Jurgen De Wispelaere, a research fellow at the Institute for Policy Research, University of Bath was interviewed on August 7th by Truthout, a nonprofit web-based news and commentary site whose aim is to provide “a platform for transformative ideas, through in-depth investigative reporting and critical analysis.” In this interview, he makes several important points regarding some of the issues in the current debate and research on Basic Income.
De Wispelaere’s key position is that Basic Income’s aim should be first and foremost about relieving poverty and social exclusion. Poverty is fundamentally a lack of money and Basic Income offers a solution to that problem. Compared to other forms of welfare, Basic Income avoids the well-known poverty trap, where earning wages leads to a loss of benefits, while also reducing the need for some of the bureaucracy associated with contemporary welfare states. De Wispelaere also says that welfare states already dispense some amounts of cash or quasi-cash, with Basic Income the main difference is really about how the money is distributed. As he says, “it is not just about whether or not you have more cash with a Basic Income, but also about how you get your cash.” Basic Income is characterized mainly by its unconditionality. De Wispelaere also mentions the Mike Leigh movie, “I, Daniel Blake” as an illustration of how current welfare policies can cause significant problems and how an unconditional Basic Income could make a big difference.
De Wispelaere also speaks about the value of Basic Income experiments, stressing that conclusions reached from one experiment may not be valid elsewhere due to limitations of time and location. Nevertheless, he argues that the experiments are worth pursuing and he identifies three key reasons for performing Basic Income experiments: implementation, politics, and philosophy.
There are a number of aspects of implementation that can be identified and fixed through running a limited experiment, things that are difficult to predict from a theoretical standpoint alone. Basic Income, although it is often presented as such, is not a simple policy; it will interact with other policies such as housing benefits, disability assistance, the tax system and pension rights. When doing an experiment, these interactions can also be tested, along with other parameters. Another great motivation for Basic Income experiments is politics. Risk-averse politicians may like the idea of a Basic Income but be reticent to propose implementing it in full. A limited trial can help gather more political support for a wider implementation. Finally, philosophical considerations reflect the different viewpoints as to whether we can trust people to play by the rules, or whether they are fundamentally lazy. Or, as De Wispelaere puts it, “do we think that the whole range of people to which Basic Income applies all are going to turn into Homer Simpsons?” According to De Wispelaere, “in many cases, evidence alone can’t solve these issues. It’s a philosophical and moral argument that has to be fought and won.”
De Wispelaere also says in the interview he is not convinced by the “Robots Are Coming” narrative. First, because we need Basic Income now to alleviate poverty, job fluctuation, and insecurity. Second, because when the robots do come there will be other significant issues that arise and Basic Income is not enough to solve those. Regarding the Silicon Valley positions, De Wispelaere says: “It is a bit of a caricature, but what they are effectively proposing is a very polarized, divided society. They talk about Basic Income as a necessary part of the solution but don’t mention other important social and economic struggles between the ‘haves’ and the ‘have-nots’. For me, Basic Income may be necessary, but it’s certainly not enough.”
The People’s Republic of China has created the largest unconditional cash transfer program in the world. It is called dibao, meaning Minimum Livelihood Guarantee. A recently published book is taking a fresh look at how effective dibao is at improving the livelihoods of impoverished Chinese people.
Dr. Qin Gao is on the faculty of the Columbia University School of Social Work, where she researches poverty, income inequality, and social welfare programs in China.
Gao has done extensive work researching dibao, and has released the book “Welfare, Work, and Poverty: Social Assistance in China,” which evaluates how well dibao has achieved its goals of lowering the amount and intensity of poverty in China.
The UBI Podcast recently interviewed Gao on her new book about the dibao program and asked her to give her thoughts on universalizing dibao.
Dibao is important to understand for basic income researchers because it demonstrates on a large-scale how basic income operates when it is not universal (since it includes a means test).
The dibao program allows each locality to set its own dibao standard (essentially the poverty line). Anyone below that standard is technically eligible for dibao assistance. The assistance in theory gives an individual enough money to reach the dibao standard. Eligibility for dibao is based on individual income, so one individual in a household could qualify, while another may not, Gao said.
For example, a dibao standard in Beijing, China is 900 RMB per person per month. If an individual made 700 RMB per month, dibao would provide 200 RMB in assistance to reach the dibao line of 900.
