Note: Please see this article for a more current update (Oct 15)
The (Second) Year of the Pilot
Status of Basic Income (and Related) Experiments in May 2017
Last Updated: May 15, 2017
BIEN cofounder Guy Standing, a basic income pilot veteran and now frequent consultant, dubbed 2016 “the year of the pilot“ in response to the burgeoning interest in experimentation with basic income in various countries throughout the world. In 2017, some of these pilot studies were launched, some have been delayed, and other plans have remained dormant. Some have turned out to resemble a full-fledged basic income to a lesser degree than first anticipated.
This page summarizes the current state of this year’s existing, planned, and previously announced basic income pilot experiments (as of May 2017).
A. UPDATES ON SEVEN STUDIES
Following are summaries of the present status (as of mid-May 2017) of seven pilot studies of basic income–or, better put, seven alleged or reported pilot studies of basic income–that have received international publicity within the past year, including projects in Finland, Kenya, the Netherlands, Ontario, Scotland, Uganda, and the United States.
First, though, an important caveat: although each project listed below has been described as a “basic income pilot” or “basic income experiment” in media reports, few manifest every characteristic of a basic income, defined by BIEN as “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.”
Granted, any social policy experiment is by its nature limited in certain ways, making it something of a vacuous criticism to say that a basic income experiment fails to test a “genuine” basic income. While a basic income is lifelong, experiments are necessarily bounded in duration. While a basic income is universal, experiments typically require that a portion of the population not receive the benefit in order to provide a control or reference group. (Even saturation studies, in which every member of a community is eligible for the program, remain limited in that the basic income does not extend to other communities in the same general geopolitical region.)
That said, some of the most highly-publicized experiments and pilot programs diverge from a basic income in ways that are significant even after accounting for inherent constraints due to the nature of experimentation. For example, the target population might not be universal. (As described below, this is the case in the experiment currently running in Finland, as well as those planned in Ontario and several Dutch municipalities and, likely, the experiment under development by Y Combinator.) Additionally, the benefits disbursed to the treatment groups in some of the experiments–such as, most notably, those planned in Ontario and the Netherlands–diverge from some of the key attributes of a basic income, such as by being household-based or reduced with earned income. (As mentioned below, the treatment conditions in the Dutch experiments will even retain a degree of job-conditionality.)
I touch upon additional caveats at the end of this article. 1. Finland’s “Perustulokokeilu” (Basic Income Experiment)
The national government of Finland has enacted a two-year experiment to investigate the effects of a basic income on labor market participation, designed and directed by Kela (Finland’s Social Insurance Institution). The experimental group consists of 2,000 persons, who were randomly selected from a pool of individuals between the ages of 25 and 58 who were receiving unemployment benefits from Kela in November 2016 (about 175,000 individuals nationwide). Participation in the basic income program was mandatory for those selected.
The 2,000 participants are receiving unconditional payments of €560 (about 590 USD) per month. Unlike Finland’s current programs of unemployment assistance, the pilot program imposes no requirement that recipients demonstrate that they are seeking employment or accept jobs offered to them, and those who do obtain work will continue to receive the full €560. (Thus, while the sample is clearly not representative of all Finns, the individual cash transfers do match the definition of basic income, although not a fully livable one.)
The experiment was officially launched on January 1, 2017–with the first payouts distributed on January 9–and will continue through December 31, 2018.
The research group at Kela will compare outcomes in the experimental group to a control group, consisting of all persons in the original target population who were not selected to participate. As mentioned above, the analysis will focus on labor market participation, including differences in employment rates between the treatment and control groups. Research director Olli Kangas has stated in recent lectures that Kela will also monitor expenditure on medication, health care usage, and income variation.
To avoid observer effects, Kela is conducting no interviews or questionnaires during the course of the experiment, and will publish no results prior to its conclusion at the end of 2018 (despite recent rumors driven by exaggerated claims stemming from a single anecdote voluntarily produced by one experimental participant).
Kangas has recommended expansion of the experiment in future years (e.g. to test different models and broaden the target population); at the time of this writing, however, the government has not acted upon this recommendation.
Status: Pilot launched in one village in October 2016; full experiment (200 villages) intended to launch in fall 2017.
GiveDirectly, a US-based charitable organization, has initiated a project in which it will eventually provide unconditional cash transfers to the residents of 200 villages in rural Kenya (about 26,000 people in total).
An initial pilot study commenced in one village in October 2016, in which all 95 residents now receive monthly unconditional cash payments of about 23 USD (€21) per month, amounting to roughly half of the average income in rural Kenya. Payments will continue in this village for 12 years. At the time of this writing, only this initial “test village” is receiving a basic income. GiveDirectly’s current objective is to launch its full experiment in September 2017.
In the full study, 300 villages will be randomly assigned to one of four groups: three treatment groups, in which all residents receive some form of unconditional cash transfer, and a control group of villages in which no cash transfers are given to any residents.
In the first treatment group, which will include 40 villages, residents will receive cash payments of about 23 USD every month for 12 years (as in the initial test village). In the second, containing 80 villages, residents will receive monthly cash payments of the same amount, but only for two years. In the third, also containing 80 villages, residents will receive a lump-sum payment equal in amount to the two-year basic income. (Note that, ignoring their time-boundedness, the schemes implemented in the first two treatment groups do meet BIEN’s definition of ‘basic income’.)
As GiveDirectly explains on its website, “Comparing the first and second groups of villages will shed light on how important the guarantee of future transfers is for outcomes today (e.g. taking a risk like starting a business). The comparison between the second and third groups will let us understand how breaking up a given amount of money affects its impact.”
The organization also indicates that it will investigate outcomes including “economic status (income, assets, standard of living), time use (work, education, leisure, community involvement), risk-taking (migrating, starting businesses), gender relations (especially female empowerment), [and] aspirations and outlook on life.”
GiveDirectly is making much of its data public as it collects it (e.g. responses to the first survey of participants in its initial pilot); this practice, however, pertains only to the pilot village, which is not itself to be included in the full experiment. The organization expects to publish its first experimental results after one or two years.
The government of the Canadian province of Ontario is preparing a three-year pilot study of a guaranteed minimum income (commonly called in a ‘basic income’ in Canada), which will take place in three locations: the Hamilton, Brantford, and Brant County region (launching in late spring 2017); Thunder Bay and surrounding area (launching in late spring 2017); and the city of Lindsay (launching in autumn 2017).
A total of 4,000 potential participants will be randomly selected from a pool of low-income adults between the ages of 18 and 64 years who have lived in one of the three test locations for at least one year. Participation is voluntary, and those who do agree to participate in the experiment may exit at any time during the study.
