Much attention has been paid in recent years to ‘universal basic income,’ the progressive policy idea that proponents argue will help societies reduce inequalities and at the same time adapt to job losses caused by increased automation. Much less attention has been paid to the political and economic trade-offs required if countries are to move towards a new welfare system. This really matters if the rhetoric about basic income is ever to become reality.
Interest in basic income has been bolstered by a flurry of basic income-inspired experiments, notably the high profile scheme trial by the Finns which took place from 2017-18. Across Europe, devolved and local governments – in Scotland, the Netherlands, and Barcelona – are at the heart of ongoing efforts to further the evidence base and challenge a dominant welfare policy model characterised by intrusive and punitive ‘conditionality.’ The idea for basic income gained ground as part of a social contract for Europe at this year’s Brussels Economic Forum, and recent surveys suggest around half of the EU population would support the idea in principle.
But while the arguments in favour of basic income have never been stronger, substantial political barriers remain. One of these is that there is no clear agreement among basic income advocates about the policy’s specific features; for example, in terms of payment level, funding method, and interactions with the wider welfare state. Different forms of basic income give rise to a specific pattern of winners and losers, and are likely to appeal to - or dissuade - different coalitions of actors.
This makes forging consensus more difficult. Support for any specific proposal falls compared to support for basic income in the abstract. What’s more, the Left – perhaps basic income’s most natural ‘home’ – is hugely divided on basic income, with many concerned that the policy is an attack on the welfare state and a capitulation to neoliberalism.
One further issue relates to where basic income ‘fits’ in structurally diverse welfare systems. This demand-capacity paradox means that for countries with the most ability to afford basic income, support is often lowest and modelling suggests the policy would make the least difference. By contrast, for countries where support is higher and where the policy could actually make important impacts, it is generally least affordable. We see this from latest microsimulation work carried out at the University of Bath’s Institute for Policy Research (IPR).
Our work has modelled a range of alternative implementation modes and payment levels; for ‘revenue neutral’ schemes funded through payroll taxes and cuts to existing benefits. Through our latest publication ‘Basic Income, Automation, and Labour Market Change,’ we show that schemes which largely replace existing welfare provisions are less feasible. This is because they carry a high cost for the taxpayer and, crucially, are likely to face opposition from those losing privileged access to generous earnings-related benefits and pensions. In general, these issues are likely to be more pronounced in countries with more widespread support and greater numbers of potential beneficiaries, because they also tend to have lower per capita incomes, lower levels of tax revenue, and greater reliance on social insurance contributions compared to income tax.
But there is a way through. Our analysis also shows that it is possible to design modest affordable schemes with positive distributional consequences, if the basic income is paid on top of existing provisions, or only partially replaces them. Such schemes would not radically simplify the welfare system nor have dramatic effects on poverty and inequality, but they would still be progressive, alleviate profound income insecurity, reduce intra-household inequalities and have many other potential societal and psychological benefits. In this vein, the idea of a Europe-wide modest basic income scheme might appear fanciful, but a so-called “Euro Dividend” could act as a powerful buffering mechanism in the context of huge economic disparities between member states.
Basic income in its current form will not be a silver bullet to every social ill, but it is a radical alternative to the status quo, which can in time make a profound impact on people’s lives. To move beyond political posturing though, we need now to focus on the details of basic income and start with small, modest, partial schemes through which we can test its impact. Only this way can we begin to build much broader support right across Europe and the rest of the world.
Dr Luke Martinelli is a Research Associate at the University of Bath’s Institute for Policy Research (IPR). His latest report, ‘Basic Income, Automation and Labour Market Change,’ is available to read online.
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