Germany: The first basic income experiment in Germany will start in 2019

Germany: The first basic income experiment in Germany will start in 2019

Basic income is going to be tested in Germany. The setup of the experiment will be similar to the one now ending in Finland, which means there will be an unconditional cash transfer to 250 randomly selected people among those already receiving benefits (250 others will act as the control group), and evaluate the impact in terms of labor market behavior, health and social relations.

 

Behind this initiative, to be initiated in May 2019, is the Sanktionsfrei organization, a non-profit managed by volunteer professionals from administration, IT-tech, communications and law. Sanktionsfrei (meaning “free from sanctions”), with headquarters in Berlin, specializes in helping sanctioned citizens by the Hartz IV social security system in Germany. It will conduct this experiment in Berlin, for a 3-year period, accepting volunteers who may apply for it through their website.

 

The basic income pilot, named HartzPlus, will be conducted as a scientific experiment, led by professor Rainer Wieland, from the Bergische Universität Wuppertal. The Sanktionsfrei team and professor Wieland are about to test a different approach to social security than the one applied in Germany at the moment (Hartz IV system), which has been reported as intrusive, bureaucratic and aggressive (sanctions). Those characteristics, contrary to what is considered by the system’s defenders, do not lead to increased willingness to pickup paid work (the objective of the program), but to resistance, decreased motivation and a generalized discredit in the social security system. Throughout the experiment, people will be checked for variations in mental health, life control, self-efficiency, sociopolitical values, among other indicators. No initial hypothesis will be considered; the experiment aims to offer scientifically informed insights to future social policy in Germany.

 

As for financing, Sanktionfrei is relying on private donors as the sole financing mechanism. Participants will receive unconditionally the amount from whatever sanctions they will be subject to by job centers (e.g.: by not responding to certain job offers or refusing to get suggested training actions); Sanktionsfrei will always try to recover the sanction money through legal action, and if it does, the participant will transfer the contested amount back to Sanktionsfrei. Otherwise, each participant gets, for the whole time period of the experiment, the full amount of their social security benefits, no questions asked.

 

 

More information at:

Tobias Kaiser, “Grundeinkommen wird in Deutschland getestet [Basic Income is tested in Germany]”, Gründerszene, December 6th 2018

André Coelho, “Finland: Going through a basic income experiment”, Basic Income News, April 20th 2018

HartzPlus website

Bolivia: BONOSOL programme is 21 years old, this year

Bolivia: BONOSOL programme is 21 years old, this year

Image credit: La Razón.

 

BONOSOL is a mandatory, non-contributory, central government social security program in Bolivia. It is unconditional in nature and started in 1997, having endured to this day, having risen more than 220% from 2008 through 2016. It disburses, at the moment, 404 €/year per adult over 60 years of age who does not benefit from a State pension, and 323 €/year for those in that same population cohort who benefit from a State pension. BONOSOL is, thus, a universal but cohort restricted non-contributory pension programme.

 

Although the programme targets people older than 60 years of age, its coverage includes all people older than 21 in 1995 (at the moment 44 years of age). It has also been suspended, soon after its start in May 1997, re-introduced with a different name (BOLIVIDA) on a 51 €/year value and then re-established again as BONOSOL in 2002, with a value of 206 €/year.

 

Nowadays, around one million people in Bolivia benefit from BONOSOL (with or without a state pension), also called Renta Dignidad, or about 9% of current population. There is no monitoring or evaluation processes for this programme, although the total fund from where payments are made is subject to annual audits. The annual cost is 0.25% of Bolivia’s GDP, and has been originally set up as a way to redistribute collected funds by the State, derived from the privatization process. However, despite, its longevity and growth along recent years, “studies have shown that at current levels of benefits in payment, the fund will run out much earlier than expected”. This might indicate a need to diversify the fund’s financing streams into the future.

 

More information at:

Jesus Paco, “Diputados aprueban suba de la Renta Dignidad”, El Deber, May 5th 2017

International Labour Organization, Social Security Department – Bolivia, Bonosol

Autoridad de Fiscalización y Control de Pensiones e Seguros: Requisitos Renda Dignidad

Re-inventing social security

Re-inventing social security

About 25 years ago, when internet emerged, I addressed an audience saying: “If newspapers [didn’t already] exist today” there is “no way investors or bankers would support the business-idea to collect news, print it on paper around midnight and dispatch this printed stuff using thousands of vehicles to bring it to shops and individual readers before morning comes”.

In most western countries, social security became significant approximately 70 years ago, when it got an extensive legal basis. It now plays a crucial role in developed countries to give purchasing power to citizens who do not have an income from a job. Moreover, in many countries it provides free health care for everybody.

Just like internet changed the way news is distributed, the fact that computers and robots replace human work is a “game changer” for social security, which was totally based on labour contributions since its inception. More and more jobs are subsidised and therefore do not really “contribute” to the social security system anymore. Just like we continue to get news, even better and faster, we want to keep social security and improve it despite paid labour becoming less important in our economic system. In most West European countries, the amount distributed by the social security system increased constantly as a share of income of households and is now, if you include benefits in kind, more or less equal to the net pay households get from work. There is little political awareness of this fact.

Assuming social security never existed and we decide to create it, how would we organise the cash redistribution part of it? Just like blood in the human body redistributes blood cells to make all parts of our body work, money fulfils a similar role in society: allowing exchange of goods and services amongst individuals.

