Researchers in several Dutch municipalities are preparing experiments to test the effects of the removal of conditions on social assistance. Although not testing basic income per se, the experiments will examine one of its key attributes (the reduction of conditionality).
This year, popular sources have occasionally continued to report that the Dutch city of Utrecht is preparing to launch–or has already launched–a pilot study of universal basic income (sometimes continuing to cite a now-outdated article published in The Atlantic in June 2016). In this light, it is particularly important to clarify the facts surrounding the Dutch social assistance experiments.
It is true that researchers have proposed experiments in several Dutch municipalities that will examine the effects of reducing conditions on welfare benefits, including the removal of job-seeking requirements and a lessening in the amount benefits are reduced with income. However, as explained below, these experiments will not test a full-fledged basic income. Moreover, at the time of this writing, none of the municipal social experiments have been launched: those in Groningen, Tilburg, and Wageningen are awaiting approval from the Dutch Ministry of Social Affairs; meanwhile, the experiment in Utrecht has been delayed indefinitely, having been denied approval by the Ministry.
Background: The Participation Act, Motivation, and Design
The Dutch Participation Act, enacted in 2015, imposes conditions on recipients of social welfare that are intended to promote their reintegration into paid employment. For example, beneficiaries are typically required to complete five job applications per week, attend group meetings, and participate in training activities in order to continue receive cash assistance.
Researchers at Utrecht University School of Economics, such as Loek Groot and Timo Verlaat, have criticized the conditions and sanctions imposed by the Participation Act from standpoint of behavioral economics. Research in behavioral economics has demonstrated, for example, that performing tasks for monetary rewards can “crowd out” individuals’ intrinsic motivation to perform such tasks. Furthermore, deprivation and fear of losing benefits may engender a scarcity mindset that impedes rational decision making. Drawing from such findings, researchers like Groot and Verlaat have hypothesized that reducing conditions on welfare benefits would better promote individuals’ reintegration and productive contributions to society (see, e.g., “Utrecht University and City of Utrecht start experiment to study alternative forms of social assistance,” last accessed May 6, 2017; note that the start date mentioned in the article, May 1, is no longer accurate).
The social experiments proposed in Utrecht and other Dutch municipalities have been designed to test the above hypothesis: randomly selected welfare recipients (who agree to participate) will be randomly assigned either to a control group or a treatment group, one in which reintegration requirements on receipt of benefits will be removed. (Although the exact design of the experiments has differed between municipalities–and between versions of the proposal–all have included a treatment group with the elimination of job-seeking conditions. Proposals experiments have also included groups with different interventions, such as, in several recent versions, increased reintegration requirements and relaxation on means-testing; see below.) These treatment groups will be compared to a control group, as well as a reference group composed of individuals not selected for the experiment, with respect to outcomes such as labor market participation, debt, health, and life-satisfaction.
Meanwhile, however, researchers must grapple with another consequence of the Participation Act: the law limits the extent to which they are legally permitted to test alternative welfare policies. For one, as mentioned in a previous Basic Income News article, the Ministry of Social Affairs has required that the municipal officials overseeing the experiment must check after six and twelve months to determine whether experimental subjects have made sufficient efforts to find paid work. At these times, if an individual has been found to have undertaken too few employment-promoting activities, their participation in the experiment must be ended. This constraint reintroduces some degree of conditionality even for treatment groups in which the requirement to participate in reintegration activities has been lifted from social assistance.
In addition, the Ministry has also requested that experiments include an additional treatment group in which stricter reintegration requirements are introduced. The experiments proposed for the municipalities of Tilburg, Wageningen, and Groningen, are currently under review by the Ministry, include such a treatment group; the initial (and unapproval) design of the Utrecht experiment did not.
Relationship to Basic Income
Largely for political reasons, proponents of the Dutch social experiments have avoided the use of the term ‘basic income’ (‘basisinkomen’ in Dutch), with researchers in Utrecht calling their proposed experiment by the name ‘Weten Wat Werkt’ (English: ‘Know What Works’). (In the Netherlands, “basic income” is often associated with the stereotype of “giving free money to lazy people”.)
This avoidance is apt, however, since the experiments have indeed not been designed to test a universal and fully unconditional basic income. The designs of the experiments have either not been finalized or are still pending government approval (see below). Regardless, however, it seems certain that any of the experiments (if approved) will test policies that differ from a basic income in several key respects. First, the population of the experiment is not “universal”; participants are to be selected from current welfare recipients (as is also the case in Finland’s Basic Income Experiment, launched on January 1, 2017, which has also been designed to test the labor market effects of the removal of conditions on welfare benefits for the unemployed).
Furthermore, within the treatment conditions themselves, the benefit will remain means-tested and household-based (rather than individual-based), in both respects unlike a basic income. In all designs proposed to date, participants within all treatment groups will have their benefits reduced if they take a paid job during the course of the experiment. However, the Tilburg, Wageningen, and Groningen experiments, as currently planned, will include a treatment group in which benefits would be reduced at slower rate (50% of earned income instead of 75%).
