by Andre Coelho | May 8, 2018 | News, Research
Since 2016 that Congresswoman Araceli Damián has supported and “presented an initiative to reform the Mexican Constitution and create the right to [a] universal citizen’s income”. In the latest version of this proposal, it is framed as an intrinsic human right, arguing that no human being’s survival should be dependent on any condition, “not even by the idea that a person should be socially useful”. The purpose has been to deliver basic income as a “central element for social policy, to face this crisis and to check the implications of including it in the Mexican Constitution”.
The problems faced by the Mexican society are generally the same in many other regions afflicted by the capitalist system: unemployment due to automation and globalization, lower economic output (to restore some equality in resource redistribution), rampant labour precarity and failure of present social policies to reduce poverty. Given this grim scenario, which has been aggravating for the last decades, it has already been pointed out by the Mexican Consejo Nacional de Evaluación de la Política de Desarrollo Social (National Council for Social Policy Evaluation), or Coneval, that basic income-like policies should be looked into, in a 2014 document titled “Informe de Evaluación de la Política de Desarrollo Social en México 2014” (2014 Social Policy Evaluation Report).
Reporting back to the 1948 Universal Declaration of Human Rights, this basic income implementation proposal for the United States of Mexico is intended to be based on the basis that “every person shall have a standard of living compatible with their wellbeing”. This, according to Araceli Damián, would allow Mexico to “engage in the construction of a Social Rights Welfare State”, and would align the Mexican constitution with international legal standards on human rights.
As a first stage of implementation, the proposal suggests an individual monetary transfer covering basic (normalized) food necessities. This first step would be implemented in 20 years, and according to four sub-stages (extending coverage every five years), accounting for residency (urban/rural), age and sex. On a second stage, and for another 20 years period, basic income would be gradually distributed until normalized basic needs are met for all people. The purpose being to meeting all Mexicans basic needs by 2050.
Araceli Damián and her partner Norma Colín have calculated both costs and benefits for this kind of gradual basic income implementation in Mexico. Costs are associated with extra fiscal efforts to finance such a policy, while benefits also include avoided costs with public health, safety and social security.
For the first step of the proposal’s implementation, covering basic food necessities, an individual amount of 1765 Mexican Pesos per month (92 US $/month) would be enough. That would also include a 15% margin for affording conservation, preparation and consumption of food. According to the sub-stages referred above, priority would be given to rural population, elderly and children, which are already covered in part by existing social assistance programs. Coverage of (adult) women would also take priority over (adult) men, due to known structural disadvantage gaps and the need to reduce women’s economic dependence from men.
Araveli Damián. Credit to: El Colegio de México A.C.
The basic food needs coverage on the first stage would reduce poverty substantially, right from the start. Calculations show that total poverty could be approximately cut in half (72.7% in 2014, compared with 39.5% of the total population, with all four sub-stages of the first implementation step completed). This program would not particularly affect the higher income brackets parts of the population, while reducing extreme poverty almost down to zero (from 36.3% down to 0.7%). This step would represent 13.2% of the gross national product (GDP) if implemented today, which is below the OCDE countries average of 21.9% of GDP spending in social protection. Implementation costs would rise gradually, from 1% of GDP if starting this year (2018), up to 9.4% of GDP after 20 years.
However, according to Araceli and Norma calculations, a full basic income for Mexico, at this moment, would represent around 54.4 % of all state revenue. For the food coverage partial basic income, on the other hand, several financing sources are identified (values per year): savings from restructuring present-day social security (at all levels of government, in about 7000 million Pesos (360 million US$)), cuts in governmental overspending (around 697 000 million Pesos (35 800 million US$)), reduction in fiscal evasion (accounting for more 484 000 million Pesos (24 900 million US$) and progressive fiscal reform (there is room for incrementing fiscal collection, from present-day 19.6% GDP, up to at least 25% GDP).
The study argues that this food coverage basic income would help stabilizing gross demand, particularly among the poorest. This stimulates a better use od existing resources, without rising operation costs for companies, while considerably reducing inequality and poverty. It is also foreseen that implementing basic income in Mexico would increase employment in at least 3%.
