Case Studies of Universal Basic Income
UBI

Case Studies of Universal Basic Income

By CryptoCelt97 | LegalArticles | 30 Mar 2021


Case studies of Universal Basic Income

 

UBI has only really gained renown in recent years. While there are a few examples of UBI being used in practice, it is still relatively rare. Some nations have systems with elements of a modern UBI system, but not a truly universal and unconditional scheme.

 

The Alaskan system

 

Alaska has implemented a system of UBI with what they call a dividend fund that has been paid yearly since 1982[1]. Despite generally being defined as a basic income, it is at times called a resource dividend. This is because the Alaskan government invests a portion of their oil revenue in a fund[2], every Alaskan citizen who has been a resident for at least a year receives a dividend from this fund. As mentioned in Chapter 3, this payment is unconditional if the citizen has lived there for a year, but it is hardly enough to satisfy sufficient subsistence – therefore it can not be judged as a fully-fledged UBI system[3]. In 2019, the citizens received £1,606[4]. However, since the payment fluctuates due to the stock market, the amount received usually ranges from between a thousand to two thousand dollars. This system has been widely praised in Alaska since its inception with scholars claiming how the dismantling of the system would amount to political suicide[5]. The Alaskan model of resource taxation has been hailed as a suitable and adaptable model of UBI, constituting an effective method of distributive justice[6]. In fact, this system bears a striking resemblance to the original principles of UBI envisioned by Thomas Paine. That of a distributive model based on the taxation of national resources.

Could the Alaskan system be exported to the UK?

While Alaska is rich in oil reserves, the UK may have to turn to alternative forms of resource taxation to achieve an Alaskan system of UBI. The UK could implement a similar design but with renewable energy instead of oil reserves. Excess energy produced from the UK’s energy market can be sold to nations within Europe through the Internal Energy Market[7](IEM). Revenue from this could be put in a fund and distributed to every citizen unconditionally – allowing UK citizens access to UBI produced from the resources of national land. Much like in Alaska, the income distributed from such a method would not amount to sufficient subsistence. But it would guarantee an economic floor that would allow greater bargaining power for the citizens[8]. It would not achieve the full remit of UBI, but it would be a beginning and would allow some economic assistance. However, the legislation could be more wide-ranging than Alaska’s constitution. Perhaps the resources fund could compromise of many different sources. In addition to excess energy funds, additional land tax on companies who exploit the country’s natural resources could be annexed onto any legislation. By expanding the resource fund to any exploitation of a range of shared resources, the dividend distributed could amount to a sufficient amount. This fund could include using other common assets like the use of public property, pollution taxes, wind farms and the broadcast spectrum[9]. The Alaskan system has been exported to other nations and states. Instead of an oil fund, Chile, for example, taxes copper while Texas has a fund based on valuable minerals and public lands[10]. Therefore, it is an adaptable system depending on the resources of the relevant nation.

An easy and adaptable common resource that the UK could use as a taxation source for a dividend fund could be the air itself. Revenue from a carbon tax could contribute towards the dividend fund. When the UK leaves the European Union, they will likely have to implement new legislation on Carbon Emissions Tax[11]. S95 (Carbon Emission Tax) of the Finance Act 2020 c.14[12], states that there will be a tax emission allowance. A Tax will be enforced for those who exceed this allowance, on a carbon equivalent basis. The tax will be collected by HMRC. While the Finance Act is in force, the carbon tax emission report will start from the 1st January 2021 – this is if the UK and EU do not agree upon remaining in the EU Emission Trading System post-Brexit. If they disagree, then S95 will come into force, and an annual tax will be imposed on excess emissions. If the UK were to adopt an Alaskan model of UBI, they could incorporate the carbon tax into a dividend fund. Therefore, tax from excess emissions could be collected into a fund and distributed to every citizen unconditionally. According to Paine, citizens should benefit from the natural and common assets of the land. This system would allow society to recapture this value and return it to the people through a dividend. The legislation is already in place for such an implementation; all that is needed now is the political will.

The Finnish experiment

 

The Alaskan experiment is an example of a form of UBI, but the Finnish example goes further. It is fair to say that Finland is the first nation to try out a fully-fledged unconditional Universal Basic Income system truly. This experiment ran for two years and distributed an income of €560 per month to the recipients[13]. The payment was unconditional, meaning that the recipient did not have to show that he was applying for employment and engaging in the labour market. A Finnish survey found that the recipients benefited both economically and mentally. The respondents to a survey from the Finnish government replied that they were more satisfied with their lives after receiving the payment, describing a decline in stress. They also had a healthier perception of their economic situation, seeing themselves as more financially secure[14]. It also led to a small increase in employment and trust in the bureaucracy. One of the main arguments that people use to dispel UBI is that it will disincentivise the workforce. This is the reason why most current welfare systems have the conditionality of seeking employment attached. Yet the Finnish experiment demonstrated a small increase in the employment of the recipients. Individuals who were granted the basic income were slightly more likely to be employed than those on the regular welfare system. Receiving the basic income encouraged recipients to seek and accept jobs they usually would not, resulting in an avoidance of the welfare trap[15]. After receiving the income, recipients reported feeling much happier and even reporting a boost in cognitive skills, along with increased trust in public services. Thus, UBI could be a positive influence on society in general if implemented. The financial security that the payment offered allowed recipients to seek out a range of work opportunities that included unpaid work and training for higher-skilled jobs. UBI could, therefore be an effective method of countering how automation is taking away low-skilled jobs. By enhancing their CV and skill range, individuals will be able to move into more highly specialised areas of employment due to being able to take a bit of time off work to focus on training. This experiment also demonstrated that lower bureaucracy would increase the population’s trust in the social system. By giving an unconditional payment, bureaucracy is decreased, which saves time and money.

