Germany: Why Thomas Straubhaar advocates an unconditional basic income

by | Oct 4, 2017 | News

Introduction
Because of the publication of Thomas Straubhaar’s latest book Radikal gerecht – Wie das bedingungslose Grundeinkommen den Sozialstaat revolutioniert (Radically just – How Universal Basic Income Can Revolutionize the Welfare State) in February 2017 by the Körber Foundation, several articles in the German media appeared reflecting on the ideas outlined in the book. This gives me the opportunity to share with Basic Income News readers some of professor Straubhaar’s main ideas about Germany’s current social system, the modern challenges that in his view might jeopardize the old social fabric and his proposed response: a radical tax reform consisting of both the introduction of an unconditional basic income and a fifty percent tax rate on all value creation. The articles that I have used most, translated, summarized and from which I cite, are written down in the first footnote[1], see below at the end of the piece.

But first, I like to present two professionals whose stories will illustrate with what problems average Germans may have to deal with in today’s daily life under the current social welfare system. After that, I will depict the historic development of Germany’s social insurance system by introducing the social politics of its two founders.

Background: Germany worries that current social system shows more and more cracks
Baukje Dobberstein is a family doctor and psychotherapist in Hanover, Germany. Everyday she is confronted with the negative consequences of poor working conditions and the social security system in her country. She says: “Our work and social system makes people sick. Not only those who have lost their jobs, but also those who have accepted sickening work conditions, because they are afraid of a repressive social insurance system. Many of us experience stress. They fear existence insecurity, are afraid of terror, of strangers, of change,” and she adds, “Stress in itself is not a disease, but too much stress can make a person ill.” That is why she fights for her dream: an unconditional basic income.

Mayor Werner Wölfle (The Greens) also expressed his concerns. In an interview with the Stuttgarter Nachrichten, a local newspaper, he said, “Yes, also in this rich city, the capital of the German state of Baden-Württemberg, Stuttgart, more than 60.000 or over ten percent of all inhabitants depends on some form of social benefits.” The most vulnerable groups to poverty are women, singles and (older) migrants. Old-age poverty is on the rise too.[2] These figures have increased steadily. In 2004, 2787 low-income earners over age 65 received additional social assistance (or Grundsicherung im Alter), which counted for nearly three percent in this age group. In 2013, it was 4536, which is already more than four percent. For the future, Wölfle fears significantly higher levels. Elderly people with broken employment biographies, long part-time working periods, low-income earners and the effects of the Hartz IV regulation reforms, that is the downsizing of employment conditions, will become much more apparent in the coming years.

The historical context of the social insurance system in Germany
This country’s social policy, largely based on work, is showing serious cracks, warns Professor Straubhaar. It was Otto von Bismarck, the first chancellor of the united German states, who created the world’s oldest welfare state in the 1880s. His main goal was to gain working class support that might otherwise go to his socialist enemies. Bismarck worked closely with the large industrial sector and aimed to stimulate economic growth by giving workers greater security. In 1884 he declared

The real grievance of the worker is the insecurity of his existence; he is not sure that he will always have work, he is not sure that he will always be healthy, and he foresees that he will one day be old and unfit to work. If he falls into poverty, even if only through a prolonged illness, he is then completely helpless, left to his own devices, and society does not currently recognize any real obligation towards him beyond the usual help for the poor, even if he has been working all the time ever so faithfully and diligently. The usual help for the poor, however, leaves a lot to be desired, especially in large cities, where it is very much worse than in the country.

In the next years Bismarck implemented his social legislation: sickness, accident, old age and disability insurance, in that order, although he believed that welfare programs “with too much socialist aspects” would force workers and employers to reduce work and production and thus would harm the economy. The introduction of these laws, and the accompanying social benefits helped to reduce the emigration of young Germans to the United States.

Germany’s social system was further developed during its ‘Wirtschafstwunder’ (economic miracle), the post World War II period of rapid industrial growth and low inflation. Ludwig Erhard, Minister of Economic Affairs in Adenauer’s Cabinet, was the architect of these glorious economic days. He was able to combine market forces with a well functioning system of social security benefits in order to achieve “Prosperity for All”. The system is financed by contributions paid by employers and employees, each contributing for fifty percent. As a consequence, coverage is mostly confined to the formal workforce consisting mainly of workers depending on wages.