While some may worry that officials will cut off dibao assistance once an individual goes over the line, Gao said the reality is more complicated.
“In reality, many local officials are very considerate of the fluctuation in people’s incomes and other family situations. For example, education needs, health care needs. So many localities actually have initiatives to not discontinue people’s dibao benefits right away if they have income that’s higher than the local dibao line,” she said.
Some localities may allow a family to stay on dibao for three months after extra income is earned to make sure they have job security and they “do not fall back into poverty right away.”
Once a family receives the cash, it is unconditional, meaning there are no (direct) behavioral conditions to continue receiving the money.
Gao said the evidence that dibao creates a poverty trap, where families remain under the poverty line intentionally to receive assistance, is not strong.
Some localities have families update their income and wealth information every three to six months. Certain villages will even publish the names of recipients to allow for public feedback on whether a family should qualify for dibao. Based on the feedback, localities will randomly select people to verify their income information.
“So it’s a very systematic and stringent process,” Gao said.
For some villages, allowing others to comment on a family’s poverty situation may further stigmatize the dibao and other forms of welfare.
“Because the dibao is an unconditional cash transfer, so by design the policy requires applicants to tell the truth and other community members and neighbors to share the responsibility of monitoring. That is part of the design of this program,” Gao said.
While on paper, the dibao is technically an “unconditional cash transfer,” the way dibao measures wealth creates its own form of conditions.
Depending on the locality, dibao recipients may face a myriad of asset tests that prevent them from owning pets, a larger than average home, a car, or luxury items. Expensive private schools and schools abroad are off-limits. In the past, even a cellphone was a disqualifier.
“I think now, many localities are more lenient on that, especially on the cell phone. But there are certain luxury goods (so-called), that you’re not supposed to have. That also features into the feedback from the neighbors and community members. They would get critical and jealous if you have certain luxury goods that they don’t have but you are getting dibao,” Gao said.
In Gao’s book, she also analyzes the subjective well-being and social participation of dibao recipients. She found dibao recipients “tend to be more isolated, and less active in their social participation” than similar peers.
Dibao recipients may feel stigmatized from participating in these activities, such as going to the movies, since it is not a “culturally acceptable use of the dibao income,” she said.
After China’s transition from a planned economy to a market-based economy, society’s expectations about how families earn their own living changed. Now it is expected that people “earn a living through their own work.” Although, Gao said China is currently going through a debate about who “deserves” welfare.
“Previously people had guaranteed jobs, but many people during the economic transformation were laid off so able-bodied adults couldn’t support themselves through jobs anymore. And that group is making up about half of the dibao population,” Gao said.
One area of concern for policymakers is ensuring the dibao is reaching the “proper recipients;” that is people in poverty. There are reports of targeting errors in administering dibao “because of misreporting or difficulty to capture the real income or assets situation in rural areas.”
“The targeting error is real and local officials are very aware of it, but that will stay with the program because of the variations of family conditions and income,” Gao said.
The dibao standard is often used as a criteria for other welfare as well. This means that qualifying for dibao also gives a family access to a host of other assistance (including education, housing, and medical assistance). However, this could create a “welfare cliff” issue, where if a family exceeds the standard they may lose a lot more assistance than they gain as income.
“I think this is one of the policy design features of dibao that needs to be revised right now,” Gao said of dibao acting as a “gatekeeper” for other social assistance.
Overall, dibao has only reduced the rate of poverty to a “modest degree.” It is more effective at reducing the depth and severity of poverty, Gao said.
When asked about the potential to universalize dibao and remove the means-test, effectively creating a Universal Basic Income for China, Gao said this idea has been “very much on my mind recently.”
“I think the best possibility probably would be for certain more developed localities to experiment with such a program and see how it works,” she said.
As for creating a UBI program in China in the near-term, Gao said this would be challenging for many reasons.
“To make the dibao or a similar cash transfer universal all around China, I don’t think it’s very likely in the short-term, both in terms of fiscal challenges and also political and cultural challenges,” Gao said.
In 1970, conservative Republican US President Richard Nixon introduced a health bill into the American Congress. It passed but was defeated in the Senate. He did not realize it was a health bill, nor did many of his fellow politicians. It was called the Family Assistance Plan, a guaranteed income for families with children, not adequate to bring the income up to the poverty line, but substantially more than was previously on offer.
