Universal Basic Income: A Realistic Solution (BIEN)

By Malcolm Torry of the Basic Income Earth Network (BIEN)





Introduction


A Universal Basic Income (UBI) – also called Basic Income, Citizen’s Income, or Citizen’s Basic Income – is an unconditional income paid to every individual. The amount received would not depend on someone’s income, wealth, household structure, employment status, or anything else. Every individual of an age would receive the same amount, every week or every month, automatically. Older people might receive more than working age adults, younger adults less, and less for children. Apart from someone’s age, there would be no conditions whatsoever: so everyone of the same age would receive exactly the same income, unconditionally. The income could start at someone’s birth, and be turned off at their death. The simplicity is the idea’s main virtue and its many useful effects.



Is UBI a realistic solution towards allieviating income inequality, homelessness, economic hardship, absolute poverty?


This is two questions. UBI is realistic, in the sense that every country could afford to implement the policy. For instance, by reducing subsidies on goods, by charging tax on fossil fuel use, or by adapting current tax and benefits systems, any country could easily pay for the program. Microsimulation research on illustrative UBI schemes has shown the last option to be entirely feasible for the United Kingdom. Similar research is likely to show the same for other developed countries. Less developed countries might need to reduce subsidies and/or implement new taxation.


But would UBI be a solution to the issues facing our societies and our economies? Here is a clear distinction that needs to be made between UBI – which is always an unconditional income for every individual – and UBI schemes. A UBI scheme is a UBI, with the levels specified for each age group, the funding method specified, and changes to existing tax and benefits systems specified in detail. There are of course many possible UBI schemes. It is always a UBI scheme that would be implemented: which means that it is the UBI scheme that would need to reduce poverty and inequality.


As microsimulation research in the UK has shown, this is perfectly possible to achieve without requiring additional public funds (by establishing a genuine UBI and adapting the current tax and benefits systems). Each country will be different, so research in each country would need to be carried out to find feasible UBI schemes that would reduce both poverty and inequality.


And UBI would only ever be a partial solution to homelessness. Homelessness has multiple roots, and only an increase in the provision of homes can solve a shortage: but one useful effect that a UBI would have would be that it would be an entirely secure income for every individual, so there would be a lot fewer evictions caused by sudden loss of earnings and the failures of complex and often punitive benefits systems to provide an income when it is needed.


What would happen to existing benefit/entitlement systems under UBI?


Whether existing benefits systems can be abolished depends on the existing tax and benefits systems of a country. Research in the UK has shown that a revenue neutral UBI scheme (that is, one with zero net cost) would not be able to abolish existing means-tested benefits without pushing far too many low income households into deeper poverty. This leaves the UK with two options: Either finding additional funds so that the UBI can be increased to a level that would allow means-tested benefits to be abolished while leaving no low income household worse off, or, keeping means-tested benefits and reducing them. Additional funding is not very likely in the current economic circumstances, so existing benefits will need to be retained and reduced. Research has shown that this would take a lot of households off them and would bring a lot more households closer to coming off them.


In short, each country would need to conduct its own research to discover whether it would be possible to abolish existing benefits if a UBI at a feasible level were to be implemented.


Will UBI encourage or deter indiviudals from climbing the ecnomic ladder or even seeking employment?


A very high UBI could have a disincentivising effect on employment. However, a UBI at a feasible level could increase employment incentives for anyone currently on means-tested benefits. If someone is on means-tested benefits, and their earned income rises, the benefits income falls and they can little better off. If UBI takes them off means-tested benefits then the only withdrawal would be income tax. There would be more incentive to seek increased earnings, new skills, and better jobs. And because UBI would be completely secure, there would be more of an incentive to start a business, as there would always be a layer of income that was not at risk: an effect well illustrated by pilot projects in Namibia and India. The combination of these different effects would make it a lot easier to climb the economic ladder.


We don’t know the effect that Artificial Intelligence, robotics, and automation will have on employment.


Previous rounds of automation have destroyed jobs, changed jobs, and created jobs. What we do know is that there will be a lot of economic turbulence.



The secure layer of income that a UBI would provide would help to protect families against the risks that this poses to household disposable incomes.


What would be the economic impact of a UBI system?


If the UBI scheme reduced inequality, poorer households would have a higher propensity to spend additional income on consumption than wealthier households and the economy would grow. The real risk is that this could increase carbon emissions. This is why a useful combination would be a fossil fuel tax that was used to fund an increased UBI. This would both reduce fossil fuel use and enable poorer households to pay the increased price of fuel. Canada is already experimenting with something similar. The employment and new business effects discussed above would also have a useful economic effect.



So yes, UBI could be a realistic if sometimes partial solution to many of the problems facing our societies and economies.


Further reading


The UK research referred to: https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em12-17a Updated research available soon.

Malcolm Torry, Why we need a Citizen’s Basic Income, Policy Press, 2018

© 2018 by Zink Publishing Inc.

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