In the latter respects, the Dutch municipal experiments bear more similarity to the Ontario Basic Income Pilot than Finland’s Basic Income Experiment [1]. While the Finnish pilot is indeed investigating non-means-tested benefits paid to individuals, the pilot studies in Ontario and (if approved) the Netherlands will continue to work with programs in which the amount of benefits depend on income and household status; however, in all cases, many conditionalities on benefits will be removed in some experimental conditions.
Despite these differences, some view the Dutch social assistance experiments as a possible step toward a full-fledged basic income. Moreover, as seen above, the experiments have been motivated largely by arguments from behavioral economics that have previously been invoked in arguments in favor of the unconditionality of basic income (see, e.g., the 2009 Basic Income Studies article “Behavioral Economics and The Basic Income Guarantee” by Wesley J. Pech).
Status of the Experiments
In contrast to some rumors and media presentations, none of the proposed social assistance experiments in the Netherlands has yet been launched.
The experiment in Utrecht, which had earlier in the year been to declared to have a launch date of May 1, has been deferred. According to a statement about the experiment on the City of Utrecht webpage, “The Ministry of Social Affairs and Employment has indicated that we need to do the experiment in a different way. We are discussing how we can conduct the study.”
Researchers are currently considering alternative designs of the experiment that will bring them into compliance with the Participation Act, and no new start date has been announced.
Meanwhile, the Ministry is reviewing experiments proposed in Tilburg, Wageningen, and Groningen, with an announcement expected later in May. As previously mentioned, these experiments have been designed to avoid conflict with the Participation Act, as had been one concern with the originally proposed design of the Utrecht experiment.
Basic Income News will publish a follow-up article of the Dutch municipal experiments, including further details on their design and implementation, after their final approval by the government.
Thanks to Arjen Edzes, Ruud Muffels, and Timo Verlaat for information and updates, and to Florie Barnhoorn and Dave Clegg for reviewing this article.
[1] I am here using these terms as proper names given by the respective governments, despite the differences between the experimental programs and a basic income as defined by BIEN.
On March 29-30th 2017, the India Network for Basic Income (INBI) and Self-Employed Women’s Association (SEWA Bharat) held the first national conference on universal basic income (UBI) in India. During the conference a series of panel discussions and lectures were held, debating and exploring a range of issues concerning basic income in India. The two-day conference was held at the India International Center in New Delhi.
The conference comes as basic income proposals in India have increased in popularity. For example, this year India’s annual Economic Survey included an entire chapter on the prospects of a universal basic income in India. India’s finance Minister, Arun Jaitley, presented the survey which describes the state of the economy from the previous year, and its prospects for the future. The chapter on basic income was authored by Arvind Subramanian, the Chief Economic Advisor to the Government of India. To read more about the economic survey, see Basic Income News coverage here.
Below are a few of the lectures and discussions from the conference that were presented in English. To see the full range of lectures at the conference, see INBI’s YouTube channel here.
Subramanian is the Chief Economic Advisor at the Ministry of Finance. In this recorded speech, he delivered the inaugural address for the conference, in which he outlined the three most attractive features on UBI in his eyes: 1) Universality, 2) Unconditionality, and 3) Agency. He also argued that UBI in India could only be made affordable if it were to replace at least some existing welfare measures.
Drabu is the Finance Minister of Jammu and Kashmir regions in India. In this speech, he explored the ‘fundamental’ question: can India pool all of its social spending to create a basic income for people below the poverty line?
Standing is a Research Professor at SOAS, University at London and Co-founder of the Basic Income Earth Network (BIEN). According to him, these are the three major justifications for UBI:1) Social justice (reduction of inequality), 2) Enhancing republican freedom and 3) Increasing the economic security of recipients.
Cherian is the CEO of HelpAge India. He made a case in favor of UBI for senior citizens, by addressing the question of whether senior citizens should be the first to receive a basic income.
Gokarn is the Executive Director at the International Monetary Fund. Although he did not openly advocate a UBI, he did argue against categorically rejecting UBI.
Virmani is the former Chief Economic Advisor to the government of India. He argued that poverty alleviation has failed and what is needed is poverty elimination. He called for a UBI to replace the hundreds of poverty alleviation schemes at work in India.
Photo Credit: (AP Photo/Channi Anand)
On episode #73 of “The Waking Up Podcast”, host Sam Harris discusses the potential merits of Universal Basic Income with political science researcher and author Charles Murray.
The conversation begins at 1:52:22.
Harris opens by describing Universal Basic Income (UBI) as “a possible remedy for the increasing role automation is playing in this economy”.
“The idea is that you replace the current system with a UBI, and that you leave people alone to make their own decisions about how to use it,” Murray said.
He insisted that the money be deposited every month, electronically, into a known bank account and that this type of income stream gives people moral agency.
Murray went on to say, “I think replacing the Welfare state with UBI is going to be the rare case where you have side effects – not unintended side effects that are terrible – but unintended side effects that have the potential for rejuvenating America’s civic culture.”
