a large degree of autonomy. CSB-MIPI contains information for respectively the localities Vienna, Milan, Catalonia and Stockholm. CSB-MIPI includes policy changes that impacted on the net disposable income of minimum income recipients, i.e. it includes changes in additional support if minimum income beneficiaries are entitled, even when this additional support is provided through a different scheme, as well as conditions tied to minimum income receipt implemented in the period 2008–start 2012. Ideally, we would focus on those measures taken in response to the crisis (see Marchal et al. 2014a). However, as the period under consideration is quite large, the distinction between measures that are driven by the crisis, are adjustments to a changed socio-economic context or would have been enacted anyhow, becomes more and more blurred. Therefore, this paper provides an overview of changes enacted since the onset of the crisis that were relevant for households relying on minimum income benefits. The focus is on policy changes that require actual intervention. For instance, regular uprating of the benefit based on an indexation mechanism is not included in the overview. In order to provide an overview as complete as possible, measures provided by the CSB-MIPI respondents were crosschecked with the OECD Benefits and Wages series (OECD 2011), the ILO/World Bank Inventory of policy responses to the global financial and economic crisis of 2008 (ILO/World Bank 2012) and MISSOC (2013). Where possible, we indicate in the main text where measures are especially unlikely to have been related to the crisis context, as per assessment of the respondent or evidence of a clear preparation before the onset of the crisis (and implemented without further modification or reference to the crisis) in secondary sources. This distinction is however more robust for the first crisis years. Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 5 of 20 An important consideration is that various authors have forcefully argued that retrenchment measures are more likely to occur through less visible administrative or technical adaptations, or even through non-intervention, in order to raise less resistance (Pierson 1996). In the context of MIP, this may occur through non-interventions such as skipping indexation, or small, technical changes such as tinkering with eligibility parameters. Our time series of gross minimum income benefits allow gauging nominal increases or standstills. We also compare trends in gross benefits to more substantively relevant denominators like prices and average wages. These, however, are influenced by other factors than policy alone. Changing access and behavioural conditions generally require explicit legal changes, although these are often of a rather technical nature. The data employed in this paper allow in principle to capture such changes. Also in this field, creeping retrenchment is possible by not adjusting nominal eligibility thresholds. This kind of retrenchment is harder to gauge, and the data employed in this paper may fail to fully take account of this. When there is a link between the benefit levels on the one hand, and the eligibility thresholds on the other, creeping retrenchment in benefit levels may also point towards a tightening of access. 3.2 Analytical framework: assessing changes We structure our assessment in line with the framework we adopted in Marchal et al. (2014a). Following Yerkes and Van der Veen (2011), we assess changes in the field of MIP from a social citizenship perspective. This perspective allows for a rather nuanced assessment of different dimensions of MIP that are relevant for its beneficiaries. Social citizenship is constituted by social rights and obligations (Kvist 2007; Marshall 1950). According to Kvist (2007), social rights are manifested through different configurations of benefit characteristics, i.e. generosity of benefits and eligibility criteria. The generosity of benefits refers to the legally guaranteed benefit levels, whereas the eligibility criteria define the pool of persons who may access the benefit. Obvious examples of eligibility criteria are nationality and residence requirements and means tests. However, the shift of social policy measures towards activation has by now been extensively documented (Aurich 2011; Marchal and Van Mechelen 2014b; Immervoll 2012; Kenworthy 2010; Eichhorst and Konle-Seidl 2008). Obligations or behavioural requirements of beneficiaries to ensure continued benefit receipt have been strengthened and made more explicit and should therefore be taken into account when assessing changes in social citizenship. Table 1 shows our operationalization of each of these dimensions. Two important caveats apply. First, we do not include the value of in-kind benefits and (free) services to which minimum income recipients may have access. Quantifying such measures is fraught with difficulties. First, provision is often only guaranteed at the local level, leading to large intra-national differences in presence and level. Second, their face value depends heavily on actual use that is determined by the specific characteristics of each beneficiary unit. Third, some of these measures are only discretionarily awarded, therefore not matching with a rights-based perspective. Second, a problem that is especially relevant for assessing the conditionality of benefits is how to treat possible (and probable) discrepancies between implementation and Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 6 of 20 regulation (Clasen and Clegg 2007). Here, the focus is on statutory rights and obligations. In this paper, we monitor legislative changes to any of these dimensions in order to assess how minimum income floors have shifted during the “age of austerity”.In addition, we assess the combined impact of these legislative changes on the net disposable income for the aforementioned family types. This allows assessing the effects of the interplay of changes in generosity and access (at least to the extent the underlying assumptions of the simulations allow for detecting changes in eligibility criteria). In line with other crisis literature, we assess whether these changes are merely parametric changes to minimum income provision, or whether they point towards a structural change. Are the institutional characteristics of MIP changed in such a way that its impact will likely be felt for years to come, on multiple dimensions and changing the underlying logic of the scheme, or do we mainly see tinkering at the margins? 