by Andre Coelho | Jun 12, 2019 | News, Research
According to a recent report (May 2019) by UCL Institute for Global Prosperity (IGP), guaranteeing universal basic services (UBS), such as health care, education, child care, transportation and digital information, would be more beneficial to low income groups than universal basic income (UBI).
It is argued, in the referred report authored by Anna Coote, Pritika Kasliwal and Andrew Percy, that “extending public services is likely to be more effective in addressing poverty, inequality and wellbeing than unconditional cash payments to individuals”. That assertion is linked to a yet to be published article by Coote and Yazici called “Universal Basic Income, A literature review”, while the present report does not “consider the case for UBI in any depth”. The discussion defending UBS, in the report, seems then to be unilateral. However, cost considerations between the two systems, for the United Kingdom reality, have been done in a previous report (from 2017). From these calculations, the authors have reached the conclusion (stated after the 2019 report’s release) that UBS would cost around 10% less than UBI to implement in the country.
Andrew Percy, co-author of the report (supported by the Joseph Rowntree Foundation) and Citizen Sponsor at IGP, has said that “universal access to basic public services must be the foundation of 21st century welfare that delivers real social security, allows people to make meaningful choices about their work, and can be delivered in an affordable and practical way”, which doesn’t seem to pitch UBS against UBI. Others, like Will Stronge (Autonomy think tank) and Mathew Lawrence (Common Wealth think tank), explicitly consider UBI and UBS to be complementary in an evolving model for society.
Anna Coote. Picture credit to: Green European Journal
Anna Coote and co-author Edanur Yazici have also recently (April 2019) published another report (signing for the New Economic Foundation), entiled “Universal Basic Income: A Union Perspective”, which clearly rejects UBI in favour of a UBS. That study has been published by the global trade union federation Public Services International (PSI), financially supported by the Friedrich-Ebert-Stiftung foundation. This particular report was analysed by UBI activist Scott Santens, who has written that it is “a prime example of a disinformation campaign designed to manipulate public opinion against the idea of universal basic income”, and a “shameless propaganda” move.
The publication of the 2019 report on universal basic services, by the IPG, has also spurred a reaction in Guy Standing, a lifelong researcher, economist, author and activist for UBI. According to him, in an article published in Open Democracy, “there is no contradiction between having some public quasi-universal basic services and a basic income”. He adds, concluding, that these systems “address different needs and stem from different rationales. But having cash enhances freedom of choice, is potentially more empowering and can be more transformative. I plead with those advocating ‘Universal Basic Services’ to stop juxtaposing the idea of more and better public services with giving people basic income security.”
More information at:
Laurie MacFariane, “Universal services more effective than a Universal Basic Income, argues new report”, OpenDemocracy, May 16th 2019
Scott Santens, “‘Universal Basic Income Doesn’t Work’ Says New Prime Example of Fake News”, Medium, May 31st 2019
Guy Standing, “Why ‘Universal Basic Services’ is no alternative to Basic Income”, Open Democracy, June 6th 2019
by Andre Coelho | Jun 7, 2019 | News, Research
Apart from experimental designs testing basic income-like policies, in small scales, theoretical evidence keeps mounting, showing that basic income is not a pipe dream, but a practical reality within our reach. Published earlier this year, a new report issued by the Compass think tank demonstrates just that. It proposes two models for change in the British social security system, one that installs a partial basic income for a cost of 28 billion £/year (approximately the benefits cut per year since 2010), and another that would rise the unconditional transfer of the first model through the operation of a “citizens’ wealth fund”.
As a summary, it can be read in the report’s conclusions:
The to models presented satisfy the feasibility tests set out earlier. Both models:
- Are progressive: they raise the incomes of low-income households at the expense of those on the highest incomes, cut poverty and reduce inequality; the greatest benefits go to the poorest;
- Provide a basic income for all, while reducing the level of sanctions; Britain would finally have a secure income floor set to rise over time;
- Become more progressive and more powerful anti-poverty instruments as basic income payments rise;
- Help to correct the gender imbalance of the present system;
- Ensure that there are almost no losers among the poorest households
- Apply a new 15% rate of income tax, an additional 3% on each rate of income tax, and an extension of national insurance payments.
