Credit to: Flickr
In a new paper, published by the Institute of Labour Economics (IZA) in December 2017, James Browne of the Organisation for Economic Co-operation and Development (OECD) and Herwig Immervoll, of both the IZA and the OECD, have discussed what the social and economic consequences might be when replacing some existing social benefits with a comprehensive basic income. The study contributes to the expanding literature (building on the work of Atkinson 1995) that uses the microsimulation technique, a method that builds a computer program based on economic inputs (such as costs, income, expenditure and savings) in order to see what the effect of one variable output (such as poverty or inequality) would be if an input was changed. It was most recently developed by EUROMOD (the only multi-country EU-wide tax-benefit model currently available), and was used in Malcolm Torry’s paper, published in May 2017 by the Institute for Social and Economic Research, which analyzed similar scenarios and outcomes to Browne and Immervoll’s. This article will compare the two papers in an attempt to better understand the growing work in this area.
The Browne-Immervoll paper focused on four countries across Europe that have different population and labour-market structures, as well as very different tax and transfer policies: Finland, France, Italy and the United Kingdom. It looked at a situation where a universal basic income (UBI) would directly replace other working-age cash-payment benefits, including unemployment benefits, social assistance and other generalised minimum-income schemes, in-work benefits, early retirement pensions (i.e. pensions paid to those below retirement age whatever their official label), student maintenance grants and family benefits. In order to ensure that hardship was not ‘built into’ the policy changes, disability allowances and housing benefits would be retained, as well as the funding of other public services, such as the provision of healthcare and education. In line with BIEN’s definition of the UBI, payments would be, in all other ways, universal, paid to the individual, provided at regular intervals in cash, and be unconditional. The funding for the reform would have to take place under budget-neutrality, which would be achieved by taxing the basic income provided and by removing any tax-free allowance from the fiscal model. The marginal rates of tax, thereafter, would remain in accordance to the rates in place prior.
Torry’s paper, dealing specifically with the UK economy, also deemed it permissible to remove tax-free allowances and to tax all earned income in order to contribute toward the funding of the reform whilst maintaining budget-neutrality. Being guided by Hirsch’s recommendations (2015) based on political feasibility, however, Torry allowed for increased Income Tax rates of up to 3 percentage points across the board to help with this funding. Additionally, and significantly, his model maintained – where necessary – the means-tested benefits entirely removed in the Browne-Immervoll version, such that if the introduction of the UBI (which he, alongside others, label a ‘Citizen’s Basic Income’) wouldn’t be sufficient in improving the economic situation of an individual, then the means-tested benefits in place prior to the reform would be available as a form of supplementary benefit.
Given the conservative (or non-existent) fiscal expansion allowed across the modelling, which in both cases is argued as being necessary for realistic simulation, the rate of the net BI payments to be provided was significantly below the poverty line in all cases. In the Browne-Immervoll model, the UBI, for adults, would be at just 21% of poverty line level (defined as 50% of median household income) in Italy (€158), at 32% in the UK (£230), at 49% in Finland (€527), and at 50% in France (€456). The tapering of income at this level (or lower for 16 to 18 year olds) had the inevitable result of an increased rate of poverty in each scenario. This effect was especially pronounced in the UK, rising from 10% to 15%, due to the fact that the UK’s pre-UBI system relied heavily on means-testing and would have, in situations of such low income levels, provided additional benefits no longer available in the new model. Though Torry’s calculated UBI for the UK was only marginally higher for both adults (£264 per month) and young adults (£216 per month), the poverty rate under the conditions of his scheme followed the opposite trend and dropped substantially, falling from 14.84% to 11.8%. This difference – the effect of which is relatively even greater given the fact that Torry, in line with De Agostini, 2017, defined the poverty line as 60% of median household income – can largely be explained by the fact that Torry retained the very same means-tested benefits that Browne and Immervoll removed.
