Japan: Billionaire Yusaku Maezawa attempts a “social experiment” by giving out 9 million US$

Japan: Billionaire Yusaku Maezawa attempts a “social experiment” by giving out 9 million US$

Japanese enterpreneur Yusaku Maezawa, enfatuated by the idea of a basic income, is giving out, unconditionally, 9 million US$ to 1000 randomly selected people from his Twitter followers group. This initiative was launched on January 1st 2020, on his Twitter page.

Maezawa is hoping this “social experiment” will have an effect on his recipients happiness, as other (basic income related) experiments have already shown (ex.: Finland, India, Canada). The payment of 9000 US$ is to be done to each of these 1000 recipients, with no strings attached, who will be monitored through regular surveys to check on how this money impacts their lives.

Senior economist Toshihiro Nagahama, from the Dai-ichi Life Research Institute, has said that “basic means a regular minimum amount offering a sense of security, [but] what Maezawa is offering is totally different”, referring still that the automation fears that have spurred interest in basic income have still not materialized in Japan. Maezawa, howecer, is hoping his initiative will kick-start more debate over the basic income policy in Japan.

More information at:

Sam Nussey, “Japanese billionaire Maezawa in $9 million ‘social experiment’ giveaway“, Reuters, January 8th 2020

Basic income’s experimental wave is over: Time for policies

Basic income’s experimental wave is over: Time for policies

The wave of basic income experiments in the last two years was a positive development in giving Universal Basic Income (UBI) some level of attention and political legitimacy in Western countries.

It is time to recognize the experimental wave is coming to an end.

Basic income activists in the next wave of UBI political discussions should push for policy changes in the direction of basic income. There are ongoing and completed trials testing cash transfers in countries with different stages of economic development. It makes more sense to build a foundation for policy changes as these results trickle out over the next few years rather than pushing for yet another experiment.

In Canada, the push for experiments backfired because a Conservative government canceled it before any results could be collected. I supported Ontario’s experiment and there was value in the research.

However, Ontario’s cancellation demonstrated that as activists move forward, we must recognize that experiments do not create a political constituency. In Alaska, the partial basic income policy has broad and significant support because everyone has benefited from it. Building a constituency that can be expanded and deepened is where activist energy should be placed in the next stage.

UNICEF funded experiments in India helped make basic income a real political discussion there, and now basic income inspired policies are being proposed by both of the main parties and a minimum income is set to be implemented in the state of Sikkim.

Experiments in developing countries and regions where basic income is still not well known may still be politically necessary. In Western countries, though, activist energy on more experiments rather than policy action seems ill-placed since UBI has already entered mainstream discussion in the West.

Experiments have already shown us cash transfers make people happier, healthier, and free them to pursue what they are interested in. The myths about basic income have been consistently undermined, particularly the idea that it would decrease work in any meaningful way. More experiments will keep telling us that giving people cash is generally good in most of the ways we measure positive outcomes.

How many times do we need an experiment to tell us cash transfers do not make people “lazy”?

Those who will not be convinced by the existing and upcoming experimental results will not be convinced by yet another experiment. The reaction to Finland’s experiment is evidence that unpersuadable opponents will latch onto even neutral effects on employment to prove basic income is a “failure.”

To truly put UBI to the test in America and Europe, actual policies that incorporate significant elements of basic income should be pushed. Cory Booker’s baby bonds is a start. Expanding the Earned Income Tax Credit that incorporates students and caregivers would instantly help millions. Political campaigns such as Andrew Yang’s are also important to bring the debate to a mainstream audience.

That is not to say pilot programs with the intent of expansion are not helpful. These provide valuable information to governments on how to implement basic income. Pilot programs with the primary intent of yet more research on “laziness” are the issue.

However, as the experimental wave of basic income begins to sunset, activists must look toward the next wave, which should focus on concrete policy steps that realize the spirit of basic income.

For these reasons, I see more experiments as an inefficient use of activist energy in the West. Worse, pushing experiments focused on gathering more data trades off with more useful discussions of how to bring elements of UBI to reality in the near-term.

 

United States: Researchers want to know if no-strings attached money can help in child development

United States: Researchers want to know if no-strings attached money can help in child development

Picture credit to: Bright Horizons

A few low-income families with children, in the United States, are about to receive 20 unconditional checks, and be subject to an overall health analysis, both mothers and their children. The program is called “Baby’s First Years” and is a research initiative from the New York University.

