by Malcolm Torry | Dec 28, 2017 | Research
Satelite picture over Europe. Credit to: TechCrunch.
A new working paper from the Institute for Social and Economic Research at the University of Essex reports on research using the EUROMOD microsimulation programme to simulate the labour market effects of several different tax and benefits reforms in countries in different parts of Europe.
The reform options tested are as follows:
- An unconditional Basic Income – correctly defined
- A general Negative Income Tax – that makes a payment if earnings fall below a threshold (the payment being proportional to the amount that wages fall below the threshold), and deducts tax above the threshold
- What the researchers call a ‘conditional basic income’ – which is a means-tested benefit that is withdrawn at a rate of 100% as earnings rise, thus constituting a guaranteed minimum income
- In-work benefits – means-tested in-work benefits without a relationship with the income tax threshold.
All of the reforms assume a flat income tax.
The research finds that the General Negative Income Tax usually promises the most efficient employment market: although in the context of the UK there is almost nothing to choose between a General Negative Income Tax and an Unconditional Basic Income. The research did not take into account the administrative complexities of a Negative Income Tax. If it had been possible to simulate the effects of administrative complexities on labour market decisions then they might have found that in the UK an Unconditional Basic Income would have turned out to be the most efficient option.
The working paper is entitled The case for NIT+FT in Europe: An empirical optimal taxation exercise, and is by Nizamul Islama and Ugo Colombinob.
Click here to read the working paper; or here to download the paper as a pdf.
Abstract
We present an exercise in empirical optimal taxation for European countries from three areas: Southern, Central and Northern Europe. For each country, we estimate a microeconometric model of labour supply for both couples and singles. A procedure that simulates the households’ choices under given tax-transfer rules is then embedded in a constrained optimization program in order to identify optimal rules under the public budget constraint. The optimality criterion is the class of Kolm’s social welfare function. The tax-transfer rules considered as candidates are members of a class that includes as special cases various versions of the Negative Income Tax: Conditional Basic Income, Unconditional Basic Income, In-Work Benefits and General Negative Income Tax, combined with a Flat Tax above the exemption level. The analysis shows that the General Negative Income Tax strictly dominates the other rules, including the current ones. In most cases the Unconditional Basic Income policy is better than the Conditional Basic Income policy. Conditional Basic Income policy may lead to a significant reduction in labour supply and poverty-trap effects. In-Work-Benefit policy in most cases is strictly dominated by the General Negative Income Tax and Unconditional Basic Income.
by Citizens' Income Trust | Jul 26, 2013 | Opinion
Åsa Lundqvist, Family Policy Paradoxes: Gender equality and labour market regulation in Sweden, 1930-2010, Policy Press, 2011, viii + 155 pp, hbk, 1 847 42455 6, £65
The Nordic countries provide generous gender-neutral parental leave and benefits and also publicly-funded childcare, and the result is an unusual combination of high fertility and high female labour market participation. This book is a detailed study of family policy in Sweden, particularly in relation to two paradoxes: that policy promotes both mothers as carers in the home and as workers in the labour market, and that men and women are regarded as both different and equal.
The book is a study of how Swedish social policy relating to the family has arrived at its present state and of more recent developments which have been driven in different directions by a greater individualisation in society (and thus defamiliarisation) and an understanding of women as disadvantaged within the family. Most recently, a reintroduction of a benefit for carers at home, and the introduction of labour market incentives for women, have exacerbated the paradoxicality of the situation.
As the concluding section of the book suggests, the fundamental paradox is between equality and freedom of choice. We might put it like this: How to preserve radical gender freedom in the face of government policies aimed at equality in the labour market? And how to preserve gender equality in the face of government legislation designed to give to carers freedom over how they organise their households and their labour market participation? These are vital questions for any government, and are thus an essential field of debate for anyone promoting debate on social policy reform.
This is a well-researched and thought-provoking book.
by Citizens' Income Trust | Oct 23, 2012 | Opinion
Karl Hinrichs and Matteo Jessoula (eds), Labour Market Flexibility and Pension Reforms: Flexible Today, Secure Tomorrow? Palgrave Macmillan, 2012, xviii + 262 pp, hbk, 0 230 29006 8, £55
Time was when a lifetime of full-time employment would be followed by retirement on a contributory state pension supplemented, for the fortunate, by an occupational pension, and, for the less fortunate, by a means-tested state supplementary pension. Those who are even more fortunate may have invested in a life insurance policy that lasts into their elderly years. Nonetheless, this hasn’t stopped some people wondering does Guaranteed Universal Life expire? Both employment and retirement income were relatively secure. Employment is now less secure, and increasing numbers of people experience part-time employment, short-term contracts, and periods of unemployment, making ‘flexicurity’ an important social policy aim: flexible labour markets accompanied by secure incomes and public services. There are also fears of an uncertain pension future, especially when it comes to investment; saving for a pension can be risky. Just like with everything in life, there is most likely a solution for this issue.
