How the welfare system in the UK – and in Scotland in particular – is failing to reduce poverty and economic insecurity, within its own terms.
Presentation of the updated findings on the basic income trial presently ongoing in Fife.
Modelling the impact of a basic income in Scotland (by Landman Economics).
Analysing political, legal and administrative scenarios enabling a first Scotland-wide basic income experiment, in the path for its implementation in the region.
The report also features direct input from potencial beneficiaries of the Fife basic income trial (which is still under study / consideration), a precious contribution from those directly affected by the current system of means-testing conditional social security. Taking the example of Fife, Painter and his colleagues have projected that “£2400 a year would half destitution and reduce relative household poverty by 8,5%. A basic income of £4800 a year would end destitution and reduce relative household poverty by 33%.” It’s relevant to notice that the Scottish living wage is currently £9 per hour, which for a regular 8 h/day job amounts to about 1440 £/month. So, these basic income amounts under consideration are only 14 and 28% of what it takes to live comfortably in Scotland.
Anthony Painter summarizes how a basic income in Scotland could be tested within a whole set of other public policies in place:
“In A Basic Income for Scotland we map how pilots of basic income could work with a full set of supports alongside cash payments. We call this community designed system of interlocking public, community, and employer supports wrapped around basic income a ‘Civic Basic income’.”
An important report on basic income has been released in the UK, as announced before, and publicly presented at the RSA last Tuesday. In that report, one central idea is to put forward, for the UK social reality: to give every adult citizen a 100 £/week (equivalent to about 460 €/month), unconditionally and without means-testing. According to the Progressive Economic Forum (PEF), this policy can be tested in the UK in five different ways (for an year):
Giving a 100 £/week (116 €/week) to every adult in a randomly selected community, plus 50 £/week (57 €/week) for children and any extra amount to account for disability necessities. The scheme would replace all benefits but the housing benefit.
Giving a 70 £/week (81 €/week) to every adult in a randomly selected community, plus 20 £/week (57 €/week) for children, but keeping child benefits. All other means-tested benefits would remain in place, accounting for the unconditional transfer as income, thus reducing or eliminating the (existing) benefits paid.
A 50 £/week (58 €/week) to every adult in a randomly selected community, plus any existing benefits (not considering the unconditional transfer as income).
A randomly selection of adults (country-wide) on welfare seeing conditionalities removed.
A randomly selection of homeless people given an unconditional cash grant, replacing other (cash or non-cash) benefits.
At the referred presentation, Labour Party’s John McDonnell, the Exchequer Shadow Chancellor, said the Labour Party is not committing to introduce basic income in the UK (if elected), but this report will definitely be instrumental for the party’s next manifesto design.
Not surprisingly, Tories in parliament stand firmly against this policy, branding it as a “handout”, and dismissing it as hugely expensive and unfair to “hardworking taxpayers”. To that, Guy Standing, main author of the referred author, has replied that governments looking forward should “at the very least introduce local pilots to see how effective it could be”. He and RSA Director Anthony Painter have been strong proponents of reducing or eliminating means-testing and conditionality in general, in a welfare system in the UK which has been “expensive to administer and is causing destitution”. Painter summarizes by saying that “basic income-style pilots have been proven to have beneficial effects on health, well-being, and trust, while giving people more freedom to decide for themselves how to manage their lives.”
A series of articles have been produced on this issue, in several news outlets, such as the Guardian, Brave New Europe, the Mirror and BBC News. The presentation video can be watched below, and also heard on an RSA podcast.
Basic Income Exhibition and Youth Basic Income to be launched
Gyeonggi province, the most populous region in South Korea, will be hosting an exhibition on basic income on April 29th and 30th to coincide with the launching of its Youth Basic Income program. The program will unconditionally give one million Korean Won ($US900) in local currency per year to 24-year-old residents of Gyeonggi province.
The program was first piloted when the now provincial governor of Gyeonggi, Lee Jaemyung, was the mayor of Seongnam City. Lee Jaemyung made the expansion of his Youth Dividend program part of his winning electoral manifesto in last year’s local election, and the program will be expanded to the whole of Gyeonggi province starting this April.
