Universal basic income: too good to be true?

“I am now convinced that the simplest approach will prove to be the most effective – the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” Martin Luther King, 1967

It may come as a surprise to learn that the current ‘hot topic’ of universal basic income (UBI) – also known as basic income or income guarantee – is actually over 500 years old.

It was first developed by radicals such as philosopher Sir Thomas More in the 16th century, drawing upon humanist philosophy.  It was mooted by Thomas Paine in the 18th century, and then again in the mid-20th century, by economists such as James Tobin and Milton Friedman.  In 1967, Martin Luther King called for a ‘guaranteed income’ to abolish poverty, and in the 1970s, a basic income experiment ‘Mincome’ was conducted in Canada.

However, only in recent years has debate on universal basic income (UBI) moved into the mainstream.

From the threat of job losses from automation and artificial intelligence, an overly complex and bureaucratic welfare system that has been branded ‘unfit for purpose’, to the failure of conventional means to successfully tackle unemployment over the last decade – basic income has been hailed as a key way to reduce inequality and provide a basic level of financial security upon which individuals can build their lives.

It has many current supporters – including billionaires Elon Musk, Mark Zuckerberg, and Richard Branson.  There is support among the general public too, with a recent poll reporting that nearly half of all adults aged 18-75 in the UK (49%) would support the UK Government introducing UBI at the level to cover basic needs in principle.

 

How does it work? 

In essence, UBI offers every citizen a regular payment without means testing or requirement for work.

Trials of different models of basic income have been conducted around the globe, including Kenya, Finland, and Canada.  There are also UBI trials planned in the district of Besós in Barcelona, Utrecht in the Netherlands and the Finnish city of Helsinki.  Closer to home, four areas in Scotland are also currently designing basic income pilots – Glasgow, Edinburgh, Fife and North Ayrshire.

While there have been many different models of basic income trialled and assessed over the years, in general, basic income schemes share five key characteristics:

  • Periodic: it is paid at regular intervals, not as a one-off grant.
  • Cash payment: it is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not paid in kind (such as food or services) or in vouchers with a specific use
  • Individual: it is paid on an individual basis—and not, for instance, to households.
  • Universal: it is paid to all, without means test
  • Unconditional: it is paid without a requirement to work or to demonstrate willingness-to-work

 

Anticipated benefits

The key anticipated benefits of the introduction of UBI is a reduction in inequality and poverty. However, advocates claim that it would also have many other benefits.  These include:

  • simplifying the existing welfare system (including efficiency gains)
  • reducing the psychological burden and stigma associated with welfare benefits
  • achieving more comprehensive coverage – no one ‘slipping through the net’
  • fixing the threshold and ‘poverty trap’ effects induced by means-tested schemes
  • enabling individuals to continue education and training, or retrain, without financial constraint dictating choices
  • making childcare arrangements easier
  • rewarding unpaid contributions such as caring and volunteer work
  • improving gender equality and help women in abusive situations
  • improving working conditions
  • addressing predicted future mass unemployment as a result of automation

 

Criticism

The key argument against the introduction of UBI is its cost – essentially that “an affordable UBI would be inadequate, and an adequate UBI would be unaffordable”.

Critics argue that if UBI were set at a level that enabled a modest, but decent standard of living on its own, then it would be unaffordable – either requiring much higher taxes, and/or the redistribution of funds from other areas, such as education or health.

However, if UBI was set too low, it would not provide an adequate income to live on, and it may be exploited as a subsidy for low wages by unscrupulous employers.

Others, such as economist John Kay, have argued that UBI simply would not have the redistributive effects intended.  Rather than improving the lives of those most in need, who would receive more or less the same as they do under existing welfare systems, it would instead provide more for the middle classes.

There is also some concern that UBI may undermine the incentive to work, and lead to the large-scale withdrawal of women from the labour market.

 

What does the evidence say?

Certainly, there is a beauty in the simplicity of UBI – and no one can argue against the goals of reducing inequality and poverty.  However, in truth, there just isn’t enough evidence available yet to judge whether or not the full-scale introduction of UBI would be successful.

While many pilots have demonstrated positive results, most have been of limited size and scope, and it is difficult to extrapolate these findings to the wider population.

Analyses by a wide range of organisations – including the RSA, the Joseph Rowntree Foundation, the OECD, and the International Monetary Fund, have drawn mixed results.

For example, a review conducted by Bath University in 2017 concluded that:

The unavoidable reality is that such schemes either have unacceptable distributional consequences or they simply cost too much. The alternative – to retain the existing structure of means-tested benefits – ensures a more favourable compromise between the goals of meeting need and controlling cost, but does so at the cost of administrative complexity and adverse work incentive effects.”

