Basic Income Alternatives Reconsidered

by Francisco Nobrega | Jun 12, 2015 | Opinion

The debate and protests over the importance of an unconditional basic income policy for our time have been spreading worldwide and gathering momentum. Here in Brazil we keep an open ear due to the success of conditional transfer policies (The Bolsa Família program) and also because we have a moot 2004 law that says that such universal and unconditional money transfer is to be inaugurated in Brazil, “in steps”. Most view Bolsa Família as one such “step”. I have been following the idea for over five years together with other activists, trying to implement a basic income pilot program here, in a small city. This is a distilled reflection of my current view about how to make utopia turn into a “protopia”, a term proposed by Kevin Kelly as a “gradual improvement in humanity” or a viable utopia.

The camp of supporters in the world is diverse and we can see two distinct and extreme interpretations of the idea:

One group sees basic income as a way to increase government through social welfare and “eliminate” work that they see as exploitative and envision complete maintenance of social services and centralized decisions, besides the monthly unconditional grant, independent from work.

Another group embrace basic income as a tool to drastically reduce government, replacing the social programs with the monthly grant independent of work.

These polarized views also disclose an important characteristic of the idea: it attracts people from the entire political spectrum, something that certainly will help future implementation. There is another surprising coincidence in all basic income visions reported in writing and video: the unanimous presentation of what I will call the “classical model”: the monthly grant will be bestowed upon all: rich, middle-class, poor and unemployed. I seldom met anyone who dared to challenge the idea of rewarding people with economic means and a job. To me this is in contrast with was in fact a strategy to eliminate poverty and the attached main evil of social welfare programs: the “poverty trap”. This is a phenomenon in which you punish economic success by removing the benefit as soon as someone is employed or becomes an entrepreneur. The poverty trap creates an incentive to stay put and avoid the risk of relinquishing the subsidy and face the competitive world outside.

A basic income payment is a right for everyone without a decent earning, whatever the reason. The logical justification is that society as a whole has been unable to provide opportunities for everyone either as an entrepreneur or an employee with the government or the private sector. Additionally the increasing efficiency in production, and the great advances in microelectronics, artificial intelligence and robotics are on the way to eliminating jobs on a massive scale. Brynjolfsson and McFee¹ have shown that notwithstanding a continuous rise in productivity, the last two decades exhibit a marked reduction in job opportunities. Frey and Osborne² released a very interesting study of 702 occupations, identifying many that are on the road to extinction due to the modern trends mentioned. In the US the authors estimate that 47% of jobs are at risk of being automated within a decade or two. This will add to the jobs already lost by “off-shoring” manufactories. Also a fundamental psychological barrier exists and resides in the deeply engrained notion that income has to be linked to work. People will have to overcome this notion just as we had to overcome certain prejudices in the recent past related to slavery, torture and the rights of women and minorities, finally embracing solidarity in the economic realm.

It is our duty as a civilized society to provide a monthly grant that will allow those without means to provide for their basic needs. But the classical model of basic income is unjust in handing over cash to those who are well off. This practice could be acceptable if we suppose that a given population was living within the same level of their means. Then the grant would be a benefit equal to all. In all countries we have a centuries-old history of inequality. In Switzerland just about one citizen in 13 is poor and needs help from the state. In Brazil about one-quarter of the population is poor and are presently helped by the Bolsa Família program. The cost of benefiting everyone will be a formidable barrier to implement the idea besides being unjust. The classical model was probably born out of our prejudice against people receiving money without pay. Apparently to appease the well off, the most indignant against giving “money for doing nothing”, the classical model wants to “buy” them as beneficiaries of the idea. But we have to give cash “for doing nothing” because the affluent societies of today have to be responsible for the lack of job opportunities. Giving cash to the needy and letting them choose what to do with it has been shown to be not only just but also cost effective. Among other pilot experiments like the one in India³ it is noteworthy to remember the success of giving cash to homeless people in London⁴ or home for the homeless in Utah⁵. The excellent results cost less than the usual city expenses for caring for the homeless in both cases. The winning GiveDirectly initiative in Kenia and Uganda also reinforces the idea of addressing the poor. Many other experiments exist with excellent results.

