European Basic Income: A post-COVID recovery strategy
Valerija Korošec
The proposal for European universal basic income & European Social Pillar Action Plan & long-term post-COVID-19 recovery strategy
V. KORO EC, a social policy analyst from Slovenia, suggested that the European Commission examine the idea of a European Universal Basic Income. The UBI would be paid directly from the ECB’s “helicopter money.” The suggestion was made within the debate of the European Social Pillar Action Plan. The proposal stems from the observed shortcomings of the current social security systems related to the COVID-19 crisis, the efforts of the United States, India and many other countries made in this direction and the research done by OECD, IMF, ILO, UNICEF, European and Slovenian experts. This proposal is not the same as the European Citizens’ Initiative “Start Unconditional Basic Incomes (UBI) throughout the EU“, for which signatures were collected starting on 25 September 2020. However, this proposal does take a similar direction as the European Citizens’ Initiative. One day Europeans will receive a local, national, European and global basic income to safeguard and foster democracy and ecological-economic development.
The proposal for European UBI & European Social Pillar Action Plan & long-term post-COVID-19 recovery strategy.
On 7th of September 2020 Mr Nicolas Schmit took part in a videoconference ‘roadshow’ to consult with Slovenian social partners and stakeholders on the upcoming Action Plan to further implement the European Pillar of Social Rights. V. KORO EC, a social policy analyst from Slovenia suggested introduction of a European universal basic income, which would be paid directly from the ECB’s “helicopter money” as proposed by Mencinger (2017), because none of the 20 principles of the European Social Pillar address the COVID-19 crisis adequately.
The current solutions in the European Social pillar, the 13th principle (unemployment benefits) and the 14th principle (minimum income), make the safety net conditional on incentives to reintegrate into the labour market. This is obviously not the right solution in the case of COVID-19, where work is not allowed. When people are not allowed to work (as in the case of COVID-19), it does not matter how educated they are, what the agreement on the minimum wage is, how good the social and economic dialogue is and so forth. In such a case is the most important social security system, a safety net that guarantees the minimum income as a kind of ‘universal insurance system’ that helps everyone, including people on the labour market, to be compensated for loss of earnings and to receive reimbursement for lost investment etc.
On the other hand, the 12th principle (social protection) and 20th principle (access to essential services) are combined with the prerogative to satisfy the conditions “to be in need and not to be able to work”. To prove this is such a demanding administrative task that is obviously not suitable in times of emergency such as COVID-19 when there is no time or resources. We have already seen in 2008 that the current system is not suitable in time of national emergency, but that is only good for ‘normal’ situations – which is exactly the opposite of what people expect from national social security systems. The COVID-19 situation also made it clear – again – that the current national social security system is good for some workers in ‘standard employment’ and not for workers in ‘non-standard’ jobs.
In the policy brief “Supporting livelihoods during the COVID-19 crisis: Closing the gaps in safety nets“, the OECD starts with a similar finding: the COVID-19 crisis has exposed the pre-existing gaps in social protection provisions (2020: p. 2). It continues with the recognition of the effectiveness of universal unconditional cash transfers (2002: pp. 13-17): “In a crisis situation, universal cash payments, made to everyone, can maximise coverage and, depending on the size of the payment, help the entire population to make ends meet. Universal transfers can be rolled out quickly as they do not depend upon the income, assets, or prior contributions of the recipient avoiding costly and time-consuming means tests. The appeal of this simplicity has led a number of OECD countries to announce plans for such schemes during the COVID-19 pandemic.” (OECD 2020: pp. 16-17, Box 4).
The same applies to emerging and developing economies, where the development of universal social protection is supported and guided by several recent key international initiatives: ILO Recommendation 202 on Social Protection Floors, and the “Leave No One Behind” agenda as an integral part of the 2030 Agenda for Sustainable Development. SDG goal 1.3 calls for “implementing nationally appropriate social protection systems and measures for all, including floors, and substantially increasing coverage of the poor and vulnerable”, while goal 3.8 calls for universal health coverage including financial risk protection. Health coverage is an important part of living, people need to know that they are being protected in case they get ill. Covid has shown just how many people are vulnerable to what is out there, that is why there are Final expense insurance policies and policies similar that are available to those who want to be prepared in case they do get ill. Health coverage can only go so far, but life insurance can help after a loved one has died.
In 2018, the High-Level Panel at the European Development Days discussed how to address inequalities and “Leave no one behind” agenda in the EU. As described in the report Addressing inequalities: A seminar of workshops (EC 2019) three experts out of four spoke about income inequality. Two of them, Fratzser (pp. 32-37) and Raitano (pp. 55) suggested that the EU should start thinking about a universal basic income, while the third, Callan, suggested that social policy should be based on facts and results of microsimulations (pp. 75).