4 Changing minimum income protection schemes 4.1 Crisis measures affecting minimum income recipients This section aims to provide an overview, as complete as possible, of the different measures that impacted on the situation of social assistance beneficiaries. We identify measures or changes as relevant, as they impact on one or more of the dimensions of social citizenship (generosity, access and behavioural conditionality) guaranteed to minimum income beneficiaries. 4.1.1 Benefit generosity 4.1.1.1 Gross minimum income benefit levels In the pre-crisis period, nominal gross benefits generally increased, as most countries (either or not automatically) adjust gross benefits levels for price rises at regular intervals (Van Mechelen 2013). There are only a few exceptions (Ireland, Bulgaria, Estonia, Lithuania, Latvia and the Slovak Republic). However, in most of these countries, governments did in fact issue periodic increases in the years before the crisis. Significant nominal decreases of gross benefit rates were rare and occurred only in the Czech and the Slovak Republic. Both were part of farreaching reforms of the social safety net. Table 1 Operationalization of the dimensions of social citizenship Rights Obligations Generosity Accessibility Conditions for benefit receipt Trends in gross and net benefit levels (nominal, real, % average wage) Description of policy measures impacting on access/eligibility conditions (including time limits) to minimum income benefits and other income components Description of policy measures impacting on the conditions for benefit receipt Crisis has also impacted on the denominators Trends in net benefit packages Comparison with previous trends in benefits allows to assess hidden retrenchment Description of first round crisis measures impacting on other income components Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 7 of 20 During the first crisis year(s), nominal growth rates did not slow down (see Fig. 1). In 2008–2009 (coinciding with the brunt of fiscal stimulus programs), benefit levels in fact increased, in over half of the countries of our sample, exceeding the average increases during the pre-crisis period. Growth rates decelerated and even halted later on in the crisis. This is especially the case in those countries without indexation mechanism. However, a substantial number of countries also skipped indexation (see Table 2). In some cases, this was a consequence of low inflation, especially in Sweden and Finland. In the latter country, skipping indexation in 2010 actually meant a real increase of benefit levels. Moreover, Finland subsequently implemented a substantial raise in minimum income benefits. In Germany, low inflation triggered in 2010 a ‘Schutzklausel’that protects certain benefits from a nominal decrease when inflation is negative. Yet in other countries skipping indexation should be understood as an austerity measure. This was the case in Romania, Slovenia, the Slovak Republic, Portugal and Spain. Moreover, in a number of countries, indexation mechanisms changed, leading to a (presumably) less generous indexation, for instance in Germany and the United Kingdom in 2011. An exceptional development occurred in Ireland, where minimum income benefits were actually cut by around 4 %. Also in Portugal, the gross benefit for a couple decreased, as part of a far-reaching reform of the minimum income scheme. In Italy (Milan), minimum income benefits depend on the available budget and on social workers’assessment of the situation. As the crisis gained foothold, the (estimated) actually awarded benefit amounts decreased. Finally, Hungary cut base rates by 20 %. It should be noted that similar nominal decreases were rather exceptional in the years before the crisis. Many of the nominal increases observed in the first crisis years translate in substantial real hikes in most countries. This is partially due to the lagged reaction of indexation mechanisms to in some cases quite substantial pre-crisis increases in consumer prices. Yet these automatic increases were further reinforced by additional increases of gross benefits in a substantial number of countries (see Table 2). Later on, the deceleration in nominal growth or the outright skipping of indexation led in some countries Fig. 1 Average trend in gross social assistance benefit for a couple, EU27, 2004 = 100. Note: time series for Cyprus, Malta, Hungary and Bulgaria were not available. Greece does not have a minimum income protection scheme for able-bodied persons of working age. Source: CSB-MIPI Version 3/2013 (see Van Mechelen 2011); OECD (2014) Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 8 of 20 where an adequate indexation mechanism is lacking, but also other countries chose to increase gross benefits over and above indexation. Later on, these additional increases become rare. In addition, from 2010 onwards, more and more countries take measures that have a negative impact on minimum income benefits. Also additional allowances were increased in the first crisis years. Often, these were increases of child-related benefits, or actual one-off crisis premiums. Again from 2010 onwards, additional increases become less common and (some) negative measures start to appear. Fig. 3 Real trends in net disposable income of a household relying on minimum income benefits, averages of family types with and without children, June 2009–January 2012. Note: see note to Fig. 2. Source: CSBMIPI Version 3/2013(Van Mechelen et al. 2011), HICP from Eurostat (2015) Fig. 4 Number of countries implementing positive/negative changes