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Basic Income: What Is It and What It Isn’t

Basic Income: What Is It and What It Isn’t

July 17, 2023

Francine Mestrum

In this blog developed with the WCPP, our author looks at three different forms of basic income – a universal basic income, a basic income for those who need it, and a universal dividend – and assesses their potential to achieve social justice.

When starting a discussion on ‘basic income’ it is crucial to first clear the semantic fog. What exactly are we talking about?

The two major meanings of ‘basic income’ are very different from each other. It’s possible to be in favour of one and against the other.

When the current debates on ‘basic income’ started, at the end of the 20th century, with Philippe Van Parijs in Europe and Eduardo Suplicy in Brasil, the topic was ‘universal basic income’ (UBI) and ‘citizen’s income’. It meant a certain amount of money given to all citizens or residents of a country, unconditionally and irrespective of the socio-economic situation or participation in the labour market. Hence the ‘universal’. A UBI was considered to be a matter of social justice and a step towards equality.

This clearly has a gigantic cost even if it was said that the wealthy would pay theirs back in taxes, supposing the wealthy do pay their taxes.

Others however proposed a ‘basic income’ ‘for those who need it’ as an anti-poverty measure, though, again, unconditionally. There are different ways to design such a basic income even if it always implies one way or other of ‘targeting’ the poor, a highly delicate exercise.

To make matters even more complicated, some started to speak of a ‘universal basic dividend’, a distributional mechanism of the incomes from extractive industries, be it oil or minerals. The underlying idea is that those natural resources are a kind of natural commons that belong to all citizens of a country.

Debates around these issues are always very lively, though very often people use the same terminology, while talking about fundamentally different things.

In this contribution, I briefly want to comment on the three proposals mentioned above.

Let me start with the easiest one: the universal basic dividend. It is based on an equal amount of cash for all citizens or residents of a geographical entity, but has no bearing with any dimension of social protection and is not funded through tax money. The underlying philosophy of the ‘commons’ is a real matter of justice for all. It is a recognition of our collective being and ownership of the planet. In fact, since national borders are totally arbitrary, we should be able to talk of a ‘global commons’ and a global universal dividend for the whole world’s population. Every citizen on Earth is an owner and has a right to the incomes of Earth’s resources. This is a very recommendable mechanism of social justice. Its only inconvenience is that these incomes and consequently the dividend vary from one year to another. The Alaska Permanent Fund is an example of this kind of dividend, paying residents an average of $1600 per year, funded by oil revenues.

The second mechanism is the basic income ‘for those who need it’ as a possibility to fight or to eradicate poverty. Again, this is directly connected with the concept of social justice. Some people, for reasons of illness, incapacity or age are not able to earn a living on the labour market, or are socially disadvantaged in other ways. They do have a human right to a decent standard of living, paid for by the solidarity of all the others who do have sufficient incomes. Many pilot schemes of this type of basic income have taken place across the world, largely focusing on helping either unemployed people, or those with low incomes. This includes the Basic Income for Care Leavers in Wales Pilot, which is currently ongoing, providing a post-tax income of £1280 per month to those leaving care in Wales at the age of eighteen.

While this type of basic income is largely confined to pilot schemes, most countries in the world already have some system of cash transfers or ‘guaranteed minimum income’, for instance after rights to unemployment benefits have been exhausted. However, in most countries they are very conditional and most often not sufficient to guarantee a life in dignity. These systems are crucial to every civilised country and belong to basic and fundamental social solidarity. Inevitably, they imply some targeting which is always very delicate, though with the administrative and preferably digital skills of local governments, a decent way of living can be guaranteed to all, without any stigmatisation.

Totally different is the case of the ‘universal basic income’ that cannot be seen as an improvement of social protection systems, but as a substitute for them.

Indeed, a UBI can only be meaningful if it procures a sufficient income for a decent way of living. If it is paid to all, irrespective of income and labour market participation, it becomes very expensive and cannot exist alongside pensions, health care, family allowances or unemployment benefits. It is either or, something most of the advocates of UBI admit.  However, many prominent international organisations, such as ILO, IMF, World Bank – who do not make their calculations on the back of an envelope – consider them too expensive. That is why even Philippe Van Parijs proposes to ‘start’ with a limited amount far below the poverty line. And that is where problems become crystal clear.

First, the argument of ‘justice’ lapses into nothingness when the UBI is not even enough to pay for rent or food and does not allow people to simply survive.

Secondly, a considerable number of wealthy people either do not pay taxes or have tools allowing them to avoid them as much as possible. Paying a basic income to higher middle classes and to the wealthy can be seen as highly unfair.

Thirdly, when all people get minimal income support, one potential risk is falling wages, meaning that most benefits of the system go to employers. In this scenario, the UBI becomes a wage subsidy, shifting the cost of labour from companies to public authorities. It makes the development of flexi- and mini-jobs all the easier.

Moreover, such a system reminds us of the Speenhamland experience – a system of poverty alleviation in England at the end of the 18th century in which local authorities guaranteed a certain minimum income, thus allowing employers to keep wages below subsistence level – in which all incentives to accrue higher wages and labour organisation disappear when local governments guarantee a level of living incomes for their citizens. However, employers should also be responsible for the well-being of their workers.

Finally, shouldn’t everyone in society contribute some form of labour if they can? Although total economic withdrawal is less likely in a UBI context than is sometimes assumed, is it acceptable that some people just withdraw from society? Can this ever be morally acceptable or socially sustainable?

In conclusion, all people certainly deserve income security and all possible solutions for a life in dignity should be examined. The best mechanism surely is a universal, broad and coherent social protection system in order to eradicate poverty, with extensive labour rights – and possibly a system of guaranteed jobs – and most of all an extensive network of public services. This is a horizontal and structural solidarity system taking into account the specific needs of all.

Universal dividends can promote more social justice. A guaranteed minimum income can be part of social protection. A universal basic income does not promote justice and fairness.