by Karl Widerquist | May 22, 2016 | Research
This article, originally published in 2007, has been re-released on the author’s website because of the increasing likelihood that basic income implementation trials are on their way.
Abstract: A basic income (BI) experiment (or a pilot project or an implementation trial) is worth doing if it focuses on the right question. Some of the problems with the U.S. negative income tax (NIT) experiments of the 1970s stemmed from a focus on the wrong question—focusing on the side effects rather the effects of the policy in question. A European BI experiment should focus on the question of policy effectiveness. The question of policy effectiveness should be formulated follows: What policy (basic income, the current system, or any other alternatives to be tested) produces the greatest increase in welfare for the poor (or the greatest decrease in poverty) per Euro of cost (both in terms of tax cost and efficiency loss)? Effectiveness is not the only important concern, but it is perhaps the most important question that an implementation trail can enlighten.
by Tyler Prochazka | May 16, 2016 | Opinion
Back in the 1990s, China started experimenting with a minimum income guarantee that topped off incomes to a minimum level set by local governments. China called the program dibao, meaning minimum livelihood guarantee, expanding the program nationwide in 2007.
In Beijing the urban monthly dibao standard is 1050 RMB ($161.50 USD) and the rural standard is 800 RMB ($123.04 USD). For urban residents, this is about five dollars USD a day.
However, even this paltry amount often does not make it to those in poverty.
A report by the World Bank found that for every 10 RMB spent on the dibao, only 1 to 2.4 RMB reached individuals in poverty (cited by the Economist). The World Bank also found the dibao program only lowered the poverty gap by 6.5 percent.
Corruption and inability to determine households’ poverty status have plagued the program. According to Lu Yang in the Indian Journal of Labour Economics, based on 2010 survey data only 21 percent of poor households were able to receive the dibao, while more than half of dibao recipients were above the poverty line.
Many local governments go to great lengths to investigate whether dibao households are secretly hoarding wealth, visiting recipients’ homes and observing whether the household has too many “high quality” products to qualify.
Others are concerned with the dibao’s effect on the poor’s effective marginal tax rate. Higher effective marginal tax rates lower the likelihood that a household member will seek work.
If a household’s average income per person goes above the dibao standard, they could sacrifice the entirety of the benefit. Each household member raises the household’s dibao standard by 100 percent. For example, in Beijing where the standard is 1050 RMB per month, a two-person household would face a 2100 RMB dibao standard. In turn, larger households are more susceptible to the problem of high effective marginal tax rates.
In some instances, it is possible that a household will have a 100 percent effective tax rate due to the dibao benefit. In these cases, the household will have the same income regardless of whether a household member chooses to work or not. Based on data from an essay in Population and Development a family of three in Tianjin with one household member employed would have the same income as an identical family that does not work at all. Clearly this has the potential to undermine labor participation if the drop off is this steep in reality.
China plans to lift 70 million people out of poverty by 2020. Such a massive undertaking requires a robust social welfare system. As it stands, the dibao program is not equipped to do this heavy lifting.
However, the dibao does provide a starting point for China to experiment with universal coverage.
The 2014 World Bank report conducted economic simulations that demonstrated expanding dibao coverage was more effective than increasing the benefit size at lowering the poverty gap.
Like the dibao, the central government of China could initiate pilot programs that universalize the dibao cash transfer, eliminating the income and wealth requirements to qualify for the dibao benefit.
Universalizing the program would potentially address many of the issues plaguing dibao, such as the high effective marginal tax rates and low rate of impoverished individuals that receive the dibao.
China’s economic miracle successfully lifted the most individuals out of poverty in world history. To do so, China undertook some dramatic reforms that completely reshaped Chinese society. Now in order to completely eradicate poverty, China may want to take yet another drastic step with a universal basic income guarantee.
by Kate McFarland | May 14, 2016 | News
The Revolution of Social Justice international conference will be held in Budapest on May 21, 2016, on the theme of “the chances of progressive politics and basic income in Europe and Hungary.”
Keynote speakers include Guy Standing (economist, Research Professor at University of London, and co-founder of Basic Income Earth Network), Iván Szelényi (Professor of Sociology at New York University), and Enno Schmidt (artist and co-initiator of the popular initiative for basic income in Switzerland).
The conference also includes two panel discussions on themes related to basic income: the first on basic income pilot projects and how to move from these experiments to national projects, and the second on how to build progressive social and political movements to support (or be supported by) basic income initiatives.
A third panel discussion, featuring a diverse group of national public figures, asks “What’s next, Hungary?”
The conference concludes with a festival–which will include a poem and song recital by Virág Erdős and László Kollár-Klemencz and concert by Kistehén Band.
Attendance is free upon registration.
by Kate McFarland | May 12, 2016 | News
Tuesday, May 17, 2016, Professor Guy Standing will deliver the RSA Scotland’s prestigious Angus Millar Lecture.