Study participants will receive a minimum annual income of 16,989 CAD (€11,340) for single individuals and 24,027 CAD (€16,038) per year for couples. That is, individuals and couples with no external income would receive this amount of money. For participants who to earn additional income, the amount of the benefit will be reduced by the amount of 50% of earned income (entailing that, for example, single individuals will stop receiving any payment if their income rises above 48,054 CAD per year). Individuals with disabilities will receive an additional amount of up to 500 CAD (€334) per month.
The benefit is not contingent on work or looking for work. However, because the amount of the benefit depends on income and household composition, and because eligibility for the study is limited to low-income individuals, the program to be tested in Ontario is not a basic income in BIEN’s sense. (As mentioned above, the term ‘basic income’ is often used in Canada to refer to guaranteed minimum income programs, in contrast to the definition adopted by BIEN and common in Europe. The Ontario government is not being sloppy or dishonest in titling the program ‘Basic Income Pilot’; mere dialectical differences explain the ambiguity.)
According to the Government of Ontario website, the experiment will measure outcomes in a variety of areas, including food security, stress and anxiety, mental health, health and healthcare usage, housing stability, education and training, and employment and labor market participation. A third-party research group will evaluate data collected during the pilot.
Results of the pilot will be reported to the public in 2020.
Status (July 2017): Six municipalities approved to proceed with two-year experiments, which will begin in Sep-Oct 2017; applications from Utrecht and Amsterdam currently under review.
In 2016, research teams in several municipalities in the Netherlands developed plans to experiment with unconditional cash transfers to replace the nation’s workfare-oriented program of social assistance. However, their plans encountered resistance from the national government, which imposes constraints upon–and, in effect, prohibits–experimentation with unconditional benefits. (For example, the Dutch Participation Act would require that experimental participants be surveyed after six and twelve months to verify that they have made sufficient efforts to find work, and dropped from the study if they have not–effectively removing the “unconditionality” of the benefit.)
A pilot proposed in Utrecht, which had gained the lion’s share of attention in the English-language news media, has been delayed after the government failed to authorize the experiment as designed by the Utrecht University research team.
On July 3, 2017, the Dutch Ministry of Social Affairs authorized experiments in the first five municipalities: Groningen, Wageningen, Tilburg, Deventer, and Ten Boer (read more). Groningen and Ten Boer will be working in collaboration.
A similarly structured experiment in Nijmegen, which is to involve 400 participants, was also approved later in the month.
In contrast the previously rejected design of an experiment for in Utrecht, the designs of the latter experiments were deemed to be in compliance with the requirements of the Participant Act. For example, each includes a treatment group in which participants are subject to workforce-reintegration requirements that are more intensive than current welfare programs.
In each of the experiments, which will run for two years, participants will be randomly selected from a pool of current social assistance beneficiaries (with participation voluntary for those selected), and assigned either to a control group or to one of several treatment groups.
Each experiment has at least three treatment groups, testing the following types of interventions: (1) removing reintegration requirements (e.g. job applications and training programs) on welfare benefits; (2) providing a more intensive form of reintegration service; (3) permitting participants to earn additional income on top of their welfare benefits. Subjects assigned to the third treatment groups will be permitted to retain 50% of additional earned income, up to a maximum of €199 per month, for the duration of the two-year experiment. In contrast, under current policy, welfare recipients are permitted to keep only 25% of additional income, and only for up to six months.
The Groningen / Ten Boer experiment includes a fourth treatment group, in which participants are permitted to choose to join any one of the three preceding groups.
It is not fully accurate to refer to the Dutch municipal experiments as tests of basic income. None includes an experimental condition in which the amount of the benefit is fully independent of either income or household composition (the existing benefits are household-based, which is not to be altered in any of the proposed experiments). Further, none of the proposed experiments includes a treatment that combines a reduction in the withdrawal rate of benefits with a removal of work-related conditions. And, as mentioned above, even those subjects who receive the “unconditional” payments will be subject to removal from the study after six or twelve months if they fail to seek work.
Researchers plan to examine outcomes such as employment (including part-time and temporary employment), education, and health and well being. 5. Eight’s Unconditional Cash Transfer Project in Uganda
Status: Launched on January 1, 2017.
In January 2017, Eight, a charitable organization based in Belgium, began disbursing unconditional cash payments in the Ugandan village of Busibi. All residents of the village, including 56 adults and 88 children, receive monthly cash payments, distributed via mobile phones. Each adult receives 18.25 USD (about €16.70) per month, approximately 30% of the average income of lower-income families in Uganda, and each child receives half of this amount, or 9.13 USD per month. The payments will continue through the end of 2018.
Used by permission of Steven Janssens
Eight is working with anthropologists at Belgium’s University of Ghent to examine outcomes along four main dimensions: girls’ educational achievement, access to health care, entrepreneurship and economic development, and participation in democratic institutions. Researchers will compare data collected during and after the pilot to data that were gathered before its launch. However, no additional village is being studied as a control, limiting the project’s usefulness as an experiment.
That said, Eight’s project has objectives beyond research. It is also the basis of a documentary, the first segments of which have already been release, and cofounder Steven Janssens has emphasized its larger purpose to inform future basic income projects: “From our experiences with this pilot we will learn and adjust where necessary, because in the long term we want to scale-up to more villages as our organization grows.”
Official site for more information: eight.world. 6. Y Combinator’s US-Based Unconditional Cash Transfer Study
Status: Design phase; no known launch date.
Sam Altman, CC BY 2.0 TechCrunch
In early 2016, Silicon Valley tech entrepreneur Sam Altman decided to pursue a privately-funded basic income experiment, motivated in part by the goal of moving away from a focus on employment effects and examining potential benefits of a basic income more holistically. To this end, he founded a research group at his company Y Combinator to design and implement the project.
In a February 2017 talk at Stanford, research director Elizabeth Rhodes explained that Y Combinator’s pilot is still in the design phase. As currently planned, it will use a stratified sample of 2,000 to 3,000 individuals from two states, between the ages of 21 and 35, with household incomes below the median in their area. At least 1,000 of these study participants will be randomly assigned to the treatment group, in which they will receive 1000 USD (about €915) per month for three years (with a subset receiving the payments for an additional two years). The payments will be given unconditionally and irrespective of income. The remainder of the sample will provide a control group.
The research group is also still in the process of developing metrics to evaluate the experimental results. However, Rhodes has indicated that experimenters are interested in a holistic evaluation of individual-level outcomes such as labor market participation, training and education, time spent with children, physical and psychological health and well-being, risk-taking, financial health, and help given to friends and family. Outcomes related to the children of participants (e.g. grades and test scores) might also be examined.