Like the heart of the human body pushes blood in various parts of our body and collects the blood on the other side, the social security system injects money, purchasing power, into society to fuel exchanges of goods and services.

In the future, the total amount of money distributed should be no less than today, and should gradually increase when automation further decreases the demand for paid labour in our economic system because we need purchasing power to drive economic activity.

The conditional character of the current social security system limits freedom to work, to move in with friends and so on. It is a huge deterrent to work and enjoy life. Assume a Belgian person gets 1200 € unemployment benefit and could get a job paying 1350 € net per month. Because that person loses the 1200 € as soon as she/he starts to work, the marginal reward is 150 € per month. Since there are approximately 150 working hours in a month, it is only worth 1 € per hour. Stupid system, yes indeed.

Therefore, the biggest part of the new social security system’s cash distribution, around 90 percent, should be a straightforward unconditional basic income distributed to everyone, the amount solely depending on the age. In the example above, this unconditional basic income could be 800 € per month for the 26 to 67 age group, lower than the highest “replacement income”, but not much lower than the average unemployment benefit in Belgium today. A second layer to the system should be conditional, based on specific needs or situations like invalidity, requiring administration. By comparison the administration cost of the new social security system would be roughly 90 percent lower than the current one.

There is no need of for additional taxes in the new system (see this Economist graph) if the basic income becomes a part (and does not come in addition) of the current income from work (or current social security benefits). For example if we decide the basic income for adults in the US to be 900 $ per month and a person’s net income from work is presently 1900 $, his pay-check will read: “basic income 900$, income from work 1000 $”. This could be done in two ways. The first way is the employer pays the basic income of his employee. The second way is that the state pays the basic income to the employee but charges a tax equal to the basic income to the employer. Either way, the employee keeps getting the same income, the employer has the same employment cost as before and the state has no extra cost. But to be aware of all these things, the employer might need to take advice about employment law from the advisors of the consultancies like Sentient in Leeds. If you own a company, you can look out for similar firms in your city or state to get an idea of all the laws before any kind of settlement about salary or employment contracts.

Only citizens which have no income at all or less than 900 $ would get more cash from the new system than what they get today. This extra distribution of money can be funded thanks to the lower administration cost of the basic income system in comparison to the present one.

If we could start all anew, we would cherish the local economy, promoting free and uncomplicated exchanges of goods and services between individuals to improve our well-being. For instance, if we have a plumbing issue in our home, instead of calling expert service providers, who have already made a big name for themselves and are doing well, we might want to contact local plumbers (such as royalflushsa.com.au) who do not necessarily have much publicity, but have excellent reviews. With an unconditional basic income-based social security, working for each other would be allowed. It would be even better if there were no labour taxes on services individuals provide to each other in the “proximity economy”.

Would the state lose much of the revenue from the income tax? Not much, since those exchanges of services do not tend to occur now, unless in “black”. But there would be an increase in revenue for people involved in proximity services, like for those who do not perform paid work today. Retired people would also consider earning money on top of their pension if they are sure there is no paperwork hassle at their Social Security office locations in Colorado, or wherever was local to them, and no risk for them to lose part of their retirement benefit.

The extra income would – for example – be spent in restaurants. That spending will yield income taxes and consumption taxes for the state, paid by those restaurants.

The social security system we know is a 70-year-old house to which our governments did not stop adding extensions. Meanwhile, they changed the windows, put in a new kitchen and bathroom, isolated the roof and connected everything by lots of cables.

We can reorganise the redistribution or purchasing power in a much better way: let’s build a new house.

ARGENTINA: Social Security Administrator Emilio Basavilbaso talks about the universalization of a citizen’s income

ARGENTINA: Social Security Administrator Emilio Basavilbaso talks about the universalization of a citizen’s income

Basavilvaso and Tagliaferro. Credit to: La Politica Online.

 

The Administración Nacional de la Seguridad Social (National Social Security Administration) in Argentina, or ANSES, is working on the universalization of the citizen’s income, which is being considered for pensioners and children. ANSES Executive Director Emilio Basavilbaso has himself stated that (the universalization of) a basic income can allow the country “not only to maintain, but to reinforce social rights”. At the moment, as Emilio Basavilbaso also agrees, a law must be passed in order to start money transfers under this partial basic income for pensioners.

 

The present government, led by president Mauricio Macri, is also considering a universal child payment (Asignación Universal por Hijo (AUH)), which has been proposed by parliament members Elisa Carrió and Elisa Carca as far back as 1997. The Argentinian government seems to be pursuing the expansion of unconditional payments per population sectors, at the moment focused on elder and younger citizens, through the internal transformation and increased capacity of the existent social security system.

 

More information at:

 

Language:  Spanish

 

Basavilbaso confirm que las jubilaciones aumentarán cerca de 15 por ciento [Basavilbaso has confirmed that pensions have risen 15 percent]”, La Política Online Economia, January 19th 2016

 

Financial Red Argentina, “ANSES Ingreso Ciudadano para la vejez [ANSES elderly basic income]”, 2nd December 2015

 

Financial Red Argentina, “Calendario de pago Ingreso Ciudadano Universal Marzo 2016 [Basic Income transfer calendar March 2016]”, March 1st 2016

 

Financial Red Argentina, “ANSES Elderly basic income: to retire without contributions [ANSES jubilacion universal: jubilarse sin aportes]”, March 1st 2016