In the lecture, “Professor Standing will explore the concept of Basic Income, particularly in relation to Scotland, which has gone from being a fringe political concept to one being discussed and piloted around the world.”
Guy Standing is a Professor of Development Studies at the School of Oriental and African Studies (SOAS), University of London, and co-founder and honorary co-president of the Basic Income Earth Network.
The RSA, a British think tank, has been active in promoting the idea of a basic income, and developed a detailed model for a basic income last December.
See the event details here for more information, or to register for the free public event.
Too late to a book a trip to Scotland? Great news: Standing’s lecture will also be streamed live on YouTube!
Image Credit: Stan Jourdan, BIEN Congress 2012 (flickr)
Thanks to my supporters on Patreon. (Click the link to see how you too can support my work for Basic Income News.)
by Andre Coelho | May 11, 2016 | Opinion
So the basic income implementation process in Namibia was halted1. Is that surprising?
After an amazing effort by minister Zephania Kameeta to get a basic income implementation program for Namibia up to the (minister) council, it was just swept away and replaced by a program intended to alleviate poverty through economic growth. The progressive approach was replaced by the traditional economic orthodoxy of endless growth and continued inequality. This program, named “Harambee Prosperity Plan”, also includes the creation of a food bank and grants for young people conditional on participation in this food bank and a few other community activities.
Let’s not forget that Namibia was one the few places on Earth where a basic income experiment was actually carried out (at Otjivero), and with excellent results. Among the positive results were better nutrition, clothing, and transportation, more savings and a rise in entrepreneurship. You could now be thinking: Ok, so they tried basic income in a pilot project with excellent results, and they had a minister who was a champion of the basic income who could take it on to national-level implementation. So what’s stopping them now? The answer seems simple, but it is also hard to deal with.
The answer is this: big corporate interests need poverty. And it so happens that Namibia has plenty of poor people2. In a recent essay, a tentative connection was established between poverty (in economic terms) and the refusal/denial of the South African government to test for basic income, let alone implement it at the national level. Basically, the argument entails that government officials deny the proven advantages of basic income, delaying its development, to protect corporate interests. These interests profit massively from the cheap labour that a mass of helpless poor people can provide.
The economic structure of Namibia, as related to income, is not much different from the South African, as can be seen in Figures 1 and 2. The similarity is striking, hence the same unwillingness of the Namibian political elite to try out the implementation of basic income, despite all the theoretical and proven practical advantages it provides for the people.
Figure 1 – The spread of households within the income distribution in South Africa, 2008
Figure 2 – The spread of households within the income distribution in Namibia, 2015
A clear image starts to appear. In these countries, poverty is an asset for big industry, which has, to a great extent, bought political power. So what can be done about it? Well, two things can happen: poverty-dependent corporations automate up to a great extent3, and/or Namibians put pressure on their elected officials – through democratic processes – to get basic income implemented, despite the corporate grip on regime politicians. The first one is highly probable, and so we will be watching a fading interest of corporations in financing political power, since with mechanical machines and Artificial Intelligence they can get their way even without resorting to poor human labour. The second one, less likely but entirely possible, may grow from the first one, when political leaders get less engaged with corporate power – and although remaining eager to please them, no longer have the same financial incentive, thus becoming more susceptible to democratic pressures.
Anyway, automation may actually not be a deterrent but rather a spark for some sort of basic income implementation. We seem to be facing a win-win situation for basic income: automation and/or democratic pressures will guarantee that basic income becomes a reality in the next few years in Namibia, and elsewhere. At this point, only ruthless autocratic power can dismiss it and keep it away for much longer. The time for change has come.
More information at:
Claudia and Dirk Haarnann, 2015. “Relief through cash: impact assessment of the emergency cash grant in Namibia”, July 2015
Claudia and Dirk Haarnann, 2015. “Piloting basic income in Namibia – critical reflections on the process and possible lessons”, Paper delivered at the 14th Congress of the Basic Income Earth Network (BIEN) Munich – 14-16 th September 2012
André Coelho, “On why basic income has not yet been deployed”, Basic Income News, 17th March 2016
Notes:
1 – At the beginning of April 2016, the Namibian president presented his state of the nation address as well as the “Harambee Prosperity Plan”, which focuses on combating poverty by the creation of jobs through economic growth, plus the introduction of a food bank.
2 – According to the Republic of Namibia National Planning Commission “Poverty and deprivation in Namibia 2015”, the account for poverty is that 26,9 % of the population lives under the official poverty line.
3 – According the report “Technology at work v2.0”, it is estimated that in countries like Ethiopia the risk of job automation covers 85% of all jobs in the coming decades (other examples like China and India rate at 77% and 69% of automation risk, respectively).
