Research reviews 16 projects across the globe
Anna Coote is a Principal Fellow at New Economics Foundation
Cross-posted from the New Economics Foundation
Making regular cash payments to every individual in a country can help to solve problems of poverty, precarity, automation and inadequate social security systems – or so it is argued by advocates of universal basic income (UBI), who hail it as a big idea and rallying point for progressive politics in our times.
Can universal cash payments achieve all this on their own? Are they part of the solution or part of the problem? A new study out this week, published by NEF and Public Services International, finds little evidence to support most of the claims made for UBI. It confirms the importance of generous, non-stigmatising income support, but everything turns on how much money is paid, under what conditions and with what consequences for the welfare system as a whole. There are more effective and sustainable ways of meeting people’s needs and fighting inequalities than just giving cash to everyone.
Sixteen practical projects were reviewed that tested different ways of distributing regular cash payments to individuals. These included past, current and planned experiments across a range of poor, middle-income and rich countries. They were considered alongside a growing body of literature covering economic simulations, policy analysis and arguments for and against UBI.
According to the Basic Income Earth Network (BIEN), UBI is cash paid at regular intervals to everyone, unconditionally. Many believe the payments should give people enough to live on (hence the ‘basic’) and be set at or above the official poverty line. What’s been tested in practice, however, is almost infinitely varied, with cash paid at different levels and intervals, usually well below the poverty line and mainly to individuals selected because they are severely disadvantaged, with funds more often provided by charities, corporations and development agencies than by governments. The study found no evidence from any of the field experiments that a scheme providing regular, sufficient, unconditional cash payments could be sustained for all individuals in any country in the short, medium or longer term – or that they could achieve lasting improvements in wellbeing for all.
Among schemes in richer countries, those in Alaska and Finland are regularly cited as positive examples of UBI. The Alaska Permanent Fund, built from the state’s oil revenues, pays all adults and children around $1,000 a year. The scheme is popular and enduring; it has been found to produce some positive impacts on rural indigenous groups, but it makes no claim to sufficiency and has not reduced child poverty or prevented widening income inequalities. Finland has a two-year trial of small monthly payments (€560) to 2,000 unemployed people but the government has refused to fund further expansion.
Two experiments in developing countries are popular with advocates who claim they show that UBI can work. The first, in Madhya Pradesh, southern India, was funded by UNICEF and the Self-Employed Women’s Association (SEWA) and lasted for three years. The second, in Kenya, is funded by a US charity called Give Directly, to which Google is a significant donor: it includes one trial due to last for 12 years and another for two years. In both countries, small, regular payments have been made to individuals in selected villages, with a control group receiving no such payments. Giving small amounts of money to people who have next to nothing is bound to make a difference and indeed these schemes have been found to bring improvements to recipients’ health and livelihoods. Nothing is revealed about their longer-term viability, or how they could be scaled up to serve whole populations. People who get their basic income from charities or aid agencies have no democratic control over how payments are made, to whom, at what level or over what period of time.
Evaluators of the Madhya Pradesh trial conclude that cash payments alone could not achieve financial emancipation: people need a collective voice, help with managing their money and other forms of public support. They urge that UBI should not become a route to lowering state benefits, rolling back the state or ‘dismantling public and universal social services’.
The cost of a sufficient UBI scheme would be extremely high, according to the International Labour Office, which estimates average costs equivalent to 20 – 30% of GDP in most countries. Costs can be reduced – and often have been – by paying smaller amounts to fewer individuals. But there is no evidence to suggest that a partial or conditional ‘UBI’ scheme, which may be less prohibitively expensive, could do anything to mitigate – let alone reverse – current trends towards worsening poverty, inequality and labour insecurity. Alternatively, costs can be met by raising taxes or shifting expenditure from other kinds of public expenditure. Either way, there are trade-offs that must be taken into account.
As this week’s report observes, money spent on cash payments cannot be invested elsewhere. The more generous the payments, the wider the range of recipients, the longer the scheme continues, the less money will be left to build the structures and systems that could (in theory) enable UBI to realise its progressive goals. ‘If cash payments are allowed to take precedence, there’s a serious risk of crowding out efforts to build collaborative, sustainable services and infrastructure – and setting a pattern for future development that promotes commodification rather than emancipation.’ Where public services are already squeezed by austerity policies, UBI may exacerbate rather than relieve the pressure on welfare states by ‘offering to replace a collective system with individual money payments’. This may help to explain why UBI has attracted support from Silicon Valley tycoons, who are more interested in defending consumer capitalism than in tackling poverty and inequality.
The report concludes that ‘making cash payments to individuals to increase their purchasing power in a market economy is not a viable route to solving problems caused by neoliberal market economics’. Rapidly changing labour markets, inadequate welfare systems, poverty, inequality and powerlessness are complex challenges that call for interlinked structural changes and there is no ‘silver bullet’ although UBI is often presented as such. There is ‘no evidence that any version of UBI can be affordable, inclusive, sufficient and sustainable at the same time’, and campaigning for it threatens ‘to divert political energies – as well as funds – from more important causes’.
These ‘important causes’ should include a radical reform of social security, for example by redistributing the £111.2 billion spent on personal tax allowances, as NEF has proposed. They should also include more and better quality public services that are available to all according to need, not ability to pay. The idea of universal basic services (UBS) offers a collective alternative to the individualist formula of UBI. New work by NEF and the Institute of Global Prosperity, due out in May, shows how UBS could be further developed and extended from schooling and healthcare to areas such as transport, care and information.
In truth, progressive champions of UBI share many goals with its critics. Both sides want more and better quality public services, more generous non-stigmatising income support, and stronger collective power for workers. A deeper understanding of the practical and ideological implications could help to build some shared political territory.