Is universal basic income sustainable? | 1

In October 2013, after gaining enough petition signatures to hold a referendum on UBI, Swiss activists celebrated by publicly dumping eight million coins. Source: Stefan Bohrer

Is universal basic

income sustainable?

Universal basic income (UBI) means replacing

means-tested benefits with an unconditional

regular payment that everyone receives. It is an

idea that has received considerable media

attention recently, following a Swiss referendum

on UBI on 5 June 2016. Although the measure

was comfortably rejected,1 the referendum has

made basic income a global debate topic, with

Finland set to launch basic income pilots at the

beginning of 2017.2

This briefing specifically evaluates the

sustainability of UBI in the UK, by looking at its

effects on population, consumption and

technology. It finds that, while there are some

risks, the overall picture from a sustainability

perspective is quite positive. This briefing

therefore recommends that UBI continues to be

researched, discussed and seriously considered.

What is universal basic

income?

According to political theorist Phillippe van Parijs,

UBI “is an income paid by a political community to

all its members on an individual basis, without

means test or work requirement.” (van Parijs,

2006, p.4).3 UBI is therefore significantly different

to more conventional methods of social security,

which are conditional, and paid to households.

The definition is loose, and actual basic income

schemes can vary greatly in terms of scale

(regional, national, supranational), sources of

funding, size of the income, and inclusivity (do

citizens receive the income or all legal permanent

residents?). UBI can also be given at different

levels for different individuals, for instance the

amount of income that children or pensioners

receive may differ from what working adults

receive.3

Background

Thomas Paine, one of the Founding Fathers of the

United States, is usually credited as being the first

to propose a form of basic income. Paine believed

that land was the common inheritance of

mankind, and therefore owners of land should

pay a tax, and this tax revenue would be used to

provide individuals with a lump sum upon

reaching adulthood.4

UBI, along with similar proposals like the negative

income tax, is notable for having attracted

support from economists both on the left, such as

James Tobin, and on the right, such as Milton

Friedman.5 Indeed, a form of basic income in all

but name was almost introduced by Republican

President Richard Nixon, when it passed Congress,

but was defeated in the Senate.4 Many on the left

see UBI as an effective tool for wealth

Is universal basic income sustainable? | 2

redistribution and poverty alleviation, while those

on the right often see it as less bureaucratic and

more efficient than existing welfare programmes.

What would universal basic

income look like in the UK?

A common objection that is made to UBI is that it

would simply be too expensive to be feasible, and

thus is a non-starter. As UBI advocates have

pointed out, however, the charge that UBI is

unaffordable in and of itself is misguided, since

the cost of implementing UBI depends on the

level of income on offer (Van Parijs, 2006, p.14).

What is usually meant, however, is that a basic

income sufficient to live on would be

unaffordable. For example, funding a basic

income of around £12,000 per person per year for

the approximately 65 million inhabitants of the

UK6 can be estimated as costing about £750-

800bn. This would be over 40 per cent of the UK’s

total GDP,7 and approximately equal to the

£772bn that the UK government is projected to

spend in 2016-17.8 Such a UBI programme would

require a mix of radical public spending cuts and

astronomical tax-rises that are likely unattainable.

However, UBI does not need to reach such levels

in order to access its benefits. Of course, a low

level of UBI that replaced all existing welfare

would be extremely regressive,9 so a successful

implementation of UBI would also need to be

combined with some elements of the existing

system of conditional welfare. The Royal Society

of Arts (RSA) fairly recently wrote a report that

advocated such a system, keeping housing and

disability benefits, while cutting other benefits in

favour of the basic income. The RSA’s model

would provide all individuals from the age of 25 to

64 an income of £3,692, with slightly lower

payments for children and higher payments for

over 65s. They sensibly also propose that basic

income is reduced to zero for the third and

additional children under five years of age, in

order to reduce costs and the incentive to have

large families. Because UBI would mostly be

funded out of existing welfare spending, and

would also create some efficiency savings since it

is less bureaucratic than other forms of benefits,

the RSA estimates that such a UBI scheme would

only cost one per cent of GDP.10 Such a cost is

very affordable, and could be funded through

increased taxes on higher earners, or through

implementing new taxes. The table below shows

the amount that five families would receive, and

compares this to what they would receive from

Universal Credit.