Y Combinator’s “pre-pilot” in Oakland, announced in May 2016 to media acclaim, is not itself an experiment; its purpose is merely to help the research team fine-tune its methods and procedures (selection of subjects, disbursement of payments, collection and recording of data, etc.). 7. Scottish Municipal Experiments
In Glasgow, Scotland, the City Council has partnered with the think tank Royal Society of Arts (RSA) to investigate designs for a basic income pilot. The planning process, while moving forward, is at an early stage in development, with the Council and RSA currently working on a study of the financial, administrative, and constitutional feasibility of the pilot. Workshops on these topics will be held in June and July 2017, and a report is planned for September.
The Councils of Fife and North Ayrshire have also committed to investigate the possibility of conducting basic income experiments.
B. OMISSIONS AND FURTHER CAVEATS
Avid followers of basic income news (including Basic Income News) might have noticed that some previously announced pilots and experiments have been omitted from the above list.
Oversight, of course, is a possible cause: if a current or planned basic income experiment is missing from this page, please submit it to our Submit a News Lead form.
In some cases, though, apparently omissions may be intentional. Sometimes “basic income experiments” are announced in the media (1) prematurely, (2) when the experiment is not actually testing a basic income, or (3) when the project is not an experiment:
India has also occasionally been cited as a location about to launch a new basic income pilot study–or even about to implement a full-blown basic income policy (see the response in Basic Income News to rumors that circulated at the start of the 2017). To be sure, the national government of Indiahas shown considerable interest in universal basic income, devoting an entire chapter to the topic in the 2017 Economic Survey, an annual document prepared by the Ministry of Finance. India is also notable in the basic income community for the success of previous basic income pilot studies. At the time of this writing, however, no firm plans for additional pilot studies (let alone a full-blown policy) have been announced, and any popular media reports of new pilot studies in India remain speculative and premature.
In general, one should be wary when the popular media announce the impending launch of a basic income experiment. Such announcements often frame the prospective studies as far more certain–and farther along in the planning process–than they actual are. Researchers and governmental officials might indicate interest in running an experiment prior to attempting to obtain funds or examining the legality or feasibility of the project, and sometimes such expressions of interest capture the ears of the media. Of course, such tentative interest does not entail that an experiment will ever actually manifest.
2. I have raised the second issue–the fact that many so-called “basic income pilots” or “basic income experiments” diverge substantially from tests of a genuine basic income–at the start of this article, and we have already seen examples above (including the Dutch social assistance experiments and the Ontario pilot).
Due to their relative lack of attention in popular media, I have not included reference to other social assistance experiments that have, on occasion, been inaccurately called “basic income experiments” — including those in Barcelona and the Italian town of Livorno. About the latter, a six-month social assistance experiment, BIEN-Italia’s Sandro Gobetti has clarified in Basic Income News, “Among the requirements [for participation in the experiment] was residency in the municipality for at least five years, unemployment status, registration at the employment center and a family income not exceeding €6530 gross per year. In exchange for €500 monthly, the municipality invited successful applicants to perform socially useful work.”
3. Finally, note that several non-profit organizations have launched projects that involve the distribution of unconditional cash transfers to individuals, but that are not experiments (although, in some cases, they might still be called “pilots”).
For example, Brazil’s ReCivitas raises money to distribute unconditional cash payments of 40 Brazilian Reais (about €12 or 10 USD) per month to residents of the village of Quatinga Velho, Brazil. In January 2016, the organization announced that the monthly payments would be lifelong, and began distributing the payments to an initial group of 14 individuals. However, the ReCivitas Institute is not gathering data to study the effects of basic income. Project leaders have stated that they are already convinced that basic income is effective, and that their goal is to provide a model and inspiration to other similar initiatives. The initiative might be considered a pilot, insofar as it is intended to provide information about how NGOs have effectively implement a basic income scheme; however, it is not an experiment.
Lottery programs that award selected individuals their own “basic income” for some length of time, such as Germany’s Mein Grundeinkommen, are also not experiments and should not be classified as such.
Most recently, a newly launched film project in the United States, Bootstraps, has begun raising money for what it calls a “basic income pilot program”. This effort also appears not to be an experiment but, instead, a similar lottery-style program, intended to generate anecdotes, publicity, and awareness of the idea of basic income rather than robustly test its effects.
Reviewed by Tyler Prochazka. Some additional proofreading by Karl Widerquist, May 25, 2017
Back in 2014, Johan Bollen and four other colleagues published an EMBO report, presenting a new and radical approach to scientific funding. Since then, Johan has paired with Marten Scheffer so as to develop and communicate further the notion of SOFA – Self Organized Fund Allocation. Scheffer has recently led the Dutch parliament to ask the Netherlands Organization for Scientific Research (NWO) to start a SOFA test pilot.
But what is a SOFA? It is a new way to allocate funds for scientific research. The traditional approach usually means a funding agency receiving many applications, which entail a time-consuming process in itself. Plus, it costs a large percentage of the funding amount to run and manage this top-down driven system. According to a recent article on the issue, by Jop de Vrize, that percentage can be as high as 25%. On top of that, it has been proven highly inefficient, since the success rate of these application is usually below 20% (19.1% in 2016 according to the US National Institutes of Health, and 11.3% at the European Research Council Starting Grants for the same year). The result is that some scientists get lots of money, while a lot of others get a fraction of that money, or even nothing.
The new SOFA funding scheme is, at its core, a distributed, self-allocating system. The funding agency still attributes a certain amount of money to a research community, but then, instead of going through a cumbersome, time-consuming, unfair and inefficient process of distribution, the idea is to get the researchers themselves to allocate funds to other researchers. Specifically, the SOFA system would attribute an equal, unconditional amount of money to each researcher – a certain earmarked value by the agency, divided by all researchers in the community – and then each one would donate 50% of their present and past funding [1] to other scientists, trusting their best judgment.
Proposed funding system (Johan Bollen et al.)
Of course, this new system is not devoid of problems, or potential challenges. Freed to allocate 50% of their research income to other scientists, researchers could choose to give money only to their friends, collaborators or mentors. Also, the problem of the money not reaching those who are needing it the most may still arise, only partially offset by the unconditional amount that will be equally distributed (50% of each year’s grant). However, Bollen and Scheffer are confident, after running many simulations, that “rather than converging on a stationary distribution, the system will dynamically adjust funding levels to where they are most needed as scientists assess and re-assess each other’s merits”. They also agree that the system would have to be include programmed features to avoid self-attribution and hide funding decisions (to keep decisions unbiased), for instance. An important feature of the SOFA system is that no one individual researcher has access to enough information so as to try and influence the attribution mechanism (contrary to the present system, which is more easily politically malleable).
