EU Minimum Income Overhaul

EU Minimum Income Overhaul

The Employment Committee of the European Union (EU) has called for all member states to provide a minimum income, or to upgrade existing minimum income schemes.

A minimum income, unlike universal basic income (UBI), is not distributed to all citizens. In most European countries, a minimum income is already provided conditionally, taking the form of various unemployment benefits, child benefit schemes, disability support, pensions, etc.

Now the Employment Committee has recommended that these schemes be overhauled, or, in any cases where they are not already provided, that they be introduced. This is in response to the fact that 25% of people in the EU – nearly 120 million – are currently deemed to be at risk of poverty and social exclusion.

The Committee’s recommendations include setting the amount provided by consulting official figures such as the Eurostat at-risk-of-poverty rate. They also recommend raising awareness among those eligible for minimum income payments, in order to increase take-up of these schemes.

However, the Committee’s recommendation is not currently binding upon member states. It will now be considered by the full European Parliament, which will decide whether to vote this proposal into law.

Although minimum income differs significantly from basic income, this initiative could potentially pave the way for the development of some form of UBI in the future.

Rebalancing the mix of benefit systems

Rebalancing the mix of benefit systems

Most developed countries’ benefits systems exhibit a mixture of different kinds of benefits, and this is increasingly true of developing countries. Most run social insurance schemes of some kind (either government-run or organized by a trade union, employer, or independent organizations); most have a layer of means-tested benefits, and some have universal and unconditional benefits for certain demographic groups (usually elderly people and/or children). In the short to medium term, this is likely to remain the situation. This is both because complex systems tend to be path-dependent ( – that is, adapting an existing system is easier than starting from scratch), and because there are good reasons for all three kinds of benefits. Social insurance represents reciprocity, with a contribution record granting a right to receive benefits when certain contingencies arise; means-tested benefits recognize that a needs-based approach can be appropriate; unconditional benefits recognize our equal members of society and represent a solid financial platform on which families can build. Each of the three types exhibits both advantages and disadvantages, with perhaps means-tested benefits offering more disadvantages than advantages, and unconditional benefits more advantages than disadvantages, with social insurance somewhere in between.

So the question is rarely: How can we replace the current benefits system? It is usually: How should we rebalance this mixture? In the UK, and in the medium term, no viable Citizen’s Income scheme could entirely abolish means-tested benefits. The complexity of the current system means that levels of Citizen’s Incomes that could be funded by adapting the tax and benefits system would be too low to avoid losses for low-income households at the point of implementation unless means-tested benefits were left in place and recalculated.

Social insurance benefits (National Insurance benefits in the UK) are another question. If a Citizen’s Income scheme were to be implemented, would we wish to abolish National Insurance benefits? Even though they are not genuine social insurance benefits (there is no connection between the amounts collected and the amounts paid out; the Government can alter the rates and durations of benefits at whim), many older members of the public still have a soft spot for them. However, younger members of society do not, and don’t understand them either.

The propensity to manage change in an evolutionary fashion, by systematic demolition (that could be carried out by hiring firms such as prodanllc.com or alike) and building afresh, means that we are likely to see Citizen Incomes implemented alongside social insurance and means-tested benefits. This is not a problem: at least for the time being.

Thank you for reading…