Universal challenge: the call for basic income is louder than ever

7 Jul 20

Proponents of universal basic income believe their case has been strengthened by the sudden shock of the pandemic, with several countries implementing emergency schemes, but what form should it take? Calum Rutter investigates.

 
 

Governments around the world are scrambling to protect their citizens from the worst effects of the economic crisis caused by Covid-19. Throughout the talk of policy responses, one idea keeps rearing its head – universal basic income. And some governments have been pursuing their own versions of the scheme.

UBI, sometimes called citizen’s basic income, guaranteed income, basic living stipend, or a multitude of variations thereof, entails a regular, unconditional transfer of money to all people in a given area. By circumventing or working alongside existing welfare structures, making a scheme universal ensures nobody ‘falls through the cracks’ to end up in extreme poverty.

“We have a lot of evidence that the knowledge that security is stable has motivating effects that also enable better health and more cost-effective services,” says Louise Haagh, professor of politics at the University of York and chair of the Basic Income Earth Network.

UBI as an idea has existed for at least several hundred years, but has gained momentum since the 1980s as a proposed tool to fix the problem of extreme poverty. Some of its proponents say the sudden shock of the pandemic has made their case stronger.

Several countries have implemented emergency basic income schemes during the crisis. Some are almost universal – including in the US, where a $290bn (£229bn) scheme has paid out up to $1,200 (£949), plus an additional $500 (£395) per child, for individuals earning less than $90,000 (£71,000). Elsewhere, schemes are based on other factors, such as recipients’ employment status.

The left-wing coalition government in Spain recently introduced a national minimum income scheme, through which 2.5 million people will be guaranteed to receive at least €462 (£413) a month, with the government either paying the total stipend or topping up wages.


There is a real danger that crisis situations lead to a singular focus on basic income as a form of rescue. Basic income is only really effective if it is combined with other mechanisms of social inclusion – Louise Haagh, Basic Income Earth Network

This is expected to cost about €3bn (£2.7bn) a year, with deputy prime minister Pablo Iglesias saying the government was “showing that its political choice is social justice”. While “not a magical solution” to society’s ills – or the current crisis – Haagh says introducing UBI would represent a “welcome return to a sense of solidarity” that has been lost in recent years.

The key thing to remember, she says, is to see UBI not as a tool in isolation, divorced from other areas of social policy, but rather as the foundation of a system supporting needs-based social schemes, such as welfare and services.

“Basic income scheme transitions are long-term projects, linked with other areas of social and economic reform to construct more positive incentives and opportunities,” says Haagh. “There is a real danger that crisis situations lead to a singular focus on basic income as a form of rescue. Basic income is only really effective if it is combined with other mechanisms of social inclusion, and it is important to bear that in mind.”

Another country that has introduced an emergency basic income scheme is Brazil, where informal workers will receive BRL600 (£93) per month – and more if they are single parents – to stop them from falling into extreme poverty.

Brazil was the first country in the world to put universal basic income into law. In 2001, senator Eduardo Suplicy wrote a bill that would have established a UBI programme for all Brazilian citizens, as well as foreign nationals resident for five years. Senate politics blunted the bill by the time it was approved in 2004, so that it established UBI in stages, rather than immediately. But even so, Suplicy, who is now a councillor in his home city of São Paulo, believes that Brazil is still leading the field on UBI.

“At that moment, I felt that our country was in the vanguard for those who struggle to build a society with more solidarity,” he tells PFF during a video call.

brazil.jpg

Brazil Shutterstock

Rio de Janeiro, Brazil

 

Sitting in front of a stylised portrait of Thomas More, who imagined a society in which citizens received a guaranteed income in his 1516 book Utopia, Suplicy says the justification for UBI is a moral one.

“If we are going to agree to the luxurious consumption of the very rich, we must first guarantee the basic security of everyone,” he says. “People have a right to participate in the common wealth of their nation.”

His bill led to the introduction of the Bolsa Família (family allowance) social welfare scheme, which guarantees a minimum income to those living below the poverty line. Initially, the programme supported 3.5 million families, but this figure has now risen to 14.3 million. Exact costs change as poverty levels fluctuate, but the scheme costs the government about 0.4% of gross domestic product each year.

Suplicy sees Brazil’s emergency basic income scheme, which could benefit as many as 77 million people – about one-third of the population – as another step towards the full rollout of UBI.

“It is going to have a very important effect on the economy, and that will provide an opportunity for Brazilian society and politicians to think about the positive experience and how it has helped so many people,” he says.

“I am 78 years old, and I believe that I will be here on earth to see a citizens’ basic income in Brazil and in many other nations.”

A major, state-backed scientific experiment into basic income took place in Finland between 2017 and 2018, looking into its effects on youth and long-term unemployment.

It aimed to find out whether the ‘carrot’ of a guaranteed income works better than the ‘stick’ of welfare payment sanctions during the unemployment benefit process.

“There were two main surprises – that [increasing] incentives to work didn’t improve employment outcomes, and that people wanted to remain involved with the employment services, even though there was no obligation to be,” says Heikki Hiilamo, author and professor of social policy at the University of Helsinki, which was heavily involved in the study.

 

In Finland, welfare is means-tested, so income from work is deducted from benefits. This was reversed for those participating in the experiment, but the researchers found very little impact on employment rates, although wellbeing and life satisfaction did appear to be enhanced.

Hiilamo is sceptical about the impact of Covid-19 on the strength of calls to implement UBI in the long term, and warns against seeing the Finnish study as anything more than a scientific experiment into UBI’s effect on employment rates.

“Basic income has been perceived as a kind of utopian idea – a radical proposal, emerging especially from left-wing parties – and a country with a well developed welfare system and a conservative government looking into it gave the idea some legitimacy in some people’s eyes,” says Hiilamo.

“But most of the recent interest has been about emergency basic income as a stand-alone measure to improve purchasing power or help people in economic difficulty – I think that’s quite different from a proper UBI.”

In the UK, Sarah Arnold, senior economist at the New Economics Foundation think-tank, advocates for a ‘minimum income guarantee’ instead of UBI – with everyone being given enough to live on by the state, and those who can afford it paying the excess back throughout the tax year.

“To provide a UBI that can be used by everybody, in every circumstance, would be difficult to design and incredibly expensive,” she says. “We think about the opportunity cost of that and how else that money could be used – such as improving public services. This would also have a public benefit – public services are a kind of collective insurance system, similar to what UBI aims to be.”

Shifting to a guaranteed income system would allow society to remunerate currently unpaid work, such as caring for relatives, she points out.

Arnold says the economic benefits of such a scheme are clear. “People on lower incomes are more likely to spend a high proportion of their income, because they need to.” But Covid-19 has also shown that such a system would have other benefits.

“The pandemic has highlighted that in the UK the government didn’t have a mechanism for getting cash into people’s bank accounts – they’ve had to go mainly through the social security system and through employers,” she says.

“That has led to a really piecemeal system, with huge differences in what people are being paid.

“If there had been something like a UBI or minimum income guarantee, the government would have been in a much better place to support people, and there would have been a much better response, because people wouldn’t have fallen through the gaps. Especially at the lower end of the income scale, people would have been protected.”

So, even among proponents, the argument around UBI is far from settled, and if schemes continue to spring up around the world during and after the pandemic, they are likely to all look very different. As the dust from the health crisis caused by Covid-19 starts to settle, the full extent of the economic disaster is still emerging.

But one fact is already clear – people will need support from their governments. And that could take the  form of UBI.

 

Did you enjoy this article?

Related articles

Have your say

Newsletter

CIPFA latest

Most popular

Related jobs

Most commented

Events & webinars