Basic Income and UBS key to improving living standards after COVID-19

Posted on Wednesday, 22 April 2020
new reality

It has been regularly commented upon since the onset of the Covid-19 pandemic that the current situation has given people opportunity and impetus to consider how we have structured society. Issues related to the economy, the environment, and the role of government in providing a minimum floor below which the living standards of its citizens should not slip have been given renewed focus and new context.

Among the policies that have been re-examined and given fresh focus in the context of the current crisis are Universal Basic Income (UBI) and Universal Basic Services (UBS).

One of these, UBI, is an idea that has been around for a long time. Thomas Paine, one of the founding fathers in the United States, was an early advocate of such a system, and it has been promoted at different times and to different extents throughout Europe over the last century. Recently, some high-profile basic income-type pilot schemes in different European countries have garnered attention, and many believe that this is a policy whose time has now come.

UBS is a idea relatively more recent in origin. Sociologists Ian Gough and Anna Coote are among its most high profile proponents, and as a concept it has been gaining increased traction in the context of the coronavirus outbreak.

Social Justice Ireland believes that the two ideas are both imperative to the development of a welfare state fit for the 21st century. As society moves further away from the economy of the mid-20th century (when the foundations of most of the welfare states of the western world were developed), it is increasingly important that the state set minimum floors of income and service access below which none of their citizens should fall.

Robust and well-funded public services set the floor which underpin the living standards of most people. Accessible healthcare, high-quality education, a well-regulated housing sector, subsidised public transport, and other important contributions to essential services, are things without which most citizens would have a significantly more difficult existence.

However, even in situation where most or all of these things are cheap (or even free), individuals will have income needs to allow them to participate in society at a level considered the social norm. This is why UBI and UBS are complementary policies, essential to ensuring that everyone in society has sufficient income and sufficient access to public services to live life with dignity and experience living standards expected in a first world country. The better the quality (and the better subsidised) the services, the lower the level of basic income necessary.

What is Universal Basic Income?

There are many different visions for what a system of UBI could look like, but generally most advocates agree on two key points for what constitutes a basic income:

  1. UBI is an unconditional payment from the state to every resident, on an individual basis, without any means test, or labour market (or any other kind of) requirement.
  2. It should be sufficient to live a frugal, but decent, lifestyle.

Most proponents of basic income argue that it should be tax-free, with all other forms of income being taxed.

It is an alternative to the current social welfare system for governments to ensure financial wellbeing for its citizens. It differs most significantly from the current system in that Ireland generally doesn’t “do” universal or guaranteed payments. (Child benefit is the exception). Most payments from the state have criteria attached, e.g. you must be available for and seeking work, or have a particular type of social insurance history, or be living below a certain income, or be otherwise unable to provide for yourself.

It also differs from the current system in that while basic income is in theory sufficient to live a frugal but decent lifestyle, most core welfare payments in Ireland (the State pension is probably the only exception) are set at a level well below what’s required for a Minimum Essential Standard of Living (MESL) or to avoid poverty. (However, UBI is not a sole means of alleviating poverty, nor is it an alternative to publicly funded services).

Potential benefits of basic income

There are many potential benefits of a system of basic income.

The green argument

UBI would help facilitate a greener society. In every society, there is a certain amount of money needed to afford a socially acceptable standard of living, and every government has a different combination of ways to achieve that for its citizens. At present we have structured our society in such a way that most people must meet their income needs through being in paid employment (or living in a household where someone is in paid employment). However, full employment relies on ever-expanding GDP, and most of us understand that constant GDP-growth conflicts with our environmental concerns. UBI would facilitate a society and an economy that does not have full paid employment as an overarching goal.

The modern society argument

Basic Income would also be an appropriate way of delivering welfare in the 21st century, given how the world of work has been evolving. Our economy is changing. There are increasing levels of precarious and low paid work. Changing technologies and increased automation mean that this trend is likely to continue. Employment in the future may be scarce. (We are already aware of the possibility of driverless cars being on our roads this decade). Will there be mass unemployment in the labour market of the future? And if so, how do we implement the social welfare system as it currently stands, where individuals must engage in employment programmes and meet certain conditions related to their payments? Many people consider UBI to be a key part of a welfare system fit for a 21st century economy.

