Universal Basic Income has been proposed as a solution to a variety of social and economic problems. It has gained support from both left and right, for different reasons. Some see it as a more efficient social welfare system: others see it as a transformation of the relationship between state, employers and individuals.
Previously it was assumed that any scheme would be too expensive and politically unacceptable, but government responses to the Covid-19 pandemic have demonstrated that it is possible to implement something like a UBI to protect people in a major crisis.
Claimed benefits of UBI are that it could:
- Give people dignity
- Give people security
- Reduce inequality
- Stimulate local economies
- Encourage good work
- Produce social benefits, and cost reduction in other services
- Reduce state administrative costs
- Remove unintended regulatory gaps and poverty traps.
Worldwide there have been a number of pilots. None has been universal, large scale and without time limits (all of which factors impact on the lessons to be learned).
These notes attempt to summarise the claimed potential of UBI and some of the objections (stimulated by the global conference organised in 2020 by the Bristol Festival of Ideas https://www.ideasfestival.co.uk/events/is-it-time-for-universal-basic-income/).
UBI might:
- Give people dignity, by removing demeaning means testing, and ending the division into “strivers and skivers”, or the “deserving” and “undeserving” poor.
- Give people security : protecting people against shocks by pooling the individual risks caused by pandemic, fire, flood, earthquake, automation
- Reduce inequality: the principal beneficiaries are the poorest, while the richest pay it back in tax.
- Stimulate local economies: the poorest spend their money, and do so locally.
- Encourage good work, by giving people the power to say no to bad work, and time to upskill
- Produce social benefits – Finland shows, even in a short term pilot, benefits in education, nutrition, health, domestic violence, divorce
- Reduce state administrative costs – removes the costs of testing eligibility and detecting fraud.
- Remove unintended regulatory gaps and poverty traps.
The questions to answer include:
- Solidarity: does it undermine the principle of social contribution through paid employment and the dignity of labour. This is a question of public attitudes and how proposals are presented.
- Free riding: will a significant number of people choose to contribute nothing. Pilots suggest that this is real, but small, effect.
- Cost: it is necessarily expensive. Conventional economics questions how the state can raise the money required without unsustainable debt. Modern Monetary Theorists see it not as a “debt” but as a redistribution of society’s resources.
- Individual circumstances: some costs vary dramatically between individuals. A separate rate would be required for children and the retired, and a targeted social security system will still be required for disability and housing.
- Alternatives: could the same money (a very large sum) be better used to provide targeted benefits or universal services. All alternatives fail the dignity test. Most fail many of the others.
- Exclusion: how to determine who is eligible, especially in relation to immigrants. UBI could be limited to citizens, with citizenship dependent on a test of residence and contribution.
- Administration: how to get the money to everyone, especially those in greatest need. Neither HMRC nor the National Insurance Number system covers everyone eligible. They would need redesign to provide a basis for making payments to everyone.
- Taxation: if some of the money is to be raised through taxation, how to get the very rich, and global corporations to contribute. This is not a problem peculiar to UBI.
- Level of payment: how to determine the level of payment. The simplest, revenue neutral, option pays £50 per adult per week (55% of single adult Universal Credit, or 76% for a couple on Universal Credit). https://neweconomics.org/2019/03/nothing-personal