It is still worthy to say that the 28 million £/year figure cited above can be collected in a variety of ways, for instance reversing the freezing of diesel and petrol excise duties since 2010 (9 billion £/year), reversing cuts in corporate tax rates from 18 to 28% (26-28 billion £/year), reduce the number and value of tax reliefs (ex.: eliminating the “entrepreneur’s relief”, saving 2,7 billion £/year), phasing out financial support to home owners and private landlords (which mainly benefit property developers) (8 billion £/year), among other possibilities. All these imply reversing tax cuts and attributed benefits to the relatively wealthier members of British society, which makes them quite progressive measures.
More information at:
Stewart Lansley and Howard Reed, “Basic Income for All: From Desirability to Feasibility”, Compass, January 2019
by Andre Coelho | Jun 5, 2019 | News, Research
The reading of results from basic income type of experiments is, apparently, dependent on who is reading them. The Ontario present government officials did not think, for instance, that there were particular advantages or benefits from pursuing with the Ontario basic income experiment. The particulars of the Ontario (basic income) pilot cancellation have been extensively reported on (some examples below), so much so that a new report was published with some evidence of the benefits experienced by more than 400 participants, according to their responses. This may be another case of dissonance between government power and common citizens: what is felt by the latter as beneficial is discarded as ineffective and wasteful by the former. Why, then, was this basic income pilot program cancelled is a legitimate question one might ask, if the participants themselves felt it as a success.
For example, the baseline survey reported that at the start of the pilot 81% of participants were suffering from moderate to severe psychological stress); At the end over 70% had reported their mental state to have improved in several categories. This is attributed to having fewer financial worries such as debt. In addition, participants were apparently better able to buy edibles online canada and other treatments for their conditions, whereas before they may have refrained due to budget concerns. Due to the legalization of medical marijuana in several countries, such as the United States and Canada, many scientists are looking into the effects of CBD and cannabis. In terms of the physiological benefits of Cannabis, compounds like CBD seem to have anti-inflammatory properties, helping to relieve chronic muscle and joint pain. Nevertheless, when ingested, these effects might be amplified, so these relief properties could be felt in even greater strength with THC edibles that you can purchase from get kush or other such cannabis retailers online. There is growing evidence that CBD is an effective monotherapy or complementary therapy for the treatment of generalized anxiety disorder, social anxiety disorder, and post-traumatic stress disorder. Cannabis (rather a chemical in the Cannabis sativa plant known as cannabidiol) may be helpful in reducing anxiety, the most common mental health issue. The information provided here is not intended as medical advice and it is highly recommended that one consults a health expert before consuming CBD products. This is merely intended as an overview various types of CBD commodities (such as CBD Oil UK) of that may be of assistance to people suffering from anxiety or stress.
Overall, the participant experience compiled in this report partly mirror that of Finland’s basic income-type experience first results: more agency, anxiety relief, more social connection and financial security. The majority started eating better, and were able to make plans for the future…which evaporated as soon as the pilot was cancelled by Doug Ford’s government. In numbers, answers returned the following results (from Basic Income Canada Network):
- 88% of respondents reported less stress and anxiety and 73% had less depression.
- 58% improved their housing situation;
- 34% found the basic income supported employment by affording transportation to work, child care or ability to start or expand a business;
- 32% of respondents were able to go back to school or upgrade skills (note that a majority of employed participants in the government baseline survey – recipients and control group – said they were in dead-end jobs);
- 74% were able to make healthy food choices and 28% stopped using food banks;
- 46% were able to pay off debt;
- 52% were able to see friends and family more often, 55% were physically more able to do activities, and 45% reported fewer health problems;
- Many respondents talked about working hard their whole lives, often at multiple jobs, but never really having a life, until basic income made that possible.
More information at:
Kate McFarland, “ONTARIO, CANADA: New Government Declares Early End of Guaranteed Income Experiment“, Basic Income News, August 2nd 2018
Sara Bizarro, “Ontario, Canada: Reactions to Ontario Basic Income Pilot Cancelation“, Basic Income News, September 18th 2018
Daniel Fabbri, “Four Ontario Mayors asking the Federal Government to take over the Basic Income Pilot“, Basic Income News, September 30th 2018
André Coelho, “Canada: Ontario’s basic income experiment ended, but the ground is fertile for more pilots“, Basic Income News, December 22nd 2018
Sheila Rogehr and Joli Scheidler-Benns, “Signposts to Success: report of a BICN Survey of Ontario Basic Income Recipients“, Basic Income Canada Network, February 2019
André Coelho, “When a few drops of rain allow flowers to blossom: Finland’s basic income experiment generates its preliminary results“, Basic Income News, February 16th 2019
by Andre Coelho | May 18, 2019 | News, Research
The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) just published a new report entitled “A Basic Income for Scotland”.