This is especially so as a system of unconditional income and universal services would provide a greater incentive to take up employment. The present system creates unemployment traps – situations where many people who are offered employment, particularly when it is low paid, must consider whether it is in their financial interest to accept it. Under a system of UBI, individuals know they will always be better off taking a job, as they would keep their welfare payment (which is tax free) and also have the benefits of their employment income (minus the appropriate amount of tax on that).

The caring and enabling society argument

Basic Income would also provide additional flexibility. People know they’ll have something to live off if they decide to take time off from paid employment to start a business, return to education, look after a sick or elderly relative, or have children that require caring in the home.

Perhaps most importantly, UBI is a great enabler. It would give everyone the freedom to choose how they spend their time: how much of it they want to give over to work, caring, volunteering, education, or leisure. It also gives people greater choice about avoiding work that they find unfulfilling, or maybe morally or socially unacceptable. The idea of UBI also buys into the notion that our shared moral responsibility means meeting the basic needs of others. It also is a way of acknowledging that all citizens contribute to the common good of society and are therefore entitled to the proceeds of that society.

What are Universal Basic Services?

The concept of Universal Basic Services, or UBS, demands that all citizens or residents of a country receive unconditional access to a range of free (or heavily subsidised, with only nominal at-point-of-access costs) public services at a certain minimum level. These services would be provided by the government or a state-body, and funded by general taxation. The term 'basic' implies there is a certain minimum level that all those entitled to the service should expect.

Social Justice Ireland has long-argued that there are seven social, economic and cultural rights to which everyone should be entitled. They are: sufficient income to live life with dignity; meaningful work; appropriate accommodation; relevant education; essential healthcare; cultural respect; and real participation in society. The first of those rights would be vindicated by a system of UBI. Under a system of UBS, citizens should expect the third, fourth and fifth of those rights, as a minimum. A basic level of accommodation, healthcare and education are three key parts of UBS. Most would agree that a certain minimum access to transport is also imperative. Other possible additions may relate to childcare, information, or legal services.

The New Economics Foundation considers the central message of UBS to be that we can only flourish as a society, now and in future, if we act together and take collective responsibility to meet needs we all share. In practical terms, that means more and better collectively provided services, where everyone has access according to need, not ability to pay.

In some respects, much of the infrastructure to achieve UBS is already in place. But there are many areas in which Ireland is failing poorly. We are the only country in western Europe that does not have a single-tier universal healthcare service. Education, while heavily subsided up to Level 8 degree-level (e.g. Bachelors degree), is still far from free when one considers the various fees and costs associated with education at all levels, from primary education through to lifelong learning. And the proportion of the Irish housing stock owned by the state is far below the European norm, while an ideological reliance on market-based solutions rather than direct intervention by government has led to a housing crisis in this country of record proportions.

Under a government that embraced UBS, such situations would not be acceptable.

Social Justice Ireland believes that the current crisis has led to changing attitudes among Irish people as to the appropriate role for government in public service provision. There has also been a glimpse of what is possible when situations demand the political will to address them. Rent freezes and moratoria on evictions (previously labelled “unconstitutional”) have now been shown to be possible, while we now have (temporarily, a least) a single-tier health service. Such things are also possible on a more permanent basis.

Funding and affordability

Affordability of any policy depends largely on what parameters are set.

For UBI, affordability depends on the level of the payment, which benefits it replaces and which remain, and what the eligibility conditions are. It is important to remember that UBI would replace most core social welfare payments like child benefit, unemployment benefit, and pensions, i.e. it would not be paid in addition to these, but instead of. It should replace tax credits for working people, saving several billions of euros more.

Social Justice Ireland’s research has shown that a partial basic income could be implemented on a revenue neutral basis (with reference to the current social welfare and income tax system) using a single income tax rate of 40 per cent (though we recommend that a more progressive tax rate is used). This is clearly eminently affordable. Better public services under a system of UBS would lower the level of UBI necessary, making it even more affordable.

Universal basic services, such as the full implementation of Slaintecare and increased funding in the education and transport sectors (as well as increased construction of social housing) will require Ireland to move in the direction of the European-average when it comes to raising revenue. While no country has yet fully met the UBS ideal, those who are closest to it collect a far higher level of taxation than Ireland, either measured on a per capita basis or as a proportion of national income. If Ireland is to provide universal basic services, or even public services and infrastructure closer to the western European norm, we must look at ways to increase government revenue on a sustainable basis. Social Justice Ireland’s 2020 Socio Economic Review contains dozens of suggestions for revenue-raising measures. (See here, page 84)