straubhaar Modern challenges: globalization, digitization and individualization
“It is a time that no longer exists,” says Thomas Straubhaar, “Recent phenomena like globalization, digitization and individualization have made an anachronism of this social policy.” He continues: “A social security system, which is unilaterally based on contributions from wage income, stems from the time of industrialization and the unbroken lifelong work careers, when the salary of the husband was the most important source of a family income. Individualization has questioned the traditional role models and the solidarity within families. Digitization will lead to vending machines and robots will displace people from production. Not only standardized simple work on the assembly line, supermarket checkout or office will disappear. Even in more qualified areas of activity, such as locomotive drivers, insurance brokers or accountants, employees will become increasingly superfluous. He cites forecasts, according to which digitization could lead to the withdrawal of almost 50 percent of all jobs in the long term. Nonetheless, he welcomes the new mega trends, which will change everyday life, social relationships and the working world at a rapid pace, fundamentally and in every respect. “But”, he stresses, “Only as long as all people benefit”.

Professor Straubhaar considers digitization as a blessing, where people had previously to perform hazardous, dirty or risky jobs – for instance, in civil engineering, roofing and tunnels, slaughterhouses and laboratories, as well as control and watch services. In the future, he foresees construction robots that will drag bricks and windows, industrial robots that will use new construction and reusable materials. Intelligent machines and self-controlled cameras will control and react, and three-dimensional police robots will ensure internal security. According to him, everything that is possible must be done so that people can be physically and mentally healthy and unharmed during work and not become ill, burned-out or even permanently damaged. “People are economically too valuable to make them do dangerous, risky or damaging work, and then drag them through the welfare state over decades, some of them until they die,” he says, “This is a privatization of labor income and a socialization of the follow-up costs. And this can not be economically efficient.”

In the age of digitization and automation, robots and artificial intelligence, it is uninspired to maintain a system of exploitation, that forces people to do work that nobody wants to do. It is more appropriate to let robots, computers and machines do the dangerous, dirty, harmful and unworthy jobs for us and to train people in the freed up time for better and less strenuous work. We need a system that is able to ensure the participation of all, that can provide equality of opportunity for all, writes Straubhaar in his recent published book Radikal gerecht.

straubhaar “Furthermore”, he told the reporter of Technology Review, “Life expectancy has risen sharply, which means that the start of a pension in the middle of 60 can hardly be financed in the long term. During the introduction of Bismarck’s pension insurance in 1889, the life expectancy for men was 36 years and for women 39 years, today it is 78 years for men and 83 years for women.”

A radical response: introduction of an unconditional basic income
No wonder that against this background the old idea of a basic income is being given new support all over the world. This is especially true for Germany, where a representative survey found early this year, that a majority of 75 percent is in favor of the introduction of an unconditional basic income.

This summer, during an Economic Forum of the CDU (Christian Democratic Union of Germany), Straubhaar advocated a radical reorganization of the welfare state by implementing a universal basic income. “Our current system cannot be reformed. This is the only way to achieve prosperity for all again”.

In Straubhaar’s view, the introduction of a basic income is nothing less than a radical tax reform. “Money for all means an income at the level of the subsistence minimum from the state without compensation such as an obligation to accept jobs or putting someone through activating measures. It is a fundamental change of perspective, from what previously has gone wrong. No more financing over taxes from work income, no more working worlds, family pictures and life-cycles, which no longer exist and do not correspond to daily life in the future. Towards a guaranteed participation and an empowerment of all. No other model takes into account both the effects of digitization and of individualization. In the social state of the 21st century, interrupted careers due to alternate periods of retraining, part time work, job change, informal care, volunteerism and so on, will be the new normal.”

How will Germany pay for a basic income?
“The future requires a ‘blind’ social state”, writes Thomas Straubhaar in Welt und N24. “Social schemes must treat all income equally, which means wages, interest, distributed profits, dividends, royalties, rental income, transaction and speculative gains, and should implement the same tax rate upon them, rather than preferring or discriminating against the other. Whether humans, robots or machines are at work, there are many good reasons, to tax every form of value creation at the source of their origins with a uniform tax rate for the financing of state tasks. All types of income should be charged with the same tax rate.”

The tax reform of the future will bundle all social policy measures into one single instrument, the unconditionally paid basic income. The concrete elaboration – that is to say the politically determined level of the subsistence minimum, which corresponds to the amount of the basic income – should provide sufficient scope for specific adaptations to new challenges in the future which are still unknown.

According to Straubhaar, the funding of an unconditional basic income follows a simple logic. It puts an end to all social insurance and social benefit payments financed by taxes and charges from the income of work. Instead, it consolidates as an universal payment all personal financial transfers and follows the concept of a negative income tax. This means that all Germans will receive money from the state, which corresponds to an outflow from the state’s perspective and thus the opposite of a tax inflow. If the whole welfare state should be replaced by an unconditional basic income, writes Straubhaar, this would suffice to pay everybody a monthly basic income of 925 euros.

