Foto: Kaspars Krafts, F64
I understand that politicians have agreed that the guaranteed minimum income (GMI) should be cut from 45 lats to 35 lats, or, from next-to-nothing to still next-to-nothing but still a considerable decrease in relative terms for those involved, namely 22%.
The reason should be that the lavish 45-lats GMI discourages people from seeking work. Perhaps it does but how do we know?
I am all in for incentives to maximize the size of the labour force but one could just as well argue that such a low GMI, whether 45 lats of 35 lats, makes it difficult if not impossible for recipients to maintain their skills, let alone improve them. These people certainly cannot afford new education; hey, they can't even afford to buy a book!
This is a typical textbook economics issue: One can argue (and show with some neat graphs that I will spare the reader for) that a lower GMI can lead to a higher labour supply as well as a lower labour supply. How to resolve which way it will go? Research - compile data and find out.
