Universal Basic Income

“The big reason poor people are poor, is that they don’t have enough money” Charles Kenny, economist.

I was lucky enough to receive a copy of “Utopia For Realists”, (and how we get there), by Rutger Bregman on Fathers Day.

Described by The Guardian as “The Dutch wunderkind of new ideas”. The book was first published in 2017 and has gone on to be a best seller.

Throughout the book he covers many areas including tax havens, wealth inequality, social mobility and homelessness. But one of the major themes is Universal Basic Income (UBI), and I thought that it might make an interesting discussion topic for our Branch Meeting.

Although not a new idea, after he first wrote on this subject a few years ago, one of his articles was picked up by the Washington Post, and viewed over 1 million times. Since then the idea has gathered increasing interest. Within the book he quotes scholars at Manchester University, who in 2010 wrote a paper entitled “Just Give Money to the Poor”. In their paper they quote numerous examples of cash handouts that had helped the poorest in society in countries such as Namibia, Malawi, Brazil and India. This seemingly simplistic act had dramatic effects on the population and rates of malnutrition, truancy and crime.

When the United Nations formulated its “Millennium Development Goals” in 2000 these programmes were not even on their radar, yet by 2010 they were already reaching more than 110 million families in 45 countries. Indeed they found that:

Households put money to good use
Poverty declined
There can be diverse long term benefits for income, health and tax revenue
This is cheaper than the alternatives.

As indicated earlier, this is not a new idea, in fact the largest basic income experiment commenced in 1973 in Dauphin, a town of 13,000 residents north west of Winnepeg, Canada. The then Provincial Governor had earmarked the modern equivalent of 83 million US dollars to help struggling families in the area. After interviewing and checking the household receipts of the towns residents, 30% of the population, some 1,000 families in all, were sent monthly cheques making their annual income up to $19,000.

The recipients were monitored by researchers, socialists and anthropologists, ensconced into the community. All went well for four years until a Conservative government were voted in and the funding stopped overnight. All details were packed away, and not wishing to throw good money after bad, no analysis was carried out on the data they had gathered.

Wind the clock forward to 2009, and after five years of searching, Professor Evelyn Forget from the University of Manitoba tracked down the 2,000 boxes of data from the social experiment that had become known as “Mincome”, gathering dust in a attic warehouse in Winnepeg. For three years she poured over all the tables, graphs, reports and interviews, in possibly one of the largest social experiments in post-war history.

“Politically, there was a concern that if you began to give a guaranteed annual income, people would stop working and start having large families”, said Forget “What really happened was precisely the opposite. Young adults postponed getting married and birth rates dropped. Their school performance improved substantially: the “Mincome cohort” studied harder and faster. In the end, total work hours only decreased down by 1% for men,3% for married women, and 5% for unmarried women. Men who were the family breadwinners hardly worked less at all, while new mothers used the cash assistance to take several months maternity leave, and students to stay in school longer.

One of the most remarkable findings though, was that hospitalisations decreased by as much as 8.5%. considering the size of public spending on healthcare in the developed world, the financial implications were huge. Several years into the experiment, domestic violence was also down, as were mental-health complaints. Mincome had made the whole town healthier. Forget could even trace the impacts of receiving a basic income through to the next generation, both in earnings and health

These experiments continue to this day. In 2017, the Finnish Government started paying 2,000 unemployed people 560 Euros a month for two years, even if they found work. The recipients said that it reduced stress and also gave them an incentive to find a good job, or even start their own business.

So there seems to be a lot of positives in implementing UBI, and some industrialists like Bill Gates and Elon Musk, say that due to fundamental changes in the structure of the US economy, i.e. jobs lost to Artificial Intelligence and automation, that some level of guaranteed income is inevitable.

How this is financed is likely to be via an increase in the rate of tax from the top 1% of earners or through Corporation Tax.

But there are fears among those who oppose UBI saying that it could trigger a rise in inflation, due to a demand for goods and services, and because of that, there will be no increase in the standard of living. That free income will be a disincentive to people, and make having a job optional.