More justice in society
As a result, according to Straubhaar, this fundamental tax reform will lead to more justice and efficiency to society and will create more support, security and freedom for the individual. People will be “relieved of the worries of economic survival”. With a guaranteed basic income, “it will not be economically necessary to force all people into labor for an ever-longer life”.

The basic income will guarantee a minimum subsistence level for all, from the infant to the old, for women and men, from the cradle to the grave through a financial payment by the state. No more, no less. If someone desires more than his or her basic income, this person can simply generate additional income. A smaller number of workers will have the chance to earn more than before due to productivity gains achieved through intelligent machines. However, all who earn income, will pay income taxes – at the source, from the first euro – in accordance with this principle: Whoever earns more, pays more taxes than those who earn less, emphasizes Thomas Straubhaar. At the end of the day, it will turn out that the majority of the population still pays positive taxes from the perspective of the state, so that in order to get a balance at the state’s level, the paid basic incomes are compensated by the tax revenues.

It is important, stresses Straubhaar once more, that the German government will tax capital income just as much as working income. This also applies to the profits, generated by robots. As soon as they are distributed to the owners of the robots, that is to say the shareholders, the same tax rate as for wages is applied to the source.

In Berlin, I saw a vivid culture around bottles: people drink beer or another (alcoholic) drink from a bottle and leave it behind for people whose job it has become to collect these empty bottles in order to cash the deposit money.

In an interview with Brand Eins, Straubhaar goes into more detail. When asked, who will pay for this unconditional basic income, he answered: “We all do by means of a taxation on value creation. When a company pays out money to one of the production factors, either to labor in the form of wages or to capital, as dividend or profits, a tax becomes due, and in both cases the same tax rate will be applied. If the profit remains in the company, thus continues to be part of the production process, no tax is payable. Only when money flows from the process to people – and not to legal entities – this money will be taxed.”

According to Straubhaar, there is nowadays in Germany a net added value of about 2,5 trillion euros and government expenditures at the federal level, at the state’s level, at municipalities and social insurance funds of a total of around 1,3 trillion euros per year. With a value-added tax of 50 percent, we would therefore come to an equilibrium, only taxes will be borne equally by labor and capital. The state does not need extra money to finance a basic income. In 2015 the social budget stood at 888 billion euros. This amount of money is enough to pay every German a monthly basic income of about 1000 euros. At present, we already pay nearly 50 percent for deductions when you sum up taxes and social security contributions in this country. It is only higher from a work income of 240,000 euros. According to statistics, this is not even one percent of the taxpayers. In the future welfare state, you don’t need to pay anymore for social insurances, because you have your basic income, you only pay for your health insurance. Everyone contributes financially to the basic income: self-employed persons, freelancers, civil servants, public representatives and the recipients of capital gains.

Asked if such a major change is politically feasible, professor Straubhaar answers: “If you really want to introduce big changes, you need a large group of winners who also recognize their advantages and are willing to fight for it. This is why both sides are of equal importance for the acceptance of a basic income: the expenditure side, that is, the securing of a subsistence minimum – and the income side, that is the taxation of value creation.”

What does it mean a tax rate of 50 percent?
Thomas Straubhaar continues enthusiastically by giving some examples to the interviewers of Brand Eins. Supposing a professor with an annual salary of 120,000 euros, from which she – like all others – must pay 50 percent for taxes. At the same time, like all the others, she receives a basic income of 12,000 euros, which means she pays a net tax of 48,000 euros, equivalent to a rate of 40%. She only has to buy her health insurance, there are no further social expenses. The financial picture of a branch manager with 60,000 euros per year looks as follows: 30,000 euros for taxes plus 12,000 euros of his basic income results in a net tax of 18,000 euros or 30%. At Grundeinkommensrechner.de everyone can calculate what such a basic income means for him or her. Regarding low-wage earners, for instance a cleaning aid, who earns 24,000 euros a year, in this tax system he or she has to pay 12,000, and at the same time he or she receives 12,000 euros as basic income. The net tax rate is therefore zero, and this person also only has to insure his or her health.

Straubhaar goes on: “Anyone who today receives unemployment benefits (Arbeitslosengeld II or Hartz-IV) and who earns something, has a marginal tax rate of 80 to 90 percent, because with each earned euro the social benefit payments diminish. With this proposal, this person will only pay the obligatory 50 percent. He also does not have to consume his entire fortune before he receives any payment, he does not have to justify himself and is not harassed anymore by anyone. And with this proposal, a policy instrument that bundles both a guaranteed basic income and the added value tax, it is not necessary to fix a general retirement age, which is anachronistic in a digital society: everyone works as long as he or she wants, and deducts 50 percent of the earnings.”

