by Tyler Prochazka | Apr 7, 2020 | Opinion
Reports are emerging that Spain is hoping to deploy a “permanent” basic income type program in the near future. The program comes as Spain aims to respond to the economic crisis from the global coronavirus pandemic.
Spain has one of the worst coronavirus outbreaks in the world with over 13,000 deaths.
Spain’s push for establishing basic income as a “permanent instrument” that “stays forever” will help reduce financial anxieties for many families worried about their jobs. Sending cash to families rather than corporations will better ensure economic security for the most vulnerable.
However, questions remain about the nature of the program and whether it will be truly universal and unconditional.
If Spain successfully implements basic income, it will become the first European country to implement the program on a national scale and one of the only places in the world to do so.
Finland famously experimented with a basic income pilot program. The experiment made recipients happier and healthier. Nonetheless, some government officials were upset the basic income pilot did not significantly affect employment status within a year for recipients.
Nadia Calviño, Spain’s minister for economic affairs, said the payments will be targeted to families and will differentiate based on their “circumstances.” In practice, differentiating based on circumstances will result in means tests that fall on the poor. If there are strict criteria, then some families who need assistance may be unnecessarily excluded or have their assistance delayed.
A better system is presuming each individual qualifies and allowing wealthier individuals to opt-out. If an individual who received basic income has a large income by the end of 2020, the government can phase out their basic income through the income tax system the following year.
Universality helps the poor, not the rich. It ensures all those who need assistance can receive it immediately. The true costs of universality are lower because it requires less administration and bureaucracy to implement the program.
by Tyler Prochazka | Jan 29, 2020 | Opinion
As US presidential candidate Andrew Yang continues to outperform expectations, his signature policy proposal, the Freedom Dividend or Universal Basic Income (UBI), is receiving increased scrutiny. Some of the criticisms are well warranted, while others are misconceptions based on a flawed understanding of how basic income would operate.
The following addresses some of the primary misconceptions regarding Yang’s plan.
UBI is too expensive
The cost issue is one of the most persistent misconceptions about basic income.
A basic income system would have a built-in clawback through the tax system. In Yang’s case, a portion of the clawback comes through the opt-in system that would substitute cash-like welfare programs for the Freedom Dividend, such as food assistance. However, most of the burden of the clawback would be on the wealthiest families who would pay more in taxes than they could receive from basic income
As I have noted previously, the UBI clawback can be both direct and indirect. For example, the Affordable Care Act (ACA) requires families to pay back some or all of their healthcare subsidies at the end of the year if their yearly income exceeds a certain amount. A UBI system can similarly create a phase-out in the income tax system.
Considering Yang’s Freedom Dividend is opt-in, it is likely that many wealthy families would not opt to receive the dividend anyway.
Indirect clawback mechanisms could include Yang’s proposed Value Added Tax (VAT). The VAT is effectively a national sales tax, meaning even lower-income people would pay back a portion of their basic income depending on how much they spend their dividend on taxed goods.
Yang has said he would exclude many essential items from the VAT, though. Calculations show the VAT combined with UBI would have a net positive effect on purchasing power for low-income individuals.
Any taxes paid on the UBI would be used for the following year’s dividend, meaning much of the money is repeatedly recycled through the system. The additional amount that is redistributed to lower-income families is called the “net cost” or real cost of basic income. The net cost is the amount the government would actually redistribute every year under UBI.
Factoring the clawback, the real cost of basic income to the government would be approximately $539 billion annually, according to Georgetown Professor Karl Widerquist. This is less than 25 percent of existing entitlement spending.
UBI would have the same cost as a Negative Income Tax (NIT) when factoring the clawback, but the sticker price of the gross cost creates a false impression of a higher cost for UBI. NIT is not universal — it only provides the subsidy to those who qualify, making the cost appear lower than UBI. When I asked Yang whether he would support NIT to avoid the cost misconception, he said NIT would be a step in the right direction.
UBI would cause inflation
The inflation misconception has been around for many years, but it has become more convincingly debunked since I first wrote about it nearly three years ago.
It is essential to note that Yang’s plan is redistributing existing cash, not printing new cash. For every dollar spent, there must be a dollar taxed first, which would offset inflationary pressures.
As Karl Widerquist noted, basic income is no different than other welfare programs in terms of increasing demand for goods. Denmark has one of the most generous welfare states in the world, but they also consistently experience a low and stable inflation rate below two percent.
