As Wales rolls out a £1,600 a month UBI trial, what do we know about making basic income schemes work?

The authors of IPPO’s forthcoming review of basic income experiments tell us why widening inequality keeps policymakers coming back to the UBI idea, time after time

Laura Smyth and Joe Chrisp

On Feb 16, 2022, the Welsh government announced plans to roll-out a basic income pilot for care leavers.

It will provide a benefit of around £1600 a month for 2 years to roughly 500 people. An amount that would be one of the highest levels of benefit offered in such an experiment and roughly equivalent to the statutory minimum wage. Although it will be taxed as income by the UK government.

COVID 19 and Emergency UBI

The pandemic saw a range of emergency economic initiatives by governments worldwide that universal basic income (UBI) proponents were eager to compare with UBI schemes.

However, while many of these policies bear resemblance to UBI, they cannot be considered as such.

These schemes have not been universal. For example, the Canadian Emergency Response benefit and the UK furlough scheme were all limited to workers who had stopped working because of COVID-19. The Spanish scheme was limited to low-income households. In the US only adults earning less than $99,000 annually received the $1200 stimulus check. Equally, many of these schemes were not unconditional. Individuals in the UK and Canadian schemes were not allowed to work while accessing these schemes.

Around the world, governments have witnessed increasing internal economic inequality as the gulf between the wealthiest and poorest in society continues to deepen.

In the UK, even before COVID-19, a decade of austerity measures had contributed to an unprecedented rise in child poverty, infant mortality, food poverty, homelessness, mental health problems, and stalling life expectancy (1). The pandemic has only exacerbated these existing inequalities, with poorer families and communities disproportionately affected. (2)

The immediate financial pressure of COVID-19 has demonstrated the inadequacy of the current levels of benefits in the UK and across the globe. Consequently, governments have been forced to implement economic initiatives that would previously have been politically untenable.

For instance, in Canada the Canadian Emergency Response benefit provided citizens who have stopped working due to COVID-19 $500 per week, for up to 24 weeks. In Spain, 850,000 households most in need have been given €1015 a month. Although not universal and only temporary, these initiatives have drawn comparison with the concept of a UBI, a radical policy idea that has entered mainstream political debate in recent years.

What is UBI?

Universal Basic Income is commonly defined as “an income paid by a political community to all its members on an individual basis, without means test or work requirement.” (3)

The two most striking characteristics of a UBI are: (1) that it is universal i.e., everyone is eligible regardless of income, employment status, etc; and (2) that it is unconditional i.e., there are no demands or requirements on the person receiving it.

The idea of UBI is centuries old and has attracted support from both left and right, albeit in different guises. The genealogy of a UBI often starts as early as 1797 when Thomas Paine advocated for a one-off capital grant be paid to individuals in his pamphlet Agrarian Interest.

The story often then turns to the 1970s and US President Richard Nixon, who as part of the War on Poverty considered legislation guaranteeing a family of four $1600. At the time the low-income threshold for a family of four was $3,968. Drawing on proposals for a negative income tax that were popular at the time, Nixon’s Guaranteed Annual Income (GAI) proposal was initially unconditional but not universal, as it was targeted at low-income households.

However, while results from negative income tax (NIT) experiments conducted by the US government at the time showed only minor work disincentives, this proved unacceptable for many conservatives who lambasted the welfare state and insisted poverty was a moral failing.

The Mincome experiment conducted between 1974 and 1979 was equally unable to generate support for a guaranteed income from the Canadian Government. In subsequent decades, the pursuit of a guaranteed income or UBI was relegated to the attention of small political parties, eccentric politicians and the occasional government inquiry.

However, after the global financial crisis of 2007-08, the UBI began to find its way into mainstream debates as a policy idea worth taking seriously. Mirroring the process in North America in the 1970s, advocates proposed UBI pilots and experiments across countries in both the global north and south to test a more radical means of tackling the economic and social inequalities that contemporary policies were not addressing.

Experimenting with UBI again

Starting in the global south, a series of UBI pilots were funded and organised by international NGOs.