Starting next month, 1000 mothers will be randomly selected from poor households in New York, New Orleans, Minneapolis-St. Paul and Omaha (Nebraska). 400 of these mothers will be given 333 $/month, for 20 months, with no strings attached, while the other 600 study participants will only receive 20 $/month during the same period (this should be the control group). The study will focus on early-stage child development, hence the women in question will be mothers to new-born babies, but living below the federal poverty line, which for a parent in a family of four roughly equates to 1070 $/month (single income in the family). For comparison purposes, the living wage of an adult in a family of four, in New York, has been calculated as 4940 $/month (single income in the family). So, the experiment being rolled-out is testing the effects of a 7% (the percentage varies according to the living wage of the other cited cities) share of the living wage, even though it represents around 33% of the poverty line wage.

Researchers want to determine “whether money has a causal impact on children and families”. This relationship has already been established in other research studies, although less evidence exists on the impact on new-born babies and their mothers. According to Katherine Magnuson, one of the involved researchers and professor at University of Wisconsin, more than allowing these mothers to more easily buy essential products for their children, the point of the study is to know if the money can “help free up some of the mental bandwidth that gets gobbled up by living in poverty”. Again, the relationship between poverty and diminished brain functions has already been demonstrated through research, but not specifically involving mothers and their new-borns development.

The team theorizes that not only the money itself, but the simple regularity of the payments is in itself a stabilization factor, due to its predictability. That can lead to alleviating stress, hence more positive relationships between mothers and their children. In the words of Katherine Magnuson, “If you’re not worried about your bus pass, you’re going to be a lot more able to have a conversation with your 2-year-old”. That extra cash may prove enough to free up what researchers call “cognitive load”, and naturally allowing mothers to focus more on their children and their future, instead of worrying about bills to pay.

Several outcomes will be analysed, such as children’s overall health and brain activity (with EEG scans), as well as behaviour and language monitoring. IQ tests will also be applied, for children older than two-years old. Mothers will also be monitored, specially concerning their health, stress levels and interaction with their children.

Lisa Gennetian, one of the study’s lead researchers summarizes the intent of this work: “What is in the best interest of children is really what our study is designed to answer (…) I think the policy implications are much broader than UBI (universal basic income)”. That view may be a consequence of a too narrow interpretation of a broader UBI definition, but still the “best interest of children” should, in principle, have a positive impact on the adults they will one day become, and the society they will help to create.

Possible similarities may exist with the Magnolia Mother’s Trust, an initiative designed to help young African mothers in the United States, financed by the Economic Security Project.

More information at:

Leslie Albrecht, “Low-income moms in four U.S. cities are being paid $4,000 a year, with no strings attached”, Market Watch, May 12th 2019

Jessica Hagen-Zanker et al., “Understanding the impact of cash transfers: the evidence”, Overseas Development Institute, July 2016

André Coelho, “United States: The Magnolia Mother’s Trust innovates and starts a basic income-like experiment with African American women”, Basic Income News, November 11th 2018

Testimony of Kenya’s basic income beneficiaries

Testimony of Kenya’s basic income beneficiaries

Written by: Mônica Dallari and Eduardo Matarazzo Suplicy

After the article “A Critical Poverty Eradication Experiment in Kenya”, published in the last issue of the BIEN News Flash, we now offer this complement with the interviews of the beneficiaries of the UBI in the rural villages of Kenya.

Stimulus to work

Richard O., 43, is a father of nine children. The couple and the eldest son, aged 18, receive a basic income. Richard paid school fees for his children to study and bought goats, $150 and $200 USD each. He also bought a cow for $250, which provides milk for the family. Now he wants a bull, which costs $300. Richard says basic income has encouraged him to work harder: “when there is opportunity, ambition grows”, he explains. “The benefit has created the possibility for people to dream of a better life.” Richard is dreaming.

Empowered women

Jane M. feels stronger now with basic income because she has the power to decide how the best use of her benefit. She and her husband have the same power in the negotiations. She felt very good to gain independence. Jane says that the basic income comes along with the responsibility of making the best use of resources, for being unconditional. As a seamstress, she receives $0.50 a day. She participates in a group of 10 women in the village who help each other. Once a month, they all get together and deliver  $10 to one of them. By relay, one of the beneficiaries gets $100 each. Jane waits her turn, she wants to invest in her own business.

New house

Edson O.N. was happy for all the villages receiving Universal Basic Income (UBI), not just selected ones. Married, now 31 years old with two children, when he does not have occasional jobs in the field, he helps his wife sell used clothes in popular markets and gets $1. He lives in a house with a mud wall and a straw roof in his father’s terrain. He is raising money to acquire his own land and build a home for his family. He estimates that will need $1,000. The steel roof tiles, for the capture of rainwater, alone cost $210.

