“Reducing poverty and inequality through tax-benefit reform and the minimum wage: the UK as a case-study”
The Institute for Social and Economic Research (ISER) at the University of Essex has released a paper titled “Reducing poverty and inequality through tax-benefit reform and the minimum wage: the UK as a case-study” as part of its EUROMOD working paper series.
The paper uses the EUROMOD microsimulation model to examine the impact on poverty and inequality of the proposals put forth in economist Anthony Atkinson’s most recent–and final–book Inequality: What Can Be Done? (2015). Atkinson, himself a co-author of the ISER study, passed away on January 1, during the final stages of preparation of the working paper.
The proposals considered include a “significantly more progressive income tax structure,” a “major increase in the minimum wage” (i.e. a “living wage”), and an increase in the amount of the nation’s universal child benefit, and two types of programs of social transfers: a strengthening of the UK’s social insurance system, and a “participation income”. A participation income–an idea developed and promoted by Atkinson–is similar to a basic income in that it guarantees all members of society a stable and secure livable income. It differs from a basic income, however, in that it is not fully unconditional: as its name suggests, a participation income is subject to a participation requirement. According to Atkinson, however, fulfilling this requirement should not require paid work or looking for paid work; it should also be able to be met through caregiving, community volunteer work, full-time education, or other unpaid but socially valuable activities.
In the simulation study, the authors note that “this participation condition cannot be imposed in our simulation exercise due to lack of data” and thus carry out the study “on the basis that everyone is entitled.” In other words, for the purposes of the working paper, they have chosen to simulate what is effectively an unconditional basic income.
The authors simulate a basic income at the level of £75 per week (or £3,902 per year), which replaces many means-tested programs.
One conclusion of the study is that, in comparison to strengthened social insurance (SI), the set of reforms introducing a participation income (PI) “produces a larger immediate impact on both inequality and poverty”. As the authors summarize, “[i]n achieving this greater impact the PI-focused package affects considerably more households, both positively and negatively: 43% of all households see a substantial gain and 21% a substantial loss, compared to 34% and 10% respectively with the SI-focused alternative.”
Other researchers have also recently used the EUROMOD microsimulation method to model the effects of basic income policies–including Malcolm Torry of the Citizen’s Income Trust (“A variety of indicators evaluated for two implementation methods for a Citizen’s Basic Income”) and, to more skeptical conclusions, the OECD (“Basic Income as a Policy Option: Can it add up?”).
The full working paper is free to download from ISER’s website:
Anthony B. Atkinson, Chrysa Leventi, Brian Nolan, Holly Sutherland and Iva Tasseva (June 2017) “Reducing poverty and inequality through tax-benefit reform and the minimum wage: the UK as a case-study,” EUROMOD Working Paper Series.
Reviewed by Caroline Pearce.
Photo: “The Poverty Trap…” CC BY-NC-ND 2.0 Neil Moralee (taken in Taunton, England)