The Basic Income Exhibition will largely be composed of three parts. First, a provincial fair will be held with 31 cities and counties participating where local specialties could be purchased with the local currency. Second, a promotional platform for basic income will be created, introducing its history, meaning, and experiments that have helped make it a reality. Third, a conference will be held under the subject of ‘Basic Income: A New Paradigm in the Age of Cooperation’. The conference will discuss basic income experiments and policies that are proceeding around the world, and go on to consider how basic income relates to the commonwealth, technological changes, the status of women, democracy, and the very definition of social value.
The keynote speakers of the conference are Annie Miller, co-founder of BIEN and the chair of UK Citizens’ Basic Income Trust, and Kang Namhoon, the chair of Basic Income Korea Network (BIKN), and they will give keynote addresses, respectively titled ‘From Vision to Reality: A New Age of Justice, Peace and Welfare’, and ‘Life in the Future driven by Technology Innovation and Basic Income’.
In addition, Governor Lee Jaemyung will present the outlines of Gyeonggi Province’s Youth Dividend program in a session on discussing the various basic income experiments and pilot programs around the world.
Other guest speakers of the conference include Almaz Zelleke (NYU Shanghai), Tomohiro Inoue (Komazawa University, Japan), Sarath Davala (Vice-chair of BIEN, India), Sam Manning (Y Combinator, USA). Leading members of BIKN, such as Min Geum, Nowan Kwack, Junghee Seo, Seungho Baek, Kyoseong Kim, Sophia Seungyoon Lee, Hyosang Ahn, will also attend as speakers at the conference.
The Youth Basic Income program that became the catalyst for the upcoming exhibition/conference is far from ideal, limited as it is in both the age group and amount involved. But it will be one of the biggest pilot programs of basic income so far in the world, involving some 170,000 people, and an excellent opportunity to observe the community effect of a basic income, with the results being analyzed by the Gyeonggi Research Institute.
One of the controversies surrounding Gyeonggi Province’s Youth Basic Income is that it will be given in local currency, which is only usable within the province rather than in cash, quite far from being an ideal basic income.
Despite its limitations, there are some hopes for the program. Given that the local currency can be only be used in small businesses of the province, it could stimulate the local economy and provide the base for a broader coalition in support of the basic income program, and basic income in general. Moreover, basic income can be regarded as part of a broader reimagining of society, and local currencies are a way to reconstruct social economies and could be part of that reimagining. As Thomas Paine once said, time makes more converts than reason, and while the youth basic income is limited, it can certainly be a step forward for basic income into political reality.
Universal Basic Income (UBI) is once again in the news as a promising program in the upcoming general election in India after finding its place in India’s 2016-17 economic survey. Proponents say UBI is economically prudent and could make a significant dent on poverty in the country. UBI bypasses India’s weak system of existing welfare schemes which are riddled with misallocation, leakages, and exclusion of the poor. It also makes sense from the perspective of an individual, who is assumed to be economically rational and thus can spend in accordance to his priorities and choices.
Having said there is insufficient empirical evidence to demonstrate how UBI could accomplish social justice and poverty reduction, especially in a country like India which is still held down by a regressive social structure in the form of a caste system. The caste system leads to a lack of mobility, producing a semi-feudal system of land ownership. Land is held by a small fraction of the population with the rest being landless or having little property, especially in rural areas. The fact that most of the poor are also concentrated in India’s rural areas makes the case that UBI could be successful at alleviating poverty.
Moreover, the proposition that UBI will reduce poverty assumes that the market works competitively and allocates resources efficiently. However, markets do fail in providing an efficient and just outcome in the presence of informational asymmetry, externalities, and monopolies. This is especially true in the case of India where the market is disproportionately in the hands of a few big players who can influence it to their advantage. For instance, giving out cash as opposed to goods and services in kind may not help in remote places if the corresponding supply of essential goods are not there (this role is otherwise performed by the public distribution system in India which may be dismantled to make fiscal space for UBI). A monopoly supplier may hike the prices to neutralise the extra income. To the extent the purchasing power of cash transfers in the form of UBI is curtailed by market fluctuations, the efficacy of basic income to alleviate poverty could be limited.
UBI even in the presence of efficient market can capture only poverty in terms of economic deprivation, whereas factors such as poor health, lack of education, discrimination and lack of entitlements cannot be addressed by the market but are crucial from the perspective of eradicating poverty.