Some problems might occur from Straubhaar’s model
In her column at Piqd, entitled The welfare state of the future is called ‘basic income’, Antje Schrupp emphasizes the importance of a discussion about the future of the welfare state and the place of a basic income therein. That said, she also has doubts about the model of a basic income, as described by Thomas Straubhaar, in his interview with Brand Eins.
The model is a good basis, she writes, but she foresees problems in the elaboration. For example, in Germany one cannot get around with 1000 euros per month of which also the health insurance has to be paid. This is especially true for the chronically ill and elderly, who cannot afford 1000 euros per month for both their health care costs and costs of living. Furthermore, medical and nursing care of the sick and aging adults is too valuable to leave it to the nonprofessional hands of family and friends.

Meanwhile, Dr. Dobberstein, who is also a blogger and activist for an unconditional basic income, has become a candidate for Lower Saxony in the newly formed political party Bündnis Grundeinkommen (Basic Income League), that will take part in the Bundestag (federal) elections next September 24 (2017).[3]

Further reading or listening:
Book Review: Basic Income as a ‘realistic revolution of the welfare state’ by Albert Jörimann.
Radikal gerecht – Wie das bedingungslose Grundeinkommen den Sozialstaat revolutioniert (Radically just – How Universal Basic Income Can Revolutionize the Welfare State) by Thomas Straubhaar, Edition Körber-Stiftung, 2017 (in German).
Radically Fair: Lecture with Thomas Straubhaar, New York, March 2017 (English)

Thanks to Kate McFarland and Dave Clegg for reviewing this article.
Credit Photos: Wikimedia Commons (Hamburg), Wikipedia, Körber Foundation, Florie Barnhoorn (Berlijn).

1. Bedingungsloses Grundeinkommen: Der langsame Weg von der Utopie zur Realität! (Unconditional basic income: the slow path from utopia to reality!), by Thomas Straubhaar, 2013.
Warum wir ein bedingungsloses Grundeinkommen brauchen (Why we need an unconditional basic income), by Thomas Straubhaar, Welt und N24, May 2017.
Das Grundeinkommen ist nichts anderes als eine Steuerreform (Basic income is nothing but a tax reform) by Thomas Straubhaar, Zeit Online, February 2017.
Grundeinkommen ist eine große Steuerreform (Basic income is a large tax reform) by Sascha Mattke, Technology Reform, March 2017.
Straubhaar: Heutige Sozialstaat-Ausgaben würden für 925 Euro Grundeinkommen reichen (Straubhaar: Today’s social-state expenditure would suffice for 925 euro basic income) by Sascha Mattke, Heise Online, March 2017.
Umdenken bei der CDU? Ökonom Straubhaar plädiert für bedingungsloses Grundeinkommen (Re-thinking at the CDU? Economist Straubhaar pleads for unconditional basic income), Pfefferminzia.de by Juliana Demski, July 2017.
Wie überlebt der Sozialstaat die Digitalisierung? (How will the welfare state survive the digitalization?) interview with Thomas Straubhaar by Gabriele Fischer and Wolf Lotter, Brand Eins, May 2017.
Der Sozialstaat der Zukunft heißt “Grundeinkommen” (The welfare state of the future is called “basic income”), by Antje Schrupp, Piqd, July 2017.↩

2. The website Altersarmut – Armut im Alter has asked attention for the increasing poverty among the elderly in Germany. An important cause is the depreciation of the pensions. According to the Deutsche Rentenversicherung (German Pension Insurance), the standard pension in the Western states of the country will decrease as follows:
2010: 1083 euros
2020: 1069 euros
2030: 1024 euros
2040: 988 euros
In the former Eastern Germany the situation is even worse. When asked, “Are you afraid to be able to keep your living standards after your retirement or, if you are already retired, in the next few years?” 72 percent of respondents answered “yes”.↩

3. Sadly, Bündnis​ ​Grundeinkommen only got 0,2 percent of the votes on Sunday, September 24, 2017. This means that nearly 100.000 persons voted for the one-theme-party. However, it is not enough for a seat in Parliament.↩

The Netherlands: ‘Free Money’ at Studium Generale Utrecht University, October 25, 2017

by | Aug 28, 2017 | News

As the social assistance experiments in several Dutch municipalities will begin this fall, Studium Generale of Utrecht University has organized an event dedicated to ‘Free Money‘.