affecting minimum income beneficiaries in the period 2008–start 2012. Source: CSB-MIPI Version 3/2013 (Van Mechelen et al. 2011) Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 15 of 20 The pattern is somewhat different for access conditions. It seems that only rarely governments sought to pursue an expansionary policy by increasing the pool of possible beneficiaries of minimum income benefits or relevant additional allowances. Some countries did tighten access conditions to additional benefits or the minimum income protection scheme as part of an austerity strategy from 2009 and 2010 onwards. It is however not very clear what the impact is on the pool of eligible persons. Finally, Fig. 4 shows that changes to behavioural conditionality related to minimum income receipt do not follow this expansion-retrenchment pattern at all. This is mainly because crisis measures generally did not impact on conditionality. Governments did increase investments in activation programs, but the actual conditions tied to minimum income receipt were mainly left unchanged by crisis responses. Measures that were prepared before the onset of the crisis were however implemented. In line with trends prior to the crisis (Weishaupt 2013), these measures generally tightened conditionality. Interestingly, most of the negative changes introduced in the period 2008–start 2012 are technical in nature. This is most clearly seen in the changes to MIP standard rates from 2010 onwards. Whereas the positive changes in 2009 were increases of standard rates, actual nominal decreases are very rare. Rather, governments introduced measures such as the skipping of indexation for inflation, changing the indexation mechanism or the introduction of a benefit cap. When nominal benefit rates did decrease, this was generally in the context of broad reforms that introduced new equivalence rates with different consequences for particular family types. In this regard, it is also noteworthy that the rather technical and invisible access conditions were often not loosened in the first crisis, yet they were tightened in a number of countries from 2009 onwards. Our findings contribute to a number of additional issues raised in the literature. For one, it is clear that the small increases observed right after the onset of the crisis did not translate in higher minimum income protection packages. In fact, the austerity tide—although perhaps less severely than feared—has impacted on minimum income schemes in quite a number of countries. In order to shed light on theoretical questions whether minimum income schemes are more vulnerable to these retrenchment measures than contributory-based income replacement schemes (Korpi and Palme 1998; Pierson 1994; Nelson 2007), a more complete comparison to changes in unemployment insurance schemes would be needed. Second, Figs. 2 and 3 show a wide variation in the size (and direction) of changes to the generosity of social floors. Whereas a study of the determinants of the direction of crisis-induced change is outside the scope of this article, a cursory reading of Fig. 2 does seem to corroborate findings by Shahidi (2015) and Armingeon (2012) on the primacy of fiscal considerations over and above ‘traditional’explanations, such as the left-right inclination of the government and institutional factors. We do indeed observe the largest decreases in countries where the crisis has hit hard, most importantly Ireland, Portugal, Hungary and Italy. Yet there are some exceptions, and in future research, we aim to look further into the combination of factors explaining variation in crisis and austerity reactions in the field of minimum income protection. Third, a number of authors have raised the question whether crisis-induced change opens up a window of opportunity to change the course of path-trapped social security schemes (Starke et al. 2013; Castles 2010). Our focus on minimum income schemes, that are relatively easy to alter, does not allow us to derive stark conclusions regarding Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 16 of 20 this conjecture. Nonetheless, most measures that affected social citizenship taken after the onset of the crisis were rather incremental. Potentially some of the austerity measures implemented from 2010 onwards will in the longer run substantially impact on the final safety net. For instance, changing indexation parameters will likely result in less generous benefits (Joyce and Levell 2011). Some countries did introduce measures coined by respondents or national sources as reforms. A rather common characteristic of these reforms is their focus on increasing conditionality and financial work incentives. This focus does not seem out of line with the pre-crisis trend towards increased conditionality and activation efforts (Eichhorst and Konle-Seidl 2008; Weishaupt 2013). Yet other reform measures, especially changing equivalence scales and tightened access criteria, generally introduce rather profound changes with regard to the other social citizenship dimensions presented above. It remains however difficult to assess whether these changes were triggered by the crisis or not. 6 Conclusions Social safety net provisions in Europe had generally suffered two decades of relative neglect and erosion prior to the crisis, legitimized by the idea that work and not welfare was the best protection against poverty. The result was that minimum income protection levels were at levels considerably below widely used adequacy benchmarks, including the EU’s own 60 % of national median equivalent disposable income threshold. The crisis smashed the notion that people capable for work ought to be able to make a decent living if they are doing enough to find and accept work. The initial phase of the crisis did indeed trigger some changes for the better—expansionary and supportive measures were the general pattern. But as this paper shows, these changes proved short-lived. Retrenchment measures become evident later on in a substantial number of countries. Whereas the expansionary measures observed