The analysis of potential gains and losses to income groups also reflected the difference in the methodologies used by the papers. The unwillingness in the Browne-Immervoll simulation to increase any current marginal rates of tax in order to collect revenue led to the expected result that those on lower incomes, overall, experienced larger relative losses. The very poorest – with little or no income – experienced gains, due to the universal and unconditional features of the new scheme, but the regressive nature of the flat uniform payments was not sufficiently offset by any progressive mechanisms, and thus the model delivered an overall regressive outcome. In contrast, Torry’s desire to avoid regressivity, and his willingness, therefore, to raise all the marginal tax rates, resulted in the top two highest earning deciles experiencing loses in disposable income of up to 5%, the third highest maintaining their level of disposable income, and the fourth decile down experiencing gains.
In order to understand the effect on work incentives of introducing a UBI, both papers focused on whether the reform would increase the effective tax rates on additional income, thus disincentivizing earning extra at the margins. Though this metric fell, on average, in both simulations – thus showing that there would be an increased (or, at least, not decreased) incentive to work – in the Browne-Immervoll model this was the consequence of removing the benefits associated with low-employment or unemployment, whereas in the Torry model this trend occurred in spite of keeping such benefits in place. As such, Torry’s simulation saw people getting wealthier – thus potentially moving up tax-brackets – but still managed to create a system where the financial rewards to work remained, or were even increased.
In conclusion, Browne and Immervoll determined that introducing a UBI in place of most other means-tested benefits would be costly and lead to negative social outcomes. Torry concluded, by contrast, that a UBI of similar level could be financially and politically feasible and would lead to many positive social outcomes. Given, however, that universal and uniform payments in an unequal society will, by definition, always increase regressivity if not offset by sufficiently progressive funding, the data gathered and logical conclusions derived are completely consistent with the papers’ respective methodologies. This comparative analysis shows that by adjusting a model’s predicated constraints, one can collect quantitative evidence to support different desired conclusions. On this basis, a UBI’s potential introduction does not seem to be determined by its feasibility (implementation, political likelihood, or positive economic outcome) but rather, by whether there can be consensus on what its purpose should be. That is, is UBI a mechanism for equalising wealth or a mechanism to simply provide everyone with something, no matter how small or large that payment may be?
More information at:
James Browne and Herwig Immervoll, ‘Mechanics of Replacing Benefit Systems with a Basic Income: Comparative Results from a Microsimulation Approach’, Institute of Labour Economics IZA, December 2017
A Atkinson, ‘Public Economics in Action: The Basic Income/Flat Tax Proposal’, Oxford: Clarendon Press, 1995
‘Why use EUROMOD?’, Euromod.ac.uk
Donald Hirsch, ‘Could ‘citizen’s income’ work?’, Joseph Rowntree Foundation, 2nd March 2015
Paola De Agostini, ‘EUROMOD Country Report: United Kingdom (UK)’, Euromod, February 2017
University of Michigan in Autumn. Credit to: Flickr.
Poverty Solutions at the University of Michigan, in collaboration with the Stanford Basic Income Lab and with support from the Economic Security Project, are inviting applications to participate in a three-day workshop from May 18th – 20th 2018, in Ann Arbor, Michigan.
The workshop will provide opportunities to learn about basic income projects and shape the long-term research agenda. Participants will discuss and debate about basic income: What are the arguments for and against? What is the evidence that cash is the way to confront economic and social issues versus employment or human capital interventions? What are the major questions experts are grappling with about basic income, and where can junior scholars fit in? This workshop will seek to equip junior scholars interested in pursuing research on basic income with the tools to take the next step in their research agenda.
Experts in the field of basic income studies will lead the workshop. Poverty Solutions at the University of Michigan will pay travel, lodging, and meal costs for a limited number of participants.
The workshop aims to:
- Familiarize participants on basic income research, currently available data sources and state of the art projects that are underway
- Present basic income findings from top research scholars in the field
- Provide opportunities for participants to engage leading experts in discussions on the top priorities for the next generation of basic income research and policy
- Provide interactive instruction and debate on the various models that basic incomes might take (e.g., child allowance, guaranteed basic income)
- Provide practical tips and ideas for basic income research design
- Provide participants with an opportunity to identify their own research projects and develop preliminary design that can be used when the participant returns to her/his home institution
Sessions will be three hours each morning and afternoon. Participants will have time to work on their research projects and consult with faculty every day. This workshop will not offer instruction in statistics or formal research methods.