Table: RSA

Such proposals are not without their problems;

for instance, lone parents are likely to be worse

off, and may need some additional financial

assistance.11 Nonetheless, it does show that UBI is

economically viable, and therefore its advantages

and disadvantages are worth assessing.

Is universal basic income sustainable? | 3

How should the

sustainability of universal

basic income be evaluated?

A society can be said to be sustainable if the

lifestyle of its members could be maintained

indefinitely, while an unsustainable society will

inevitably deplete its resources until it is

impossible to maintain the lifestyle of everyone in

that society. To become more sustainable,

societies need to reduce their environmental

impact, and environmental impact can be defined

according to the Ehrlich equation:

𝐼 = 𝑃𝐴𝑇

Where I is the total environmental Impact; P

stands for total Population; A stands for

Affluence, which is the average quantity of goods

and services consumed per person, and T stands

for Technology, which is how inefficiently goods

and services are produced.12

The Ehrlich equation is useful for assessing the

overall sustainability of UBI. While in and of itself,

UBI is very unlikely to make unsustainable

societies sustainable, we can look at whether or

not UBI would make societies relatively more

sustainable by looking at its effects on population,

affluence and technology.

UBI has impacts on all three components of the

Ehrlich equation in a multitude of ways. This

briefing considers the effect of UBI on four

different sustainability issues: poverty,

employment, migration and innovation. Each of

these areas has an effect on population,

affluence, technology or some combination of

them.

There are, of course, other factors besides

sustainability that should be considered, for

instance, UBI proponents often make a

philosophical case that UBI enhances the freedom

and welfare of individuals (Van Parijs, 1995).13

Nonetheless, given the urgency of moving

towards more sustainability to prevent

environmental calamities, it is incredibly

important that UBI is sustainable, because welfare

schemes need to consider not just the well-being

of the current generation, but also that of future

generations.

Assessing the sustainability of

universal basic income

Poverty

The importance of poverty alleviation from a

moral and social perspective is unambiguous.

However, poverty alleviation is also a crucial pillar

of sustainable development, for three reasons.

Firstly, poverty tends to cause population growth.

This is because individuals in poverty are less

likely to have access to contraception and sex

Is universal basic income sustainable? | 4

education that allows individuals to limit family

size, and because people in poverty may have to

rely on their children to look after them in their

old age. This problem is exacerbated by the fact

that population growth also increases poverty, as

it means that resources used to combat poverty

are divided amongst more people, thus creating a

vicious cycle.14

The second reason is that those in poverty are

often more likely to face problems such as poorer

health, less access to education, higher crime

rates, etc., and the cost to governments of coping

with these effects is huge. It is estimated that

child poverty alone costs the UK £29 billion per

year in dealing with the consequences of such

poverty (Hirsch, 2013).15 This means that poverty

often causes an increase in the quantity of goods

and services that a society requires.

The third reason is that poverty perversely

incentivises governments to pursue unsustainable

economic growth. The logic is that if the economy

can be made to grow, then everyone will have

more and poverty can be reduced without

redistribution. The issue with this argument is that

economic growth goes hand in hand with a

negative environmental impact, such as carbon

emissions and resource depletion (Laurent,

2014).16 It is therefore critical that alternative

solutions to poverty are implemented, because

attempts to solve poverty via economic growth

will inevitably just move burdens from those in

poverty now to future generations.

Conventional welfare policies and poverty

The main methods utilised in the UK to keep

families out of poverty is through minimum wage

legislation and the provision of means tested

benefits, often conditional on applicants working

or proving that they are looking for work.

Proponents of UBI argue, however, that these

methods suffer from many deficiencies.

