United States: Andrew Yang hits the stage at CNN Presidential Town Hall

https://www.youtube.com/watch?v=nz4ZflSFVrs

Andrew Yang, the only Democrat presidential candidate to the US elections in 2020 announcing a basic income policy in his platform, has been on CNN Presidential Town Hall, solo featured on the latest 14th of April.

At this televised campaign event, Yang was clear about his intentions to help Americans transition through these present times of great transformation and uncertainty. Central to his campaign is the Freedom Dividend policy (unconditional 1000$/month for every adult starting at 18) which, according to him, will be a key policy to help people to retrain, gain other skills and stay active in entering this new age of automation. He points out other potential benefits to be gained from the Freedom Dividend, such as deep reduction of bureaucracy, paternalism in social services, stigma for beneficiaries and social security running costs. He also referred the increased leverage power accruing to individual workers and unions, if they had such a thing as the Freedom Dividend to fall back onto.

In the show, he was faced with most of the important questions asked to any presidential candidate, namely related to policies in economy, employment, health, education, housing, drug use and possession and gun control. The environment was, however, a clear absence in this CNN’s Town Hall show, which could be an indication of what really are the priorities in the minds of American people. Specifically, speaking about the employment issue, Yang was direct to say that “the goal should not be to save jobs, the goal should be to make our lives better”, which is very different from what other Democratic candidates (e.g.: Bernie Sanders) are saying (Federal Jobs Guarantee). Nevertheless, Andrew Yang is certain that the Freedom Dividend “does not solve all problems for all people, but it will move us in the right direction”.

Faced with the inevitable question on how to pay for the Freedom Dividend, Yang underlines the importance of “we have to go where the money is”. As an experienced entrepreneur, and specifically one related to technology, Yang has an idea about how much money tech giants (e.g.: Facebook, Uber, Google, Amazon) have, and how much they owe in federal taxes. So, according to him, effectively taxing these companies will make up for the most part of the Freedom Dividend cost, plus any savings possible from eliminating obsolete social benefit schemes (due to the implementation of the dividend).

He also attributes the rise of hate ideologies (e.g.: white supremacy) as a result of a dysfunctional economy, because poor, stressed people are easier to scare into these hateful discourses. Removing, therefore, “the economic boot off people’s throats” will definitely help diminish these polarizing hate agendas which, according to him “have no place in our society”. Yang also believes the Freedom Dividend will improve people’s chances of getting better housing conditions (although refers municipal intervention as important, in order to provide for affordable housing) and better school performance. On the latter, he cites research that says 75% of kid’s performance at school depends on non-school factors, among which one of the most important is economic condition. Hence, the Freedom Dividend can also help kids learn more, and better.

More information at:

André Coelho, “United States: Andrew Yang is not only talking about basic income: if elected, the idea is to implement it”, Basic Income News, 15th March 2019

Jason Burke Murphy, “Unites States: Andrew Yang reaches milestone: likely to be in a televised debate”, Basic Income News, 19th March 2019

United Kingdom: The interest for a basic income trial in Sheffield is building up

United Kingdom: The interest for a basic income trial in Sheffield is building up

Wall painting in Sheffield.

The Universal Basic Income (UBI) Lab Sheffield, a campaigning group working from the city of Sheffield, northern UK, has written to all the 84 city councilors in the region, as a move to have them support a local basic income experiment.

The main driver behind the initiative is to “ensure that nobody is economically left out, and that nobody lives in poverty”, in the words of Sam Gregory. This basic income experiment, as proposed by the UBI Lab Sheffield, would be applied in one of three ways:

  1. Removing conditions from social benefits from around 4000 ill or disabled people (while another 4000 people group act as control group) (costing around 18 million £);
  1. Paying 130 £/month (Note 1) to 4000 adults living next to each other (for instance, in a neighbourhood) (costing around 23 million £);
  1. Applying different tax and benefits rules to a 4000 people group, whereas one subset would get, unconditionally, 6000 £/year, disabled or retired people would receive benefits above that level, and children would benefit from a smaller amount. Costing 60 million £, the test pilot would be funded by a new income tax (applied only within that 4000 people group), ensuring that all those earning less than 25000 £/year would see a net raise in their income.

