Institute of Political Science

05/14/2020

The Basic Income Debate: Keeping it Intelligent

by Malcolm Torry

Introduction

During the past five years or so we have seen growing interest in the idea of a Basic Income (also known as a Citizen’s Income, a Citizen’s Basic Income, or a Universal Basic Income), that is, an unconditional income for every individual. Increasing income insecurity has clearly been one of the reasons for that increase in interest, so it is no surprise that during the coronavirus crisis, which has seen incomes become even less secure, we have seen an even larger increase in interest in Basic Income. To take just a handful of the many recent developments in the Basic Income debate: Finland has recently published the quite positive final results of its two-year experiment with unconditional benefits for unemployed individuals. In the United Kingdom, 110 Members of Parliament and Peers, representing most of the political parties, have written to the Chancellor of the Exchequer asking for a Basic Income to aid the recovery. That letter was well-informed: but this has not always been the case. In Spain, the government has implemented a minimum income scheme (which establishes levels of income below which households are not allowed to fall, and which therefore requires means-tested benefits to be paid). Unfortunately, multiple journalists have termed this a ‘Basic Income’, which has caused UK Members of Parliament to believe that Spain has implemented a Basic Income, which it has not. Such misreporting appears not to have occurred in relation to similar government measures in the Netherlands, so a more rational debate about Basic Income has been able to take place.

The widespread nature of the debate today makes it more important than ever that discussion should be intelligent. This requires three main ingredients: clear definitions; scrupulous logic; and high-quality research evidence.

Clear definitions

For most organisations and individuals globally, a Basic Income is an unconditional regular income for every individual. To take the definitions of the two longest standing organisations in the field: the UK’s Citizen’s Basic Income Trust (founded in 1984) defines a Citizen’s Basic Income as ‘an unconditional, nonwithdrawable income paid to every individual as a right of citizenship’, and the Basic Income Earth Network (BIEN) (founded in 1986) defines Basic Income as ‘a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement’.

It is particularly problematic when something is called a Basic Income when it isn’t one. For instance, a recent experiment in Ontario with a means-tested and household-based (but not work-tested) benefit was called a ‘Basic Income’ pilot project. The misnaming caused discussion of the project to be chaotic.  

It is nearly as problematic when it is entirely unclear whether a Basic Income is intended. We have already discussed a misunderstanding relating to Spain. Two more recent examples:

On the 18th March, in an exchange in the UK Parliament, a variety of terms were employed: ‘universal basic income’, ‘income guarantee’, and ‘universal income scheme’. These terms can mean very different things, allowing different participants in the debate to mean different things, and to sound as if they might be agreeing with each other when in fact they were not. And similarly, on Easter Day, the 12th April, Pope Francis sent a message to ‘our brothers and sisters in social movements and organizations’, during which he said this: ‘This may be the time to consider a universal basic wage … It would ensure and concretely achieve the ideal, at once so human and so Christian, of no worker without rights.’ What did he mean? A Basic Income? A global minimum wage? An income of some kind just for workers, somehow defined? A lively debate has ensued as to what the Pope meant.

There is of course no organisation that can impose a definition of ‘Basic Income’, or insist that an unconditional income for every individual should be called a ‘Basic Income’. What would be helpful, though, would be a recognition among academics and policymakers that agreed definitions are required if debate is to be intelligent, that the definitions published by the longest-standing organisations in the field might legitimately be regarded as normative, and that any divergence from them should be clearly stated.

Scrupulous logic

In 2017, Bo Rothstein decided that a Basic Income scheme that paid £800 per month to every working age adult would be too expensive, would compromise the reciprocity on which welfare states are based, and would induce idleness and criminal activity among young adults, and that therefore Basic Income would be a ‘bad idea’. The precise Basic Income scheme that he discussed certainly would be a bad idea if ever it were to be implemented as a permanent policy, because it would indeed fall foul of most of Rothstein’s objections. However, this does not mean that ‘Universal Basic Income’ would be ‘a bad idea for the welfare state’, as the title of his article had suggested.