Studium Generale is a university’s public platform for knowledge sharing and reflection by organizing lectures, seminars and other activities aimed at students and the general public. Entrance is always free and accessible without reservation.

In the Netherlands, municipalities are responsible for the provision of tailor-made benefits to anyone who has insufficient means to support him or herself, and for achieving the purpose of the Participation Act, that is, making recipients independent from social assistance. Several municipalities are conducting two-year experiments, in the context of which they have the option of implementing social assistance regulations in an alternative way.

Each experiment will include at least three treatment groups, who are subjected to various regimes, and a control group. The restrictiveness of obligations between the groups will vary, from a group which has fewer obligations imposed on it to a group which is even more intensively supervised. In addition, participants in a third treatment group may retain a limited amount of their income from work on top of their payments. See the links at the bottom of this article for more details.

Researchers of Utrecht University, one of the four universities that will supervise the experiments scientifically, have been critical about the design of the pilots because of its limited scope and complicated nature.

The experiments, as they are proposed now, raise a number of questions, such as: why don’t we all give a basic income? Is it too expensive, or are there any other objections?

Rutger Bregman (The Correspondent) and Professor Ingrid Robeyns (political philosopher and economist at Utrecht University) will address these issues during the “Free Money” event on October 25, 2017.

Rutger Bregman has written several books on ‘Free Money’ — for instance, Utopia for Realists — and was one of the speakers at TED2017 in Vancouver last April.

Ingrid Robeyns holds the chair in Ethics of Institutions. In her teaching she focuses on normative and applied ethics and (normative) political philosophy. She has been teaching about justice theories and economic ethics at the masters level in recent years. In her own research, Robeyns addresses a number of normative issues related to demography, gender, family, and institutional economy. Robeyns writes for the English-language group blog Crooked Timber and occasionally on her own site Buiten Categorie. She will also be one of the speakers during BIEN’s 17th Congress next September in Portugal.

The event will take place on October 25, 2017. The language is Dutch. Those interested are invited to join the discussion on Facebook event. For more details, see here.

Previous information on social assistance experiments in The Netherlands:

Florie Barnhoorn, “The Netherlands: Amsterdam on collision course over social assistance experiments” (August 5, 2017).

Florie Barnhoorn, “The Netherlands: All that’s left is the action. Where do we stand with the experiments?” (June 2, 2017).

Kate McFarland, “The Netherlands: Social Assistance Experiments Under Review” (May 9, 2017).

Florie Barnhoorn, “The Netherlands: Design of BI Experiments Proposed” (October 26, 2016).

Credit Picture Flickr.com CC Ealasaid.
Thanks to Kate McFarland for reviewing this article.

Dutch Government authorizes social assistance experiments in five municipalities

Dutch Government authorizes social assistance experiments in five municipalities

by | Jul 11, 2017 | News

The municipalities of Groningen, Wageningen, Tilburg, Deventer, and Ten Boer have received permission from the Dutch Ministry of Social Affairs and Employment to proceed with proposed social assistance experiments.

Jetta Klijnsma, CC BY 2.0 Partij van de Arbeid

Jetta Klijnsma, State Secretary of Social Affairs and Employment, signed the authorization of the five municipal experiments on July 3, 2017.

Groningen and Ten Boer will be carrying out their experiments in cooperation with one another.

In each of the experiments, which will run for two years, participants will be randomly selected from a pool of current social assistance beneficiaries (with participation voluntary for those selected), and assigned either to a control group or to one of several treatment groups.

Each experiment has at least three treatment groups, testing the following types of interventions: (1) removing reintegration requirements (e.g. job applications and training programs) on welfare benefits; (2) providing a more intensive form of reintegration service; (3) permitting participants to earn additional income on top of their welfare benefits. Subjects assigned to the third treatment groups will be permitted to retain 50% of additional earned income, up to a maximum of €199 per month, for the duration of the two-year experiment. In contrast, under current policy, welfare recipients are permitted to keep only 25% of additional income, and only for up to six months.

The Groningen / Ten Boer experiment includes a fourth treatment group, in which participants are permitted to choose to join any one of the three preceding groups.

Although international media have referred to these experiments as “basic income experiments”, the description is a bit of a misnomer. In all treatment groups, benefits remain means-tested and household-based, and participation is limited to current welfare recipients. Moreover, legal constraints create an effective demand on participants to seek work (on pain of removal from the experiment); this effective conditionality, unique to the Dutch experiments, is discussed below.

