by Sara Bizarro | Sep 10, 2017 | News
On August 29, 2017, the Roosevelt Institute released a report where researchers Michalis Nikiforos, Marshall Steinbaum, Gennaro Zezza model the macroeconomic effects of implementing Basic Income. (Marshall Steinbaum is a Research Director and a Fellow at the Roosevelt Institute. Michalis Nikiforos and Gennaro Zezza are both associated with the Levy Institute.)
The Roosevelt Institute, following the legacy of Franklin and Eleanor Roosevelt, presents itself as re-imagining “America as it should be: a place where hard work is rewarded, everyone participates, and everyone enjoys a fair share of our collective prosperity”, and as building a “new economic and political system: one built by the many for the good of all”.
The report presented by the Roosevelt Institute evaluates three different variations of Basic Income, $1000 a month to all adults, $500 a month to all adults, and a $250 a month child allowance. The researchers also analyzed two different types of funding, increasing the federal debt and increasing taxes on households. The model is designed considering an eight year time period and Basic Income is progressively introduced throughout that period.
From their models of the three scenarios, the researchers conclude that, if funded by increasing the federal debt, each Basic Income policy would have a result of economic growth, the $250 child allowance would increase the GDP by 0.79%, while the $1,000 per adult would increase the GDP by 12.56%. When the Basic Income is financed by household taxes, the model forecasts no effect on the economy if the program was simply giving “ with one hand what it takes away with the other”. However, if the model is adapted using what the researchers call a “distributional model”, it forecasts a beneficial effect on economic growth. As the researchers describe it, “the distributional model incorporates the idea that an extra dollar in the hands of lower income households leads to higher spending. In other words, the households that pay more in taxes than they receive in cash assistance have a low propensity to consume, and those that receive more in assistance than they pay in taxes have a high propensity to consume.” The general idea is that lower income brackets tend to spend everything they earn, therefore consuming more, and higher income brackets tend to save part of their earnings, therefore, consuming less in relation to their potential as consumers. Therefore, if you take from the rich to give to the poor, the money will be flowing more than when it is simply accumulated by the few, and in this way, the economy will grow. The researchers (and this is the official position of the Roosevelt Institute as well) assume that our economy is “not currently operating near potential output” and this is so partly because of current gaping inequality, which is “one of the main reasons why the US economy faces the prospect of secular stagnation”.
Besides assuming that the economy could be preforming better, the model used also incorporates two microeconomic assumptions: “(1) unconditional cash transfers do not reduce household labor supply; and (2) increasing government revenue by increasing taxes levied on households does not change household behavior.” These assumptions have been promptly criticized in the media. However, the researchers themselves are aware that the assumptions are contentious, and have thus sought to establish them with evidence. They base assumption (1) on a survey of experiments done by Ionana Marinescu in a paper entitled “No Strings Attached: The Behavioral Effects of U.S. Unconditional Tax Transfer Programs” that estimates the microeconomic behavioral impact, using several experimental designs, results in labor supply remaining unchanged. Regarding assumption (2), the idea that increasing taxes does not change household behavior, the researchers assume that since the tax increase is progressive, the most affected households are the higher income brackets who tend to save and “hoard” money, so to speak, so they would save less but not change their consuming behavior in a drastic way. In order to justify this assumption, they use data from the Congressional Budget Office.
The report concludes that the researchers’ aim is not to have the final word on how to model the macroeconomic impacts of Basic Income but, instead, simply to have applied a valid model, which has done a reasonably good job of explaining macroeconomic effects so far, and used it to predict the effects of three Basic Income variations; on this model, the introduction of a Basic Income with a distributional component would mostly result in economic growth.