John Rawls in his seminal work propounding the concept of distributive justice is guided by the ‘difference principle,’ which stresses that goods and services should be arranged in a manner that serves to benefit the least advantaged and foster growth towards equality of opportunity. To the extent that everyone will receive the same amount of cash transfer irrespective of his or her requirement, the UBI fails to ensure distributional justice, in accordance with the ‘difference principle’. In this case, justice would require maximizing assistance to those who need it most, which at present our welfare schemes (despite its weaknesses) strives to achieve. UBI at best can only work in conjunction with the existing policies. In order to fully eradicate poverty, the welfare state should work towards increasing its capacity to deliver and regulate rather than leaving it to the market.
Rishi Kant
Currently pursuing Master’s in public administration (MPA), LKY school, National University of Singapore. Graduated in Economics from Delhi University and Post Graduated in Economics from Jawaharlal Nehru University. 5year experience of teaching in various colleges of Delhi University and working with the government of India under various capacities. He has worked as a researcher in the field of Labour economics and evaluated major labour market policies in India such as the Mahatma Gandhi National Employment Program. He has also part of capacity development programs organised by IMF in the areas of Macro-Economics, Fiscal and monetary policies, and Financial Programming and policies.
References
Ackerman. B, et al (2006), ‘Redesigning distribution: basic income and stakeholder grants as cornerstones of an egalitarian capitalism’, The Real Utopias Project, Vol. V. London.
Khera. R (2016) ‘A Phased Approach Will Make a Basic Income Affordable for India’, The Wire.
Michel. H (2008), ‘Global Basic Income and its Contribution to Human Development and Fair Terms of Global Economic Co-Operation: A Political-Economic Outlook’, A Paper for the Congress of the Basic Income Earth Network, University College, Dublin, Ireland.
Pettit. P (2007), ‘Basic Income and the Republican Legacy’, Basic income studies, International Journal of Basic Income Research Vol. 2.
Porter. E (2016), ‘A Universal Basic Income Is a Poor Tool to Fight Poverty’, New York Times.
Standing. G (2002), ‘Beyond the New Paternalism: Basic Security as Equality’, London.
Standing. G (2015), ‘India’s experiment in basic income grants’, Global Dialogues, Vol. 5.
Taylor. T (2014), ‘Economics and Morality’, Finance & development, a quarterly publication of the international monetary fund, Volume 51.
Todaro, Smith (2015), ‘Introducing Economic Development: A Global Perspective’ Economic Development, 12th edition, chapter 1, Pg 20.
Tobin. J, et al (1967), ‘Is a negative income tax practical’? The Yale Law Journal.
Van. P (1995), ‘Real Freedom for All’, Oxford, Oxford University Press.
The evaluation of the Finnish BI Experiment reveals the problems in the current conditional labour market policies
The first results of the Finnish Basic Income (BI) experiment were published at the beginning of February 2019. According to the results, the benefit mimicking basic income did not have any positive employment effects when compared to the control group, i.e. those not included in the experiment. There are several possible reasons for this result.
Firstly, we must keep in mind the specific characteristics of the target group of the experiment. Both the treatment group and the control group were drawn from the unemployed job seekers receiving unemployment benefits from the Social Insurance Institution of Finland (Kela) in November 2016. In order to understand the specificity of the group, we have to take a cursory look at the Finnish unemployment system.
An unemployed individual who is a member of a voluntary unemployment fund and meets the employment condition of 26 weeks during the previous 28 months is eligible for earnings-related unemployment benefits. At the average wage level, the benefit is about 65 percent of previous earnings. The benefit can be paid up to 300-500 weekdays depending on the work history and the age of the claimant.
An unemployed individual who is not entitled to the earnings-related unemployment benefit (the right to the benefit has expired due to long-term unemployment or the unemployed individual does not yet fulfill the employment condition) can qualify for unemployment benefits paid by Kela [1]. These Kela’s ‘basic security’ benefits (basic unemployment allowance and labour market subsidy) are not income-related. In principle, the labour market subsidy is income-tested and the duration is unlimited.
At the end of the year 2017, 369,058 people received unemployment benefits in Finland. Out of them, 196,452 (53.2%) received labour market subsidy and 31,460 (8.5%) basic unemployment benefits. Hence a minority, i.e. 138,949 (37.6%), were entitled to an earnings-related daily allowance from unemployment funds.