Sjir Hoeijmakers, an econometrician who consulted municipalities in their design of the experiments, prefers to speak of “experiments in the context of the Participation Act” (cf. this Basic Income News article), while others refer to “social assistance experiments”.

The experiments are expected to begin around October 1 of this year.

The Ministry of Social Affairs and Employment is currently reviewing applications from three additional municipalities who also wish to conduct experiments on social benefits: Amsterdam, Nijmegen, and Utrecht. Decisions on these proposals are expected later in the summer.

 

Update: Shortly after the publication of this article, Nijmegen was granted permission to carry out its experiment, which will commence on December 1. A full report on Nijmegen’s experiment will follow. 

 

Background

The municipalities of Groningen, Tilburg, Wageningen, and Utrecht have been planning social assistance experiments since 2015, following the enactment of the Dutch Participation Act. Originally, these experiments were conceived as trials of unconditional basic income (or at least policy moving in this direction), although political pressures encouraged their proponents not to use the term “basic income” (which is popularly associated in the Netherlands with utopian thinking and celebration of laziness). Under the Participation Act, municipal officials are required to implement obligations and sanctions to encourage recipients of social assistance benefits to seek employment. For example, beneficiaries are generally expected to complete a set number of job applications per week, participate in training programs, and attend group meetings as conditions on receiving their benefits. Skepticism regarding the effectiveness of these conditions was a main motivation of the experiments.

In September 2016, Klijnsma authorized municipalities to perform experiments, up to two years in duration, testing the effects of altering the conditions of the nation’s social assistance benefits. This authorization was granted, however, only under strict terms of compliance with the nation’s Participation Act, which effectively prevent the municipalities from testing an unconditional basic income (despite interest in the idea from researchers and promoters of the experiments). For example, in the case in which an experiment treatment involves the removal of work reintegration requirements, the Ministry mandates that officials assess test subjects after six and twelve months to verify that they have made adequate effort to find employment; those who have not done so are subject to dismissal from the experiment.

The Ministry also capped the amount of earned income that participants are permitted to retain on top of their benefits, and required that any experiment including a treatment group with relaxed conditions on social assistance also include a treatment group with stricter conditions.

In the face of these constraints, researchers were forced to design experiments farther from “basic income experiments” than originally desired.  

 After announcement of a start date of May 1, 2017, Utrecht saw its proposed experiment put on-hold due to a failure to comply with the terms of the Participation Act. The city has since submitted a revised proposal to the Ministry of Social Affairs and Employment, which is pending evaluation.  

Another municipality, Terneuzen, proposed a small-scale study of basic income–providing unconditional cash payments of €933 to 20 test subjects–which was axed by Klijnsma earlier in the year. Terneuzen has not submitted a new proposal to the Ministry of Social Affairs and Employment.

In a recent presentation to the Dutch branch of BIEN, Sjir Hoeijmakers stated that 45 municipalities are considering social assistance experiments.

 

More Information

“Eerste vijf gemeenten krijgen toestemming voor bijstandsexperimenten” (July 3, 2017). Official press release of the Dutch government.

Charlotte Huisman, “Vier steden mogen experimenteren met soepelere bijstand,” Trouw, July 3, 2017.

“Should the Netherlands test the basic income,” EuroTopics, July 4, 2017.

 

Previous Basic Income News Coverage

Florie Barnhoorn, “The Netherlands: All that’s left is the action. Where do we stand with the experiments?” (June 2, 2017).

Kate McFarland, “THE NETHERLANDS: Social Assistance Experiments Under Review” (May 9, 2017).

Florie Barnhoorn, “NETHERLANDS: Design of BI Experiments Proposed” (October 26, 2016).

Information provided by Florie Barnhoorn, Hilde Latour, and Ruud Muffels.

Photo (Tilburg) CC BY-NC-ND 2.0 Stephan Ohlsen

THE NETHERLANDS: Social Assistance Experiments Under Review

by | May 9, 2017 | News

Researchers in several Dutch municipalities are preparing experiments to test the effects of the removal of conditions on social assistance. Although not testing basic income per se, the experiments will examine one of its key attributes (the reduction of conditionality).

This year, popular sources have occasionally continued to report that the Dutch city of Utrecht is preparing to launch–or has already launched–a pilot study of universal basic income (sometimes continuing to cite a now-outdated article published in The Atlantic in June 2016). In this light, it is particularly important to clarify the facts surrounding the Dutch social assistance experiments.