It required the breadwinner to accept work if available. Thus it was targeted, conditional, and inadequate by itself to eliminate poverty, but it was a huge change in thinking from a conservative leader in the United States. It came with this impressive rhetoric
“Initially this new system will cost more than welfare, but unlike welfare this is designed to correct the condition it deals with and thus lessen the long range burden and cost.”
The health-income gradient and the failure of ‘welfare’
We know that health and poverty are inextricably linked, that health outcomes follow the income gradient, and that the basis for this association in wealthy countries with good health systems is not simply access to care, but poverty and its own associations. Thus the Nixon proposal was a health bill.
The famous Whitehall study of British public servants who all had similar access to the National Health Service demonstrated a clear association of income with health outcomes. Those most in control of their own lives lived longer and suffered less.
Because of concern about wasting taxes on welfare and about the so called ‘welfare trap’, we have developed a highly targeted welfare system in Australia, with a strong emphasis on mutual responsibility. Our efforts to identify any welfare ‘fraud’, accidental or intentional, have become increasingly intense.
We continue to force people to chase jobs which do not exist or which they could not do. We hound them with letters generated by computers and then make it difficult for them to question any charges against them. We demean them. We dis-empower them even further than their poverty, unemployment, mental illness, or physical illness already does.
A BIG idea
An alternative is needed. The concept of a Basic Income Guarantee (BIG) is not new. Thomas More wrote about it 400 years ago in his book Utopia. Variations of it have been advocated for centuries. Bismark’s social insurance in Germany has some elements of the concept. Nobel Laureate economist and free marketeer Milton Friedman advocated it in the form of a negative income tax (NIT).
Dr. Tim Woodruff
Four trials in the 1960-70s in the United States used Friedman’s model (p 107-109). If an individual’s tax return indicated a low or no income, a tax rebate was paid as a monthly deposit to a bank. The size of the rebate declined slowly as income was earned, ensuring earned income led to an increase in total income. The largest of these four trials involved 4,800 families, and the amount given varied from 50 to 100 percent of the poverty level. There were no work requirements.
The alternative model to NIT is a cash payment. This was trialed in Canada in 1974, where 60 percent of the Low Income Cutoff (poverty level) was paid. For every dollar earned the payment was reduced by fifty cents. Analysis of results showed that even though only one third of the population ever qualified over the 4 years of the trial, high school completion results increased and hospital admissions decreased during the trial compared to the control group.
An even more simple model is one in which the cash payment goes to every individual adult and is not means tested. This eliminates any negative perception of being needy, because everyone receives it. For those who do not need it, the money can easily be recouped by changes in taxation.
Counting costs, reaping benefits
The Basic Income Earth Network established in 1986, defines a basic income guarantee (BIG) as “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement”. This does not specify the level of the cash payment but the simplest and likely the most effective method would be to make the level at or slightly above the poverty line.
Concerns about the basic income guarantee relate both to the benefits and the costs. The Canadian trial mentioned above, demonstrated both health and education benefits. Analysis of the effect of increased household income in the Cherokee Indian community as a result of distribution of profits of a Cherokee owned casino showed less criminality and improved education down the track. None of this is surprising.
But does this mean people will not work as hard? The US trials referred to previously showed a decrease in hours worked particularly among women and young adults. Is that bad? It is not clear from the data what they did instead of working so much. Were women spending more time looking after their families? Were young adults looking more carefully at work options and training?
Men reduced their work hours by about six percent but it did not appear that they were permanently unemployed. Rather, it appears they were spending more time between jobs. The sky did not fall in. Most people who can earn a little more than a poverty level income will do just that.
Is it affordable?
A basic tax free income guarantee of $22,000 (the poverty line at 50% of the median income for a single person) for every adult Australian (18 million people) would cost $400 billion a year. But the idea is not to increase the net income of millionaires by $22,000. It keeps administration simple to give the basic income to everyone and recoup in taxes from the wealthy. So the real cost is much less.
Only about six million Australians currently receive income support. Another one million or so have some funding from the Federal Government. Being generous, for eight million to receive the BIG would cost $176 billion, almost completely offset by replacing the welfare budget of $150 billion. That could be abolished.