More Information:
Michalis Nikiforos, Marshall Steinbaum, Gennaro Zezza, “Modeling the Macroeconomic Effects of a Universal Basic Income”, The Roosevelt Institute, August 29th, 2017
Rakeen Mabud, Felicia Wong, “Starting the Conversation: The Economics of a Universal Basic Income”, The Roosevelt Institute, August 31st, 2017
“The Distribution of Household Income and Federal Taxes, 2013”, Congressional Budget Office, 2016
Ioana Marinescu, “No Strings Attached The Behavioral Effects of U.S. Unconditional Cash Transfer Programs”, The Roosevelt Institute, May 11th, 2017
by Ashley | Sep 10, 2017 | News
Pictured: Kenyan village to receive GiveDirectly’s guaranteed basic income Source: Nichole Sibecki for NPR
GiveDirectly offers to give every adult in a Kenyan village a guaranteed basic income of 27,258 Kenyan Shillings- or 264 US dollars- per year for the next 12 years without any conditions. Providing unconditional cash transfers directly to people has proven to increase economic outcomes and psychological well-being.
GiveDirectly, a US-based nonprofit, is challenging the traditional structure of international aid by shifting the power dynamics between donors and people who receive aid. In our current structure, donors decide what people receive since most aid provided by governments, nonprofits and individuals is given as an in-kind donation. Instead, the purpose of GiveDirectly’s donation structure is to trust the expertise of people experiencing poverty to choose how best to spend the money. GiveDirectly will be measuring the long-term outcomes.
According to the first part in an NPR series on emerging aid models to redress global poverty, GiveDirectly will provide every adult in a village in Kenya a guaranteed basic income of 2,271.50 Kenyan shillings per month, or 22 US dollars for the next 12 years. Typically, adults live on less than 206.50 Kenyan Shillings per day, or 2 US dollars. For two-parent households, this donation boosts their monthly income by 50 percent. The money is wired to a bank account connected to each villager’s phone. Some families have used this additional income to better support household nutrition and education outcomes for children. The US-based nonprofit plans to expand the guaranteed income to 200 villages in Fall 2017 and assess the long-term impacts by comparing the outcomes with 100 villages that do not receive the payments.
Already, a study published in the Quarterly Journal of Economics discovered how, in Kenya, unconditional cash transfers (UCTs) have a significant impact on economic outcomes and psychological well-being in communities. UCTs contribute to local economic development by increasing consumption rates. They also improve social and emotional development in communities that heavily rely on social networks for supports and services that may otherwise be inaccessible.
Research from Canada’s Mowat Centre also shows that providing money with no strings attached can help support social entrepreneurs that may be experiencing financial hardship to get their ventures off the ground. For example, one Kenyan family that is a beneficiary of GiveDirectly’s donation, is focused on investing in an entrepreneurial venture to grow a forest of eucalyptus trees and sell the fuel from the plants. Profits from the family’s venture would be used to fund high school tuition for four children as an investment in breaking the intergenerational cycle of poverty.
In contrast to GiveDirectly’s aid model, Zambia’s government is choosing to filter who receives aid and under what conditions. Originally, a government program gave families in a rural west Zambian village 164, 628.31 Zambian Kwacha, or 18 US dollars, every other month for the past five years. The program proved to be successful: families used this additional support to invest in creating multiple business ventures to multiply their capital. To help aid these business ventures, the usage of related software can make this a lot easier, and with advancements in technology, businesses are able to conduct remotely accessing Sage software services so they are always on point with what they require. The government has therefore decided to scale up the program to increase the population receiving this cash aid. Simultaneously, the government has decided to limit the cash transfer to exclude people such as those who initially received the money in the pilot program: two-parent households, people who are employed, and people who are able-bodied. Instead, Zambia will provide aid only to single-parent households, people with disabilities, seniors, and people who are unable to work. This limitation on providing aid based on who is deemed eligible is what GiveDirectly is challenging.
GiveDirectly’s guaranteed income in Kenya is increasing access for all with the goal of improving health outcomes and building towards financial security. It can be particularly valuable for people with disabilities who often experience job discrimination and barriers to financial self-sufficiency. For them, this monthly influx of cash provides a foundation for independence. People with disabilities often struggle to afford medication and rely on financial support from other family members to sustain themselves. This additional monthly income will help to mitigate the costs of medication and basic necessities for everyone.