While UBI proponents do not necessarily advocate

abolishing a minimum wage, it has the major

drawback that, if the minimum wage is too high, it

will cause higher levels of unemployment, as

businesses will reduce the numbers of workers

they employ, and/or will automate jobs, limiting

its capacity to combat poverty.17,18 Additionally,

minimum wage laws only help those who actually

have jobs; such laws do little to provide for the

unemployed, or those who provide unpaid care.

Conditional welfare has three inherent problems:

the first is that conditional welfare creates what is

known as the welfare trap, which is a perverse

incentive for those on welfare to not seek work.

This effect occurs because as welfare recipients

earn more income from work, their benefits are

withdrawn — the net gain in income from working

more hours, or in better-paid jobs, can therefore

be so small that seeking work is unattractive.19

The effect can be mitigated by withdrawing

benefits more slowly as income increases; this,

however, substantially increases the cost of

providing welfare.17

The second problem is that some individuals who

are in poverty may not take up conditional

welfare that they are entitled to, either because

Is universal basic income sustainable? | 5

of a lack of knowledge of how to access welfare,

or because of the time required to prove that the

conditions have been met (Van Parijis, 2006, p.9).3

For example, in the United States, there are four

million poor Americans who qualify for Medicaid

(the US healthcare programme for individuals

with low incomes), and yet are not enrolled.20

The third problem is that conditional welfare is a

public expenditure that is aimed at a group

without a great deal of political influence, and this

makes them more susceptible to being targeted

as a source of public spending cuts, compared to

services that are protected by lobby groups, like

healthcare or pensions.17

Universal basic income and poverty

UBI avoids many of the above deficiencies of

minimum wages and conditional welfare: unlike

the minimum wage, it provides assistance to

those who are outside the labour force, and it

does not cause employers to lay off workers.

Unlike conditional welfare, it removes welfare

traps, since basic income is not withdrawn from

individuals who increase their income. As a

universal payment, it will potentially be easier to

protect from cuts than existing welfare schemes,

and removing existing obstacles to accessing

welfare is likely to ensure that more, if not every,

individual in poverty receives assistance.

Proponents of UBI also offer two additional

reasons that UBI would be more effective in

eradicating poverty than conditional welfare. The

first is that a welfare system that is constructed

around work may face serious problems as more

tasks become automated and unemployment

begins to rise. A well-known study suggests that

47 per cent of jobs are at risk of being automated

in the next few decades (Frey and Osbourne,

2013).21 UBI may allow society to enjoy the

benefits of automation without driving so many

people out of work and into poverty.22 It would

also ensure that the benefits that automation

brings are distributed throughout society, rather

than just to the owners of machines.23

The second reason is that UBI improves the

bargaining position of low-paid workers: instead

of feeling compelled to take the first job that

comes along, UBI allows workers to look around

longer for better-quality and better-paid work, to

negotiate with their employers for better terms of

employment, or to gain more qualifications to

achieve a higher standard of living. (Olin Wright,

2006, pp.3-4).24

Evidence

There is, at present, limited evidence of the

effects of UBI. However, between 1974 and 1978,

there was an experiment with basic income in the

town of Dauphin in Manitoba, Canada. Evelyn

Is universal basic income sustainable? | 6

Forget (2011) analysed the data collected from

this experiment, and found that Dauphin saw a

significant reduction in hospitalisation compared

to other parts of Canada, as well as lower rates of

high school dropout.25 Forget argues that since

poor health and education is indicative of poverty,

this suggests that the income security that basic

income provides can have significant effects in

tackling poverty and its effects.

Graph: Forget

There is, overall, a strong case that UBI could

make serious headway in combatting poverty

without resorting to unsustainable levels of

economic growth. While more research is

certainly needed to be sure of such conclusions,

UBI still seems incredibly promising in this regard.