in the first crisis years generally centred on increases in benefits, retrenchment measures were more often enacted through more technical changes. Examples include as follows: skipping indexation, tightening the means test, abolishment or decrease of additional benefits (for instance child benefits). Few countries actually cut minimum income benefits. Moreover, with the exception of Hungary and Ireland, cuts were mainly part of a more encompassing reform that changed base rates as well as equivalence rates. This is broadly in line with the retrenchment literature where it is argued that retrenchment is often pursued through less visible, apparently technical changes. The long-term impact of these technical changes is hard to predict. For now, time series and standard simulations of changes in net disposable income packages show relatively modest impacts in the period 2009–2012. Yet some of the technical changes may carry the seeds for an incremental path departing process, such as new, less generous indexation mechanisms or different equivalence scales. These changes may have far-reaching implications in the longer run, although their immediate impact is rather modest, not in the least because they may impact on the notion of what a social floor should actually entail. Nonetheless, in some countries, such as Hungary, Italy, Portugal and Romania, the combined effect of various retrenchment measures already now weighs heavily on minimum income beneficiaries. An important common denominator of the reforms enacted in the wake of the crisis was the attention to behavioural conditionality requirements. This focus reaffirms a Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 17 of 20 policy trend apparent in the pre-crisis years, but in a largely different macro-economic context. An open question for further research is how this focus on activation will impact on the situation of minimum income recipients in a context that starkly differs from the pre-crisis employment high. This is all the more relevant as we possibly have not yet seen the end of retrenchment in social protection schemes in Europe. The UK government for example recently announced cuts to the Universal Credit—the main income protection scheme for ablebodied persons of working age, be it in or out of work. Budgetary concerns where a stated motive. Similarly, only a couple of months after the implementation of the Portuguese 2010/2011 reform, the Portuguese government implemented a further tightening of equivalence scales within the minimum income scheme. Other countries have announced changed to minimum income schemes. In this regard, the description of policy reforms provided in this article, may serve as a cautionary tale: the common denominator of most reforms were an increased focus on activity requirements, coupled to a focus on savings and stricter equivalence scales. The obvious fact that minimum income schemes are considered a viable target for austerity measures by national governments is all the more disquieting as social floors within the EU were largely below the poverty threshold to begin with. This stands in stark contrast to the calls by both the European Commission (2008) and the International Labour Organization to ensure adequate social floors (International Labour Organization, 2012). Whereas the continued focus on work incentives and activity requirements by the national governments could to some extent be considered in line with these organizations’concern about well-functioning labour markets and unemployment, the inadequate benefit levels and restricted access conditions are not. Endnotes 1 EU27 excluding Cyprus and Malta. No information available for Denmark. In Greece, no minimum income scheme for the able bodied of working age currently exists. 2 More in particular, standard simulations cover the income situation of a single, a couple, a couple or a lone parent with two children aged 7 and 4, and a lone parent with a young child. 3 A list of the names of the benefit schemes covered is provided in Van Mechelen and Marchal (2013). 4 Both the Slovenian as the Czech activation-related changes to minimum income benefits were already included under changes in minimum income benefits. 5 A 35-year old able-bodied single minimum income recipient, no own income; couple without children, couple with two children, aged 7 and 14; lone parent with two children, aged 7 and 14. Competing interests The IZA Journal of European Labor Studies is committed to the IZA Guiding Principles of Research Integrity. The authors declare that they have observed these principles. Authors’information SM is a PhD student at the University of Antwerp. IM is a professor at the University of Antwerp and a research fellow of IZA. NVM is a post-doc researcher at the University of Antwerp. Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 18 of 20 Acknowledgements SM gratefully acknowledges a PhD scholarship from the Research Foundation Flanders. The authors would like to thank the participants of the ECPR General conference (Bordeaux, 5–7 September 2013) and the ESA Crisis, Critique and Change conference (Turin, 28–31 August 2013) for helpful suggestions and comments. The authors are solely responsible for any remaining shortcomings and errors. Responsible editor: Kahanec Author details 1 Sint-Jacobstraat 2, M171, 2000 Antwerp, Belgium. 2 Sint-Jacobstraat 2, M181, 2000 Antwerp, Belgium. 3 Sint-Jacobstraat 2, M178, 2000 Antwerp, Belgium. Received: 10 April 2015 Accepted: 5 January 2016 References Armingeon K (2012) The politics of austerity: what political parties can do and what markets want. 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Submit your manuscript to a journal and benefi t from: 7 Convenient online submission 7 Rigorous peer review 7 Immediate publication on acceptance 7 Open access: articles freely available online 7 High visibility within the fi eld 7 Retaining the copyright to your article Submit your next manuscript at 7 springeropen.com Marchal et al. IZA Journal of European Labor Studies (2016) 5:4 Page 20 of 20