The application deadline is Friday, February 16, 2018
Applications will be accepted from emerging scholars, including early-stage graduate students, advanced doctoral students, postdoctoral fellows, and faculty early in their career. Members of groups historically under-represented in the social sciences – including scholars from Historically Black Colleges and Universities (HBCU), Tribal Colleges and Universities (TCU) and Hispanic Serving Institutions (HSI) – are strongly encouraged to apply.
To apply, send application materials via email to email@example.com with the title: Application for New Directions in Basic Income Workshop. Applications should be submitted as a single PDF file that includes the following elements, in the order listed below:
- Cover sheet with your name and institutional affiliation with mailing address, email address, and telephone number
- Curriculum vitae or resume
- Brief summary of your current research or analysis activities and interests and how they relate to basic income (about 2 pages, 1 inch margins, 11 font)
- Description of how participation in the workshop will benefit your research and/or long-term career goals (no more than 2 pages)
- For questions about the content, structure, objectives or applying for the workshop, contact Poverty Solutions at firstname.lastname@example.org.
The deadline for receipt of applications is 5 PM Eastern Time on Friday, February 16th 2018. Selected applicants will be notified no later than Friday, March 16th 2018.
Map of Europe. Credit to: Flickr
The European Social Survey (ESS) has published its 2016 Round 8 results, which include, for the first time in its history, a polling question asking participants to express their attitude to the hypothetical introduction of a basic income scheme in society.
The 34,604 participants across 18 European countries were asked whether, overall, they would be ‘strongly against’, ‘against’, ‘in favour’ or ‘strongly in favour’ of a scheme – labelled by the ESS as a ‘basic income scheme’ – that operates under the following conditions:
- The government pays everyone a monthly income to cover essential living costs;
- It replaces many other social benefits;
- The purpose is to guarantee everyone a minimum standard of living;
- Everyone receives the same amount regardless of whether or not they are working;
- People also keep the money they earn from work or other sources;
- This scheme is paid for by taxes.
There was also an option to leave no response to the question. The answer rate across the countries mostly fell between 90% and 98%, though the two anomalies were Poland, with an 85.3% rate, and the Russian Federation, with an 80.9% rate. Given it would be conjecture to determine reasons for this variation (since any information of this type wasn’t included in the survey), the more in depth analysis focused on those who did express opinion.
Of this group, the Russian Federation had the highest percentage ‘in favour’ or ‘strongly in favour’ of the ‘basic income scheme’, at a combined 73.2%, whilst participants in Norway were the least in favour, with only 33.7% answering in the positive. Taking the Esping-Anderson definition used throughout the ESS analysis of country groupings (based on Welfare State Regimes in 1990), it was evident that there was a slight, but evident, correlation between the category the country falls within and the general positivity expressed in the survey. The ‘Eastern Europe’ countries, for example, tended to be generally more in favour of the scheme, with, in addition to Russia, 65% of those in Slovenia, 58.5% of those in Poland, 52.2% of those in the Czech Republic, and 46.7% of those in Estonia either ‘in favour’ or ‘strongly in favour’ of the scheme (representing the 1st, 3rd, 5th, 8th and 12th countries, respectively, most in favour of the idea). Conversely, the countries falling within the ‘Social Democratic’ grouping tended to be generally less in favour of the scheme, with 66.3% of those in Norway, 62.4% of those in Sweden, 54.0% of those in Iceland, 50.2% of those in Netherlands and 44.3% of those in Finland either ‘against’ or ‘strongly against’ the scheme (representing the 1st, 3rd, 5th, 9th and 12th countries, respectively, least in favour of the idea). The countries within ‘Christian Democratic’ grouping – Germany, France, Austria and Belgium – plus the UK and Ireland, showed a more even split, generally in favour of or generally against, whilst Israel and Switzerland were treated as their own categories, with the former 65% either ‘in favour’ or ‘strongly in favour’ of the idea, and the latter, at the other end of the scale, 65.3% either ‘against’ or ‘strongly against’ the idea.