Removing the tax free threshold of $18,200 for the 12 million earning more than that would generate $41 billion. But anyone on a low income would still have a total income of more than $22,000.
Tweaking the tax rates on higher incomes would effectively remove the BIG from higher income earners. Provision for children would add to the cost. Reducing BIG for dual income households to a level which would reflect economies of scale, in the same way as pensions do currently, would reduce the cost.
Most Australians would not lose a cent. All Australians would be guaranteed a basic income, whether sacked, disabled, unable to find work, or simply unemployable. The NDIS and Medicare would continue unchanged. This is all possible. Even the Productivity Commission thinks it’s worth investigating (p69):
“While Australia’s tax and transfer system will continue to play a role in redistributing income, in the longer term, governments may need to evaluate the merits of more radical policies, including policies such as a universal basic income.”
A bold move for health
If Australia introduced BIG we would have a system that almost eliminates poverty, thus appealing to those deeply concerned about the plight of the disadvantaged. We would also have a system which gives such people the genuine capacity to make their own decisions about what they do with their lives, which should appeal to those committed to individual responsibility.
Implementing this idea would do away with the current cruel, dis-empowering, wasteful welfare system. It would improve health outcomes. It could improve productivity. It would improve the life prospects of the 13% of Australians who currently live in poverty, the 17.4 percent of kids who are being raised in poverty, and the 40 percent of children in single parent families who live in poverty.
This is a health issue. Medical groups of all types should think about how we might use our knowledge and concern about health to bring this issue to the minds and actions of our politicians.
About the author:
Dr. Tim Woodruff is president of the Doctors Reform Society, an organisation of doctors and medical students promoting measures to improve health for all, in a socially just and equitable way. On twitter @drsreform
The 10th annual international Basic Income Week will be September 18 to 24.
Basic income organizations throughout the world have organized events and activities in honor of the advocacy and awareness week. These include, but are not limited to, the following:
In Canada, BIEN’s affiliate Basic Income Canada Network, is collecting answers to the question “How might a Basic Income Guarantee affect your life and/or your loved ones?” to compile and send to Prime Minister Justin Trudeau and other federal cabinet members. Responses will be sent during Basic Income Week.
BIEN’s Dutch affiliate, Vereniging Basisinkomen (VBi), is hosting a workshop on the first day of Basic Income Week, featuring talks by VBi chairperson Alexander de Roo, independent researcher Sjir Hoeijmakers (who was an advisor for the Dutch social assistance experiments), and others.
In Melbourne, Australia, the Kevin Club will host “A Conversation About Basic Income”, in which supporters of the idea will gather to discuss the possibilities for basic income in Australia.
Rutger Bregman will present his book Utopia for Realists in Oslo, Norway,where he will also join a panel discussion on basic income.
In Denmark, Erik Christensen (Aalborg University) will hold a presentation of his new book, På vej til borgerløn (“On the way to basic income”) and, on the following day, debate “Basic Income: Emancipation or Cost-Savings Measure?” with Kristian Kongshøj, a postdoc in political science at Aalborg.
In Brussels, Belgium, a debate will be held between representatives across the political spectrum–Liberals, Christian Democrats, Socialists, and Greens–who profess “a minimum of sympathy” for basic income. Although the debaters all claim to be sympathetic to basic income, one question at stake in the debate is whether these individuals of diverse political views are really talking about the same concept when they speak of “basic income”.
Interested individuals may subscribe the calendar on the official site of Basic Income Week to see new events as they are added, and interested groups may add new events to be seen.
Basic Income Week is independently organized and not affiliated with BIEN, although many BIEN affiliates choose to participate. (In fact, Basic Income Week defines ‘basic income’ in a stricter manner than BIEN; Basic Income Week’s definition, unlike BIEN’s, stipulates that a basic income must, by definition, be high enough in amount to “prevent material poverty and provide the opportunity to participate in society and to live in dignity”.)
Pictured: Kenyan village to receive GiveDirectly’s guaranteed basic income Source: Nichole Sibecki for NPR
GiveDirectly offers to give every adult in a Kenyan village a guaranteed basic income of 27,258 Kenyan Shillings- or 264 US dollars- per year for the next 12 years without any conditions. Providing unconditional cash transfers directly to people has proven to increase economic outcomes and psychological well-being.