Grassroots savings clubs in low-income communities are another asset to consider when measuring the long-term impacts of GiveDirectly’s guaranteed income. Some people do not have access to banks or struggle to save money when it is easily accessible from an electronic savings account. Savings clubs are typically groups of 10-15 community members who collectively pool their resources each month. The total amount is then provided to a different individual from the savings club to look after for a month. This community-based savings account relies on faith in the community members to manage the money for everyone else. Some villagers have noted how critical this social bonding is to allow them to maintain their savings since they know the community is depending on them to effectively manage their budget. Researchers have found in case studies around the world, from Bangladesh to Central/South America and West Africa, that savings club serve as a common element of the economic infrastructure in low-income neighborhoods.
Giving cash directly to children and families, with no strings attached is being shown to improve the quality of life in a number of communities, particularly in boosting economic, health, and education outcomes. As more organizations begin measuring the long-term impacts of unconditional cash transfers and basic incomes, we will continue to gain evidence on whether these are viable solutions to deeply entrenched social issues like global poverty.
More information at:
Ashley Blackwell. “CANADA: Mowat Centre Report Shows Impact of Basic Income on Social Entrepreneurship.” BIEN. 28 July 2017.
GiveDirectly. “Basic Income.” 4 September 2017.
Johannes Haushofer and Jeremy Shapiro. “The short-term impact of unconditional cash transfers to the poor: Experimental evidence from Kenya.” The Quarterly Journal of Economics vol. 131 (4). 1 November 2016.
Nurith Aizenman, “How to Solve Poverty: Why Not Just Give People Money.” NPR. 7 August 2017.
“Cash Aid Could Solve Poverty- But There’s a Catch.” NPR. 9 August 2017.
“How to Buy A Goat When You’re Poor? Join A ‘Merry-Go-Rund’.” NPR. 19 August 2017.
by Sara Bizarro | Sep 6, 2017 | News
The Portuguese political party PAN (People, Animals, Nature), defends a Basic Income pilot program in Cascais, a town just outside of Lisbon. The proposal is put forward by the PAN Cascais candidate, Francisco Guerreiro in the context of the local elections happening in Portugal on October 1st. We spoke to Francisco Guerreiro about the proposal and he said: “Cascais in a town that has a high budget of around 160 million € and with a diverse population at a social, economic and cultural level.” PAN defends that Cascais would be a great location for the implementation of a pilot program.
Francisco Guerreiro, PAN candidate for Cascais
Francisco Guerreiro’s proposal is to create a workgroup to discuss a pilot program in the municipality of Cascais that would be diverse, including, not only politicians but also academics and scientists. PAN does suggest however that the pilot should be constructed in a way that is as encompassing as possible, including several social strata and not only applicable to the unemployed or to people with low income. The workgroup that PAN proposes would also analyze the financial viability and funding of the pilot program, as well as the sample and the length of the program, exploring national and international sources of funding. Cascais is a municipality that besides having residents of different social and economic status, also has both urban and rural settings, making it an ideal experimental ground for a Basic Income pilot.
PAN is the only Portuguese political party so far to officially include Basic Income in their program and has a longstanding history of defending the idea. However, this is the first time that there is a specific proposal to implement a pilot program by a local candidate. The political party PAN is also a partner of the 17th BIEN Congress happening in Lisbon, September 25-27 and of Basic Income Week, September 25-30.
More information at:
[In Portuguese]
Sofia Rodrigues, “PAN vai propor estudo sobre atribuição do Rendimento Básico Incondicional [Political party PAN is going to propose a study on the implementation of a basic income]”, Público, 15th February, 2016
Maria João Lopes, “PAN defende projecto-piloto de rendimento básico em Cascais [Political party PAN defends a basic income pilot project in Cascais]”, Público, 27th August, 2017
[In English]
André Coelho, “Portugal: Presidency candidate Manuela Gonzaga supports basic income”, Basic Income News, 19th October, 2015
André Coelho, “PORTUGAL: Basic income conference in Portugal paves the way for a wide public discussion”, Basic Income News, 24th February, 2016
by Kate McFarland | Sep 1, 2017 | Research
Teppo Eskelinen and Johanna Perkiö have published “Micro-investment perspective and the potential of the universal basic income” in Development Policy Review (June 2017).
