Is universal basic income the answer to our employment crisis?

Dec 08, 2020

7 mins

Is universal basic income the answer to our employment crisis?
Guirec Gombert

Journaliste et Rédacteur de contenus indépendant

How do you live when you can no longer work? In the recent past, some of the world’s wealthiest countries have improvised responses to the economic and health crisis. These have taken the form of short-time working in France, stimulus payments in the United States, and income support grants for the self-employed in England and Spain. This has led to the revival of the idea that there should be a universal basic income (UBI), or unconditional wage, paid to everyone regardless of income. Spain has taken the first step towards introducing a UBI, while in France politician Benoît Hamon has written a book calling for its introduction. Even Pope Francis backs the concept. Germany is taking the idea very seriously. Its government is funding a three-year scientific study in which about 100 participants will receive €1,200 per month. So, is universal basic income the miracle we’ve all been waiting for?

“Before the health crisis, people looked for work so they could live. Now that they can no longer work, what they want is money,” said Steven Strehl, the strategic director of Mein Grundeinkommen, a German non-profit whose name translates as “My Basic Income”. Since 2014, the organization has paid nearly 700 people an unconditional basic income of €1,000 per month for one year at a time. Participants are chosen in a raffle and the payment is financed through crowdfunding. The aim is to advance the debate on the topic and increase understanding of the effects it has on beneficiaries.

The discussion around UBI has now entered the big league with a scientific study funded by the German government. Mein Grundeinkommen launched the Basic Income Pilot Project in partnership with the German Institute for Economic Research in Berlin, the University of Cologne, and the Max Planck Institute for Research on Collective Goods in August 2020. The first of three consecutive studies began with payments in the spring of 2021. For three years, 120 randomly chosen participants will receive €1,200 per month, an amount that puts them slightly above the poverty line in Germany. This will be paid to “both engineers who earn a very good living and [unemployed] people” regardless of their status. A sample group of nearly 1,400 people from similar socio-professional backgrounds, who will not receive the basic income payment, will also be followed.

“Universal income changes the perception of your place in society”

Strehl firmly believes in the merits of paying a basic fixed amount to all members of society regardless of their income, employment status, or age. “Over the past six years, the people who were picked [by Mein Grundeinkommen to receive a UBI] have reported increased self-confidence, better health––and some have found better jobs as a result of the training they’ve been able to fund,” he said. A universal basic income would do more to combat the current wave of unemployment than giving tax incentives to companies, according to Strehl. “Before the pandemic, there were already many people in Germany who had to combine two or three small, low-paid jobs to survive. A universal basic income will provide a safety net to prevent millions of newly unemployed people from being caught in this spiral. And those who have a permanent job, but want to change it, can do so without fear of unemployment and without pressure.

The position held by Mein Grundeinkommen has been gaining supporters, including Pope Francis. In his latest book, Let Us Dream: The Path to a Better Future, the Pope says he believes a universal basic income would guarantee “people the dignity to refuse employment conditions that locks them into poverty”. Last July, the United Nations Development Programme called for the establishment of a temporary basic income for the three billion poorest people in the world. On the other side of the Atlantic, Twitter chief executive Jack Dorsey announced early in 2020 that he would donate $1 billion, or about 28% of his fortune, towards fighting the coronavirus. Then, after the most pressing matters of the pandemic are resolved, according to the New York Times, he plans to shift focus to two key issues: women’s health and education, and universal income. The idea of a universal basic income has been making headway with politicians and the general public in Europe too, particularly Italy, England, and Spain, which voted in favor of a minimum living wage in May 2020. A survey conducted by Oxford University revealed that a staggering 70% of European respondents back the idea. It was conducted in March, just as Covid-19 was taking hold.

In the UK, the idea of introducing a UBI has increased in popularity across many sectors and political parties. One major political figure who supports the concept is Molly Scott Cato, a former MEP, Green Party politician, activist, and green economist. Like many people who back this move, she sees it as one way of shifting a floundering economy out of crisis and towards something more sustainable—not just for people, but for the planet too. In an article for the Ecologist published in May 2020, Cato said, “Capitalism isn’t working. We need a universal basic income as we come out of the coronavirus lockdown into the economic—and the climate—crisis.” However, the country’s two leading parties remain against the idea, though it is increasingly popular among MPs. Cato said, “Both the Labour and Conservative parties have resisted this policy because they are both wedded to the wage-labor system that lies at the heart of a capitalist economy.”