Prior to COVID-19, the OECD, IMF, ILO and UNICEF had already studied the idea of universal basic income (UBI) in detail. There is an important history of research on the sustainability of UBI funding and its implications for income distribution based on microsimulations, e.g. OECD (2017) and IMF (2018). The findings of the above-mentioned papers were also confirmed in a paper based on microsimulations (KORO EC 2019), which was presented in 2019 at the International Conference on Universal Child Grants organised by ILO and UNICEF to explore the conditions and possibilities of introducing UBI for children. The microsimulations proved that in developed countries UBI can be introduced at a level just above the current Guaranteed Minimum Income scheme (GMI) within the same fiscal envelope (i.e. budget-neutral).
Some Europeans mistakenly assume that the idea of universal basic income is not the right solution for the EU. They think that the EU is the part of the most developed world with the best social security systems. They seem to have overlooked the fact that because of automatisation and digitalisation, the most developed countries have the biggest problem with ‘non-standard’ employment. It is no surprise that Japan and Korea were the two countries, besides the United States, that introduced ‘new universal transfers’ (OECD 2020: p. 4). They also seem to overlook the fact that the EU is heterogeneous. The EU Member States have different social security systems. There are also major divergences in the effectiveness of national administrations in the use of ‘EU money’. Different success in using the ‘Covid-19 money’ will only foster additional divergences in Member States, which can easily turn into political divergences.
As stated at the Bled Strategic Forum (31 August 2020) by some Eastern EU countries, they are ready to follow their own path, as they do not wish to be the ‘second tier’ of the EU. These are the political reasons for the proposal that the EU should distribute the ‘ECB helicopter money’ as a European universal unconditional cash transfer directly to EU citizens. There is also an economic reason: to effectively stimulate aggregate demand in Europe (EP 2016). This has been proposed a number of times since 2008. In Slovenia, we have two papers by an eminent economist on this subject (Mencinger 2015 and Mencinger 2017).
This proposal is not the same as the European Citizens’ Initiative “Start Unconditional Basic Incomes (UBI) throughout the EU” although it goes in the same direction.
EU citizens expect the EU Commission to take into consideration the facts about a universal uniform unconditional individual cash transfer that are based on data and microsimulations. It could be called a European UBI. This transfer should be financed by the ECB. The same for all Europeans, to foster social convergence. This is the main difference with the current EU approach in the domain of the European Social Pillar and post-Covid-19 recovery plan with country specific measures that foster further divergence. Hopefully, the new European Citizens’ Initiative for UBI in the EU will be an additional, democratic sign for the European Commission and the European Parliament of what EU citizens want and expect from them in the area of social security: the Universal Basic Income. The European UBI could be the first step towards a world in which all people will eventually receive a local, national, European and global basic income in order to safeguard and foster democracy and ecological-economic development.
Sources:
Bruegel (2020) The fiscal response to the economic fallout from the coronavirus Source: https://www.bruegel.org/publications/datasets/covid-national-dataset/
EC 2019. Addressing inequalities: A seminar of workshops. Source: https://op.europa.eu/en/publication-detail/-/publication/d10809c5-4478-11e9-a8ed-01aa75ed71a1
EP 2016. Helicopter money: A cure for what ails the euro area? https://www.europarl.europa.eu/RegData/etudes/BRIE/2016/581970/EPRS_BRI(2016)581970_EN.pdf
IMF 2018. Universal Basic Income: Debate and Impact Assessment. WP/18/273. Source: https://www.imf.org/en/Publications/WP/Issues/2018/12/10/Universal-Basic-Income-Debate-and-Impact-Assessment-46441
KORO EC 2019. Unconditional Basic Individual Universal Child Grant for Belgium following the Slovenian approach. Source: https://basicincome.org/wp-content/uploads/2020/01/Paper_SI_UBI_UCG_BE-KORO EC-2019-for-India.pdf
Mencinger 2015. The Revenue Side of a Universal Basic Income in the EU and Euro Area. Source: https://www.eaco.eu/wp-content/uploads/2015/09/mencinger-2.pdf
Mencinger 2017. Universal Basic Income and Helicopter Money. Basic Income Studies, Volume 12, Issue 2, 20160021, eISSN 1932-0183 Source: https://doi.org/10.1515/bis-2016-0021.
OECD 2017. Basic Income Policy Option. Background Technical Notes. Source: https://www.oecd.org/els/soc/Basic-Income-Policy-Option-2017-Brackground-Technical-Note.pdf
OECD 2020. Supporting livelihoods during the COVID-19 crisis: Closing the gaps in safety nets. Source: http://cnt.be/DOSSIERS/Covid-19/OESO-OCDE-2020-05-20-Supporting-livelihoods-EN.pdf
UNICEF 2019. The International Conference on Universal Child Grants organised by ILO and UNICEF. Source: https://www.odi.org/events/4580-international-conference-universal-child-benefits
