Universal basic income is not a silver bullet for inequality, writes Theo Stone
The idea of a universal basic income has become a mainstay hypothetical for the political left. The Green party has been running with the concept for several years now, giving it a prime position in their 2017 manifesto. Meanwhile, shadow chancellor John McDonnell has repeatedly expressed interest in the idea, going so far as to call it ‘an idea whose time may well have come.’
The historical roots of UBI run deep, with early propositions available in the works of Thomas Paine and Bertrand Russell, and groups campaigning for it located across the world.
On paper, it seems like a winning solution. Everyone, regardless of wealth, would receive a fixed, equal sum of money each month that can be used to spend on anything they please. What to do with it, whether it would be to advance their education, assist with rent, or buy chips, would be up to them.
It is touted as a potential solution to rising poverty, as well as the possibility that automation could take people out of work. It could even see Keynes’ predictions of a 15-hour working week come to fruition.
The thinktank Compass produced several micro-simulations to assess the effects and feasibility of a variant of UBI. In its simplest state, the scheme would replace means-tested benefits, instead giving every adult £292 a month. The results would be abominable. Predictions indicate that child poverty would increase by ten per cent, pensioner poverty by four per cent and working poverty by three per cent.
A modified scheme was also tested, with a basic income of £284 provided for working-age adults to stand alongside existing benefits, instead of replacing them. However, it would also count as income when calculating eligibility for means-tested benefits. Whilst this would be less expensive because of its inclusion in pre-existing social spending, we would still require around £170bn (6.5 per cent of gross domestic product) for it to work, or around two-thirds of the NHS budget.
The results, however, are disappointing. While models predict that we would see a notable reduction in child poverty (from 16 to nine per cent) the reduction in poverty for working-age people and pensioners would be modest –from 13.9 to 12 per cent for those in work, and from 14.9 to 14.1 per cent for pensioners. The impact is modest at best, and certainly does not justify the cost if poverty reduction is our goal.
The Canadian city of Ontario is currently undertaking a trial run of the system, providing $1,400 a month to its citizens, with an extra $500 going to those with disabilities. Overall, it has produced lower stress, better mental health, and overall greater happiness.
The only problem is that, if you were to provide this level of support to every citizen in the country, you would wind up consuming around 40 per cent of total GDP, over three times what the country spends on healthcare, and over 20 per cent of what it spends on total welfare. To implement a universal basic income, you would have to dismantle the welfare state, taking us backwards rather than forwards.
We must not forget that our current economic problems go beyond income inequality. A key tenant of the system we live in is that market exchange is nearly the only way by which we can acquire what we need or desire. UBI focuses too much on how to provide within the current system, rather than seeking to change it.
As pleasant as the idea to provide each person with a set income is, it fails to address the structural problems that made people campaign for it in the first place, and if implemented poorly, it might risk doing more harm than good.
Theo Stone is a graduate student in philosophy at the University of Amsterdam. He tweets @TheShentonStone
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