Institute for Policy Research releases “Assessing the Case for a Universal Basic Income in the UK”
The Institute for Policy Research (IPR) at the University of Bath has released a policy brief titled “Assessing the Case for a Universal Basic Income in the UK”.
The 94-page policy brief surveys the rise in popularity of the idea of universal basic income (UBI), especially in the UK context, and examines its feasibility and possible implementation strategies.
The report’s author, IRP Research Associate Luke Martinelli, draws upon his previous microsimulation studies, including “The Fiscal and Distributional Implications of Alternative Universal Basic Income Schemes in the UK” (March 2017) and “Exploring the Distributional and Work Incentive Effects of Plausible Illustrative Basic Income Schemes” (May 2017). He supplements his own work with the simulation analyses of other researchers, including Malcolm Torry (Citizen’s Income Trust) and Howard Reed and Stewart Lansley (Compass) in the UK and Olli Kangas (Kela) in Finland. Martinelli argues that microsimulation techniques, which can be used to model the economic effects of UBI at a national level, allow researchers to address questions about the feasibility and desirability of UBI that are out-of-reach by “real-world” experiment–given that the latter “do not test for the crucial effects of accompanying tax changes, nor examine how changes in income and behavioural responses would be distributed across different demographic groups in the case of a truly universal payment” (p 16).
In Chapter 3 of the policy brief, Martinelli applies these simulation studies to the question of the affordability of UBI. Investigating both full and partial UBI schemes, Martinelli investigates the fiscal implications of the policy for the UK government, taking into account potential adjustments to the existing tax and benefit system, as well as their consequences for poverty and inequality. Overall, Martinelli finds that data “appear to suggest” that “it is possible to design a UBI such that it is both affordable and adequate” (emphasis in original), with the most feasible option being a partial UBI on top of existing means-tested benefits (p 48). However, he issues several notes of caution in interpreting this (apparent) consequence.
One cautionary note concerns the fact that the simulation studies use only static models, which do not provide for possible changes in labor market participation resulting from the introduction of UBI. In Chapter 4, however, Martinelli examines the labor market effects of UBI in detail, again drawing upon simulation studies. Here, he considers the results of studies that model the impact of UBI schemes on financial work incentives, concluding that UBI does significantly improve incentives, especially for low-income groups and recipients of means-tested benefits (although, as the author admits, monetary incentives are “by no means the only factor affecting labour supply decisions,” p 63). In this chapter, Martinelli supplements the simulation analysis with empirical findings from previous experiments on unconditional cash benefits (including, especially, from the negative income tax experiments conducted in Manitoba in the late 1970s). He also reviews a range of theoretical considerations, including the prima facie tension between the positions of UBI supporters who see the policy as a way of incentivizing employment (e.g. as contrasted to means-tested benefit schemes) and those who advocate the policy as providing an “exit option” from employment.
In the final chapter of the policy brief, Martinelli scrutinizes implementational challenges facing UBI in the UK, including complications building political coalitions around the idea. As Martinelli stresses, apparent political consensus around UBI is likely to dissolve when specific policy implementations are issue. In concluding the report, he urges supporters of UBI not to demand a full basic income immediately, but instead to consider an incremental approach. As potential first steps, Martinelli mentioned a small universal payment (“partial basic income”) or a basic income restricted to certain age groups (e.g., as suggested by Malcolm Torry, young adults or adults nearing pension age).
The full report can be downloaded here:
Luke Martinelli, “Assessing the Case for a Universal Basic Income in the UK”, Institute for Policy Research, September 2017.
Reviewed by Russell Ingram
Photo (Bath, England) CC BY-NC-ND 2.0 David McKelvey