In the United States, food assistance, which can be freely spent like cash on most food items, has not produced inflation in food prices. On the contrary, research from the London School of Economics shows in states with higher take-up of food stamp assistance, prices have dropped and there is greater product variety relative to those areas with lower food assistance take-up. This is because suppliers respond to increased demand with more competition entering the market.
Thus, the guaranteed demand from basic income could generate higher levels of competition that brings down costs for low-income people.
In Alaska, which has a small Universal Basic Income funded by oil revenues, inflation has been lower than the U.S. average since the program started. Other research in Mexico demonstrates that directly giving cash does not produce inflation.
Since the United States is a globalized market, any short term demand spike creates an economic profit that is resolved by increased production, bringing the price down in the long-run.
In fact, the United States is experiencing unusually low levels of inflation. Contributing factors could include the Amazon.com effect, automation, immigration, and global trade. Basic income would not change these underlying factors keeping a hold on inflation.
The main area where there could be meaningful inflation in the medium term is the cost of rent because there is a fixed supply of land.
Basic income could empower more people to move and find other options. Renters would have a better bargaining position with their landlord if they had a guaranteed dividend than if they are desperately clinging to their job.
In the long-run, greater purchasing power from low-income people should induce more homebuilding and open up a greater share of unoccupied housing. That said, the high cost of rent exists now in many areas and should be addressed as a separate policy issue.
Nonetheless, it is unlikely that any inflation from UBI could completely wipe out the improved purchasing power from the dividend, let alone make people worse off.
UBI would cause laziness
The problem of laziness is one of the most thoroughly debunked misconceptions about UBI. Among those who closely study cash transfers, many no longer consider labor participation an interesting research question because the results consistently show no effect. Those who have read the relevant research and are still convinced that basic income causes laziness will likely never be persuaded otherwise.
As I reported in 2016, “The Overseas Development Institute just released the largest meta-analysis of cash transfer programs ever, spanning 15 years of data and 165 studies. The main takeaway is that studies show a consistent reduction in poverty measures. Perhaps an even more important conclusion is that most evidence showed an increase in work participation after receiving the basic income.”
Many specific examples from across the developmental spectrum corroborate the conclusion that basic income would not meaningfully reduce work. In Finland’s basic income experiment, there was no negative effect on work. Iran’s generous basic income did not reduce overall work but did cause some young people to substitute their time for more schooling. In Alaska, their partial basic income did not reduce overall work. On the contrary, Alaska’s basic income increased part-time work due to the increased demand generated by a basic income.
With a permanent basic income, there is reason to believe that a healthier and more productive labor market will emerge. For example, the Finland experiment showed basic income recipients were happier and more trusting overall. Many polls indicate that individuals would use the basic income to gain additional skills, spend time with family, volunteer, and engage in freelancing.
If the poor are no longer clinging to a job for survival, they can more freely find a job where they can be the most productive. They will also have more bargaining power to demand better working environments.
Most importantly, basic income would allow greater time and mental energy to be focused on the most important job in society: caregiving. Volunteering and caregiving provide enormous economic and societal benefits that are not recorded in GDP because they are typically unpaid.
Basic income gives people the right to say no to exploitation. But the most revolutionary aspect of UBI is that it finally gives everyone the opportunity to yes to their passions.
by Guest Contributor | Nov 4, 2019 | News
The Gyeonggi Research Institute released “Satisfaction survey report on the youth basic income in Gyeonggi Province” at the start of September.
Gyeonggi Province started the youth basic income, a kind of trial project, last April. The age group of 24 is given 1M Korean Won (about $900) a year in local currency under the project. A satisfaction survey was carried out to find out the recipients’ attitudes toward the youth basic income.
As a result of the survey, the overall level of satisfaction of the youth basic income in Gyeonggi Province was 77.10 points, indicating that 80.6% of the entire respondents were satisfied. The main reason for satisfaction was because ‘It was paid out to all youths aged 24 residing in Gyeonggi Province’ (35.2%), ‘It was paid out in Gyeonggi regional currency which could be used like cash’ (31.6%), ‘There are no conditions for receiving youth basic income such as being employed or carrying out job-seeking activities’ (11.3%).