The social services network present in all countries should be used. The first measure I propose, considering Brazil, is to remove all conditionalities linked to Bolsa Família or to unemployment benefits. The bureaucracy should analyze requests from the needy, families or individuals without income. After entering the monthly grant system the newcomer would have a generous time interval (years) before the grant expires. This longer interval will remove the “poverty trap” long enough for progress out of the grant system. In case a lack of income remains, the person/family will apply, near the end of the allotted time, to stay in the system. So whoever is in need will be helped and whoever falls into economic need will be supported. The amount paid should be enough for the basic needs of the person/family. Recipients who want to advance economically will pursue whatever full or part-time jobs are available or even start a business. The basic monthly cash should be followed with provisions of communal facilities for support and education for the beneficiaries whenever appropriate. In parallel, some of the suggestions exposed⁶ in the “Get America Working!” study could be implemented to reduce the cost of having workers by means of a tax rearrangement that would drastically shorten the current payroll expenses and many more jobs could be created.

Reducing economic uncertainty will have multiple benefits for society: the mental health value of reducing the anxiety and stress linked to insecurity, the social environment will be safer, and most importantly, the poverty trap will be neutralized, unleashing the creative potential of men and women.

Francisco G. Nóbrega

MD, PhD, is President of the Municipal Council for the Citizen’s Basic Income in the city of Santo Antonio do Pinhal, SP, Brazil. francisco.nobrega@gmail.com

The opinions expressed here are solely those of the author. I thank Jim Hesson for improving the English and suggestions by him and Marina P. Nobrega.

1- Race Against the Machine – how the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy. Erik Brynjolfsson and Andrew McFee, 2011, Digital Frontier Press, Mass, USA

2- The future of employment: how susceptible are jobs to computerization? Carl Benedikt Frey and Michael A. Osborne, 2013, https://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf

3- Basic Income: A Transformative Policy for India. Sarath Davala, Renana Jhabvala, Soumya Kapoor Mehta, and Guy Standing. New Delhi: Bloomsbury Publishing India, December 2014.

4- The London experiment: https://www.washingtonpost.com/opinions/free-money-might-be-the-best-way-to-end-poverty/2013/12/29/679c8344-5ec8-11e3-95c2-13623eb2b0e1_story.html

5- The Utah experiment: https://www.newyorker.com/magazine/2014/09/22/home-free

6- Get America Working! site: https://www.getamericaworking.org

Book review: ‘Could a Citizen’s Income work?’

by Citizens' Income Trust | May 24, 2015 | Opinion

Donald Hirsch, ‘Could a Citizen’s Income work?’ A paper commissioned by the Joseph Rowntree Foundation as part of its Minimum Income Standard programme, and published in March 2015. www.jrf.org.uk/publications/could-citizens-income-work

The Citizen’s Income Newsletter usually mentions relevant think tank research and working papers in the ‘news’ section, or occasionally in the context of an editorial, but Donald Hirsch’s paper is particularly significant and so demands a full review. Its importance is twofold: it evaluates a number of Citizen’s Income schemes for viability; and it identifies the changes that might be required in the ways in which the public and policymakers think about income maintenance if a Citizen’s Income were to be a possibility. The paper therefore tackles a number of different feasibilities: financial feasibility, psychological feasibility, and what we might call institutional or policy process feasibility.

The paper recognises that a Citizen’s Income would address some very real problems experienced by the UK’s current largely means-tested benefits system. For instance: a Citizen’s Income would not be withdrawn as earnings rose, and so would not impose the employment disincentives that means-tested benefits currently impose; no stigma would be attached to a Citizen’s Income; and a Citizen’s Income would be simple in structure and so would not suffer from the complexities of much of the current system. The full list of arguments on page 4 of the paper is a model summary of the case for a Citizen’s Income.