GiveDirectly, a US-based nonprofit, is challenging the traditional structure of international aid by shifting the power dynamics between donors and people who receive aid. In our current structure, donors decide what people receive since most aid provided by governments, nonprofits and individuals is given as an in-kind donation. Instead, the purpose of GiveDirectly’s donation structure is to trust the expertise of people experiencing poverty to choose how best to spend the money. GiveDirectly will be measuring the long-term outcomes.
According to the first part in an NPR series on emerging aid models to redress global poverty, GiveDirectly will provide every adult in a village in Kenya a guaranteed basic income of 2,271.50 Kenyan shillings per month, or 22 US dollars for the next 12 years. Typically, adults live on less than 206.50 Kenyan Shillings per day, or 2 US dollars. For two-parent households, this donation boosts their monthly income by 50 percent. The money is wired to a bank account connected to each villager’s phone. Some families have used this additional income to better support household nutrition and education outcomes for children. The US-based nonprofit plans to expand the guaranteed income to 200 villages in Fall 2017 and assess the long-term impacts by comparing the outcomes with 100 villages that do not receive the payments.
Already, a study published in the Quarterly Journal of Economics discovered how, in Kenya, unconditional cash transfers (UCTs) have a significant impact on economic outcomes and psychological well-being in communities. UCTs contribute to local economic development by increasing consumption rates. They also improve social and emotional development in communities that heavily rely on social networks for supports and services that may otherwise be inaccessible.
Research from Canada’s Mowat Centre also shows that providing money with no strings attached can help support social entrepreneurs that may be experiencing financial hardship to get their ventures off the ground. For example, one Kenyan family that is a beneficiary of GiveDirectly’s donation, is focused on investing in an entrepreneurial venture to grow a forest of eucalyptus trees and sell the fuel from the plants. Profits from the family’s venture would be used to fund high school tuition for four children as an investment in breaking the intergenerational cycle of poverty.
In contrast to GiveDirectly’s aid model, Zambia’s government is choosing to filter who receives aid and under what conditions. Originally, a government program gave families in a rural west Zambian village 164, 628.31 Zambian Kwacha, or 18 US dollars, every other month for the past five years. The program proved to be successful: families used this additional support to invest in creating multiple business ventures to multiply their capital. To help aid these business ventures, the usage of related software can make this a lot easier, and with advancements in technology, businesses are able to conduct remotely accessing Sage software services so they are always on point with what they require. The government has therefore decided to scale up the program to increase the population receiving this cash aid. Simultaneously, the government has decided to limit the cash transfer to exclude people such as those who initially received the money in the pilot program: two-parent households, people who are employed, and people who are able-bodied. Instead, Zambia will provide aid only to single-parent households, people with disabilities, seniors, and people who are unable to work. This limitation on providing aid based on who is deemed eligible is what GiveDirectly is challenging.
GiveDirectly’s guaranteed income in Kenya is increasing access for all with the goal of improving health outcomes and building towards financial security. It can be particularly valuable for people with disabilities who often experience job discrimination and barriers to financial self-sufficiency. For them, this monthly influx of cash provides a foundation for independence. People with disabilities often struggle to afford medication and rely on financial support from other family members to sustain themselves. This additional monthly income will help to mitigate the costs of medication and basic necessities for everyone.
Grassroots savings clubs in low-income communities are another asset to consider when measuring the long-term impacts of GiveDirectly’s guaranteed income. Some people do not have access to banks or struggle to save money when it is easily accessible from an electronic savings account. Savings clubs are typically groups of 10-15 community members who collectively pool their resources each month. The total amount is then provided to a different individual from the savings club to look after for a month. This community-based savings account relies on faith in the community members to manage the money for everyone else. Some villagers have noted how critical this social bonding is to allow them to maintain their savings since they know the community is depending on them to effectively manage their budget. Researchers have found in case studies around the world, from Bangladesh to Central/South America and West Africa, that savings club serve as a common element of the economic infrastructure in low-income neighborhoods.
Giving cash directly to children and families, with no strings attached is being shown to improve the quality of life in a number of communities, particularly in boosting economic, health, and education outcomes. As more organizations begin measuring the long-term impacts of unconditional cash transfers and basic incomes, we will continue to gain evidence on whether these are viable solutions to deeply entrenched social issues like global poverty.