It is true that researchers have proposed experiments in several Dutch municipalities that will examine the effects of reducing conditions on welfare benefits, including the removal of job-seeking requirements and a lessening in the amount benefits are reduced with income. However, as explained below, these experiments will not test a full-fledged basic income. Moreover, at the time of this writing, none of the municipal social experiments have been launched: those in Groningen, Tilburg, and Wageningen are awaiting approval from the Dutch Ministry of Social Affairs; meanwhile, the experiment in Utrecht has been delayed indefinitely, having been denied approval by the Ministry.

 

Background: The Participation Act, Motivation, and Design

The Dutch Participation Act, enacted in 2015, imposes conditions on recipients of social welfare that are intended to promote their reintegration into paid employment. For example, beneficiaries are typically required to complete five job applications per week, attend group meetings, and participate in training activities in order to continue receive cash assistance.

Researchers at Utrecht University School of Economics, such as Loek Groot and Timo Verlaat, have criticized the conditions and sanctions imposed by the Participation Act from standpoint of behavioral economics. Research in behavioral economics has demonstrated, for example, that performing tasks for monetary rewards can “crowd out” individuals’ intrinsic motivation to perform such tasks. Furthermore, deprivation and fear of losing benefits may engender a scarcity mindset that impedes rational decision making. Drawing from such findings, researchers like Groot and Verlaat have hypothesized that reducing conditions on welfare benefits would better promote individuals’ reintegration and productive contributions to society (see, e.g., “Utrecht University and City of Utrecht start experiment to study alternative forms of social assistance,” last accessed May 6, 2017; note that the start date mentioned in the article, May 1, is no longer accurate).

The social experiments proposed in Utrecht and other Dutch municipalities have been designed to test the above hypothesis: randomly selected welfare recipients (who agree to participate) will be randomly assigned either to a control group or a treatment group, one in which reintegration requirements on receipt of benefits will be removed. (Although the exact design of the experiments has differed between municipalities–and between versions of the proposal–all have included a treatment group with the elimination of job-seeking conditions. Proposals experiments have also included groups with different interventions, such as, in several recent versions, increased reintegration requirements and relaxation on means-testing; see below.) These treatment groups will be compared to a control group, as well as a reference group composed of individuals not selected for the experiment, with respect to outcomes such as labor market participation, debt, health, and life-satisfaction.

Meanwhile, however, researchers must grapple with another consequence of the Participation Act: the law limits the extent to which they are legally permitted to test alternative welfare policies. For one, as mentioned in a previous Basic Income News article, the Ministry of Social Affairs has required that the municipal officials overseeing the experiment must check after six and twelve months to determine whether experimental subjects have made sufficient efforts to find paid work. At these times, if an individual has been found to have undertaken too few employment-promoting activities, their participation in the experiment must be ended. This constraint reintroduces some degree of conditionality even for treatment groups in which the requirement to participate in reintegration activities has been lifted from social assistance.

In addition, the Ministry has also requested that experiments include an additional treatment group in which stricter reintegration requirements are introduced. The experiments proposed for the municipalities of Tilburg, Wageningen, and Groningen, are currently under review by the Ministry, include such a treatment group; the initial (and unapproval) design of the Utrecht experiment did not.

 

Relationship to Basic Income

Largely for political reasons, proponents of the Dutch social experiments have avoided the use of the term ‘basic income’ (‘basisinkomen’ in Dutch), with researchers in Utrecht calling their proposed experiment by the name ‘Weten Wat Werkt’ (English: ‘Know What Works’). (In the Netherlands, “basic income” is often associated with the stereotype of “giving free money to lazy people”.)

This avoidance is apt, however, since the experiments have indeed not been designed to test a universal and fully unconditional basic income. The designs of the experiments have either not been finalized or are still pending government approval (see below). Regardless, however, it seems certain that any of the experiments (if approved) will test policies that differ from a basic income in several key respects. First, the population of the experiment is not “universal”; participants are to be selected from current welfare recipients (as is also the case in Finland’s Basic Income Experiment, launched on January 1, 2017, which has also been designed to test the labor market effects of the removal of conditions on welfare benefits for the unemployed).

Furthermore, within the treatment conditions themselves, the benefit will remain means-tested and household-based (rather than individual-based), in both respects unlike a basic income. In all designs proposed to date, participants within all treatment groups will have their benefits reduced if they take a paid job during the course of the experiment. However, the Tilburg, Wageningen, and Groningen experiments, as currently planned, will include a treatment group in which benefits would be reduced at slower rate (50% of earned income instead of 75%).