The report is organized in four main sections:
- How the welfare system in the UK – and in Scotland in particular – is failing to reduce poverty and economic insecurity, within its own terms.
- Presentation of the updated findings on the basic income trial presently ongoing in Fife.
- Modelling the impact of a basic income in Scotland (by Landman Economics).
- Analysing political, legal and administrative scenarios enabling a first Scotland-wide basic income experiment, in the path for its implementation in the region.
The report also features direct input from potencial beneficiaries of the Fife basic income trial (which is still under study / consideration), a precious contribution from those directly affected by the current system of means-testing conditional social security. Taking the example of Fife, Painter and his colleagues have projected that “£2400 a year would half destitution and reduce relative household poverty by 8,5%. A basic income of £4800 a year would end destitution and reduce relative household poverty by 33%.” It’s relevant to notice that the Scottish living wage is currently £9 per hour, which for a regular 8 h/day job amounts to about 1440 £/month. So, these basic income amounts under consideration are only 14 and 28% of what it takes to live comfortably in Scotland.
Anthony Painter summarizes how a basic income in Scotland could be tested within a whole set of other public policies in place:
“In A Basic Income for Scotland we map how pilots of basic income could work with a full set of supports alongside cash payments. We call this community designed system of interlocking public, community, and employer supports wrapped around basic income a ‘Civic Basic income’.”
More information at:
Anthony Painter, “The case for basic income is growing. Scotland can take it forward”, RSA, May 8th 2019
by Benjamin Sadlek | Apr 7, 2019 | News, Research
Picture credit to: Biodiversity & Community Health.
Measuring income in developing countries
A study published in the National Bureau of Economic Research in the Fall examines cash transfer programs across a range of developing countries and uses household data from Indonesia and Peru to examine the effectiveness of targeted transfer programs in those countries. The study explores the costs and benefits of targeted and universal cash transfer programs, and the different circumstances that developing countries face that affect the performance of different transfer schemes.
One of the key challenges identified for developing countries that affect the viability of a universal basic income (UBI) are the sizes of the informal sector (1) and the resulting revenue sources. Developed countries largely get their revenue from income taxes (2), but given the size of the informal sector in many developing countries, the bulk of government revenue comes from sources like consumption taxes and official development assistance (ODA), with the latter in some low-income countries accounting for more than half of that country’s operating budget.
Effectively targeting the poor for cash transfer means that you must have a way to reliably measure income and means, and therein lies the problem for many developing countries. In Indonesia and Peru, 88% and 79% of the employed populations are reported as below the tax exclusion threshold, and therefore do not pay income taxes. This is not necessarily to say that upwards of 80% of true income is below the income tax threshold, but it shows the problems associated with informality and lack of information. In any case, it complicates the means-testing portion of targeted transfer programs like those in the US.
In lieu of directly measuring income for means-testing, developing country governments can use what’s called a “proxy-means test” by measuring indirect things like assets and consumption. Another complication is that people can easily misrepresent their economic situation, depending on what indicator the proxy-test uses to measure poverty. Therefore, the mechanism for determining who qualifies for the transfers are often a mystery kept by the designers of the proxy-tests, and the data collection method must in some way provide incentives for telling the truth.
Findings from the data
To measure the success of the targeted programs in Indonesia and Peru, the authors used consumption data from 2010-2011 period from the Indonesian National Socioeconomic Survey (SUSENAS) and the Peruvian National Household Survey (ENAHO) to measure the size of the program’s “inclusion errors” and the “exclusion errors”, meaning the amount of people who do receive transfers who shouldn’t and the amount of people who don’t receive transfers who should. They are able to do this because the datasets used provide information on predicted consumption used by the proxy-means tests of each country, and the actual consumption for that period in each country.
In the 2010 period, in both Indonesia and Peru, transfers reached around 80% of intended beneficiaries, meaning those whose economic situation actually qualified them to receive benefits got them 80% of the time, and 20% did not (meaning a 20% exclusion error). There was also a cost of transferring the benefit to 22% and 31% of those whose economic situation did not actually qualify them for the benefits, judging by the actual consumption data (meaning the inclusion error).