In terms of demographic breakdown, age seemed to be a driver of support, with all country groupings showing the highest level of support within the 15-34 age group, from which a common curtailing trend prevailed as the age bracket increased. The source of participant’s income also seemed to determine level of support in a similar cross grouping trend, with all country categories showing the highest level of support when income was derived from ‘unemployment benefits’ or ‘other social benefits’, and conversely, all showing the lowest level of support when income was accrued through ‘self-employment’, ‘pension’, and to a lesser extent, through general ‘wages or salaries’. Though the level of actual income, in terms of income percentile category within the country groupings, offered no indication as to whether a participant would be generally for or against the idea, there was a clear trend that, if the participant felt that they were finding it ‘very difficult’ or ‘difficult’ to cope with their level of income, they were far more likely to be pro the idea of the basic income scheme. Somewhat pertaining to real income not being an indicator, ‘social class’ (defined by ‘skilled workers’, ‘unskilled workers’, ‘small business owners’, ‘lower-grade service class’ and ‘higher-grade service class’) showed no variation in preference other than the country groupings’ reasonably strong overall proclivity. ‘Gender’ and ‘educational level’ both showed scattered and inconclusive trending.
Though the results of the survey do give some indication (and from a large data source) of people’s openness to ‘basic income’ across much and varying parts of Europe, the wording of the question requires that caution is taken when interpreting the data. Whilst the ESS description of a ‘basic income scheme’ does include all the elements BIEN determine as being necessary when talking about the concept (universality, unconditionality, with payments made periodically, in cash and to the individual), it also states, additionally, that it would would be paid for ‘by taxes’ and that it would replace ‘many other social benefits’. It was, therefore, the opinion of a particular implementation of universal basic income that was sought after (especially where the latter condition’s inclusion was concerned), where preconceived notions of the scheme’s potential positives or negatives are already affirmed. That is, it implies that there is no option for basic income to be included in addition to, and thus leading to an expansion of, the current social security system, but only as part of one that is fixed or diminishing in size. Other recent surveys, such as the IPSOS Mori in the UK, and the Politico/Morning Consult in the US, used wording only focusing on the basic income concept rather than its implementation.
More information at:
‘ESS8 – 2016 Data Download’, European Social Survey.org, October 31st 2017
Stuart Smedley, ‘Half of UK adults would support universal basic income in principle’, Ipsos.com, September 8th 2017
Patrick Hoare, ‘US: New POLITICO/Morning Consult poll finds that 43% of Americans are in favour of a UBI’, Basic Income News, October 5th 2017
Reverend Dr William Barber. Credit to: Flickr
Reverend Dr William Barber of Birmingham, Alabama, has spoken of the need for a “breakthrough” in the civil rights movement in the US, citing an acceptable development being a point where “every poor person has a guaranteed income”. During his tour across 14 states, Rev Barber talked of the need for a “moral revival across the US”, and hoped that the content of his talks would lay the foundation for a new ‘Poor People’s Campaign’ – a 1968 campaign which attempted to push Congress into passing an economic bill of rights including a package of equitable funding, funds for poor communities and a guaranteed income.
Though one’s interpretation of a “guaranteed income” can differ significantly from a Universal Basic Income (UBI), given the context of Rev Barber’s comments in referring to the Civil Rights movement in the 1960s and therefore to Reverend Dr Martin Luther King Junior’s repeated reference to “guaranteed income” in speeches and writings at the time, the form of “guaranteed income” being referred to would seem to share many qualities with the standard conceptions of a UBI. In his book published in 1967, ‘Where Do We Go From Here: Chaos or Community’, Dr King dedicated a whole section in Chapter 5 (titled ‘Where Do We Go’) to his idea of why a “guaranteed income” was necessary, and what it would look like.
