Global Economy and regeneration, Finance

Basic Income: Trials and barriers

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Photo by Alexander Grey on Unsplash

Introduction

Basic Income—an unconditional financial transfer from states to citizens—is a radical idea with a long history and a lot of currency in a world confronting structural issues in the welfare state and the economy. If implemented, it would be revolutionary. Divorcing income from the requirement to work would have radical impacts on the labour market; replacing or supplementing the welfare state’s in-kind services (health, education, housing, and so on) with direct cash payments would rewrite the social contract between state bureaucracies and citizens. Yet with the institutions of the welfare state under strain and the labour market quickly evolving, many feel that it is a policy whose time has come.

The policy had a vogue during the last decade, with high-profile advocates like Rutger Bregman and Andrew Yang and closely watched experiments in Finland and Ontario. There are dozens of basic income pilot projects ongoing or recently concluded across the US and the UK, including a particularly prominent experiment in Stockton, California and a small one in the UK split between East Finchley and Jarrow. A database of US-based projects can be found at https://guaranteedincome.us/. On top of these experiments, the success of Covid-era fiscal transfers has been argued to have demonstrated the viability of basic income as a welfare measure and the state capacity to provide it.

Local governments have played a central role in basic income policy development and implementation. Most pilot projects to date have taken place under the auspices of local governments or through partnerships between local and national governments.

This article will discuss best practices for local governments undertaking basic income pilot projects as well as theoretical and practical issues they will need to confront. It will draw on historical examples to illustrate key points.

Universal appeal

Though historically viewed as a left-wing policy, there are many arguments for the necessity or desirability of basic income from across the political spectrum.

One argument has to do with automation. In this argument, technological advances—like, most recently, generative artificial intelligence—will make many jobs obsolete and necessitate some sort of non-work-dependent payment for those whose skills have abruptly become obsolete.

Another argument stresses basic income’s universality, its efficacy in poverty reduction, and its anti-paternalism—rather than in-kind transfers from states to citizens such as health care, education, and housing, which dictate (however loosely) a normative lifestyle, basic income simply puts money in people’s pockets and lets them decide how to spend it.

Another popular case for UBI runs along similar lines and underlines the opportunity that the institution of basic income would permit for governments to cut in-kind services and wasteful bureaucracies.

The costs and benefits of universal basic income against those of the welfare state as it currently stands is also a common argument for its adoption. Making the evidence-based case for basic income is the impetus behind the basic income pilots that have proliferated since the 1970s and especially in the last ten years.

These are just a few examples among many.

At the same time, though, there are many issues with basic income that any serious government would need to resolve. These include:

  • Cost
  • Level of income
  • Eligibility
  • Political considerations – will a change in government scrap the program?
  • Social considerations – will society think it’s fair to give people money for nothing?
  • Economic considerations – will people still work?

On top of that, governments running basic income pilot projects need to be clear about what they want to discover and take necessary steps to safeguard the integrity of the experiment. Basic income has important effects on people’s lives, on society at large, and on other policies and institutions. There will be effects on the labour market, entrepreneurship, education, physical and mental health, reproduction—it’s a long list, and it will all be worth studying.

Cost/level

Basic income can be geared toward different income levels ranging from pocket change up to full sufficiency. Will Stronge, a co-director of the think tank Autonomy who has worked on basic income pilots throughout the UK, argues in an interview with Novara Media that basic income could be brought in at a relatively low level initially to be cost-neutral to the state. Subsequently, it can be made an election issue, with parties arguing for and against raising the level. This democratic process would work out both the economics of basic income—the level of income and cost to the public purse—as well as the political issue of fairness. Societies differ in what they deem fair and the issue of the state giving people money for nothing has hindered the progress of basic income at many points. It is important that a government experimenting with basic income to pay attention to this issue.

What are basic income pilots trying to find out?

Though the point of universal basic income is precisely its universality, almost all basic income pilots have instead taken the form of supercharged, no-strings-attached welfare, limiting eligibility to the poor or underprivileged. Their findings tend toward the anecdotal: this person used the money to escape an abusive relationship, that person used it to go back to school, this one opened a business, that one took time off from work to care for their children, and so on. Though helpful, this is not especially rigorous. It’s no surprise that giving poor people money helps them. Basic income pilots should gather data on the full range of social, economic, and political effects. This is because the question for local government is not “does more money help poor people?” but “how would basic income reshape people’s requirements of us?”

Researchers have noted that impacts on the labour market tend to be smaller than might be expected, while health outcomes markedly improve.

Independence and political interference

Evelyn L. Forget emphasizes that basic income pilots should be run by an independent body that can pursue its research goals with integrity uncompromised by political calculations. In theory, as mentioned, the basic income idea has left-wing, right-wing, moderate, and heterodox arguments in its favour, and could scramble the entire idea of a left-right political spectrum.

Two Canadian examples serve as warnings. In the 1970s, Canada undertook a basic income pilot in two sites in Manitoba, Winnipeg and the rural community of Dauphin, which was the first and to date only “saturation” experiment in which all members of a community were eligible for the grant. The project operated as a partnership between the Liberal federal government of Pierre Trudeau and the left-wing NDP provincial government of Edward Schreyer. The scope and budget for research, originally generous, were steadily cut back over the course of the program, and when Progressive Conservative governments were elected at the federal and provincial levels, the experiment was terminated without so much as a final report. It was only in the 1980s that documents were made available to third-party researchers. Since then, researchers like Derek Hum, Wayne Simpson, and Evelyn Forget have demonstrated its effects on the labour market—minimal—and on health—small, but positive. Still, the lack of resources at the time of the experiment and its premature termination seriously undermined its scientific and political utility.

Much the same thing happened in Ontario in the 2010s. The Liberal provincial government of Kathleen Wynne introduced a basic income pilot in 2018 that involved 4000 participants. It was abruptly cancelled the next year by the newly elected Progressive Conservative government of Doug Ford. (Incidentally, the cancellation of both projects by right-wing governments should not be taken to demonstrate the inherent left-wing nature of basic income. Right-leaning figures like Milton Friedman, Charles Murray, Elon Musk, and indeed Richard Nixon have advocated for it.)

Different policy designs

There are two main forms that basic income policies take: the demogrant and the negative income tax. A demogrant is a payment from states to people. In most proposals, it is a flat payment universally delivered to all eligible citizens or residents of a country. (In spite of the “universal” tag, restrictions of some sort usually apply: for example, minors might be ineligible or receive their demogrants in trust that are released when recipients turn 18.) A negative income tax works through the tax system and pays out money to people whose income falls below a certain threshold.

There are important theoretical distinctions within basic income. A Guaranteed Income or Negative Income Tax is meant mainly as a welfare supplement. True UBI is more revolutionary and has ramifications on a whole society’s labour force, education, and health.



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