This experiment is set to last for three years, according to the UBI Lab Sheffield’s design strategy. The idea is to measure several outputs, including but not limited to participation in the (paid) workforce, such as broader activity and personal care. Interviews and other qualitative studies would also be a part of all options, as described above.

Campaigners consider Sheffield a promising basic income test ground, but recognize that the city has no funding options for such an experiment. So, it would have to depend on central government financing, which can be more difficult, considering all the political agitation at the moment due to the Brexit-related issues (Sheffield was one of Britain’s cities to marginally vote pro-Brexit). However, the Labour Party is strong in Sheffield (holds 53 out of 84 seats in the city council), and its candidates for the upcoming elections in May already asked UBI Lab Sheffield for information. Sheffield Green Party is also supporting an UBI experiment in the city, as part of its campaign to the city council elections.

Note 1 – The National Living Wage in the UK is around 1300 £/month (calculated from hourly living rate for workers aged 25 and over).

More information at:

Mike Brown, “Universal Basic Income: Brexit-Voting Sheffield May Be England’s First Test”, Inverse, April 1st 2019

Mark Bryan, Jason Leman (lead authors), “Proposal for a Sheffield pilot“, UBI LAB Sheffield, March 2019

Canada: Alberta Liberals propose transversal tax breaks, a basic income pilot, and investments fueled by oil revenues

Canada: Alberta Liberals propose transversal tax breaks, a basic income pilot, and investments fueled by oil revenues

David Khan. Picture credit to: Sylvan Lake News

This Monday, April 12th 2019, David Khan, leader of the Alberta Liberals, announced a series of fundamental changes to the way social policies are practiced in this Canadian province, if elected next Tuesday (Alberta Votes 2019). These changes include large investments in oil-related infrastructure, public and health services, eliminating or considerably reducing income tax, and setting up a basic income pilot test.

The party’s platform ranges a large number of issues, from finance, employment, poverty, energy, democratic reform, down to indigenous relations and drug possession. However, the Alberta Liberals are clear in their overall message: if elected, they are here to put the economy growing. That pervading principle of contemporary economics has been contested extensively, but (economic) growth still attracts strongly, and David Khan is focused on achieving it.

Khan boldly states: “I encourage all Albertans to read our policies because we have the best pro-growth fiscal strategies of any party in this election.” In this case, it means to move from a tax policy based on income tax, to another resting on an 8% Value Added Tax. Even though that number is 60% below the standard VAT rate of many European countries (generally above 20%), Khan is certain “it’s the least harmful way of collecting tax”. That would cumulate with a generalized income tax break, effectively exempting 70% of the Albertian population from paying income tax.

Revenues, then, for governmental investments such as mental health services, social health care, affordable housing and, the basic income pilot test, would mainly come from energy-related commerce, particularly oil, which if an expansion does happen, might lead to more professionals with experience in the oil industry, looking to Find Work in Canada or possibly find work in other similar projects. There might however be some possible backlash. That is professed at the same time as strictly defending the environment, where “we will not tolerate industry damaging our future and our children’s future” can be read on the party’s platform first text page. However, it seems to go unnoticed that the oil industry’s record on environmental protection has not been admirable, to say the least. The idea is to restart the Trans Mountain and the East pipeline projects, both stalled for a long time due to constitutional and environmental reasons. For some reason these projects have been kept waiting, or stored in place for later elimination, because, at put by Jon Biger Skjærseth and Tora Skodvin in their book on climate change and the oil industry, “these companies share the same core aim of selling as much oil and gas as possible at the highest possible price and the lowest possible cost within the same global market”. And, of course, eventually all that oil and gas gets burned, adding up to the already alarming CO2 levels in the atmosphere.