Eskelinen and Perkiö analyze basic income as a tool to promote micro-investments by poor individuals and households, hypothesizing that a basic income would impart to such households a “greater confidence to undertake more risky activities, knowing they will have a minimum income to fall back on.”
As they explain in the abstract, the authors “aim to estimate potential impacts of the BI by synthesising existing knowledge. This estimation will not be quantitative, but rather show likely outcomes of a BI scheme. We will complement existing knowledge by exploring cognate cash transfer policies and other experiences that bear similarity to the BI.”
As a core part of their analysis, the authors examine the pilot studies conducted in the Namibian village of Otjivero-Omitara (2008 to 2009) and the Indian state of Madhya Pradesh (2011 to 2013), looking especially at the effects on “labour, behavioural impacts, psychological impacts, and investment in human capital.” Regarding psychological impacts, they point out that, in the Madhya Pradesh experiment, “households receiving cash grants were three times more likely to start a new business or production activity than control group households,” which appears to affirm their conjecture that “the availability of money combined with a sense of security is what eventually determines the occurrence of micro-investment.” Regarding behavior, they note a “recurring observation” that part of recipients’ additional income was “invested in income-generating activities.”
Eskelinen is a philosopher and social scientist who has published on political theory, political economy, global justice, and development theory. He is senior lecturer at University of Jyväskylä.
Perkiö is a doctoral candidate in the social sciences at the University of Tampere, writing her dissertation on the history of the basic income debate in Finland (see her November 2016 presentation for Kela). Many of her previous articles and blog posts on basic income available online, including the Transform! Network discussion paper “Basic Income Proposals in Finland, Germany and Spain,” the International Solidarity Work report “Universal Basic Income – A New Tool for Development Policy?,” and a response to the OECD’s recent critical report on basic income, published on Kela’s blog.
Reviewed by Russell Ingram
Photo: Store in Madhya Pradesh, CC BY 2.0 Brian Gratwicke
by Kate McFarland | Aug 31, 2017 | News
Nature Needs More, a wildlife conservation group based in Australia, is currently investigating the potential of basic income to help curb illegal hunting.
Founded in 2013 under the name Breaking The Brand, the group’s first advocacy and educational campaigns focused on curbing the demand for the products of illegal hunting, such as rhinoceros horns. As its work progressed, however, Breaking The Brand realized that its demand reduction campaigns could not be sufficient to stop illegal wildlife trade; successful wildlife conservation “needs more”.
Now called Nature Needs More, the organization is exploring new strategies, including a basic income pilot project designed to measure its effects on hunting and wildlife conservation.
Elephants in Namibia, CC BY-NC 2.0 Frans Vandewalle
Nature Needs More is inspired in part by the Basic Income Grant Pilot Project conducted in 2008 in the Namibian town of Otjivero. Prior to the introduction of the basic income grant, the local police station commander told researchers that poaching was the most common criminal activity, stating, “Poverty and unemployment are the reasons for these criminal activities. Otjivero is a tiny place and there is no source of income there. Most people hunt or poach just for survival.” In 2007, 20 instances of illegal hunting and trespassing were recorded between January 15 and October 31. In 2008, however, after the introduction of the basic income pilot, the count fell to only one instance during the same time period.
As Nature Needs More notes on its website, current basic income experiments–such as the 12-year randomized control trial that the non-profit GiveDirectly is due to launch in rural Kenya in September–are not linked to conservation outcomes.
Thus, the organization is considering the possibility of launching its own basic income experiment within the next two years.
Describing its hypothesis, Nature Needs More states, “Financial security would not only mean less poaching for food [and] less illegal harvesting … but would [also] mean wildlife trafficking syndicates would have less leverage to recruit poachers from the impoverished communities neighbouring key conservation areas.”
The organization is also exploring whether a basic income might help conservation areas convert to ecotourism as a revenue source.
Reviewed by Caroline Pearce
Rhino photo CC BY-NC-ND 2.0 Martin Heigan