The unconditionality associated with the SOFA scheme, plus its widely-distributed nature draws some similarities with the basic income concept. Basic income, as defined at the Basic Income Earth Network (BIEN), rests on the independence of income and work-status, or even willingness to work. Granted, the SOFA scheme implies that the money is distributed among scientists, devoted and committed to scientific work, with clear and established study plans. However, it is also clear that some of the previous conditions associated with funding decisions – mainly a discussable notion of merit coming from a very small group of peer-reviewers who end up allocating the grants – will collapse if SOFA is introduced. Another similarity with basic income proposals has to do with de-complexification of the attribution system, also reducing its overhead costs, as a function of both distributing 50% of the grants unconditionally and putting in the hands of the researchers themselves the responsibility of distributing the other half of each grant. In the basic income arena, that advantage usually takes the form of reduced costs with social security management, and lowering complexity through existing program’s extinction and remodeling. A third similarity has to do with trust. Unlike the present system, SOFA inherently trusts researchers to allocate 50% of their grants to others. This trust is also present in most basic income proposals, which allow recipients to spend their basic income as they see fit, hence furthering their personal freedom and capacity to more efficiently solve problems in their own lives.
The SOFA scheme has been presented to Eppo Bruins, a member of the Dutch House of Representatives, who proposed a call for a SOFA test pilot in June 2016, which was approved by the parliament. However, the NWO, the agency which would start and manage the experiment, has resisted the initiative. According to Scheffer, that is understandable, since “if applied universally, the novel system would make the agency redundant”.
Notes:
[1] – Management of past funding options is still not included in the proposed model, but is considered important by the authors, to better use of unused funds.
Hong Kong’s newspaper of record, South China Morning Post, recently covered the surge of interest in Universal Basic Income (UBI) in the Asia Pacific.
The author, David Green, points out the positive data that has been demonstrated thus far from cash-grant experiments, such as in India.
South Korea has had interest in basic income since the “youth dividend” was implemented in Seongnam city. BIEN held its Congress in South Korea last year.
The article notes that Taiwan is seeing increased interest in the idea of basic income since the first Asia Pacific focused Basic Income conference was held in Taipei.
The headline references China’s dibao program, which is a cash-grant minimum income guarantee. The dibao has many differences to UBI as conceived by Basic Income Earth Network (BIEN). Primarily, dibao is not a universal cash-grant (dibao is means-tested and only given to those that are under the dibao poverty line).
Due to dibao’s means-tests, the article notes there are an array of issues with China’s minimum income guarantee, primarily that it does not reach the poor.
Tyler Prochazka, features editor of BI News, was quoted as advocating for China to create “special economic zones” to test a UBI.
What would be the effect of a citizen’s income (CI), aka basic income or BI, on wage levels – how would employers respond to its introduction? What would be its effect on the supply of labour, and on the total amount of paid work done in the economy? Would we still need a legally enforced minimum wage? This article explores the behavioural effects of a BI, on workers, jobseekers and employers. It first examines contrasting hypotheses as to the effects on wages and labour supply, then use official data to make a rough estimate of these effects for individuals in different socioeconomic and household circumstances. Analysis indicates that a Minimum Wage will remain essential after the introduction of a modest BI, to prevent the latter substituting for wages and job security, especially in the case of individuals in less advantaged circumstances.
Introduction
Frequently mentioned arguments for a BI include two different groups of incentive effects that can’t all take place at once for the same person or household. The first is the category of effects that increase labour supply to employers; that it would help people out of the ‘poverty trap’ and encourage them to get a job, or to move from part-time to full-time work. The second is the category of effects that would reduce labour supply to the market; that it would encourage shorter working hours and more leisure; that it would encourage some people to take time off work to study or to care for elderly loved ones or to do unpaid volunteer work. Which groups in the labour force would increase their ‘offer’ of work to the market and which would reduce it? Under what circumstances, and in response to what level of BI, would people work more, or work less ?
We are in the dark here for a number of reasons. Firstly, most previous experiences of anything like a BI have been in other countries, often in much poorer countries than the UK with much more self-employment – Brazil, India and Namibia to mention examples. The US and Canadian experiments of the 1970s were far from ‘universal’, all being a variant of income maintenance for previous welfare claimants only. All we have to go on to tell us what might be the labour market effects of BI are the responses of claimants and employers to previous benefit systems in the UK or in comparable European contexts, and informed guesses about what claimants and employers would do in response to a new type of benefit which has no very similar precedent in nature or scale.
The risk of BI reducing wage rates and job security
Benefit systems have in some instances been found in practice to lead to lower wage rates (Gray 2014). Among these examples, the oldest was the Speenhamland system of poor relief in the early nineteenth century (Polanyi 1957). More recently, lower wage rates, increased precarity and job splitting – leading to jobs with very short hours in place of the full time work that most jobseekers wanted – was an evidenced effect of the high ‘earnings disregard’ levels present in French, German and Belgian systems of unemployment benefit in the 1980s and early 1990s (Gray 2002, 2004). In the UK, Wilkinson (2001) found a ‘Speenhamland effect’ of Working Families Tax Credit. The same argument was made in relation to tax credits when they were first introduced (Bennett and Hirsch 2001). Since 2014, the UK government itself hinted that employers had taken advantage of tax credit, defending their 2015 plan to reduce tax credit allowances (later reversed, but only partly) by saying that ‘the tax credit system had, for too long, been used to subsidise low pay’ (BBC News, 15.9.15). This view was underlined by the statement that corporation tax was being cut to ‘introduce incentives for business to remove the need for tax credits with pay rises ‘ (George Osborne’s budget speech on 8.7.15).
Thus benefit systems that allow unemployed people to move into temporary employment like that offered by this denver staffing agency, without total loss of benefit, as in the examples above, can lead to reduced wages. With WFTC (and the later Working Tax Credit), when unemployed people got a job they re-applied for in-work benefits to partially replace their out-of-work benefits, whilst with Speenhamland and the continental disregards (Polanyi, op.cit; Gray 2002) they just kept some of the benefit they had whilst they were unemployed. Such systems, to a greater or lesser degree, alleviate the ‘poverty trap’ where almost 100% of benefits are lost on taking a job, as with JSA, discouraging employment. But unfortunately downward pressure on wage rates is an inevitable effect of allowing unemployed people to keep getting state money when they get a job, if that is all we do. If ending the ‘poverty trap’ persuades some unemployed people to take jobs they previously wouldn’t have accepted because the wage was too low, employers will then find it easier than before to recruit the numbers they want at a lower wage – unless a minimum wage law prevents this . In fact right wing writers (e.g. Friedman 1962, Parker 1989) have argued for BI precisely because it helps and encourages people to take low paid jobs. And if pay falls, it falls not just for those who may be desperate for any job, but for all those changing jobs – and possibly even for those in jobs and staying in the same workplace. Many recent press reports show how easy it is for employers to issue new, worse contracts in the current under-regulated, under-unionised environment. Some defenders of BI argue that if the BI was high enough, a minimum wage law would not be needed – and even that some element of ‘wage subsidy’ is beneficial because it would protect small businesses like rural shops. (Or, one might add, this would help socially important sectors currently placed in serious difficulty by the recent rise in the legal minimum wage, in particular social care). But pay would fall not just for small businesses (including small shops and care homes, which some people might want to have lower costs to prevent them from closing). It would fall for supermarket chains and other corporate giants as well. In any case there are alternative, more targeted, ways of helping small businesses or particular sectors – especially those where, as with social care, the public sector is the main customer.