However, the prime reason for dissatisfaction of dissatisfied respondents was because ‘It was only being paid to youths aged 24 out of the youth group’ (33.3%), ‘Gyeonggi regional currency couldn’t be used in supermarkets, department stores, entertainment stores and others’ (11.7%), ‘It was paid out per quarter over 4 times and applications had to be made each time’ (11.7%), indicating that they were dissatisfied with payment subject and application method, and in case of ‘payment method’.
The Institute is carrying out a few other surveys and researches to find out various effects of the youth basic income and they will come out soon.
You can find the report here.
Written by: Hyosang Ahn
Executive Director of BIKN
by Tyler Prochazka | Oct 30, 2019 | Opinion
Conrad Shaw wants America to know about Universal Basic Income, and he has two big projects to help make it happen.
Shaw’s documentary project is filming 21 Americans across 10 states who are receiving a basic income for two years. The documentary series will be released throughout 2020.
More recently, Shaw created the UBI Calculator to show individuals how much they would gain (or lose) from various basic income proposals.
The goal behind these two projects was to “answer the two main questions you get when you’re having a discussion about UBI.” That is, what would people do with the money and how do you pay for it.
The UBI Podcast spoke with Shaw about the UBI Calculator and what it could mean for the basic income movement.
Many people are worried that basic income “is just going to be taxing the middle class.” The UBI Calculator helps answer this concern about whether the middle class would be taxed more or would gain more under a basic income program.
With the calculator, an individual can type their own household income, social assistance, and other information to see how basic income plans would affect them, including Andrew Yang’s plan.
Shaw spent “hundreds” of hours on Google Spreadsheets developing the math behind the calculator, along with an intern who spent ten weeks assisting the development. He said he made the calculator based on “conservative” assumptions so that individuals can see the “worst-case scenarios” rather than paint a more rosy picture of each plan.
“I think credibility comes from not only the depth of the analysis when you’re talking about web tools I think it also comes from the ease of use and just the ease of functionality,” he said.
To build the calculator, Shaw raised $70,000 USD “to make the version of it that I thought it needed to be.”
For the future, Shaw plans to make a “policymaker mode” where individuals can “go in and play with the actual economics themselves.”
“Maybe they’re against you know taking money from the military and flat taxes and so they really want to have a carbon tax and see how much can be made from that and a land value tax,” he said.
Another area to explore is the “dynamic effects” of basic income, which looks at how UBI might affect the broader economy.
“We can have windfalls from the reduction in costs of poverty crime and health emergencies we can have a windfall from the economic stimulus of just putting money in the hands of consumers which creates jobs and creates extra revenue,” he said.
Building this calculator and preparing his documentary was meant to have an “impact on the national discussion in time for the 2020 election,” Shaw said.
“Right now it is a very powerful moment in the UBI movement,” he said. “UBI needs to be more of a grassroots movement if it’s going to get something legislated.”
by Guest Contributor | Oct 29, 2019 | Opinion
Groups across the UK are calling for pilots of a radical alternative to the current welfare system.
With more people losing jobs to automation and the Devolution in the North East that’s currently happening, groups are worried that if this continues, the whole of the UK will be facing serious consequences in the future.
A Universal Basic Income (UBI) would see all citizens given a guaranteed income regardless of their eligibility for benefits or their employment status.
Finland, Kenya, India, and cities across the United States have recently piloted the revolutionary idea.
Supporters of a basic income, such as the University of London’s Professor Guy Standing, believe that it would guarantee minimum living standards and basic economic security across the UK.
The movement started in South Yorkshire with the founding of UBI Lab Sheffield in 2017. This is a grassroots group formed of researchers and activists exploring the potential impact of a basic income through calling for pilots in local areas.
In recent months, UBI Labs have launched in Liverpool, Leeds, Kirklees and the North East.
UBI Lab Liverpool was founded by Councillor Patrick Hurley, who introduced a motion supporting a UBI pilot at Liverpool City Council.
Artist Toby P Lloyd, whose work explores the liberating potential of a basic income, is leading UBI Lab Newcastle.
There are also ongoing discussions with groups interested in launching UBI Labs in Belfast, Hull, Birmingham, Derry/Londonderry, Exeter, Lancaster, Portsmouth, Manchester, Norwich, and West Sussex.
The UBI Lab network allows groups to share resources, promotional materials, advice, and experience.