The authors then employ a social welfare function, which measures the utility of a dollar between a low-income person and a high-income person, to measure the effectiveness of more narrowly targeted programs in relation to a universal program (UBI). Using this function, they were able to identify a socially optimal targeted transfer amount, which was 19% and 18% of the population for Indonesia and Peru respectively. While utility is lowest at the point of no transfer, the graph shows utility and overall social welfare both decline steadily after the socially optimal point. A UBI, then, has the lowest utility of almost any ratio, and even with the administrative cost savings included, the added benefit is almost imperceptible (these are represented by the little tick mark pointing upwards at the point of “UBI”).
This is nothing too surprising, though, because it essentially confirms that having a system where wealthier individuals also receive the benefit is not as socially efficient as targeting the poorest individuals, because the dollars are worth more to poorer individuals. What is interesting is that savings in administrative costs in this model also do not provide a big boost to social welfare.
Advantages and drawbacks of universal cash transfers
A UBI would address some of the failings of targeted transfer programs by providing what the authors call “horizontal equity”, which essentially measures the degree of errors at different levels of transfer, and also an added benefit of transparency.
If we imagine a family in the exclusion error population goes to apply for benefits and find that they are not eligible, verifying their eligibility would be difficult given the secrecy of the methods used in proxy-means identification. A UBI would be an ideal fix for this problem because it is available to everyone, and though you would be including those who may not necessarily need it, you would not deny anyone who actually does need it.
There is also the issue of labor market distortions that targeted transfers can cause. It is well known that programs in the US and in some European countries result in recipients to avoid finding work because they risk losing their entitlement. Even if the methods used in proxy-means testing are not known, households in developing countries may restrain themselves on activities that they perceive may end up disqualifying them for the benefit, such as reducing consumption or avoiding formal income.
Other issues with a large informal sector that would complicate implementation of a UBI are identification to avoid double counting, getting the money to recipients that may not have bank accounts or formal residences to mail a check to, and accruing taxes from the rise in incomes that will occur through increased consumption. Dependence on consumption taxes also presents a risk to the scheme, because large informal sectors might also affect tax losses from consumption.
Discussion on UBI in developing countries and alternative methods
The primary strength of the argument for UBI in the context of a developing country comes from the fact that targeted transfers currently deny resources to some of the extreme poor, where a UBI would theoretically not be denied to anyone. It would also theoretically be more straightforward and fairer of a system. A crucial strength with targeted transfers comes from the fact that it can use limited resources the most effectively, and even if it misallocates some resources, on the whole, it can effectively allocate resources.
It makes sense on an intuitive level for developing countries with tight budgets to send money where it would be the most effective through targeted transfers, but this results in both inclusion and exclusion errors, which can either be seen as the best outcome possible or simply insufficient. The exclusion error population could be seen as an unacceptable outcome creating a highly underprivileged class, and even the definition of the population that qualifies for transfers might be considered insufficient. In Indonesia, while the impoverished population has been receding, during the Asian financial crisis it rose to as high as 23%, and the population that is “near poor” have been estimated to be as much as 42% (3). This could play into an argument for UBI: by allowing everyone to have the same benefit, there would be no inclusion or exclusion errors, and it would still be much more socially optimal than no transfer at all.
While the authors recognize that targeted and universal programs work well in different circumstances, they seem to imply that, for developing countries, the social welfare achieved by targeted transfers is currently the best game in town. Universal programs like public education and health care are two examples of already widely accepted government programs, yet cash transfer programs remain largely targeted.
The authors also introduce some interesting alternatives that capture some of the strengths of targeted and universal programs. For example, with “community-based targeting”, a village might get a certain number of “beneficiary slots”, and in a completely public setting, the village communally decides where to allocate them. The strength of this program seems to emanate from the fact that local communities have a more intimate knowledge of who needs the assistance the most. In the “differential cost and self-identification” method, benefits would be available to an entire population like UBI, but your relative wealth would affect the ease of which you get the benefits, as determined by a proxy-means test. The key to this program would be the fact that the benefits are worth less the higher up the income ladder you are, and things like long application processes would deter some applicants. The added benefit to this would be that those who are in the exclusion error population would receive some recourse if they are initially denied benefits.
It is clear that having an income tax base with which to measure prosperity and draw taxes from is currently the ideal system to operate with a UBI. Jenson (2019) demonstrates that development accompanies a shift from self-employed to employed populations in the United States with over a century of data, which could be the natural outcome of development in other contexts. If a UBI turns out to be an ideal system for reducing extreme inequality and increasing other indicators of human wellbeing, a question of its appropriateness might also entail identifying the correct level of development. Advancing this issue still requires more pilots in more varied circumstances.