Finally, Araceli and Norma propose to rewrite the Mexican Constitution in several articles, highlighting the following addition to article 4th:
“Every person, since birth, has the right to a universal basic income. The State will guarantee this right through monetary transfers, which value shall be enough for all people to reach a dignified minimum quality of life. The Law shall state the amount, periodicity and transfer method, as well as a program for its roll out in a gradual fashion.”
More information at:
(in Spanish)
“Informe de Evaluación de la Política de Desarrollo Social en México 2014 [2014 Social Policy Evaluation Report]”, Consejo Nacional de Evaluación de la Politica de Desarrollo Social (Coneval), February 2015
Araceli Gonzaléz and Norma Colín, “Que reforma y adiciona los artículos 4o. y 73 de la Constitución Política de los Estados Unidos Mexicanos, suscrita por las diputadas Araceli Damián González y Norma Xóchitl Hernández Colín, del Grupo Parlamentario de Morena”, Gaceta Parlamentaria 4864-IV, 12th September 2017
by Andre Coelho | Apr 5, 2018 | Research
David Calnitsky has recently published a paper analyzing the impact of basic income on the labor market, on the Socio-Economic Review Journal. The Abstract reads as follows:
“How do firms react when the whole labor force has access to a guaranteed income? One view argues that the guaranteed income is an employer subsidy, facilitating low wages and a ‘low-road’ industrial strategy. The second view suggests that in providing an alternative to work, the guaranteed income tightens labor markets and pulls wages up. This article examines the impact of an understudied social experiment from the late 1970s called the Manitoba Basic Annual Income Experiment, or Mincome. This research focuses on Mincome’s ‘saturation’ site, the town of Dauphin, Manitoba, where all residents were eligible for unconditional payments. Using an archived survey of local firms that inquires into wage rates, applications, hiring, and work hours, I find support for the second view. I close by examining the mechanisms behind the employer subsidy argument and considering the conditions under which a variety of income-support policies might increase or decrease wages, and more broadly, foster compromise or conflict in the labor market.”
Calnitsky concludes in this article that it is unlikely that business organizations will come to support basic income, if it can be shown to increase the bargaining power of workers. However, dependent on certain implementation details, basic income can be made to facilitate exploitation by employers, rather than obstruct it. For instance, if it replaces some welfare state functions, leaving people less economically safe as a result, and hence more vulnerable to (economical) abuse. At the very end, he also reminds readers that support for basic income may be more efficient if made upon “the policy features themselves, rather than a generic proposal suffering from overly malleable and mutable definitions.”
More information at:
David Calnitsky, “The employer response to the guaranteed annual income”, Socio-Economic Review Journal, February 16th 2018
by BIEN | Mar 23, 2018 | Research
Picture: credit to Engineers Ireland.
Steffen Hertog, Associate Professor in Comparative Politics in the Department of Government at the London School of Economics and Political Science, has published a paper in Energy Transitions (Hertog, 2017) which relates the efficiency in wealth sharing and basic income.
The paper makes the case that hydrocarbon producers with higher rents per capita make a unique category of the rent-dependent nations. Those that face specific development challenges not present in mid-rent nations.
With a look into the patterns of rent distributions in high-rent countries, excessive public employment, and energy subsidies, Hertog argues that these lead to lower labor productivity and the exclusion of the national population from the privatized labor market.
Hertog proposes unconditional cash payments in high-rent countries as a means to minimize the distortion patterns in the hiring of nationals for the private labor market and in labor productivity resulting from rent distribution.
More information at:
Stefan Hertog, “Making wealth sharing more efficient in high-rent countries: the citizens’ income”, Energy Transitions, December 2017
by Claire Bott | Mar 15, 2018 | News, Research
The UK-based Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) has released a report suggesting a Universal Basic Opportunity Fund (UBOF) as a stepping-stone to a full universal basic income (UBI).
The suggested UBOF would consist of £5000 a year for two years, and would be made available to every person in the UK upon request. Although this would fall significantly short of a full, life-long UBI, the study’s authors, Anthony Painter, Jake Thorold and Jamie Cooke, suggest that the UBOF would have a number of potential uses: “A low-skilled worker might reduce their working hours to attain skills enabling career progression. The fund could provide the impetus to turn an entrepreneurial idea into a reality. It could be the support that enables a carer to be there for a loved one without the need to account for one’s caring to the state.”
Noting that the UK’s rate of corporate tax is currently being gradually reduced from 28% to 17%, the study suggests that the UBOF could be funded simply by returning the corporate tax rate to its original level.