The chapters in this book are the result of a European Commission funded research project on the prospects for income security in old age in a Europe increasingly characterised by insecure employment and therefore flexible employment patterns. The problem that policy-makers and the book’s authors face is that many state and occupational pension schemes are posited on the now outdated notion of the ‘standard employment relationship’ – lifelong, stable full-time employment. Such schemes, whether state, occupational, or private, are funded by employee and employer contributions. Less stable employment patterns mean fewer and lower contributions and thus less income security in old age.
Each of the book’s chapters studies the current pension structure, labour market position, and recent reforms, in a particular country. There are chapters on Germany, Italy, Poland, Switzerland, Denmark, the Netherlands, and the UK. The editors conclude that these countries fall into three groups and that each group exhibits a particular pattern of recent reforms. Countries that previously relied for retirement income on state contributory pensions have raised contribution rates and/or subsidized the insurance fund out of general taxation, and have now introduced private and occupational pension schemes, which could be worth looking into when finding the right time to step away from your business. In countries with already more than one of the three ‘pillars’ of pension provision – state, occupational, and private – the emphasis has tilted towards private and occupational schemes, and now towards compulsory enrolment in funded portable defined contribution schemes which blur the boundary between private and occupational pensions. Eastern European countries are seeing both the development of contributory public schemes and a transition into privately funded pensions.
On the basis of the research results presented in the individual chapters the editors conclude that in segmented labour markets (for instance, in Germany, where ‘insiders’ still experience considerable employment security, and ‘outsiders’ highly insecure employment) pension provision ‘dis-integrates’: that is, it is worse at poverty prevention and income maintenance for those experiencing more fragmented labour market participation than for those in more secure employment; that in countries with more homogenous labour markets (as in the UK, where employment insecurity is more equally shared across the labour market) there are integrating elements in the pension system; and that where the labour market is highly homogenous, as in Denmark, the pension system is highly integrated. Central to the integrating characteristics of Denmark’s and the Netherlands’ systems are their ‘generous basic pensions based on residence … These schemes are crucial in preventing poverty in old age, especially for workers with interrupted carers or on an atypical contract, as well as women, who mainly work part-time’ (p.244). What isn’t entirely clear is what’s causing what: Does a more or less homogenous labour market result in a particular pattern of reforms, or is there some third factor causing both the labour market type and the reform pattern?
In the UK we might soon be moving in a more universalist direction. If we want to prevent poverty in old age then the evidence of this book suggests that it is in this direction that we should move, because it is in this direction that flexicurity can be achieved. The more general lesson to be drawn from the book is that poverty prevention and income maintenance in old age will be best served across Europe by universal state pensions accompanied by compulsory enrolment in portable funded defined contribution schemes to which both employer and employee contribute.
This is a well researched, well edited, and clearly written book, and anyone with anything to do with pensions policy should be reading it.
by Peter Knight | Oct 4, 2022 | Events, News
Basic income has become the subject of a lively and controversial debate in politics, civil society and academia. By questioning the fundamental assumptions of our social interaction, it challenges us to redefine the way we want to live together. At Basic Income and Development, this year’s FRIBIS’ annual conference, we will be taking a closer look at the relationship between basic income and development ideas and the potential they hold for the challenges of both the present and the future.
For decades globalization and neoliberal economic policies have driven social and ecological crises worldwide. The ongoing climate change has not only lead to environmental disasters, but is also causing social crises. The increasing social and economic inequality is resulting in social polarization and increasing support for populist parties. And, as more and more public goods and services have been privatized in favour of economic growth, the risks in the wake of the various global crises have become collective problems. At the same time standards for the management of natural resources and the natural living environment are lacking, as are norms and values for labour markets, health policy and crisis prevention. We also lack sustainable means and mechanisms to establish social, ecological and economic justice.
Given these challenges, we want to explore the extent to which basic income can help to overcome crises and create new perspectives. Could a basic income help us to use environmental resources more sustainably, preserve biodiverse habitats and make social communities more resilient? Would it help people in (post-)conflict regions to build or secure social peace? Or would it rather have the opposite effect, as some critics suggest? What are the potentials and risks of a basic income for development practices in the Global South, and how does this/do they relate to concepts of redistribution and justice? These and other questions will be addressed at this year’s FRIBIS annual conference.
Visit the conference website here.