Can we avoid the Speenhamland effect and the poverty trap with a single measure? Probably not , for two reasons, as follows. First of all there is the question of whether a BI would be affordable at a level high enough to enable people to refuse all jobs below whatever we consider to be a reasonable wage level. Secondly any measure which increases labour supply is likely to induce easier recruitment at low wages. BI removes the poverty trap for the unwaged, and many of their job applications are directed at low paid sectors. So BI on its own, even at a high level, is liable to induce wage freezing, or recruitment at lower than previous hourly rates, just as did tax credit and the continental high-disregard systems. This can be avoided by ensuring that employers are obliged by law to pay a minimum wage – as I argued in 2014, such a regulation is an important safeguard against the BI being use to benefit employers rather than employees.
However, also at stake are other aspects of labour standards, and these are at issue even with a very high level of BI. Guy Standing (1999) amongst others has argued that a BI is a good defence against precarity – in these days of widespread temporary jobs, zero hours contracts and part-time unemployment, it makes such conditions more tolerable and less exposed to poverty. But if such jobs become more tolerable, employers will find it easier to recruit to them. In effect, such employers would be using state funds as a subsidy to support their practice of laying off workers for the weeks or days they are not needed, rather than meeting the costs of continuous maintenance of their labour force as they do in long-term employment contracts with specified hours. Again repeating the argument of my 2014 paper, limiting the use of temporary labour, and in particular zero hours contracts, is an important form of regulation to prevent this. What is important here is the similarity between a BI and the high disregards in these French, Belgian and German benefit schemes, which did encourage the offer of temporary and ‘mini-jobs’. They were like a partial BI for the unemployed. To combat these effects of encouraging more precarity, alongside a BI we need regulation of zero hours and limitation of temporary work. This is essential if the BI is not to end up subsidising employers who show no long-term responsibility for training or supporting their workforce and want to turn labour supply on and off like a tap.
Moreover, the problems of precarity are not solved by a BI without other measures. A prospective landlord or mortgage company will be unimpressed by someone who doesn’t know whether next week’s income will be her wage for 40 hours (say £400) plus her £80 BI, or just her £80 BI. It is creditworthiness and a secure long-term income that gets people a home – which is a good reason for minimising insecurity in the jobs market. A stable and secure income is important for individuals’ credit rating and thus their financial wellbeing, according to journalists’ advice on how to obtain a good credit rating.
An ‘on your bike’ economy where individuals have unpredictable changes in jobs and housing may also be inimical to family relationships and children’s education ‘
BI and the freedom to with-hold one’s labour
So far this paper has focussed on one potential effect of BI –the increase in the supply of labour. That is, the unemployed would move more easily into employment because they would face no poverty trap, and precarious jobs would become more acceptable. But it is often said that BI would enable people not to work, that is not to work for so long or all the time because they chose study, caring, or volunteering; or not to work because they wanted to refuse exploitative conditions. At first sight these two expectations seem in contradiction to each other; would BI induce more paid work or less? Firstly, it depends on the level of BI compared to average wages. Secondly, the effects would differ between various population groups.
Let us consider first the effect of BI on the unemployed. Unemployed people fall mainly into two groups – those receiving JSA and those who are ineligible – plus some eligible non-claimants who feel they cannot meet the very strict conditions, or have no fixed address. The ineligible group are mainly people whose 6 months’ entitlement to insurance-based JSA has expired and they cannot claim income-tested JSA because they have an employed partner . Ineligible unemployed also include those aged under 18. The argument that people are deterred from working by the benefits poverty trap applies mainly to this non-claimant group, because for those on JSA, the benefit conditions are the main factor. People on JSA are currently under such strict rules as to what jobs they can refuse that they are often obliged through fear of sanctions to apply for rock bottom pay and conditions regardless of the ‘poverty trap’ (Gray 2004). The financial incentive effect of a BI (that is, removing the poverty trap) would make little difference to them. What would make a big difference is that BI is unconditional : all the job centre rules about applying for so many jobs each week, with sanctions for even minor rule infringements, would not apply.
Current JSA rules have been getting gradually tighter, with sanctions and the imposition of compulsory work-for-benefit placements becoming more common, even since 1996. These aspects of the job centre system, described by labour economists as ‘conditionality’ and by critics also as ‘workfarist (Gray, 2004; Peck and Theodore, 2000) were designed to chase people into bad jobs. According to OECD-reported research, greater conditionality of benefits systems do increase the outflow from unemployment into jobs (OECD, 1994, 2000). That is, greater conditionality leads to an increase in labour supply. Conversely, relaxing the punitive sanctions and workfare regime would enable people to spend longer looking for a good job, or re-training in new skills, with nobody forcing them to take the first offer even if this does not meet their income and job security needs or fully use their skills. That is, less conditionality could be expected to lead to a fall in labour supply; this option to turn down bad jobs would work against the Speenhamland effect explained earlier. If a BI was introduced, it is hard to say which effect would win out – easier recruitment by employers to low paid or casual work because of the cushion of BI, or more difficult recruitment on low wages/temporary contracts because of the end to benefit ‘conditionality’.
It is because of the threat of sanctions and workfare that some voices in the trade union movement have recently taken up the historically popular claimants’ movement demand for a BI, a demand first flagged up by Bill Jordan (1989). BI was enthusiastically discussed at a conference on welfare held by UNITE and the PCS in autumn 2014, leading to the publication by UNITE of the ‘National Welfare Charter’ linking BI to the demands to end sanctions and workfare, which was endorsed by a fringe meeting of the TUC in 2015 (see
There was also a UNITE/USDAW motion supporting the principle of BI passed at the TUC itself in 2016.