As for the basic income test pilot, the Alberta Liberals are invested in rolling it out, since they “support the creation of a Basic Income.” The arguments for such a belief come from reduced bureaucracy, financial security for all and the elimination of jobs through automation.

More information at:

Sarah Rieger, “Alberta Liberal platform promises basic income pilot project, no income taxes for most“, CBC News April 8th 2019

Damian Carrington, “‘Worrying’ rise in global CO2 forecast for 2019“, The Guardian, January 25th 2019

Study Finds Issues with Universal Basic Income for Developing Countries

Study Finds Issues with Universal Basic Income for Developing Countries

Picture credit to: Biodiversity & Community Health.

Measuring income in developing countries

A study published in the National Bureau of Economic Research in the Fall examines cash transfer programs across a range of developing countries and uses household data from Indonesia and Peru to examine the effectiveness of targeted transfer programs in those countries. The study explores the costs and benefits of targeted and universal cash transfer programs, and the different circumstances that developing countries face that affect the performance of different transfer schemes.

One of the key challenges identified for developing countries that affect the viability of a universal basic income (UBI) are the sizes of the informal sector (1) and the resulting revenue sources. Developed countries largely get their revenue from income taxes (2), but given the size of the informal sector in many developing countries, the bulk of government revenue comes from sources like consumption taxes and official development assistance (ODA), with the latter in some low-income countries accounting for more than half of that country’s operating budget.

Effectively targeting the poor for cash transfer means that you must have a way to reliably measure income and means, and therein lies the problem for many developing countries. In Indonesia and Peru, 88% and 79% of the employed populations are reported as below the tax exclusion threshold, and therefore do not pay income taxes. This is not necessarily to say that upwards of 80% of true income is below the income tax threshold, but it shows the problems associated with informality and lack of information. In any case, it complicates the means-testing portion of targeted transfer programs like those in the US.

In lieu of directly measuring income for means-testing, developing country governments can use what’s called a “proxy-means test” by measuring indirect things like assets and consumption. Another complication is that people can easily misrepresent their economic situation, depending on what indicator the proxy-test uses to measure poverty. Therefore, the mechanism for determining who qualifies for the transfers are often a mystery kept by the designers of the proxy-tests, and the data collection method must in some way provide incentives for telling the truth.

Findings from the data

To measure the success of the targeted programs in Indonesia and Peru, the authors used consumption data from 2010-2011 period from the Indonesian National Socioeconomic Survey (SUSENAS) and the Peruvian National Household Survey (ENAHO) to measure the size of the program’s “inclusion errors” and the “exclusion errors”, meaning the amount of people who do receive transfers who shouldn’t and the amount of people who don’t receive transfers who should. They are able to do this because the datasets used provide information on predicted consumption used by the proxy-means tests of each country, and the actual consumption for that period in each country.

In the 2010 period, in both Indonesia and Peru, transfers reached around 80% of intended beneficiaries, meaning those whose economic situation actually qualified them to receive benefits got them 80% of the time, and 20% did not (meaning a 20% exclusion error). There was also a cost of transferring the benefit to 22% and 31% of those whose economic situation did not actually qualify them for the benefits, judging by the actual consumption data (meaning the inclusion error).

The authors then employ a social welfare function, which measures the utility of a dollar between a low-income person and a high-income person, to measure the effectiveness of more narrowly targeted programs in relation to a universal program (UBI). Using this function, they were able to identify a socially optimal targeted transfer amount, which was 19% and 18% of the population for Indonesia and Peru respectively. While utility is lowest at the point of no transfer, the graph shows utility and overall social welfare both decline steadily after the socially optimal point. A UBI, then, has the lowest utility of almost any ratio, and even with the administrative cost savings included, the added benefit is almost imperceptible (these are represented by the little tick mark pointing upwards at the point of “UBI”).