In the US, the idea of introducing a UBI has increased in popularity across states particularly since the onset of the COVID-19 pandemic. As the country’s history represents, national crises do often seem to fuel social reform and the current scenario could be transformative. The idea of Universal Basic Income in the US first gained traction in 1934, when populist senator Huey Long proposed a minimum as well as maximum income that was to be about 300 times the average. Today, pilot programs have been launched and are running in more than 20 cities including St. Paul, New Jersey as well as Minnesota. Interestingly however, a survey by Pew Research Center in August 2020 found that more Americans (55%) opposed a UBI than favored it. “Majorities of Black (73%) and Hispanic adults (63%) favor the government providing a UBI, compared with 35% of White adults,” it stated in the report.

Real and lasting benefits

Julia Eisenach, 28, won Mein Grundeinkommen’s raffle in April 2020. For her, it was a relief. She said, “I was still living with my parents, and my first contract as a TV cinematographer had just ended, right at the peak of the pandemic.” She used her UBI money to move to Hamburg and look for a new job. “It’s liberating. I’m not forced to take the first job that comes along to pay my bills. I can keep looking for a job I like in my field and I’ve got time to work on projects that mean a lot to me,” she said.

An experiment conducted in rural Kenya reveals the positive effects that UBI has on employment. Since 2017, a group of economists at the Massachusetts Institute of Technology and other universities have been giving money to 10,000 poor households, with no strings attached. “Those households may be more able to take advantage of their income stability to make long-term investments,” according to Quartz. For example, with the support of a UBI, many people have taken the initiative of starting their own employment projects or new business. This virtuous circle has led to a decline in the unemployment rate. In Namibia, where a “basic income grant” project was trialed in the village of Otjivero in 2010, program manager Herbert Jauch said, “All of a sudden, a whole series of economic activities appeared. This clearly shows that minimum income does not make people lazy but opens up opportunities.”

From trial to reality

Will attempts to introduce a universal basic income ever move beyond the experimentation phase? At present, Alaska is the only state to have implemented a real universal basic income. Alaskans have been receiving a UBI since 1982, but it is financed by oil revenue so the amount varies in accordance with profits. For example, the monthly payment was about €80 in 2016. This is far from the amount Hamon has in mind for France. It’s also much lower than the amount trialed in Finland from 2017 to 2018 when 2,000 unemployed people received a monthly payment of €560. However, the project was abandoned when its impact on employment was deemed too small. On a larger scale, a UBI might even increase the risk of poverty, according to the Organisation for Economic Co-operation and Development. Its calculations for France show this would mean a drop in income for 30% of households, including a large proportion of the unemployed. Such a reform would result in more frequent losses among the poorest and the richest, with the middle classes are more likely to gain.

For advocates of a universal basic income, there’s little point in drawing such conclusions without real trials taking place first. Yet there is a wealth of experience out there, whether thanks to crowdfunded raffles in Germany, oil money in Alaska, or surveys looking at how much we really need to be happy as examined in the UN’s World Happiness Report.

French economist David Cayla of Économistes Atterrés (Appalled Economists), a group of economists, academics, and citizens, has a strong view on the subject. “Universal income is a red herring!” he said. Besides the cost of financing it, which is one of the main objections raised by critics, there’s also the disconnect between work and wealth. “If you want to distribute more wealth, you have to produce more. However, proponents of a universal basic income have a more sober conception of a society based on a reduction in working time, which will automatically lead to a decrease in wealth. [The idea] doesn’t hold. The role of the state is not to distribute money but to facilitate the means of inclusion. This requires the creation of public jobs, orders for private companies, and the development of a strong industrial policy. For me, it’s unrealistic to imagine that a universal basic income will provide an exceptional response to this situation.”

Regardless of which side you’re on in this argument, the triple crisis—environmental, health, and economic—has created the desire for a different type of society, a different job market, and a better work-life balance. It should, therefore, come as no surprise that some people dream of changing the model altogether.

Translated by Andrea Schwam

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