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Basic income: a BIG disappointment

08/10/2020

By Nicholas Freeland

Anyone who has come across any of my earlier blogs probably knows that I have a marginal preference for inclusive life-course approaches to social protection! I have always assumed, therefore, that when eventually the conditions were right for universal basic income, I would be an avid supporter of basic income grants (BIG) and the like. But that time now seems to be approaching, and I find that I am not a BIG fan!

COVID-19 has sparked a mass of interest in “basic income”. South Africa’s Minister of Social Development has advocated it; Spain has promised it on a permanent basis; UNDP has argued for it globally (at least on a temporary basis); South Korea, Hong Kong and Singapore have used universal cash transfers as a response to the pandemic, with Japan apparently also planning to do so; Tuvalu is paying a monthly grant to every one of its citizens for the duration of COVID. The social protection world is abuzz that basic income’s time has finally come, some 500 years after Thomas More wrote, in his “Utopia”, that “it would be far more to the point to provide everyone with some means of livelihood, so that nobody’s under the frightful necessity of becoming, first a thief, and then a corpse.”

But the more you look at basic income, the less attractive it seems, at least from a social protection perspective.

Let’s begin with what we mean by “basic income”. At least that’s straightforward: you just give money to everyone. But actually, it turns out not to be so straightforward. The Basic Income Earth Network (BIEN), probably the foremost global forum, proposes that “A Basic Income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement”.

The first thing to note about this definition is that “basic income” is synonymous with universal basic income: the “universal” in “universal basic income” is tautologous, since “basic income” is already paid to “all”. Wikipedia confirms this: “Basic income, also called universal basic income (UBI), citizen’s income, citizen’s basic income, basic income guarantee, basic living stipend, guaranteed annual income, or universal demogrant…”. But it creates an inconsistency. If we think of an alternate type of social security, say a “child benefit” or a “social pension”, then a “universal child benefit” would be definitionally distinct from a “child benefit”, and a “universal social pension” from a “social pension”, by virtue of necessarily being paid to all members of that category rather than just some. By contrast, in theory, there is an absolute requirement that basic income must be paid to all individuals of all ages in a particular society.

BIEN expands its definition to separate out five key characteristics of basic income:

  • Periodic: it is paid at regular intervals (for example every month), 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, therefore, paid either in kind (such as food or services) or in vouchers dedicated to 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.

The World Bank’s comprehensive “Exploring Universal Basic Income: a Guide to Navigating Concepts, Evidence and Practices” (Gentilini et al, 2020) begins by observing that: “The debate on a UBI is often chaotic and without precise definitional contours”.[1] It goes on to characterise basic income along three different axes of social protection: that it is cash, rather than in-kind; that it is universal, rather than targeted, and that it is unconditional. These three criteria map well to three of BIEN’s five. The Bank is not explicit in its classification that payments should be to individuals rather than households, nor that they should be made at regular intervals. But in its subsequent categorisation of different programmes, it does add an additional consideration: that basic income should be state-led.

However, when you reflect more on these characteristics through a social protection lens, it becomes clear that they are still incomplete:

  • Frequency – from a social protection perspective, the frequency of payments matters. It is not enough to say (as BIEN does in its definition) that payment must be “at regular intervals (for example every month)”. Paying once every decade is “regular”…but useless for providing social support. So, we need to be clear: the frequency of transfers should be monthly, or at worst every two months.
  • Flat-rate – the concept of paying something to everyone is clear, intuitive and appealing (at least to a universalist), but the definitions above are coy about whether this should be at a flat rate to everyone. But surely, logically it should? Otherwise, a basic income becomes rather less simple and basic. Because if you then need to differentiate to give different amounts to young children, older persons, those with disabilities, those who are employed and so on, then you are not really solving the problems of existing life-course social security. So, rationally, basic income should be paid at a flat rate.
  • Coverage – The definition suggests that basic income should be “paid to all”. But “all” of what? BIEN and the World Bank are silent on this. But Wikipedia boldly ventures that it “can be implemented nationally, regionally, or locally”, with nothing to define the scale of what might be meant by “local”. But, surely, we need to be clear that we are not talking about providing income support just to a single village (as a number of basic income pilot programmes do): it has to be national in coverage, either to every citizen or to every resident.
  • Duration – Especially from a social protection perspective, income transfers have negligible value unless they are delivered consistently over a sustained period, so that individuals can be confident of making plans around them. So basic income, in common with all forms of social security, must be multi-annual.

So, we find that we now have ten necessary characteristics of basic income:

  • regular payments
  • at monthly intervals
  • in cash
  • universally
  • to individuals
  • at a flat rate
  • with full national coverage
  • unconditionally
  • by the State
  • on a pluri-annual basis.

Based on these characteristics, there has only been one operational example of true basic income anywhere in the world: the Subsidy Reform Programme in Iran, from 2010 onwards.