Employment

One of the major objections made against UBI is

that providing individuals with unconditional

payments will disincentivise them from actively

pursuing work, since they can just live on their

basic income.17 This perceived effect is seen as

unfair, since it would involve those who work

subsidising the idle. It also may be a problem from

a sustainability perspective; the challenges of

transitioning to more sustainable societies are

great, and are likely to require a skilled, adaptable

and active labour force.26 Reductions in work

participation may also make it more difficult to

continue to fund UBI from taxes, undermining its

long-term economic viability.

It is, however, unclear what exact effect UBI is

likely to have on incentives to work. As noted in

the previous section, existing welfare systems

create their own disincentives to work, and UBI

removes these disincentives. So, for some less

well-off individuals, UBI may increase the

incentive to work.

How much less will people work?

The major difficulty of trying to evaluate the effect

of UBI on work incentives experimentally is that

those receiving the income know that it is

temporary, and therefore may not change their

behaviour. Nonetheless, the Canadian trial lasted

for four years, and so may have been long enough

to give some indication of the effect of UBI on

work incentives. It was found that UBI had a

moderate effect on reducing work effort; one per

cent for men, three per cent for wives and five per

cent for unmarried women (Hum and Simpson,

2001).27

This reduction effect is certainly modest, though

given enough time, or an overly generous UBI, it

may reach a level that is problematic.

Is universal basic income sustainable? | 7

What do people who work less do instead?

Figuring out how much less people work,

however, is not the only issue to consider. Paid

work is not the only way individuals can offer a

valuable contribution to society — individuals may

use their time to perform unpaid care, or seek out

greater levels of education. It therefore needs to

be considered which individuals may reduce their

level of paid work, and what they do in its place.

The evidence from Canada suggests that primary

earners hardly reduce their working hours at all;

instead, most of the reduction comes from

secondary earners and young people.28 A likely

scenario is that secondary earners are often more

able to spend time looking after children and

other dependants, while young people choose to

spend more time in education. In fact, Forget

(2011) found that during the basic income pilot in

Dauphin, the percentage of students that

completed high school was significantly higher

than it was prior to and after the trial.25

Graph: Forget

Having more young people finish education is

important for having a diverse and skilled

workforce to deal with future challenges of

sustainable living, while having more individuals

provide voluntary care to their family members

can be important for reducing the use of

healthcare resources. Both of these tendencies,

therefore, may be important from a sustainability

point of view.

It is therefore unclear what the exact effects of

UBI will be on the work individuals do, and

whether these effects are positive or negative.

This is something that should be viewed carefully

in future basic income experiments.

Migration

One serious concern raised about implementing

UBI is the effect it will have on migration. It is

argued that if a country like the UK implemented

UBI it would face a serious dilemma: the income

could be made available to all residents, in which

case UBI may precipitate an unsustainable influx

of immigration. Alternatively, UBI could be

restricted to citizens, but this would have the

undesirable effect of labour market dualisation,

where lower income foreign workers without

access to welfare would dominate low-income

menial jobs.17

Migration is a serious issue for UBI; most

proponents take a middle route through the

dilemma, preferring to make UBI conditional on

residency, not citizenship, but requiring a certain

number of years of residence prior to the receipt

of the income (van Parijs, 2006, pp.6-7).3 This

route mitigates the potential dangers of labour

market dualisation and high immigration without

Is universal basic income sustainable? | 8

necessarily eliminating them. It is important to

note, however, that research has found that

migrants are not attracted to countries by

unemployment benefits (Giulietti et al., 2013):29

they tend to care much more about access to jobs

and speaking the language of the country.

It is, however, true that UBI may provide a greater

incentive than contemporary unemployment

benefits, due to its unconditional nature. It is

therefore important that if UBI is implemented, it

is done so in conjunction with well-constructed

migration policies.

Innovation

While technological innovation is unlikely in and

of itself to be sufficient to promote a sustainable

lifestyle, it is nonetheless an important factor in

making sustainability goals more attainable, by

ensuring we use our resources as efficiently as

possible.

One potential advantage that UBI offers in this

regard is that it may significantly spur innovation.