The premise of his discussion was based on the need, as he saw it, to abolish poverty on the grounds that “if democracy is to have breadth of meaning, it is necessary to adjust this inequity. It is not only moral, but it is also intelligent. We are wasting and degrading human life by clinging to archaic thinking”. Though he accepted that the causes of this poverty are the indirect consequence of multiple social evils – limited educational opportunities; poor housing; fragile family relationships – Dr King said that the solution could not also be indirect, since in order to be effective the programs required to improve those situations sufficiently would have to be coordinated and comprehensive, which, to date, has never been the case. In addition, he stated “that no matter how dynamically the economy develops and expands it does not eliminate all poverty”. His conclusion, therefore, was that the simplest approach to the issue was also the most effective, which was to provide people with a direct guaranteed income.
Other than a guaranteed income being a way of addressing the moral quandary we face as a society, Dr King pointed out that “we are likely to find that the problems of housing and education, instead of proceeding the elimination of poverty, will themselves be affected if poverty is first abolished”. He also talked about the psychological benefits to the measure, including a flourishing of individual dignity, the ability for people to seek self-improvement, and a reduction in the friction experienced in personal relations “when the unjust measurement of human worth on a scale of dollars is eliminated”.
Dr King did expand on the specifics of what such a program should look like, stating two key conditions he deemed indispensable in ensuring that the guaranteed income remained a progressive measure. The first of these was that a guaranteed income should be pegged to the medium income of the society in order to avoid perpetuating welfare standards. The second was that the level of the income should be dynamic, such that if the income of society grows so does the payment. This latter measure would be necessary to avoid the system becoming regressive.
More information at:
Oliver Laughland, ‘Inspired by Martin Luther King Jr, a new civil rights leader takes center stage’, The Guardian, 25th October 2017
Matt Orfalea, ‘Martin Luther King Jr. on the record for a Guaranteed Income’, Medium, 9th January 2017
Mat Orfalea, ‘MLK on Guaranteed Income: In his own words…’, Medium, 11th November 2015
As part of the Economic and Social Research Council’s (ESRC) Festival of Social Science 2017, the European Social Survey (ESS) is teaming up with Ronnie Cowan MP in a free event that will be held in Portcullis House, Westminster, from 9am on Thursday 16th of November to discuss the UK’s attitude to Universal Basic Income (UBI).
For the first time in the history of the ESS, a question was included in the welfare section of face-to-face surveys asking the participant’s opinion of a UBI. Using the data collected, which was released in October 2017, the event will discover whether there is an appetite for introducing a UBI in the UK. ESS will also present analysis of data in the context of other welfare attitudes gathered throughout the survey. Following presentations, there will be an open Question and Answer session in which attendees will have an opportunity to ask speakers what they think the implications of this data are for public policy.
Analysis of responses gathered through the ESS will be presented by members of the ESS HQ team, including the Director, Professor Rory Fitzgerald, who is based at City University, London. Professor Fitzgerald said: “This is the first time that we have included questions in the European Social Survey on the concept of a universal basic income so we are really excited to discuss the results. We will focus on how the UK compares with other European countries, and public opinion on other items included in our welfare module”.
Ronnie Cowan MP said: “A universal basic income is an idea which has been considered in various forms for over two hundred years. Luminaries such as Abraham Lincoln and Dr Martin Luther King have supported the concept as a way of helping alleviate poverty and providing society with a safety net… I wholeheartedly welcome the Scottish Government’s recent commitment to establish a fund to support local authorities as they develop their own basic income schemes… The Basic Income pilot projects are vitally important to the debate. To design, run and monitor pilots and analyse the results takes a great deal of expertise and effort but they may have the potential to shine a light on any shortcomings – opportunities and ultimately produce solutions… I believe a universal basic income is an idea whose time has come and I very much look forward to discussing the subject further.”
You can register for the event here.
‘The future of welfare: Basic income?‘, European Social Survey News, 25th October 2017