Reduction of domestic violence

Kennedy A.A. realized that violence and stress within families have greatly reduced with the introduction of the UBI. He is the elder of the village, a joint judge and chief of the community, not necessarily the eldest. He is often called in neighbors’ quarrels and family disputes. He is married at 43 years old with three daughters. He says: “when there is money, conflicts decrease. Men do not come back home angry and frustrated. The benefit brought peace to the families. Children, who grew humiliated in old and torn clothes, began to wear decent clothes. Access to food and medicines has improved. Everyone starts to know the feeling of well-being.”

No piper water

Nilton is 12 years old and Elvis is six years old. They are brothers and were carrying for the second time in the day buckets of water. The houses in the village don’t have sewage or piper water. In Kenya, 37 percent of the population do not have access to drinking water. Nilton and Elvis are responsible for getting water for the family. They walk about 400 meters to the reservoir. Nilton carries two buckets of 10 liters and Elvis two of 5 liters. When it rains, those who can take advantage of rainwater with the use of gutters in the steel roof, a privilege for only a few families.

Community teacher

Mary A. is illiterate. In the village, only 8 percent of the villagers know how to read and write. In Kenya, illiteracy reaches 22 percent of the population, but the prospect is that literacy will improve with the introduction of UBI. Now, no child leaves school. They all have food when they return home. In the village, no one else sleeps hungry. With three grandchildren in elementary education, Mary helps pay a teacher hired by the community. Since few teachers are offered by the government, parents get together to pay more teachers.

Prosperity

Aggrey O., 56, raises five children alone. Everyone studies. The money was primarily used to pay the high school of the two older children. Annuities can range from $300 to $550. As a farmer, Aggrey earns $1.50 a day. When the yield from his garden is very good, he can earn up to $3 a day. For him, life has improved a lot with basic income. To live it is necessary to have prosperity. He wants to send his children to university. He says that Felix, the youngest at eight years old, is very clever. “Why do I desire to send the children to university? The same way you left Brazil and are here for having studied, I also want my children to go to Brazil because they studied.”

Precarious health

Jane A., 76, is a widow and lives with her sister. She spends the money on medicine. Lack of sanitation causes many diseases. According to data from “Doctors Without Borders,” in 2016 there were 216 million cases of malaria in the world, with 445,000 deaths. Sub-Saharan Africa is responsible for 90 percent of the cases. Malaria is the leading cause of death in Kenya, followed by tuberculosis, a consequence of the HIV virus, which affects 1.5 percent of the population. Violence against women is one of the main causes of the spread of HIV.

Polygamy and the Marriage Law

Ruth O., 34, is the second wife of a bigamy husband. She has three daughters and takes care of five orphans: a nephew and four children from her husband’s first wife, who died in 2011. As the wives get along well, which is rare in these situations, Ruth decided to raise the children when their mother passed away. Frequently in cases of polygamy, wives live in separate houses with their children, but they share the same family terrain. The relations are not easy, the treatments are differentiated, a lot of rivalry arises between the children and the women. The first wife has certain privileges and rights, for being the only relationship officially recognized. There is no law regulating the registration of other polygamous relations.

Although the 2010 Constitution does not provide for polygamy, in 2014 the Matrimonial Law was approved by the National Assembly and the Senate, and sanctioned by the president, which legalized marriage as a “monogamous or polygamous union” between men and women. The women’s claim to allow the first wife to be consulted about the convenience of her husband having a second wife was rejected by deputies of the situation and the opposition. Polygamy is valid only for men.

No tools

Victor O., 24, has a son. He lives in his mother’s house along with five brothers. He is an electrician, he repairs cell phones, radios, and electrical materials, but he has no work. Victor stopped his studies in seventh grade. Victor regrets he has no tools to perform the repairs, which ends up restricting the work a lot. He has no offer of service, so he goes from house to house. He can do three or four services a month and earns about $4 a month.

Cemetery at home

Mary S., 48, has seven children and is the second wife of polygamous husband Joseph S.O., who died in 2010 and is buried in the family backyard. In the same terrain are the houses of the two wives. According to custom, the cemetery is reserved only for those who have no family. In fact, it is the solution to bury people who die at home without any kind of medical care. In 2017, according to data from the Kenyan government, of the 190,000 deaths, 100,000 occurred in hospitals and 90,000 in the residences.

Finnish basic income experiment reveals problems of conditional benefits

Finnish basic income experiment reveals problems of conditional benefits

Minna Ylikännö

Research team leader, Social Insurance Institution of Finland

(minna.ylikanno@kela,fi)

and

Olli Kangas

Professor of Practice, University of Turku

(olli.kangas@utu.fi)

 

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.

[2] Explanations why the unemployed were the target group of the experiment are given at https://tutkimusblogi.kela.fi/arkisto/3316.

[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.