The reason for this is that UBI reduces the cost of

failure when it comes to setting up new

businesses, since one can depend on the basic

income for financial support even if the venture is

a failure.30 While most UBI proponents have

largely seen this as an economic benefit, a

measure that makes it easier for individuals with

good ideas to pursue them may increase the

probability of developing technology that allows

us to move towards more sustainable lifestyles.

This outcome is highly uncertain, but does provide

some additional weight to the idea that UBI is a

promising step towards more sustainable

lifestyles.

Conclusion

UBI is not a totally riskless policy: it will require a

substantial restructuring of existing welfare

systems; it may be expensive or regressive if

implemented poorly; it may have damaging

effects on worker motivation for some, and it may

encourage unsustainable levels of migration.

Nevertheless, the potential benefits that UBI can

offer are massive: it could have a decisive impact

in reducing poverty and eliminating welfare traps,

undermine the damaging idea that we need

perpetual economic growth, and promote

valuable innovation.

Given these benefits, UBI must be very seriously

considered. The study in Finland and others

elsewhere could bring important insights about

the effects of UBI and the best way to implement

it; these should be watched carefully. UBI could

offer a very effective way for the UK to

restructure our welfare system in a more

sustainable way; it should continue to be

researched and debated.

1Switzerland's voters reject basic income plan. (2016, June 05). Retrieved July 15, 2016, from http://www.bbc.co.uk/news/world-europe-36454060

Is universal basic income sustainable? | 9

2 Matthews, D. (2015, December 08). Finland's hugely exciting experiment in basic income, explained. Retrieved July 15, 2016, from http://www.vox.com/2015/12/8/9872554/finland-basic-income-experiment 3 Van Parijs, P. (2006). Basic income: A simple and powerful idea for the 21st century. In B. Ackermann, A. Alscott, & P. Van Parijs (Eds.), Redesigning distribution: Basic income and stakeholder grants as alternative cornerstones for a more egalitarian capitalism (Vol. V, Real Utopias Project Series, pp. 4-39). Lon: Verso. Retrieved July 15, 2016, from http://www.ssc.wisc.edu/~wright/Redesigning Distribution v1.pdf 4 Shafarman, S. (n.d.). A brief history of basic income ideas. Retrieved July 15, 2016, from http://basicincome-europe.org/ubie/brief-history-basic-income-ideas/ 5 Matthews, D. (2016, April 25). Basic income: The world's simplest plan to end poverty, explained. Retrieved July 15, 2016, from http://www.vox.com/2014/9/8/6003359/basic-income-negative-income-tax-questions-explain 6 Time series: United Kingdom population mid-year estimate. (2016, June 23). Retrieved July 23, 2016, from https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/timeseries/ukpop 7 World economic outlook database. (2016, April). Retrieved July 23, 2016, from http://www.imf.org/external/pubs/ft/weo/2016/01/weodata/weorept.aspx?sy=2014 8 Gauke, D. (2016). Budget 2016 (Great Britain, HM Treasury). Retrieved July 23, 2016, from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf 9 Greenstein, R. (2016, May 31). Commentary: Universal basic income may sound attractive but, if it occurred, would likelier increase poverty than reduce it. Retrieved July 15, 2016, from http://www.cbpp.org/poverty-and-opportunity/commentary-universal-basic-income-may-sound-attractive-but-if-it-occurred?version=meter 10 Painter, A., & Thoung, C. (2015, December 03). Creative citizen, creative state. Retrieved July 23, 2016, from https://medium.com/rsa-reports/creative-citizen-creative-state-a3cef3f25775#.t3amk5bm9 11 Review of the RSA report on universal basic income. (2016, January 25). Retrieved July 23, 2016, from http://www.basicincome.org/news/2016/01/review-of-the-rsa-report-on-universal-basic-income/ 12 Sustainability and the Ehrlich equation. (2011). Retrieved July 23, 2016, from http://www.populationmatters.org/wp-content/uploads/ipat.pdf 13 Van Parijs, P. (1995). Real freedom for all: What (if anything) can justify capitalism? Oxford: Clarendon Press. 14 Poverty. (2011). Retrieved July 23, 2016, from http://populationmatters.org/wp-content/uploads/D15Poverty.pdf 15 Hirsch, D. (2013). An estimate of the cost of child poverty in 2013. London: CPAG. Retrieved July 23, 2016 from https://dspace.lboro.ac.uk/dspace-jspui/bitstream/2134/16983/1/Cost%20of%20child%20poverty%20research%20update%20(2013)_0.pdf 16 Laurent, E. (2014). Inequality as pollution, pollution as inequality. <hal-01070526>. Retrieved 23 July, 2016 from https://hal-sciencespo.archives-ouvertes.fr/file/index/docid/1070526/filename/laurent-inequality-pollution.pdf 17 Sighing for paradise to come. (2016, June 04). Retrieved July 15, 2016, from http://www.economist.com/news/briefing/21699910-arguments-state-stipend-payable-all-citizens-are-being-heard-more-widely-sighing 18 Worstall, T. (2016, June 25). Bernie Sanders' influence on the Democratic platform - The $15 an hour minimum wage that kills jobs. Retrieved July 15, 2016, from http://www.forbes.com/sites/timworstall/2016/06/25/bernie-sanders-influence-on-the-democratic-platform-the-15-an-hour-minimum-wage-that-kills-jobs/#42df7bb9fff9 19 Flowers, A. (2016, April 25). What would happen if we just gave people money? Retrieved July 15, 2016, from http://fivethirtyeight.com/features/universal-basic-income/ 20 Barry-Jester, A. M., & Casselman, B. (2015, September 28). 33 Million Americans Still Don’t Have Health Insurance. Retrieved July 23, 2016, from http://fivethirtyeight.com/features/33-million-americans-still-dont-have-health-insurance/#fn-6 21 Frey, C. B., & Osborne, M. A. (2013). The future of employment: How susceptible are jobs to computerisation. Retrieved July 15, 2016 from http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf 22 Schneider, N. (2015, January 6). Why the tech elite is getting behind universal basic income | VICE | United States. Retrieved July 15, 2016, from http://www.vice.com/read/something-for-everyone-0000546-v22n1