Similarly, the IMF conclude that in the UK and France, UBI would be inferior to existing systems in targeting poverty and inequality. However, there are some aspects of UBI that are difficult to model, such as the behavioural impacts of having economic security.  Trials and experimentation are important sources of such information.

Thus, the planned trials of UBI in Scotland and elsewhere may well help to provide further answers.  And we – along with others around the world – will be watching with interest.

As First Minister, Nicola Sturgeon aptly puts it:

It might turn out not to be the answer, it might turn out not to be feasible. But as work and employment changes as rapidly as it is doing, I think it’s really important that we are prepared to be open-minded about the different ways that we can support individuals to participate fully in the new economy.”


Follow us on Twitter to see what developments in public and social policy are interesting our research team.

Universal Credit and housing benefit: facing up to the challenge of change

by James Carson

English money

How are housing associations and their tenants preparing for Universal Credit?  It’s one of the big questions at the heart of the coalition government’s reform of the benefits system. Until recently, the answer was unclear, but we’re now starting to get a better picture of the likely impact of benefits reform on social housing.

In 2010, the coalition government embarked on a major programme of changes to the welfare system. The staged roll-out is intended to simplify the system, replacing five different benefits with a single payment, known as Universal Credit. One of the major changes will see social tenants who previously had their housing benefit paid to their landlord receiving a single monthly payment.

Right from the start, there have been concerns that tenants will have difficulties managing direct payments, and that rising numbers will struggle to pay their rents. Initially, it was difficult to assess whether these concerns were valid, but last month the Department for Work and Pensions published a package of reports evaluating a series of demonstration projects testing the direct payment of housing benefit to tenants living in social housing.

Continue reading

Three options DWP should explore in supporting those with poor mental health into work


Traffic cone with the text "works in progress".

By Steven McGinty

Last week, the UK government announced a new pilot scheme to support those with mental illness back into work. While similar to other government initiatives, this scheme has the unique selling point of offering treatment at an earlier stage, alongside employment support.

Like many of the government’s return to work policies, this might prove to be controversial. Many have expressed concerns over a comment from the Department for Work and Pensions (DWP) that suggests that counselling could become mandatory for those claiming benefits.  One of the most notable individuals to question this policy is Tom Pollard, Campaign and Policy Manager at Mind. He suggests that,

“If people are not getting access to the support they need, the government should address levels of funding for mental health services rather than putting even more pressure on those supported by benefits and not currently well enough to work.”

Although this pilot scheme has caused some heated debate, this is just one of the many ideas available to the government. Others include:

Aim High Routeback (Easington Pilot), County Durham

This pilot scheme was launched in 2005, as part of the Northern Way pilots, and was said to take a ‘health-first’ approach. The scheme was based in an NHS Primary Care Trust building, with participants focusing on the practical management of their health conditions, and employment only being discussed once individuals had started to make progress with their health. The project reported an above average return to work rate, in comparison with the other pilots. Interestingly, one of the key findings of the study was that participants were more likely to return to work if they felt like their health was ‘good or improving’.

JOBS II Model

This model was developed in the US and involves the use of peer led groups. The idea is that these groups can be used to support those with mental health problems back into employment, as well as prevent the negative health impacts which can arise from unemployment. The programme works on improving the jobseekers’ ability to search for work, as well as to cope with the setbacks of finding employment. The model has been found to be successful and has recently been recommended by the Department for Work and Pensions.

Mini-ICF-APP

This is a measure for assessing patients that was piloted by a community mental health team in Oxfordshire. The pilot involved asking new patients to fill in a 10 minute survey. This survey allowed medical staff to better assess the support needs of patients, as well as to identify their strengths and weaknesses. The staff were then able to offer more targeted referrals and interventions. For example, the use of cognitive behavioural therapy (CBT) or the tailoring of a patient’s medication. The pilot reported that this approach led to an improvement in outcomes for patients.

This is just a small sample of the research on improving the employment prospects of those with mental illness.

At Idox, our database contains all the research highlighted. We also provide an enquiry service, allowing members to receive the support of information professionals, as well as save time on their research.

Further reading (you may need to be a member to view some of these articles):

 

 

Idox Budget 2014 Summary

Pound coin

Idox Policyfinder Team

Presented to Parliament by Chancellor of the Exchequer George Osborne, Budget 2014 sets out the next steps in the Government’s long-term economic plan. The Government believes this Budget not only sets out further action to secure the recovery and build a resilient economy, but also the most radical reforms to saving for a generation, providing security for families to plan for their future.  Continue reading