In the pandemic, UBI keeps gathering momentum

The world is simmering. Pressures on individuals and families are growing.

Even before Covid-19, it was a time of growing inequality, climate change acceleration, and the weakening of long-standing trans-national relationships.

It is a fecund time for pessimism and fatalism. So perhaps it is strange that a utopian idea – universal basic income (UBI) – is going from strength to strength.

Scope wrote just a few weeks ago about how Westminster politicians from various parties – including Alliance and the SDLP – are having serious discussions about how it might work in the UK.

Previous reports said the government, including the Treasury, were looking into the policy (albeit explicitly as something to help during the pandemic).

Since then, the final results of the only real test of UBI to date have come back positive; the concept is now a frequent talking point in major media outlets (see here, here or here – but there are too many examples to list); and a poll of Europeans (including the UK) found that a massive 70% of people want it put in place.

It is too early to call a basic income inevitable. However, what does seem inevitable is UBI’s place in mainstream discourse. Major parties are likely to formally back its implementation. The longer most of society lives in difficult economic times, the louder the calls for UBI will grow. The only thing that can silence those calls will be a demonstration that UBI does not work.

Right now, it looks like the opposite might be true.

Finland

Last week, the final results were published from the world’s only major practical study of a basic income so far.

Kela, Finland’s Social Security Institution, randomly selected 2,000 between the ages of 25 and 58 and paid them €560 a month in 2017 and 2018. Participants had no obligation to seek a job and, if they did accept one, the payment kept coming anyway.

Analysis by Kela and the Ministry of Social Affairs and Health found that recipients of the monthly payment were more satisfied with their lives, experienced less mental strain, sadness, loneliness and depression.

They also felt better about their own economic security, had more trust in society and social institutions, were more confident in their future and in their ability to influence things around them.

Those effects are brilliant. Perhaps they are unsurprising. However, UBI does not come with some concerns.

One of those is the effect on the jobs market. Critics and sceptics say UBI will reduce the incentive to work.

The Finland pilot project suggests this is not a huge concern. In fact, there was a slight increase in time in employment for those who received the UBI payment compared with the control group.

This is a qualified success due to some changes in the wider Finnish social security system during the two-year pilot. However, before those changes came into place there was no noticeable effect of UBI on employment, either positive or negative – which still amounts to an argument in favour of a basic income.

The concern is about a significant negative effect on the jobs market. If that negative effect is not there, there is no problem.

Numbers

After the Finland pilot, a total of 60% of recipients of the payment said they were either living comfortably or doing OK (13% and 47% respectively), compared with only 52% of the control group (8% and 44%, respectively).

Accordingly, 28% of those receiving the payments said they had difficulty making ends meet, compared with 32% of the control group. The remainder of those polled said they were barely getting by – 12% receiving UBI compared with 15% in the control.

A total of 22% of those receiving the payments said they felt depressed, compared with 32% of those in the control group.

At the end of the project, some of the recipients were interviewed in greater detail. These interviews suggest that UBI opened up opportunities for people in a position to take them but, for those in greater hardship, it was less effective.

Helena Blomberg-Kroll, professor at the University of Helsinki, said: “The basic income seems to have increased activity of different kinds among those who were active already earlier. Then again, for those who were in a challenging life situation before the experiment, the basic income does not seem to have solved their problems.”

It is worth noting that the pilot payment in Finland of €560 a month – roughly £490 – is considered theoretically low for a UBI payment (albeit, for single individuals, it still compares well with both Jobseeker’s Allowance and Universal Credit here in the UK). North Down MP Stephen Farry suggested that the current Westminster discussions were revolving around a figure of about £800 per month.

Regardless, no-one should expect UBI to be a silver bullet but if, as a policy, it can make significant improvements to enough people’s lives then it deserves serious consideration.

Consideration involves looking at negatives as well as positives. Hurting supply in the jobs market is one of three major worries about UBI.

Another, which cannot be properly examined in a pilot scheme, is how it will affect other parts of the economy. If it is the source of major inflation, it could undermine itself. UBI won’t work if it hikes up housing and food prices, say, beyond any benefits felt by low-income recipients. That is a complex problem that probably comes down to implementation.

The third problem is simpler. It is the sheer cost of such a policy.

Future

There are around 53 million adults in the UK. If they received £800 each, every month, that amounts to a public-spending commitment of over £500bn every year. Current UK public revenue is around £800bn.

Now, a good slice of the UBI would come back to the revenue as these payments would still be subject to taxation. UBI would also allow a huge reduction in current social security spending. It would also require changes (and overall increases) to various parts of the tax system.

It is not impossible to pay for, but would require a massive restructuring.

No-one should expect UBI to be easy but it has widespread and growing support.

Many super-rich people who are concerned about growing inequality (and the likelihood of that increasing under automation) think it could work. There are calls for UBI from the political left, right and centre.

Andrew Yang, who ran to be the Democratic nominee for President of the USA in this year’s elections, made UBI his signature policy. Even though he was never really in the race, the policy itself has moved into the mainstream, and beyond, into a place of huge popular support.

A recent study led by Oxford University Professor Timothy Garton Ash found that 71% of Europeans, across all age groups, support the idea of a UBI.

The UK was included in this study, and 68% of adults here support the policy.

Professor Garton Ash said: “These striking results reveal remarkably positive attitudes across Europe to what was previously seen as a radical, if not utopian idea.”

UBI is no longer pie in the sky. We are past the point of discussing it as an interesting curio, as pure concept, as something alien or futuristic. It is the time for details, for policy proposals, and asking how UBI might fit into the society we have now and the one we are trying to build in the short- as well as long-term.

It might just be the time to see if this thing can work.