The major contribution of the paper is the way in which it outlines the three ‘seismic shifts’ that would need to occur in public attitudes if a Citizen’s Income were to be implemented. The public and policymakers would need to be convinced

1. ‘that everyone should be given some baseline level of financial support from the state, even if they choose not to do anything to try to earn money for themselves;’ (p.5)
2. ‘that the basic marginal tax rate should be substantially higher than it now is, since otherwise almost everybody’s net income from the state would rise, and there is no obvious way to finance this.’ (p.5)
3. ‘potentially a reduced role of the state in ensuring that each citizen can afford particular essentials, notably housing and childcare, through income transfers, if a citizen’s income replaced means-tested payments for these.’ (p.3)

Hirsch says of the first two of these seismic shifts:

Politicians are likely to perceive both of these as unacceptable to voters, a view supported by evidence on social attitudes. It can be argued that both of these conditions could become more acceptable under a regime with a citizen’s income than they are now. Persuading the public and politicians of these arguments, however, would not be easy. (p.5)

And he says of the third:

Under a system of largely market-based rents, it would not be easy to include a simple rent element in a citizen’s income payment without creating shortfalls for some or large surpluses for others. (p.5)

Particularly in relation to the first two seismic shifts, Hirsch’s conclusion is that ‘a debate about the principle of a citizen’s income may thus contribute to a long-term reconsideration of policies and attitudes towards state support’ (p.3).

The paper contains a useful study of the differences between Universal Credit, Negative Income Tax, and Citizen’s Income; a discussion of the ways in which Income Tax would have to rise to pay for different levels of Citizen’s Income; an exploration of the different ways in which Citizen’s Income schemes might tackle differing housing costs; and a discussion of the way in which abolishing tax allowances, such as the Personal Allowance, rather than simply raising Income Tax rates, could pay for a Citizen’s Income. It also contains a description of the differences between the levels envisaged in various researched schemes and the Minimum Income Standards researched by the Joseph Rowntree Foundation ( – although it has to be said, of course, that the current benefits system does not come anywhere near to the levels of the Minimum Income Standards). Then follow descriptions of the kinds of households to which a Citizen’s Income would tend to redistribute income, and the important statement that ‘all the [paper’s] calculations make the simplified assumption of no behavioural change. Knowing what would actually happen to earned incomes as a result of a citizen’s income is very difficult, but is likely to affect outcomes quite profoundly’ (p.16). Then come discussions of household and individual assessment units, the effects of different approaches to meeting housing costs, and lifecycle redistribution. A particularly important section is a discussion of a Partial Citizen’s Income as a stepping stone towards a full one. A partial Citizen’s Income would be likely to impose losses on low income families if means-tested benefits were abolished, and to impose additional complexity if they were not. Hirsch suggests that a Partial Citizen’s Income might be useful if it could be implemented as one stage of an already agreed plan to implement a full Citizen’s Income. There is much merit in this suggestion.

Hirsch describes the Alaska Permanent Fund, and the Namibian and Iranian schemes, but not the more recent Indian pilot project. He correctly points out that these schemes have not reduced employment market activity, and might also have said that in the Namibian pilot project a significant increase was in evidence.

Hirsch makes the important point that income is different from such services as healthcare and education because households generate income as well as require it. This means that it is important to ensure that a Citizen’s Income scheme does not inadvertently reduce the amount of income created, and that both removal of the Personal Tax Allowance and higher Income Tax rates might have such effects on earned incomes. In his concluding section, Hirsch suggests that a Universal Credit with a lower taper rate might be a useful step in the direction of a Citizen’s Income. He might also have pointed out that Universal Credit is not universal, is not based on the individual, is not unconditional, is still means-tested, and is regressive.

When it comes to the study of particular Citizen’s Income schemes in the paper’s appendices, the paper makes two valid points: that the immediate implementation of a ‘full’ Citizen’s Income is unlikely to be feasible in the short term; and that, because a ‘partial’ Citizen’s Income would not fully replace means-tested benefits, it could make the system even more complicated.