When consulting the above percentages, we can argue that the basic income experiment covered the population group that represents a majority of unemployed job seekers in Finland. However, despite this, the experiment was targeted to the long-term unemployed or those unemployed with a very short working history. Maybe the experiment would have yielded different results if it had included those unemployed individuals receiving earnings-related unemployment benefits, not to mention low-income earners, free-lancers and micro-entrepreneurs [2].
Secondly, at the beginning of 2018, the center-right government implemented a new labour market policy measure, namely ‘the activation model’. The aim of the reform was to increase labour market participation by sanctioning the unemployed by benefit cuts if specific activation criteria are not met [3]. While the activation model contaminated the control group, the results may be distorted.
A third possible explanation is that people do not react on monetary incentives as strongly as is usually supposed e.g. in the economic literature. But once again, we must keep in mind the specific characteristics of the target group. It may be that this group would react more strongly on services than on income transfers.
The fourth explanation to the “zero” result may relate to the possibility that the effects of a basic income counteract each other. In the treatment group, the strong monetary incentive to accept jobs (€560 net a month) might have increased employment, while the less stringent conditionality might have made the BI receivers ‘lazier’. Thus, these opposite effects may have repealed each other resulting in an overall zero outcome.
Too strong an emphasis on labour market behaviour?
The proponents of basic income disagree with the above view of laziness. On the contrary, they argue that by empowering people and giving them the freedom to choose for themselves the outcomes are more positive than what is achieved through sanctioning the unemployed. As desired outcomes of basic income, they emphasize not only the increased activity in the labour market but also increased the wellbeing of the citizens.
In fact, the proponents of basic income hardly consider the activation to employment as the main aim of BI, but rather the wellbeing of its receivers. For the supporters of BI, the economic activity e.g. in the labour markets is not a sin non qua for a functional society even if it was widely considered to be the prerequisite for it, at least if we aim to obtain the present welfare state model that is financed via income tax.
When the Finnish government decided to launch the basic income experiment, its main interest was in the employment effects of BI. The government obviously wanted to see if BI is good for employment. Thus, the government’s goal was rather limited and only when discussed in the parliamentary committees, the interest was laid in the wider wellbeing aspects of BI. However, the main interest still was – and still is – in the labour market behaviour of the BI recipients.
The preliminary results for the first year do not display any employment effects, making the opponents of the BI claim that the BI does not solve a low labour supply. However, we can turn the focus upside down. The zero result is an interesting one. According to the proponents of mainstream labour market policies in Finland, we should have witnessed a clear decrease in the labour supply among the basic income recipients compared to the control group. However, we did not observe anything like that. Neither was the employment rate better in the control group that remained in the current, conditional and punitive benefits system.
Hence, in regard to the long-term unemployed (which was the case for most of the recipients in Finland’s basic income experiment), the mechanism improving their labour market status is much more complex and perhaps more attention should be paid in the wellbeing effects of the experiment than on the employment effects. This is done in many other experiments outside Finland – in the evaluation of the experiments the focus in on the sine non qua for activity, namely wellbeing.
What should then the political decision makers do based on the results? Shall they abandon basic income, if it does not increase employment, even if it improves people’s well-being? Or shall they abandon basic income, while strengthening the conditionality of the existing system in order to more effectively “activate” labour, even if it decreases people’s wellbeing? Considering the recent developments in Finland’s labour market policies, one should perhaps bet on the latter option.
[1] If the unemployed person violates the Unemployment Security Act, he/she may lose the right to the unemployment benefits and he/she may to apply for last resort social assistance of in need for financial support.
[3] The activity is monitored in periods of 65 days of payment. The activity requirement are met if an unemployed person, over the course of a single payment period, has been in salaried employment for at least 18 hours, or have earned an income of at least EUR 245.64 from self-employment, or if he/she has participated in five days of employment-promoting services or some other employment-promoting activity arranged by the Employment Services.
Basic Income, Solidarity Economy and Social Protection
The 24th BIEN CONGRESS in Maricá & Niterói – Rio de Janeiro, Brazil – 27-29 August 2025
Maricá provides unconditional transfers to almost half of its population. 7 other cities in the state of Rio de Janeiro have already created their own local currencies inspired by Maricá’s Citizens Basic Income. Our other host city, Niterói provides transfers benefiting more than 100,000 individuals.
Pre-congress events: Latin America Day: 25 Aug. & Early Career Day: 26 Aug.