This research adds to the knowledge of basic income in developing countries from pilots in Namibia (2008), Madhya Pradesh (India, 2010), and in other expansions of cash transfer schemes in Zambia (2010) and in Iran (2011).
Notes
1 – The informal sector describes the portion of the population who work but do not contribute to a social security system, are often self-employed, and whose activities and revenue amounts are largely unknown.
2 – By contrast, in the 2017 US Federal Government budget, 83% of revenue came from individual income and payroll taxes.
3 – Figures from the World Bank’s report “Making the New Indonesia Work for the Poor”.
More information at:
Rema Hanna, Benjamin A. Olken, “Universal Basic Incomes vs. Targeted Transfers: Anti-Poverty Programs in Developing Countries”, The National Bureau of Economic Research, August 2018
Abhijit Banerjee, Paul Niehaus, Tavneet Suri, “Universal Basic Income in the Developing World”, The National Bureau of Economic Research, February 2019
Anders Jensen, “Employment Structures and the Rise of the Modern Tax System”, The National Bureau of Economic Research, January 2019
Namibia Pilot Project, Basic Income Grant Coalition
SEWA, “Piloting Basic Income Transfers in Madhya Pradesh, India”, SEWA and UNICEF, January 2014
Pedro Arruda and Laura Dubois, “A brief history of Zambia’s Social Cash Transfer Programme”, International Policy Research Brief, June 2018
Chris Weller, “Iran tried its own basic income scheme — and people didn’t give up working”, Business Insider (France), May 23rd 2017
Jehan Arulpragasam and Vivi Alatas (coords.), “Making the New Indonesia work for the poor”, The World Bank, November 2006
Adi Renaldi, “Poverty Isn’t Decreasing, Indonesia’s Official Poverty Line Is Just Too Low”, Vice, July 23rd 2018
by Andre Coelho | Apr 5, 2019 | Research
Valerija Korošec. Picture credit to: DNEVNIK.
Valerija Korošec, a known sociologist and social policy analyst in Slovenia, as well as ex-presidential candidate for that country, has presented a paper entitled “Unconditional Basic Individual Universal Child Grant for Belgium following the Slovenian approach”, at the International Conference on Universal Child Grants, which took place in Geneva from 6th through 8th of February 2019.
This paper’s abstract reads as follows:
This paper presents some evidence for developed countries suggesting that a universal, unconditional and uniform basic income (UBI) approach is more effective than a means-tested, conditional and targeted benefit system in addressing child poverty.
In accordance with the aim of the International conference (2019) on Universal Child Grants (UCGs) a policy design for Universal Child Benefit for Belgium is outlined. It follows the concept of Universal Basic Income Proposal for Slovenia (KOROŠEC, 2010), for which the simulation already showed that a UBI approach is more effective than means-tested, conditional and targeted benefits. The findings of KOROŠEC (2010) fit well with those of the OECD (2017) study ‘Basic Income as a Policy Option: Can it add up?’ and the IMF (2017) Fiscal Monitor ‘Tackling Inequality.’ Also, the most recent study Universal Basic Income: Debate and Impact Assessment (IMF, 2018) resembles KOROŠEC (2012) up to the point of similar outlining of the necessary steps in designing the UBI policy framework.
Certain consensus starts to emerge on circumstances in which a UBI system is better than the current means-tested system for all.
The affordability study for UBI UCG in Belgium presented here (i.e. SI_UBI UCG_BE) is simulated by MEFISTO, which is a micro-simulation model for Belgium based on EUROMOD. This simulation shows that with the same amount of money (no budget change) child poverty rate drops if the current 27 schemes are replaced with a universal flat-rate child grant (200 €/month) and a 400 €/month single parent supplement. Child poverty rates drop the most in the first and second income deciles. The majority of the population is either unaffected or benefits by the simulated reform, and the Gini is slightly lower, by 0.03.
We confirm, at least for two developed countries that already have quite universal and comprehensive social security systems, Slovenia and Belgium, that within the same fiscal envelope (budget neutral) and with UBI implemented on a level just above the current Guaranteed Minimum Income scheme (GMI) a UBI system is better than the current (means-tested) system.
Valerija is also a responsible at the Institute of Macroeconomic Analyses and Development at the Slovenian Government, and coordinator of the Slovenian Universal Basic Income Network affiliate.
More information at:
Kate McFarland, “SLOVENIA: Basic Income advocate Valerija Korosec makes bid for Presidency”, Basic Income News, August 17th 2017