In the latter respects, the Dutch municipal experiments bear more similarity to the Ontario Basic Income Pilot than Finland’s Basic Income Experiment [1]. While the Finnish pilot is indeed investigating non-means-tested benefits paid to individuals, the pilot studies in Ontario and (if approved) the Netherlands will continue to work with programs in which the amount of benefits depend on income and household status; however, in all cases, many conditionalities on benefits will be removed in some experimental conditions.

Despite these differences, some view the Dutch social assistance experiments as a possible step toward a full-fledged basic income. Moreover, as seen above, the experiments have been motivated largely by arguments from behavioral economics that have previously been invoked in arguments in favor of the unconditionality of basic income (see, e.g., the 2009 Basic Income Studies article “Behavioral Economics and The Basic Income Guarantee” by Wesley J. Pech).

 

Status of the Experiments

In contrast to some rumors and media presentations, none of the proposed social assistance experiments in the Netherlands has yet been launched.

The experiment in Utrecht, which had earlier in the year been to declared to have a launch date of May 1, has been deferred. According to a statement about the experiment on the City of Utrecht webpage, “The Ministry of Social Affairs and Employment has indicated that we need to do the experiment in a different way. We are discussing how we can conduct the study.”

Researchers are currently considering alternative designs of the experiment that will bring them into compliance with the Participation Act, and no new start date has been announced.

Meanwhile, the Ministry is reviewing experiments proposed in Tilburg, Wageningen, and Groningen, with an announcement expected later in May. As previously mentioned, these experiments have been designed to avoid conflict with the Participation Act, as had been one concern with the originally proposed design of the Utrecht experiment.

 

Basic Income News will publish a follow-up article of the Dutch municipal experiments, including further details on their design and implementation, after their final approval by the government.

Thanks to Arjen Edzes, Ruud Muffels, and Timo Verlaat for information and updates, and to Florie Barnhoorn and Dave Clegg for reviewing this article.

Photo: Groningen, CC BY 2.0 Bert Kaufmann


[1] I am here using these terms as proper names given by the respective governments, despite the differences between the experimental programs and a basic income as defined by BIEN.

THE NETHERLANDS: Citizens’ Initiative on Implementation of a Basic Income in 2018 Will Not Be Discussed in Parliament

THE NETHERLANDS: Citizens’ Initiative on Implementation of a Basic Income in 2018 Will Not Be Discussed in Parliament

by | Jan 18, 2017 | News

On December 15th 2016, the ‘committee for citizens’ initiatives’ decided not to allow a discussion in Dutch Parliament about the proposal, organized by Basisinkomen2018, to implement a universal basic income (UBI) in 2018.

Although enough citizens signed the citizens’ initiative (more than the threshold of 40.000), UBI will not be discussed in Parliament because it already has been discussed in reaction to the ‘note of initiative’ (“initiatiefnota”) of the member of parliament Norbert Klein in September last year.

The rule is that a topic cannot be forced onto the agenda by means of a citizens’ initiative if it has been discussed in the past two years.

Klein’s proposal was submitted after the start of the citizens’ initiative, it was only discussed (and not decided about) in a meeting of the committee of social affairs and did not concern an implementation of a UBI (it asked for more research). Nevertheless, the ‘committee for citizens’ initiatives’ (one of its members being Norbert Klein) decided the proposal did not meet the criteria to be admitted for discussion in Parliament.

 

In reaction to this decision, Norbert Klein spoke in the House of Representatives, “To the 65,000 people that signed this citizens’ initiative, the procedural side is of course subordinate to the content. That’s why I consider the great support for the basic income as especially valuable and as a support for me to continue to push for a basic income. The basic income is on the agenda and will remain on the agenda in 2017.”

Johan Luijendijk, Pieter Parmentier and Michael Amendeone from Basisinkomen2018 are disappointed but remain positive:

“We will invite the political parties ourselves. We organized a symposium: Basic Income, Full Power Ahead (“Het Basisinkomen, Volle Kracht Vooruit“) that will be held on January 23rd. We are honored that a union leader (Reinier Castelein), a scientist (Jan Rotmans), a theater man (George van Houts) and an entrepreneur (Tom Stuij) want to contribute to the discussion as convinced ambassadors of a UBI.”

No more seats are available for this symposium, which emphasizes the popularity of the concept of a UBI in The Netherlands.

 

Info and links

NETHERLANDS: 58,800 people sign petition calling for a parliamentary debate on basic income [Florie Barnhoorn]

 

Special thanks to Josh Martin and Danny Pearlberg for reviewing this article

Photo: The plenary hall of the Tweede Kamer (“Second Chamber”), the Dutch Parliament by JVL, CC-BY-SA 2.0