This is nothing too surprising, though, because it essentially confirms that having a system where wealthier individuals also receive the benefit is not as socially efficient as targeting the poorest individuals, because the dollars are worth more to poorer individuals. What is interesting is that savings in administrative costs in this model also do not provide a big boost to social welfare.

Advantages and drawbacks of universal cash transfers

A UBI would address some of the failings of targeted transfer programs by providing what the authors call “horizontal equity”, which essentially measures the degree of errors at different levels of transfer, and also an added benefit of transparency.

If we imagine a family in the exclusion error population goes to apply for benefits and find that they are not eligible, verifying their eligibility would be difficult given the secrecy of the methods used in proxy-means identification. A UBI would be an ideal fix for this problem because it is available to everyone, and though you would be including those who may not necessarily need it, you would not deny anyone who actually does need it.

There is also the issue of labor market distortions that targeted transfers can cause. It is well known that programs in the US and in some European countries result in recipients to avoid finding work because they risk losing their entitlement. Even if the methods used in proxy-means testing are not known, households in developing countries may restrain themselves on activities that they perceive may end up disqualifying them for the benefit, such as reducing consumption or avoiding formal income.

Other issues with a large informal sector that would complicate implementation of a UBI are identification to avoid double counting, getting the money to recipients that may not have bank accounts or formal residences to mail a check to, and accruing taxes from the rise in incomes that will occur through increased consumption. Dependence on consumption taxes also presents a risk to the scheme, because large informal sectors might also affect tax losses from consumption.

Discussion on UBI in developing countries and alternative methods

The primary strength of the argument for UBI in the context of a developing country comes from the fact that targeted transfers currently deny resources to some of the extreme poor, where a UBI would theoretically not be denied to anyone. It would also theoretically be more straightforward and fairer of a system. A crucial strength with targeted transfers comes from the fact that it can use limited resources the most effectively, and even if it misallocates some resources, on the whole, it can effectively allocate resources.

It makes sense on an intuitive level for developing countries with tight budgets to send money where it would be the most effective through targeted transfers, but this results in both inclusion and exclusion errors, which can either be seen as the best outcome possible or simply insufficient. The exclusion error population could be seen as an unacceptable outcome creating a highly underprivileged class, and even the definition of the population that qualifies for transfers might be considered insufficient. In Indonesia, while the impoverished population has been receding, during the Asian financial crisis it rose to as high as 23%, and the population that is “near poor” have been estimated to be as much as 42% (3). This could play into an argument for UBI: by allowing everyone to have the same benefit, there would be no inclusion or exclusion errors, and it would still be much more socially optimal than no transfer at all.

While the authors recognize that targeted and universal programs work well in different circumstances, they seem to imply that, for developing countries, the social welfare achieved by targeted transfers is currently the best game in town. Universal programs like public education and health care are two examples of already widely accepted government programs, yet cash transfer programs remain largely targeted.

The authors also introduce some interesting alternatives that capture some of the strengths of targeted and universal programs. For example, with “community-based targeting”, a village might get a certain number of “beneficiary slots”, and in a completely public setting, the village communally decides where to allocate them. The strength of this program seems to emanate from the fact that local communities have a more intimate knowledge of who needs the assistance the most. In the “differential cost and self-identification” method, benefits would be available to an entire population like UBI, but your relative wealth would affect the ease of which you get the benefits, as determined by a proxy-means test. The key to this program would be the fact that the benefits are worth less the higher up the income ladder you are, and things like long application processes would deter some applicants. The added benefit to this would be that those who are in the exclusion error population would receive some recourse if they are initially denied benefits.

It is clear that having an income tax base with which to measure prosperity and draw taxes from is currently the ideal system to operate with a UBI. Jenson (2019) demonstrates that development accompanies a shift from self-employed to employed populations in the United States with over a century of data, which could be the natural outcome of development in other contexts. If a UBI turns out to be an ideal system for reducing extreme inequality and increasing other indicators of human wellbeing, a question of its appropriateness might also entail identifying the correct level of development. Advancing this issue still requires more pilots in more varied circumstances.

