Universal Basic Income: What is the experience?

World

In this follow-on blog post Stephen Moncrief, of the IFoA’s COVID-19 Action Taskforce (ICAT) Social Security Group, continues to take us on a journey to consider whether the Coronavirus pandemic should alter our views on the desirability of Universal Basic Income (UBI) approaches.

Universal Basic Income: What is the experience?
In my first blog we looked at what Universal Basic Income is and how the concept has developed since it was first put forward by writer Thomas More in his 1516 novel, “Utopia”. 

In this blog we look at the history of where UBI has been used and what we can learn from the experience.

UBI history

There have been numerous UBI schemes trialed worldwide.

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Details of some of the UBI schemes implemented worldwide are set out below:

  • Canada: In 1974 the Canadian province Manitoba launched a five-year experiment called Mincome. 
     
  • Finland: A trial scheme was introduced in January 2017 to run until December 2018 for 2,000 randomly selected unemployed people (aged between 25 and 58). A monthly payment was made of €560 Euros for 2 years (total cost 20m Euros). The study compared the employment and well-being of basic income recipients against a control group of 173,000 people who were on unemployment benefits. The trial only applied to the unemployed and so was targeted rather than a full UBI.
     
  • Germany:
    In August 2020 Germany announced a pilot UBI scheme. The scheme will apply to 120 people for 3 years who will receive €1,200 per month (just above German’s poverty line). The study will compare their experiences with a control group of 1,380 people not receiving UBI.

    The study, conducted by the German Institute for Economic Research, has been funded by 140,000 private donations. The intent is to improve the debate about universal basic income by producing new scientific evidence. Supporters say it would reduce inequality and improve well-being, while opponents argue it would be too expensive and discourage work.
     
  • Italy: Italy's "citizens' income" scheme was introduced in 2019. It requires recipients - people with very low income and savings - to retrain, as Italy's unemployment rate is among the highest in the EU. It was 8.4% in March 2020, and the economic paralysis under the pandemic is expected to push it higher.
     
  • India: In 2010 a project was launched across 20 villages in the Indian state Madhya Pradesh (designed by Professor Guy Standing and funded by UNICEF). 
     
  • Kenya: “Give Directly” is a targeted UBI experiment in Western Kenya providing each eligible adult $22 per month for 12 years (Note: some receive for 2 years and others a lump sum) to see if this helps lift them out of poverty. Payments are received by mobile phone and it is targeted to rural areas.
     
  • Namibia: In 2008, a two-year experiment in Namibia provided around 1,000 people in the villages Otjivero and Omitara with 100 Namibian dollars (around £10 at the time) a month. 
     
  • Spain: Spain is planning to pay a basic monthly income to about a million of the country’s poorest households to help them weather the impact of the coronavirus outbreak.
     
  • USA – Stockton, California: Scheme: In February 2019 the city (prompted by bankruptcy in 2012) introduced a $500 per month UBI (on a pre-paid Debit Card) for everyone for 18 months.
     
  • USA - Alaska: In October each year every individual receives a payment into their bank account from the “Permanent Fund Dividend” which is funded by the profits from the state’s oil industry.

 

Insights
Whilst the objectives of various schemes and trials differ, one of the principal concerns about UBI is that it results in a “disincentive to work”. The following have been extracted from conclusions on these schemes:

  • Finland: No significant impact on employment but some minor positives were found. For a 12 month period those on basic income worked 6 more days (78 days) compared with the control group. The findings suggest that basic income doesn’t seem to provide a disincentive to work, but there had been an expectation it would provide an incentive to work. 
  • Canada: The main reported outcome was a 9% reduction in working hours among two main groups of citizens:
    • Married women used the income to extend maternity leave or look after infants.
    • Teenage boys were using the income to stay in education beyond age 16.
  • USA: Trials covering 8,500 Americans to support the Nixon proposal of 1969:
    • Reductions of working hours of about 9% were initially reported (mainly women with young children, and young adults) but when adjusted for unreported income there was virtually no reduction in working hours.

 

Most trials and schemes have produced evidence of less tangible benefits:

  • Finland
    • People had benefitted from security, empowerment, reduced stress and generally felt happier.
    • When surveyed they reported better financial well-being, mental health and cognitive functioning, as well as higher levels of confidence in the future.
    • Some improvement in trust in people, companies and politicians.
  • Kenya
    • Governments are not best placed to determine how people should spend their income and UBI enables people to make choices between short-term (food) and longer-term (sustainability).
  • India:
    • Professor Standing describes its “overwhelmingly positive” effects: “Improved sanitation, improved child and adult nutrition, better health, better healthcare, and improved school attendance and educational performance. In general, people spent the extra money sensibly.”
    • He claims social equity improved, with marked benefits for people with disabilities, women and those from lower castes.

 

It seems reasonable to conclude that UBI can provide some intangible benefits and that the impact on employment might not be as adverse as generally assumed. This may depend on the culture of the relevant nation and how developed the economy is. However, the trials so far have largely been targeted or limited in nature and therefore a larger scale empirical study would be beneficial to form any firm conclusions.

Pocket money
In my first blog I mentioned we introduced a family level pseudo-UBI unconditional pocket money for my children. Historical experience has been mixed. It is true they feel a sense of worth and independence from their own income. It is also true that not linking the income to work (chores) results in a greater propensity for those chores not to be completed! However, true UBI does not require any work in return so I should really trial additional funds for extra chores!

In a future blog we will look at more recent views on UBI and whether the current pandemic should alter our thinking on the future of this concept.

The IFoA Covid-19 Action Taskforce Social Security group comprises Laura Llewellyn-Jones, Stephen Moncrief, Alan Newton, Peter Tompkins, Chris Sutton and Tawanda Chituku.

Next article in this series: Universal Basic Income: Where have UBI schemes not been implemented?

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