First, two pilots of UBI were run in Namibian villages Otjievero and Omitara in 2008. Then in 2011 and 2012, the Madhya Pradesh Unconditional Cash Transfers Project (MPUCTP) was launched in India. This was followed in 2016 by non-profit GiveDirectly, who began sending direct cash payments to more than 14,000 households in the Siaya and Bonmet Counties of Kenya. However, while these pilots have produced data showing improvements in health, productivity, and financial stability of participants, they have not resulted in changes to social policy in these countries (yet).

Alongside news of these experiments, a re-examination of Mincome data by Evelyn Forget helped to build momentum for a second look at UBI by policymakers in the global north (4). Thus, experiments have also been held in Europe and North America, with pilots launched in 2017 in Finland, the Netherlands and Barcelona. These experiments were not universal, being aimed at unemployed or low-income individuals, but they did include at least one treatment group that received an unconditional benefit without work requirements. Although attention has been paid to measuring the health, social and financial outcomes of these experiments, policymakers and news media (besides Barcelona) were primarily concerned with the effect on employment. This was also true of the Ontario pilot launched in 2018, which was terminated early by the then-incoming Premier, Doug Ford, due to his belief that it would not encourage employment among participants.

However, these pilots typically showed no significant results regarding employment. Perhaps counter-intuitively given the prior expectation that an unconditional income would reduce employment, this result attracted much criticism and overshadowed the positive effects observed in the mental and physical health of participants. This coverage may partly explain why these experiments have also thus far not resulted in clear policy changes.

Nevertheless, the setting up of UBI experiments continued with Stockton Mayor Michael D. Tubbs, launching the first US mayor-led pilot in 2019. In the same year, Gyeonggi Province in Korea introduced a UBI for young people (24-year-olds specifically) and has been publishing analysis of the effects on a yearly basis. Following on from the Stockton pilot, which showed improved health, financial stability and employment among participants, in June 2020 Mayor Tubbs and the Economic Security Project founded Mayors for a Guaranteed Income. The sudden emergence of the global COVID-19 pandemic then changed the social policy context in which UBI advocacy and experimentation took shape.

Will COVID-19 accelerate UBI roll-out?

While COVID-19 financial support schemes were intended to be temporary, a number of academic and media articles have cited the pandemic as making the economic and social arguments for UBI more compelling.

In April 2020, 110 parliamentarians from across the UK political spectrum signed a motion urging the government to make UBI part of its COVID-19 recovery plan.

Yet, it’s unclear whether the general public are as familiar with the concept and how it might operate.

A survey in 2016 showed only 58% of Europeans had “at least some” familiarity with UBI. And whether this has changed because of COVID-19 is unlikely.

While a UK based survey found a majority supported a UBI, it is unclear whether participants had heard of UBI prior to being questioned on it. Certainly, while most of the public are aware of the universal credit uplift or the furlough scheme, association between these policies and UBI may not be as popular a narrative as UBI proponents might assert.

The Irish government is also pursuing at least one basic income experiment for artists.

In the US as well, the Mayors for Guaranteed Income is now supporting over 20 pilot experiments in various US cities.

While COVID-19 may not have motivated these pilot experiments, it has contributed to increased poverty and hardship and perhaps the idea that a policy solution as radical as a UBI will be necessary to solve such problems. The effect of the pandemic on employment is predicted to be 10 times greater than that of the 2008 financial crisis. At the same time employment no longer guarantees a route out of poverty. In the face of such mounting economic inequalities, UBI is likely to continue to catch the attention of some policy makers. However, a question remains as to whether this attention and experimentation can lead to tangible policy reform.

Research assistant Laura Smyth and postdoctoral researcher Dr Joe Chrisp are based at the Institute for Policy Research (IPR) at the University of Bath.

 

Footnotes

(1) Taylor-Robinson, D., Barr, B., Whitehead, M. (2019). Stalling life expectancy and rising inequalities in England. Lancet. 394, pp.2238-9.

(2) Whitehead M, Taylor-Robinson D, Barr B. (2021) Poverty, health, and covid-19. BMJ. pp.372-376

(3) Van Parijs, P. (2004). Basic Income: A Simple and Powerful Idea for the Twenty-First Century. Politics & Society, 32(1), 7–39. P.7

(4) Forget, E. L. (2011). The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment. Canadian Public Policy / Analyse de Politiques, 37(3), pp.283–305