In May, Shadow Chancellor John McDonnell announced that a Labour government would pilot basic income in Sheffield, Liverpool, and the Midlands.
Pilots in Canada, Namibia, and Finland have shown significant health benefits. Researchers found that a basic income reduced stresses associated with economic insecurity.
The pilot proposal produced by UBI Lab Sheffield is designed to measure the impacts on health and wellbeing as a key outcome of any basic income trial.
Members of the UBI Lab network have started conversations about basic income with council leaders, councillors and directly-elected mayors across the country.
The network wants to encourage more local authorities to lobby Westminster for a basic income pilot in their area and people interested in setting up new groups across the UK.
A recent Gallup poll found that 77% of UK adults favour the introduction of a basic income as a way to support workers who lose their jobs to automation.
In Spring 2020, the UBI Lab Network will host the second edition of UBI North in Sheffield. This will be the biggest conference on basic income in the UK.
Tchiyiwe Chihana of UBI Lab Sheffield said:
“Piloting a Universal Basic Income is an essential aspect of exploring potentially viable responses to the urgency of ever-expanding social and economic disparities. Consultative in approach, UBI Lab Sheffield ensures that multiple options reflecting the needs and experiences of people at micro and macro levels can be factored into a pilot while being adaptable. This also means that as many people as possible also have insight into the development of a potential UBI pilot in the city. Collectively, the raw data being developed has added to the resources of our city and has contributed to a sustainable knowledge pot for future use. The networking and the spin-off discussions that have developed out of UBI Lab Sheffield cannot be overstated.”
Cllr Erin Hill of UBI Lab Kirklees said:
“At a time when society seems very divided, the one thing most of us can agree on is that the current system isn’t working for anyone. Universal Basic Income – a regular payment made to everyone regardless of income or behaviour – isn’t a magic solution to all our problems, but it is a vital part of creating the better society we so clearly need. UBI doesn’t leave anyone behind. It provides basic security and opportunity for all citizens; protection for working people; a lifeline for those with caring responsibilities; better health and life chances for our children and grandchildren; support for marginalised groups, and so much more.
Right now, we have local people doing six or seven zero-hour contract jobs and still having to claim benefits; nurses and teaching assistants relying on food banks; people caring for relatives and being financially punished for it, and most people in poverty also being in work. Something has got to change. Across the world we have seen UBI transform lives and communities – I want us to be part of that transformation too.
Here in Kirklees we have a rich history of ordinary people standing up and demanding change for themselves, their families, and their communities – from women’s fight for the vote to the recent campaign to save our local hospital. I’m really proud that UBI Lab Kirklees has made a commitment to engage with local people, to make your voices central to the debate about what kind of society we want to be.”
Cllr Patrick Hurley of UBI Lab Liverpool said:
“The Basic Income is an idea whose time has come. Paying a wealth dividend to each citizen in order to help them make the best of their lives could be transformational for our country. People who want to take a chance on a change of career, or want to care for family members, or need a helping hand to smooth out life’s rough edges, would all benefit massively from something like this. At UBI Lab Liverpool, we think a series of demonstrations and pilots across the country could show the benefits to the wider population with limited downsides. That’s why we’re working with colleagues from across the city and across the country to promote Basic Income and see how best to implement it at a national level.”
Toby P Lloyd of UBI Lab Newcastle said:
“Critics of Basic Income say that it would make people lazy and they would all stop working. This argument has a very narrow view of ‘work’, defining it only as paid employment. Society relies on a huge amount of unpaid ‘work’ for it to function, most of this is done by women. Basic Income would not solve this, but it would be a first step in rewarding this unpaid labour and recognising its value. Basic Income would also be a way of investing in people, giving them more control over their lives and how they use their time, enabling them to reach their full potential. This is not possible for many people under the current system, because they are trapped in exploitative jobs which leave them with no time or energy to do anything else.”
Notes for editors:
– UBI Lab Sheffield is a collaboration between multiple organisations and individuals, seeking to explore the potential of a Universal Basic Income and the possibility of a pilot in the city. Organisations involved include Opus Independents, Sheffield Equality Group, The Centre for Welfare Reform and the University of Sheffield. https://www.ubilabsheffield.org/
– A feasibility study launched by the Scottish Government and supported by NHS Scotland is currently looking at the practicalities of a pilot in Scotland.
– Press assets and images are available at: https://www.ubilabsheffield.org/press