And this definition makes a mockery of many of the current claims of providing basic income. Looking at programmes in the recent past, the Basic Income Experiment in Ontario, Canada, was limited to a particular age group (18-64), was household-based, was means-tested, had a variable rate, and didn’t provide cash (it was essentially a negative income tax); Finland’s KELA-run programme targeted only unemployed adults, and only a small sample of those; and Barcelona’s B-MINCOME is highly selective (even within its limited geographical neighbourhood) among only those already having a file with social services, and it is means-tested, household-based, age-restricted (25-60), variable-rate and conditional (at least in some of its treatment arms)! Finally, the many renowned basic income pilots (such as SEWA in India, GiveDirectly in Kenya, BIG Coalition in Namibia) are by definition not national in coverage (or anywhere near it – most cover less than 2000 individuals) and are not state-led.

Post-COVID enthusiasm shows similar incongruity. South Africa’s Minister rowed back fairly swiftly to clarify that she was only talking about basic income for the 18 to 59 year age group (or perhaps as a priority just “the most vulnerable groups of our population … the youth between 18 and 24 and the elderly between 50 and 59”). Spain’s “basic income” proposals are household-based and tightly poverty-targeted. UNDP’s is explicitly “temporary”. South Korea, Hong Kong, Singapore and Japan are only initiating one-off (or two-off, in Singapore’s case) payments: furthermore, South Korea’s is household-based, Hong Kong’s excludes under-18s, and Singapore’s is only for over-21s. Even Tuvalu is proposing payments to its 11,500 citizens only for the duration of COVID-19. So, no imminent prospect of true basic income.

Perhaps basic income has a useful role in distributing dividends generated by national resources and assets, such as the ongoing Alaska Permanent Fund, the short-lived Human Development Fund in Mongolia, Macau’s Wealth Partaking Scheme, the casino profits of the Eastern Band of Cherokee Nations, or the one-off Scheme $6,000 in Hong Kong. But surely social protection requires a more nuanced approach? This is because good social protection (by which I mean inclusive rights-based life-course social protection!) should reflect the vulnerabilities faced at each stage of the life-course and should be designed in such a way as to help achieve the government’s objectives for that stage. A flat-rate transfer to everyone is far too blunt an instrument.

In most countries, for example, existing old-age pensions are significantly higher than existing child benefits, reflecting their different objectives: a pension to allow people to live in dignity, to meet the increased costs of healthcare and to contribute to supporting others in the household; a child benefit to meet the objectives of good nutrition (for mother and child), early childhood development and access to education. Support to persons with disabilities often entails a higher transfer still, to compensate the additional costs involved in participating fully in society (which is not taken into account by a basic income). And transfers to people of working age should be designed primarily to support their engagement (or re-engagement) with the labour market, to recompense them for unemployment or unpaid work, for example in the care economy, or when they are sick. These different sets of objectives at different life-course stages require different programmes, often with different funding mechanisms, for example through a mix of contributory and tax-financed schemes.

Illustration of a life-course social protection system (Development Pathways)

What governments have an opportunity to do now, in response to COVID-19, is not to introduce basic income across the board, but to fill the gaps that have been revealed in their existing programmes to move towards universal life-course coverage. Child benefits, old-age pensions and disability allowances should be made universal, and integrated systems should be put in place to provide income support to all those of working age who need it (which in many countries has emerged as the most glaring lacuna). This could conceivably be in the form of a universal flat-rate transfer to all in that age group (though this would still not count as basic income by the strict definition). But it could also be achieved through judicious integration of contributory and tax-financed approaches to ensure that everybody receives such support when they need it.

That would indeed be a BIG step in the right direction, and – for social protection purposes at least  – a much better option than More’s utopian vision!

[1] Gentilini, Ugo, Margaret Grosh, Jamele Rigolini, and Ruslan Yemtsov, eds. 2020. Exploring Universal Basic Income: A Guide to Navigating Concepts, Evidence, and Practices. Washington, DC: World Bank.

Our blogger, Nicholas Freeland, is an independent consultant in social protection and a Senior Associate of Development Pathways. Nicholas is a frequent contributor of blogs and papers for Development Pathways. 

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COMMENTS 7

  • Thanks for this contribution. It gives a very good summary of most of the arguments.
    I fully agree with the conclusion you draw.

    As for the title you chose and as a respons to Guy Standing. The experiments with income guarantees for poor people aren’t dissapointing as such (mostly on the contrary). But they’re simply not about Universal Basic Income.

  • I completely agree that the Bien definition is [deliberately] non-committal on both frequency of payments and variation by age. As I think I said, if you asked UBI scholars or campaigners, you would find that they would have a pretty firm idea of an acceptable frequency. And the Alaska Permanent Fund dividend wouldn’t meet criteria for either certainty (it varies year to year), amount, or frequency. However, it has the characteristic of permanence (so far), universality and unconditionality, which sadly means it’s got as much in common with a Basic Income as any pilot, trial or experiment so far attempted!

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