This research adds to the knowledge of basic income in developing countries from pilots in Namibia (2008), Madhya Pradesh (India, 2010), and in other expansions of cash transfer schemes in Zambia (2010) and in Iran (2011).

Notes

1 – The informal sector describes the portion of the population who work but do not contribute to a social security system, are often self-employed, and whose activities and revenue amounts are largely unknown.

2 – By contrast, in the 2017 US Federal Government budget, 83% of revenue came from individual income and payroll taxes.

3 – Figures from the World Bank’s report “Making the New Indonesia Work for the Poor”.

More information at:

Rema HannaBenjamin A. Olken, “Universal Basic Incomes vs. Targeted Transfers: Anti-Poverty Programs in Developing Countries”, The National Bureau of Economic Research, August 2018

Abhijit BanerjeePaul NiehausTavneet Suri, “Universal Basic Income in the Developing World”, The National Bureau of Economic Research, February 2019

Anders Jensen, “Employment Structures and the Rise of the Modern Tax System”, The National Bureau of Economic Research, January 2019

Namibia Pilot Project, Basic Income Grant Coalition

SEWA, “Piloting Basic Income Transfers in Madhya Pradesh, India”, SEWA and UNICEF, January 2014

Pedro Arruda and Laura Dubois, “A brief history of Zambia’s Social Cash Transfer Programme”, International Policy Research Brief, June 2018

Chris Weller, “Iran tried its own basic income scheme — and people didn’t give up working”, Business Insider (France), May 23rd 2017

Jehan Arulpragasam and Vivi Alatas (coords.), “Making the New Indonesia work for the poor”, The World Bank, November 2006

Adi Renaldi, “Poverty Isn’t Decreasing, Indonesia’s Official Poverty Line Is Just Too Low”, Vice, July 23rd 2018

Italy: “Notebooks for income QR9” – Big Data, WebFare and Basic Income

Italy: “Notebooks for income QR9” – Big Data, WebFare and Basic Income

Basic Income Network Italia (BIN Italia) has released a new editorial production. Titled “QR9 (Quaderni per il Reddito) – Notebooks for Income: Big Data, WebFare and basic income for all! We are on the net, we produce value, we want basic income“, it’s freely accessible over the Internet.

This publication (March 2019) features 16 authors, offering different perspectives thanks to an included variety of articles written by several italian and international authors.

As reported in the back cover: “Today the Capital expresses its value and lives within neurons and silicon and this evolution changes the relationship between Labor and Capital. Identifying a sort of WebFare Manifesto, could mean a new speech to claim an unconditional basic income, the fruit of our being connected to the network”.

QR9 Index:

Sandro Gobetti and Luca Santini, “We are connected. Basic income and WebFare for all
Andrea Boggio, Big Data & Digital Labor”
Benedetto Vecchi, “The basic income between technocapitalism and social fragmentation”
Roberto Ciccarelli, “Why unconditional basic income and self-determination is a political revolution”
Daniele Gambetta, “From the network to the social network: self-determining the discourse”
Francesca Bria and Evgeny Morozov, “Digital rebel cities claim a New Deal on data”
Stefano Simoncini, “Populist Machines. The challenge of basic income and technological sovereignty between local and transnational”
Maurizio Teli, “WebFare, digital identity and collective freedom”
Andrea Fumagalli, “Network value and basic income: from the WebFare to the commonfare”
Roberto Paura, “From basic income to Universal Basic Assets: a manifesto for equity in the 21st century”
Giuseppe Bronzini, “Social cooperation between the big data economy and basic income”
Giuseppe Allegri, “The great convergence for basic income in the digital age”
Franco Berardi Bifo, “Thinking about basic income in the horizon of collapse”
Luther Blissett, “WebFare: income for all and all platforms for users!”