Following a description of the Citizen’s Income Trust’s 2013 illustrative scheme, Hirsch proposes changes and lists their additional costs, which is useful, but is not itself a criticism of the scheme as published. He then studies the Institute for Social and Economic Research working paper proposals (reprinted in the previous edition of this Newsletter), and correctly recognises that in order to reduce losses in disposable income, a means-tested system needs to be retained and that this would create an additional level of complexity.

Hirsch’s descriptions of these recently researched Citizen’s Income schemes are largely accurate. There are places in the discussion at which a broader canvas would have been helpful. For instance, the discussion of the higher rates of Income Tax that would be required might have included consideration of overall gains and losses – for if a household’s Income Tax rate rises, but the overall effect of the Citizen’s Income, increased Income Tax, and alterations in other benefits, leaves the household with the same disposable income, then for households originally on in-work or out-of-work means-tested benefits, it really is no problem that Income Tax rates have risen – except that, as Hirsch correctly points out, Income Tax rates are a psychological issue as well as a fiscal one: and it is in the area of the psychological issues related to Citizen’s Income that his paper makes a most useful contribution. An additional important issue is that where households are not currently on means-tested benefits, and Income Tax rates rise, then even if there is no overall loss in disposable income at the point of implementation of a Citizen’s Income, those households’ marginal deduction rates will rise. This might result in behavioural change in the employment market.

A further issue to which Hirsch correctly draws attention is that of redistribution. For schemes in which means-tested benefits are abolished, redistribution effects could be substantial. Hirsch evaluates a particular scheme of this nature, and concludes that

the overall distributional effects would include, but not be restricted to, a redistribution of income from better to worse off groups. There would also be a significant redistribution from people without children to those with children among lower earners, and also some losses for those with very low part-time earnings. Finally, … among groups presently receiving transfers from the state, couples would do relatively better than single adults (with and without children). (p.15)

So either such redistributional effects would need to be justified, or a different kind of scheme would need to be selected. Hirsch does not study in detail the redistributional effects of Citizen’s Income schemes that retain means-tested benefits, where those means-tested benefits are recalculated by taking into account households’ Citizen’s Incomes as existing income. This would require the kind of microsimulation work contained in the Institute for Social and Economic Research working paper (Torry, 2015). The low levels of gains and losses generated by such modelling of the alternative schemes in that working paper suggest that redistributional effects would be far less significant than for schemes that abolish means-tested benefits. Clearly further research is needed in this area.

In relation to those same alternative schemes, and to his discussion of housing costs on p.13, Hirsch might have mentioned that the schemes researched in the 2015 Institute for Social and Economic Research working paper are clear that housing costs support would be left as it is under the current system. A further issue that Hirsch might have discussed is that the ISER paper employed the Euromod modelling software and Family Resource Survey data to generate entirely robust costings and results on gains and losses. As he recognises on p.26, his own paper does not calculate precise tax rates and income outcomes. It would have been able to do so if his suggestions had been modelled using Euromod.

This review cannot do proper justice to the detail contained in Hirsch’s well-researched and well-ordered paper, but we hope that it will encourage our readers to read his paper for themselves, to study his arguments, and to ponder his conclusions. Any future study of the feasibility of a Citizen’s Income, and of particular Citizen’s Income schemes, could do a lot worse than set out from the arguments of this paper.

Hirsch has already done the Citizen’s Income debate a significant service, and we hope to see further such analysis and argument in the future. What would be particularly useful would be to have a side-by-side evaluation of the current benefits system and of a Citizen’s Income scheme (both with and without accompanying means-tested benefits), treating the two systems as competitors on a level playing field, and evaluating them according to a set of clear criteria. As Hirsch says,

the present system suffers from strong negative perceptions and a consequent lack of political support, which has helped the implementation of recent cuts in the real value of benefit levels without obvious political fallout. If a citizen’s income or any other reform could command public confidence, this would help strengthen the underpinning of a system which ensures that nobody in the UK lacks a basic level of income. (pp.4-5)