Over and above the virtue of abolishing benefit sanctions, a BI that was high enough to enable people to refuse low pay or very insecure work would probably reduce the total of hours worked and the number of jobs offered. Some of the worst jobs would not be offered because they would attract few applicants. But if the BI was not high enough to enable people to refuse ‘bad’ jobs, it would have the opposite effect – low pay would be more acceptable and employers would recruit more easily at low wages than if there was no BI. It is impossible to say, a priori, how much would be ‘high enough’ to mark the tipping point or boundary between these two effects, above which labour supply falls. Moreover, the tipping point could vary according to socioeconomic group and region.
Turning to people who are not on out-of-work benefits – that is, people in paid work, mothers and other carers, students and would-be students, the level of the BI would be the key factor in their decisions about whether and how much to work. Just as people clearly find it hard to manage on JSA of £73.10 per week, they would probably not stay completely out of work for long on a BI of £70 or £80 per week unless they had some parental support. However for many students that might be riches, given that the maximum maintenance grant of £65 per week in England has just been abolished for new starters. Some parents might work more if they found £70 or £80 a handy childcare grant, but others might want to spend more time with their children. Some older people might find it was enough to make up any deficit in their pension entitlement and therefore retire sooner than they would otherwise. Some full-time workers might do less overtime, and some people (in particular students or those in poor health) might give up part-time jobs. Some people might feel more confident about starting their own business with even a small BI as a cushion in the early stages, rather as they were once encouraged by the Enterprise Allowance Scheme of the 1980s – but they could be people moving out of unemployment or out of jobs they found boring or ill-paid, so the net effect on labour supply is again unpredictable.
If a BI were high enough (how high we don’t know) it would encourage more people to work part-time, even those used to quite high hourly rates. For there to be any substantial effect of a BI in terms of people withdrawing, at least by working shorter hours, from jobs they already had, a BI would have to offer enough for them to feel that the loss of income was worth the gain in non-work time. For example if a BI of £150 per week was introduced, this would enable someone to give up 10 hours work per week without loss of income if s/he earned £15 per hour after tax, but to give up 15 hours work per week and have the same weekly income as before if s/he only earned £10 net per hour. But if the BI were only £60, the person on £15 per hour would only feel motivated to work 4 hours per week less whilst the person on £10 per hour might work 6 hours less. The higher the BI in relation to the individual’s hourly wage, the greater would be the likely reduction in labour supply from people already in paid work. The ‘value of leisure’ (whether used as leisure, or for some form of unpaid work or study) clearly varies considerably with the individual, depending on their tastes, commitments and current hourly wage rate. As a rule of thumb, one might expect that if – and only if – people have a ‘target weekly income’ they want, irrespective of the amount of effort it takes to obtain it, the ratio of the BI to the hourly wage rate gives us the maximum number of hours by which they would seek to reduce their work time. So for example, if the hourly wage was £10, a BI of £100 would induce people working 45 hours to seek only 35 hours, and a BI of £140 would induce people to seek 31 hours rather than 45. But things might not be as simple as that, firstly because the value of the first extra hour of leisure may be greater than further hours, secondly because employers are not that flexible, and thirdly because the ‘target weekly income’ may vary with the extent of income security, the effort involved in earning, the costs of commuting, work clothes and lunches, and the influence of other family members in response to the introduction of a BI.
Conversely, if we consider new graduates or school leavers, or mothers returning to work, the question might be, ‘what is the minimum extra income I need?’ The higher the BI, the more likely they would be to meet that target with a small number of hours’ work per week. The higher the ratio of the BI to the hourly wage, the more likely are new entrants or re-entrants to the labour market to be satisfied with a small number of hours of work. But independently of the level of the BI, the higher their hourly wage rate the more likely people are to achieve their ‘target’ income with a short working week. So if we want to encourage part-time work to reduce any pressure placed by automation on the ‘supply’ of jobs, a high legal minimum wage would help, whatever the level of BI offered.
Clearly not everyone would react to the introduction of BI in the same way. How it would affect their ‘propensity to work’ would vary with the level of wages individuals can obtain, depending on occupation, skills, experience; their entitlements (or lack of them) under the previous benefit system; caring commitments; the desire to study; their partner’s work, their health/disability; and heir closeness to pensionable age.
Who would work less and who would work more ?
This section attempts to investigate what the effect of a BI might be on the employment behaviour of different groups in the population. Who would respond to a BI by offering more labour to the market – taking a job when they hadn’t before, or seeking longer hours? And who would respond to a BI by reducing their personal labour supply, dropping out of paid work or seeking shorter hours?
The method used here is first to consider which categories of people would gain from a BI introduced in the range of £70 to £90 per week for a working age adult, and which categories would lose through paying higher taxes to finance the BI. Both gainers and losers are categorised by their current employment status. They include full time workers, who can vary their hours only by doing overtime in some instances: and part-time workers or self-employed people, both of whom can in theory at least vary their working hours quite a lot, in the case of the part-timers possibly by changing jobs or taking two jobs. Then there are unemployed jobseekers (divided into those claiming JSA and those who are not claiming); people who are medically unfit for employment or whose job choices are heavily constrained by their health; people whose main activity is caring for relatives; students; and those who are still under pension age but wholly or partly retired. Most of these groups can be identified from the Labour Force Survey; however, the published data for 2016 do not identify all the categories in the table separately, and have been supplemented by published LFS data for earlier dates, and from other sources as detailed in the notes. There may be an unintended overlap, thus some double counting, for some categories. Thus the estimates of numbers are very rough, and may be regarded as guesstimates of the rough order of magnitude of numbers pending the possibility of access to the raw data which one could interrogate to provide better estimates of the numbers in these various categories. Further information about sources, and some caveats, is given in the note to the two tables below.
Table 1 shows roughly how many people are in each sub-group, and hazards a guess at what the effects might be for different sections of the labour force of a BI in the region of current JSA entitlement or not much higher. For clarity, those whom we can expect would be likely to raise their hours of work in response to a BI are highlighted in yellow and those whom we expect to reduce their hours in grey. This table suggests what might be the direction of change in offer of paid work to the market from each group, considering both the likely effects of the BI itself and the likely effects of higher taxes to pay for it, compared to the current system. The higher tax burden would of course impact on income groups above the ‘breakeven’ level where BI and income tax bill would be equal. Table 2 shows guesstimates for what might be the total effect on labour supply in terms of hours per week. It should be emphasised that this is highly speculative and needs to be informed by more research on labour supply elasticities and the gains/losses produced by a BI system compared to the current benefits system, as well as by interrogation of the Labour Force Survey and other large data sets to obtain better estimates of the numbers in each labour market category. The guesstimates of what proportion of people in each of the categories would respond by working more or less are mere hypotheses and not based on evidence. However, the table may serve to show the very rough orders of magnitude of the changes expected.