The study states that “The UBOF is an ambitious effort to re-envisage the relationship between citizen and state, emphasising trust in people as opposed to a default of suspicion as is the case currently. It also represents a practical step and valuable experiment on the possible road towards a more permanent Universal Basic Income model.”
The RSA states that its mission is “to enrich society through ideas and action.” It regularly publishes research papers on a variety of social issues. Anthony Painter is the Director of its Action and Research Centre, while Jamie Cooke is the head of RSA Scotland, and Jake Thorold is a research assistant.
More information at:
Anthony Painter, Jake Thorold and Jamie Cooke, “Pathways to Universal Basic Income“, RSA Action and Research Center, February 2018
by Patrick Hoare | Mar 5, 2018 | News, Research
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
by Andre Coelho | Feb 12, 2018 | News, Research
Ville-Veikko Pulkka
Although an experiment on basic income is being performed in Finland at the moment (being expected to end by January 2019), this does not say much about what Finns think about it, or about basic income in general. According to recent research developed by Ville-Veikko Pulkka, a doctoral researcher at the University of Helsinki, not only does survey methodology deeply affect people’s responses, but current beliefs and views of society by Finnish citizens are also such that “there is no need for a paradigm shift”.
Ville-Veikko and his colleague Professor Heikki Hiilamo ran another survey in late 2017, arguing that other surveys on basic income in Finland such as Center party’s think tank e2 in 2015, Finnish Social Insurance Institution (Kela) in 2015, and Finnish Business and Policy Forum EVA in 2017 skewed results due to different ways of defining and framing basic income, with support ranging from 39 up to 79%. These researchers view their survey as “a more realistic view on basic income’s support in Finland”, having it based on the Basic Income Earth Network (BIEN) definition. They also explicitly referred the basic income net level of 560 €/month, which is around as much as many basic social benefits in Finland.
Ville-Veikko and Professor Hiilamo have found that the partial basic income of 560 €/month currently being tested in Finland is actually the most supported one among several basic income options (partial(1) with more or less than 560 €/month, full(1) with 1000 or 1500 €/month), with 51% of respondents saying it is a “good idea” (20% being undecided and 21% firmly considering it a bad idea). Significantly, of the surveyed income schemes, the most supported one was “participation income” (78% of supporters) which is not a basic income by definition.
This survey also showed that the younger the respondents (around 1000 in total), the more support the basic income proposal (the one cited above) receives – 72% under 24 years of age, down to 42% for people over 65. Occupation also seems to have a strong influence, with students showing 69% of support for basic income and entrepreneurs only 38%. For relatively obvious reasons, the unemployed and part-time employed were also more in support of the idea (68 and 61% respectively).
The new survey by Ville-Veikko and Professor Hiilamo comes at a time when it becomes clear that the Finnish government’s path is not to break from “the activation policies implemented since the 1990s”. This has been shown through the recent implementation of a tighter work activation model, aimed at the unemployed, which brings more conditionality and sanctions into the system. This is, apparently, contrary to the basic income spirit of unconditionality and, on top of that, the government is already considering tightening up unemployment benefits even further.
From the referred survey and recent Finnish government moves toward activation policies, it seems clear that running an experiment on basic income does not equate to leading the way towards the implementation of this policy. According to Ville-Veikko, basic income in Finland is likely to receive more support if only unemployment and work precarity rises significantly in the near future, which is uncertain even given the latest studies on the subject. It also becomes clear that the public remains polarized regarding social policies for the future: on the one hand there is moderate support for basic income, and on the other hand there is clear support for activation measures such as the “participation income”.
Notes:
1 – here, “partial” refers to receiving the stipend and maintaining eligibility for housing allowance and earnings-related benefits, and “full” refers to losing eligibility to those same benefits.
More information at:
Kate McFarland, “FINLAND: First Results from Pilot Study? Not Exactly”, Basic Income News, May 10th 2017
“New model to activate unemployed comes into effect amid rising criticism”, YLE, 26th December 2017
“Finnish government plan for jobless: Apply for work weekly – or lose benefits”, YLE, 10th January 2018
Micah Kaats, “International: McKinsey report identifies basic income as a potential response to automation”, Basic Income News, 16th January 2018