Both Harris and Murray agreed that A.I. has the potential to radically transform the job market, unrecognizably, within 20 or 30 years.
Harris, who has expressed his concerns about UBI with previous guests on the podcast, asked, “Are you worried at all about the incentives just not being aligned if you give out UBI? Is there any tweaking of it that makes it more likely to produce the good changes you’re picturing?”
Murray responded by describing his plan.
“There are a couple of really, really important things. One of them is that indeed you do get rid of the other Welfare state services, and that you have a very high point at which the guaranteed income is subject to a surtax. I want to lure people into working so they get to a point where they can’t afford to quit. In my plan, I say it’s $30k of earned income, so until you get $30k of earned income on your own, you keep all of the…let’s say, $12k, and then after that you start to pay a small surtax back. Anything you go out and earn, you keep. So you’ve gotten into the habit of working and if you’ve gotten up to $30k, you are not going to trade a $42k per year lifestyle for a $12k per year lifestyle. But if you have the payback point quicker, I think you increase the likelihood that you have disincentives to work. It needs to be deposited electronically into a known bank account. It needs to be universal because one of the key things about this is that everybody knows that everybody else is getting the money. Once you have that universal knowledge, then a whole variety of interactions can be set in motion that wouldn’t be set in motion without that knowledge.”
Murray also discussed the potential for work disincentives, which is a common criticism of UBI.
“You can fairly easily design it so it’s quite likely to produce good effects. I am not denying it will have work disincentives. There will be work disincentives. But we are already at a point where something more than 20% of working-age males with high school diplomas – and no more – are out of the labor force. We’ve got a problem already and I see a lot of ways in which the moral agency of an income could make the problem less.”
The basic income is known for cutting across ideological lines. Libertarians, who have had a long history supporting the basic income, are also giving the idea a fresh look as a way to replace the current welfare system.
Many libertarians, though, remain skeptical of whether a Universal Basic Income (UBI) is in line with libertarian ethics, and other libertarians believe it would cause economic damage.
Daniel Eth, a PhD student at UCLA studying computational nanotechnology, argued in Thinking of Utils that strict libertarianism, particularly without UBI, “enables oppressive systems to emerge, even when no one is acting in bad faith and all agreements are consensual.”
Eth joined the UBI Podcast to discuss the problems of libertarianism that does not endorse basic income.
One of the primary issues with strict libertarianism, Eth argued, is that without a social safety net, workers are not truly volunteering for work, because they are agreeing to work simply to survive.
“There is an uneven power dynamic and that contracts are almost inherently exploitative, at least for those that are living hand to mouth,” Eth said.
At least with a basic income system in place, Eth said, the workers could decide to walk away from unreasonable working conditions.
“if a basic income is large enough to satisfy people’s basic needs, it goes a long way to correcting for that (power dynamic),” he said.
One area of agreement between Eth and libertarians is that market-based solutions “tend to be much more effective than the alternative of central planning.”
That is to say, without appropriate taxes to account for things like pollution, then the market outcome will not reflect these costs to society and the environment.
From this framework, Eth said something like a carbon tax would be a “great way to pay” for a basic income because it would account for pollution, but also allow the market to solve.
“The market is almost like an algorithm, like what a computer might use to solve a problem and I think it tends to be better at finding solutions than central planning. But you have to ask it the right question. You have to make sure you are solving the problem you want to solve,” Eth said.
Fabiano Horta, the Mayor of Maricá, Brazil, has extended the unconditional income already distributed in Maricá, Brazil, to all its residents. He also aims at raising the distributed value tenfold during 2017.
The unconditional income is paid in Mumbuca, a local social currency. One Mumbuca is valued at one Real. The initial income was 10 Mumbucas per month, roughly equivalent to 3 €/month. It was introduced by Washington Siqueira (known as Washington Quaquá), who was Mayor of Maricá until late 2015. This was reported on at the time. The modest amount was given independently of the recipient’s job status, and initially only distributed to the town’s poorest residents, around 35,000 people. Under Mayor Fabiano Horta the program has already been extended to all residents (around 150,000 in total) in Maricá.
Like Quaquá, Horta is a PT party (left-wing) affiliate and federal deputy. Horta wants to raise the unconditional income, financed by the town’s oil revenues, to 30 €/month during 2017. This unconditional dividend is supplemented with conditional subsidies to poor families, where an extra 85 Reais/month (28 €/month) is available from current welfare programs.
The stipend is being paid electronically in the Mumbuca social currency even though fewer than 10% of all businesses in Maricá accept Mumbuca (businesses have to wait more than a month to get Mumbuca exchanged into Reais by the government). The program has been criticized by opposing politician Fillipe Poubel, who says that people will become dependent on the stipend. Poubel calls for the creation of jobs instead. Horta maintains the unconditional income will stimulate local economy. He also has said that the town will be able to scale up this project “in an exponential way over the next ten years”.