A Basic Income is an unconditional income. A Basic Income scheme is a Basic Income with its levels for different age groups specified, the funding method specified, and any changes to existing tax and benefits systems fully specified. Proving one particular Basic Income scheme infeasible or undesirable says nothing about whether Basic Income is infeasible or undesirable. There might be a wide variety of Basic Income schemes that would be desirable for various reasons; and it only requires one Basic Income scheme to pass a raft of feasibility tests in a particular context for Basic Income to be feasible in that context. The distinction between Basic Income and Basic Income scheme really matters.

Other distinctions also matter. A Basic Income, a Negative Income Tax, and a Minimum Income Guarantee, are all different from each other in significant ways. They should never be confused with each other. For instance: a Negative Income Tax and a Basic Income can generate the same relationship between earned income and net income, but administratively they are utterly different. This means that they need to be evaluated separately on their respective merits, and never together.

High quality research

A major problem faced by Switzerland when in 2016 it held a referendum on implementing a Basic Income was that although no figures were mentioned on the ballot paper, the organisers had suggested a figure of £2,500 Swiss francs per month for every adult: a figure not backed by financial feasibility research. This was a major reason for the proposal’s defeat.

If debate about social policy change is to be intelligent, then the best available research is required, particularly in relation to financial feasibility. As above, all that is required for Basic Income to be financially feasibility in a particular context is for one Basic Income scheme to be financially feasible. But what do we mean by financial feasibility? At least the following: 1. Either additional revenue must be already identified to pay for the scheme, or the scheme as a whole must be revenue neutral (that is, fundable from within the current tax and benefits system). This suggests that a scheme intended to be permanent should be revenue neutral, whereas a short-term scheme might not have to be. 2. At the point of implementation, no significant disposable income losses should be suffered by low-income households, and no unsustainable losses by any household. 3. All poverty and inequality indices should fall. 4. If means-tested benefits are not abolished, then at least significant numbers of households should be taken off them. Research conducted in 2012 showed that in the UK it would not be possible to satisfy both revenue neutrality and criterion 2 at the same time if means-tested benefits were to be abolished, so they must be retained. This means that the only research method available for testing illustrative Basic Income schemes is microsimulation: a computer programme into which are coded all of a country’s tax and benefits regulations, and through which is passed financial data from a statistically significant sample of the population. A range of statistics is then calculated from the output data. A Basic Income (normally at different levels for different age groups) can then be added to the programme, and existing taxes and benefits changed, and the programme run again to generate a second set of statistics. The sets of statistics can then be compared to see if the feasibility criteria have been met. If they have not been, then the levels of the Basic Income can be altered, and the changes to the tax and benefits system altered, and the programme run again, and again the two sets of statistics are compared. The process continues until a Basic Income scheme is discovered that fulfils the financial feasibility criteria. The Institute for Social and Economic Research at the University of Essex has recently published new microsimulation research on an illustrative Recovery Basic Income for the United Kingdom and a subsequent smaller permanent Basic Income. While some of the conclusions of the working paper would not necessarily apply to countries other than the UK (for instance, the conclusion that an immediate Emergency Basic Income would not be possible to implement), other conclusions might be more relevant: for instance, that a Recovery Basic Income at something like Minimum Income Standard levels would be feasible to implement but could only be afforded for a short period, and that a continuing smaller Basic Income would be financially feasible. It would be useful to see similar research undertaken for other European countries. 

Conclusions

The increasingly widespread debate about Basic Income is too important for it to be allowed to be unintelligent. It is therefore incumbent on politicians, civil servants, think tank staff, journalists, and academics, to ensure the intelligence of their own contributions to the debate, and to do all they can to ensure the intelligence of the debate as a whole. Clear definitions will need to be stated and adhered to; logic will need to be rigorous and transparent; and research must be of the highest quality. The active engagement of relevant university departments and institutes in pursuing this agenda will be essential.

About the Author

Malcolm Torry is Director of the Citizen’s Basic Income Trust and a Visiting Senior Fellow in the Social Policy Department at the London School of Economics. 

Back