In Table 1 there are four quadrants; on the left side are those who are currently not in paid work and on the right side those who are employed or self-employed. In the upper half of the table are the ‘gainers’ from BI (‘G’ groups) and in the lower half the ‘losers’ who would pay more tax than their BI – that is, their income is above the breakeven point. These two variables – in paid work or not, gainers or losers, divide the table into four.
In the upper left quadrant(gainers from BI, not employed) we have those with non-economic reasons for staying out of the labour market, plus those most affected by the ‘poverty trap’ in the current benefits system. Unemployed people, if claiming benefit, would be more likely to enter work quickly because their BI would remove the poverty trap, although as noted earlier the effect of removing benefit conditionality would work in the opposite direction and modify this incentive effect. Unemployed people not claiming benefit would especially gain from a BI taking them out of the poverty trap if any money they earn currently results in a loss of JSA or tax credit for their partner. But the published LFS data do not tell us how many of them are in this kind of household situation. So the table makes a very arbitrary guess that half of the non-claimant unemployed are in this situation.
In the bottom left quadrant(non-employed ‘losers’ from BI) we have the ‘early retired’ and a few others who are not working by choice – taking a gap year, ‘housewives’ (or ‘househusbands’) without young children, etc. It is assumed that most of these, in particular ‘early retired’ people (those aged 50 to 64, not in paid work, nor disabled nor engaged in care ) are in the ‘loser’ category since they have decided they do not need earnings, so they are probably people of above average means due to wealth, partner’s income or early pension entitlement. Also in the bottom left quadrant, a few early retired people (defined as aged 50-64 and not working or claiming unwaged benefits) might respond to higher tax by thinking their money is no longer enough and they should take a part time job – or keep up some activity in their former profession. In the bottom right quadrant (employed or self-employed, ‘losers’) other workers aged 50 plus, if already partly retired and working part-time, might decide that the extra tax makes it no longer worth working and would retire completely. Also in this quadrant are some other part-time workers who are not carers, nor over 50, nor disabled nor students – it is assumed that they have non-economic reasons for their choice of paid hours and that a BI would probably not affect this choice.
In the top right quadrant of the table (in paid work, whether full or part time, gainers from BI) we have people who are employed (or self-employed) part-time because of caring or for health reasons, plus students. Many students can be expected to drop their part-time jobs if they had a BI, at least in term time, and this is important because there are over 2.3 million students employed part-time – they are a larger category than the unemployed. Then there are mothers who are in paid work part-time; they might be affected by the poverty trap associated with tax credits, and welcome the lower withdrawal rate of a BI, so they might seek longer hours. However research on American and Canadian experiments in offering something like a BI suggests that women with children tend to reduce their hours (or delay return to work) when offered a BI (Prescott et al. 1986, Hum and Simpson 1993). But if they are lone parents on benefit or their partner is not working (and therefore claiming income based JSA in the current system), they might work longer hours because they would no longer penalised by a loss of benefits from the household as their earnings rise. Blundell, Dias, Meghir and Shaw (2012,2015), when modelling the effects of the 1999 introduction of WFTC, found that more generous in-work benefits overall reduce mothers’ work offer to the market. The change from Family Income Supplement to WFTC in 1999 made the in-work benefits regime more generous with a lower ‘taper’ rate and by starting the taper at a higher level of income. This change was rather like what a BI would do since it offered, in effect, a higher ‘disregard’ of earnings and partial alleviation of the poverty trap. Modelling the introduction of WFTC showed a positive effect on lone mothers’ employment rates – but only very small unless they were home owners. For the much larger number of partnered mothers, there was a negative effect on employment rates of 2-3%, and also a negative effect on their hours. On balance it seems likely that the effect of a BI on the employment seeking behaviour of part-time-employed mothers would be a small reduction in the hours they offer to the labour market.
Table 2 attempts to gauge the rough orders of magnitude of these effects, to determine whether it is more likely that a BI would lead to a rise in aggregate labour supply or a fall. This second table takes each of the groups identified in Table 1 and hazards a guess at how large the effect per person in each group would be. Thus, having established hypotheses about the direction of labour supply effect in Table 1, Table 2 offers a guesstimate of how large these effects would be. It suggests that a BI for working age adults in the range of £70 to £90 per week, if all benefits for children and disabled people remain as now, would produce a substantial increase in labour supply, of 3.92 million hours or the equivalent of 98,000 full time workers. Compared to the overall 31.56 million people in paid employment or self-employment, this seems small – but in certain sectors and places where jobs are scarce, it could have a substantial effect on wage levels. As shown at the end of Table 2, there is a particularlylarge increase in labour supply forunskilled or entry level jobs – altogether possibly almost 12.3 million hours. This is a very powerful argument for keeping a minimum wage law in place.
The overall result is highly sensitive to the size of the effect on the unemployed, which is likely to be the largest of all the effects on separate labour force groups. Alongside the effect on the unemployed, there would be substantial effects on students and mothers. The potential increase in labour supply from the unemployed, if the BI reduced their number by one third, would be perhaps 21 million hours per week. But the contrary fall in labour supply from students might be over 11 million hours per week. This is useful to the job prospects of the unemployed, since they often compete with students for unskilled part-time jobs.
For mothers, the effects are particularly unpredictable and would depend a great deal on what regime is in place to help with childcare costs, as well as on the income tax rate. In the table, if a 5% increase is assumed in the number of working mothers and their average hours were 19 per week (as estimated by Alakeson, 2012), this would lead to an increase in labour supply of 2.09 million hours.
Full time workers who do not currently get WTC but who would gain from BI might reduce their overtime, which in aggregate amounts to a large effect even though paid overtime per person across the labour force is very small anyway in the current state of the economy. The full time workers who don’t gain from BI, but find themselves with a higher tax rate than before or in a higher tax band, might also do less overtime because of the disincentive effect. A guesstimate is a fall of 7.7 million hours per week, if say average overtime per worker was reduced from one hour to half an hour across all these full time workers.
At this level of BI few full timers would feel able to switch to part-time jobs, unless perhaps nearing retirement. But assuming a BI would mean a higher income tax bill for some groups, some early-retired workers might re-enter the labour force for ‘mini-jobs’ (‘unretirement’) and some might postpone their retirement. Others might reduce their hours, whether because they felt the BI enabled them to do so, or because if they were well paid and therefore in a higher tax band to pay for the BI, they felt deterred from continuing full time. These effects are small and comprise increases in hours from some older workers set against reductions from others – the net effect might be less than one million hours per week. (Effects on people over 64 are not considered here; however depending on the level of BI for people currently receiving state pension, there obviously would be some labour market effects in so far as some pensioners do also have jobs)
Conclusion
The interesting points shown by this series of guesstimates are that firstly whilst the effect of a BI on unemployed people’s job seeking and job acceptance is the largest effect, the effects on mothers, students and choice of retirement age are also important. Whereas much discussion of the labour market effects of BI has focussed on the unemployed or ‘prime age’ full time workers, the responses of other groups in the labour force may be of considerable impact on the likely change in overall labour supply. Despite the likely fall in students’ working hours, one would expect a large rise in labour supply will be at the lower end of the pay ladder, making the retention of a minimum wage very important. It must be emphasised that the guesstimates of both size and direction of the labour supply effects mentioned here are highly speculative, and no more than an initial sketch of the several different effects that need to be subjected to proper econometric modelling in order to assess what would really be the effects of introducing a BI.