Is universal basic income sustainable? | 10

23 Skidelsky, R. (2016, June 23). Basic income revisited. Retrieved July 15, 2016, from https://www.project-syndicate.org/commentary/unconditional-basic-income-revisited-by-robert-skidelsky-2016-06 24 Wright, E. O. (2006). Basic income as a socialist project. Basic Income Studies, 1(1). doi:10.2202/1932-0183.1008 25 Forget, E. L. (2011). The town with no poverty: The health effects of a Canadian guaranteed annual income field experiment. Canadian Public Policy, 37(3), 283-305. Retrieved July 15, 2016, from http://public.econ.duke.edu/~erw/197/forget-cea%20%282%29.pdf 26 Sustainable development | Employment | Jobs. (n.d.). Retrieved July 23, 2016, from http://www.sustainable-environment.org.uk/Economy/Employment.php 27 Hum, D., & Simpson, W. (2001). A guaranteed annual income: From Mincome to the millennium. Options Politiques, 22(1), 78-82. Retrieved July 15, 2016, from http://archive.irpp.org/po/archive/jan01/hum.pdf 28 Dubner, S. J. (2016, April 13). Is the world ready for a guaranteed basic income? [Audio blog post]. Retrieved July 23, 2016, from http://freakonomics.com/podcast/mincome/ 29 Giulietti, C., Guzi, M., Kahanec, M., & Zimmermann, K. F. (2013). Unemployment benefits and immigration: Evidence from the EU. International Journal of Manpower, 34(1), 24-38. doi:10.1108/01437721311319638 30 Pugh, J. (2016, June 05). Why Switzerland's universal basic income referendum matters, even though it failed. Retrieved July 23, 2016, from http://qz.com/699739/why-switzerlands-universal-basic-income-referendum-matters-even-though-failed/