If we now consider a considerably higher BI – say £150 per week – it is likely that some full time workers with no caring commitments and of ‘prime’ working age would reduce their hours to part-time, if their job conditions permitted that. There would probably be a demand for three or four-day a week jobs. Here the previous analysis about the trade-off between the hourly value of leisure and the wage rate comes into play.
If people did reduce their income from work it would erode the income tax base, which must be taken into account in assessing how large a BI would be affordable. Ensuring that a BI does not induce a fall in the tax revenue used to pay for it is one of several reasons why it would be desirable to fund it partly from non-income tax sources – such as taxes on personal wealth, land value tax, capital gains tax and corporation tax.
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At the World Economic Forum in January this year, four panelists were invited to talk about universal basic income (UBI): Professor Guy Standing (University of London), co-founder of BIEN and author of several books on UBI, Neelie Kroes, former minister in the Dutch Parliament, former EU commissioner, and current member of several boards, Amitabh Kant, CEO of the National Institution for Transforming India (NITI Aayog), and Professor Michael Sandel (Harvard University), author of “What Money Can’t Buy, the Moral Limits of Markets”.
According to Guy Standing, there has been much evidence gathered through foundational research on the feasibility, affordability and implications of UBI, but this research has been ignored for many years. Due to the realisation of the potential effects of automation, however, interest in UBI has recently increased. Automation is not Standing’s personal motivation though—he advocates for UBI for three main reasons:
It is a means of realising social justice in line with Thomas Paine, Henry George and others, who have claimed that public wealth is created over generations. Therefore, if private inheritance is permitted, we should also establish public inheritance as a social dividend of this public wealth.
It is a means of enhancing republican freedom: freedom from domination by figures of authority using their arbitrary power.
It is a means of providing people with basic security. It is not designed to eradicate poverty per se, but rather to address the issue of insecurity, which underlies the rise of populism we see today. It is known that mental health and mental development is improved by basic security.
Standing: “I wish people would look at the evidence rather than continue with their views. We have done pilots, covering thousands of people and most fundamentally we found that the emancipatory value of a basic income is greater than the money value.
It gives people a sense of control of their time, so that the values of work grow relative to the demands of labour. The values of learning and public participation grow, the values of citizenship are strengthened. We found evidence from UBI experiments showing that the values of altruism and tolerance are enhanced. At the moment, society is suffering from a deprivation of altruism and tolerance.”
When asked to explain the support for UBI from both left- and right-wing politicians, Kroes argues that the flexibility of the concept is a reason why there is an interest from both left- and right-wing political movements: it can either decrease or increase the role of the government, the level of the UBI can vary and there are a number of different ways to fund it.
As Kroes explains, the UBI could replace large parts of the existing welfare system and would require choices to be made in advance regarding which benefits would be cut. This specificity would make it more difficult to find support from politicians across the political spectrum, which is why Kroes suggests starting off with a more modest system that would more easily find political support and can be seen as a starting point.
“The least ideological arguments in favour of a UBI are coming from technical entrepreneurs in Silicon Valley at the moment”, Kroes continues, noting that “they are trying to defend their own future”.
Kant is asked to explain the attractions of a UBI from a governmental perspective. He explains that the huge rural employment guarantee scheme and the public distribution system in India are very inefficient, mostly due to corruption.
Furthermore, India is facing changes in the labour market, where low skill-low pay jobs are decreasingly necessary, while the demand for high skill-high pay jobs is increasing. This shift requires radical restructuring of the educational system to provide the right skills, Kant argues.
There are huge inequalities in India: one third of the population is living below the poverty line. These are the people that should be targeted with a UBI, and 1000 rupees per person per month would be affordable, says Kant. India also has a few specific advantages, he further argues. There is a huge infrastructure of biometric and mobile phone payment systems in the country. At the same time, India recently transformed its ‘black economy’ of almost 1 trillion US dollars (parallel to a 2 trillion US dollar formal economy) into a ‘white economy’. This resulted in a significant increase of government tax income, so there is enough money to potentially fund a UBI, Kant explains.
Kant suggests it would be best to provide people with a UBI in the form of an interest-free loan for a period of three years, ensuring the money is repaid and recycled so it can reach more people. Simultaneously investing in creating jobs on the back of domestic consumption would give this scheme a push.
In response to this, Standing argues that, “in our pilots in India, we found that people improved their nutrition, family health, schooling, schooling performance, and entrepreneurship. The consequence was that they were generating more income and lowering the public service costs, as they were healthier. I would be very wary about turning it into a loan, because a loan rewards the entrepreneurial and therefore would increase the inequality in the villages. Where there was a basic income, it didn’t sort out the potential winners from the losers, it increased community solidarity”.
Professor Sandel is asked to talk about the role of work and the importance of paid work. “We tend to think of work primarily as a source of income, but work is also a source of meaning, an identity. The debate about basic income forces us to debate about the social meaning of work,” he explains.
There are two basic arguments for a UBI that are fundamentally distinct, according to Sandel: the ethical argument, which suggests that one can still choose to work and contribute to society, and the compensatory argument (from Silicon Valley), which sends the message that one is compensated for accepting a world without work and contribution to society is no longer of value.
Standing responds to Sandel’s view: “We need to reconceptualise what we mean by work. I believe the technical revolution is actually creating more work. The only problem is that it is not being remunerated, so it is contributing to growing inequality. The reason why Silicon Valley types are worried is because they think income is going to the owners of the robots and the others are going to be without an income.”
“The affordability question is a very easy one to answer,” Standing replies to a question asked by the chair. “Somehow, with Quantitative Easing [QE], the US government managed to fund Quantitative Easing of 475 trillion dollars. If that money had been used to pay a basic income, every American household could have received 56,000 dollars. That is just one little example. But I strongly believe that we must frame basic income as paid from rentier capitalism and from rentierism. Because at the moment the corruption of capitalism about which I’ve written is primarily because the returns to property and intellectual property and the rentier incomes from natural resources are going to a tiny minority – and we need to be sharing that.”