Though we must take precautions with the Finnish experiment, the data set provided was minimal and the period of implementation was not long enough to provide long term data on the benefits and weaknesses of such a system. The payment was also only provided to those who were already on benefits and unemployed. Therefore, the data gathered was not representative of society. Though what it did show is that implementation is possible, and it does have benefits for society.

 

Indonesia’s conditional cash transfer programme

 

An interesting case study to analyse is Indonesia’s conditional cash transfer programme. This programme is not an unconditional basic income scheme as the name suggests, but it is an appealing alternative to the UK’s current condition-based welfare systems. Instead of the conditions of the payment being based upon employment, they are based upon family participation[16]. The programme aims to provide these conditional cash transfers to families who are on the poverty line. Families are paid annually if they meet the requisite conditions, which include school attendance, vaccination compliance, and general positive household behaviour[17]. Moreover, to be eligible for the payment by the programme the household claiming must include a pregnant woman, a child under five, or a child under 18 with fewer than nine years of schooling and must be sufficiently poor. Replacing employment conditions with conditions of health and education could be a method of UBI in the UK. An unconditional programme might be seen as being overly radical by some and therefore might be politically unobtainable. Therefore, shifting the conditions that trap citizens in a poverty cycle (employment conditions) with conditions of positive household behaviour may be more obtainable and beneficial for society. The programme certainly helped with combating the effects of poverty in Indonesia. Rema Hanna observes that stunted growth of children fell by 20% in areas where the programme was active[18]. The cash transfer programme helped aid families on the poverty line in feeding their children while promoting their education, which will help with their economic mobility in the future. An Indonesian model could help our welfare system be more equipped to deal with automation since payment is not employment-based. In the future, when employment opportunities may be down, some citizens will be at risk of losing their benefits due to their skills not being adequate for the changing economy. Shifting the conditions over to be more health and education-based would allow them to maintain receiving their payment while ensuring that they are not starving and children not suffering. It could be a more viable option, at least short term that a full unconditional and universal system of basic income. 

 

 

[1] Eduardo Suplicy, (2007) ‘Citizen’s Basic Income’, Latin American Programme, Washington, DC, Woodrow Wilson International Centre for Scholars, pp. 1-28, Available from: <http://www.wilsoncenter.org/sites/default/files/LAP_CitizensBasicIncome.pdf> [Accessed 2 Nov 2020]

[2] Karl Widerquist, Jose Noguera, Yannick Vanderborght, and Jurgen de Wispelaere, ‘Basic Income’ (Wiley-Blackwell, 2013) pp.11-45.

[3] Karl Widerquist, and Michael Howard (eds), ‘Alaska’s Permanent Fund Dividend: Examining its Suitability as a Model’ (Palgrave Macmillan, New York, 2012)

[4] Ibid

[5] Scott Goldsmith, ‘The Economic and Social Impacts of the Permanent Fund Dividend on Alaska’ In: Widerquist K., Howard M.W. (eds) ‘Alaska’s Permanent Fund Dividend, Exploring the Basic Income Guarantee’ (Palgrave Macmillan, New York, 2012)

[6] Ibid, Scott Goldsmith

[7] Matteo Ciucci, (2020), ‘Internal Energy Market’ | Fact Sheets on The European Union | European Parliament. [online] Europarl.europa.eu. Available at: <https://www.europarl.europa.eu/factsheets/en/sheet/45/internal-energy-market> [Accessed 11 December 2020].

[8] David Casassas, ‘Basic Income and the Republican Ideal: Rethinking Material Independence in Contemporary Societies’ (Basic Income Studies, 2(2), 2008)

[9] Colin McClung, and Gary Flomenhoft, ‘Message in a Bottle: Bottling Economic Rent for Public Revenue Valuing Common Assets for Public Finance in Vermont’ Ed. 35 Gary Flomenhoft and Amos Baer (Burlington, VT: Gund Institute, 2008) Pages 26-29.

[10] Gary Flomenhoft, ‘Applying the Alaska Model in a Resource-Poor State: The Example of Vermont’ In K. Widerquist and M.W. Howard (eds) ‘Exporting the Alaska Model: Adapting the Permanent Fund Dividend’ (Palgrave Macmillan, New York, 2012)

[11] Assets.publishing.service.gov.uk. 2020. [online] Available at: <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/902737/Carbon_Emissions_Tax_-__consultation.pdf> [Accessed 13 December 2020].

[12] Finance Act 2020 c.14, S95 Carbon Emission Tax. Available at <https://uk.westlaw.com/Document/IA165DEB0D0D911EAA40EF8DEA38CC02A/View/FullText.html> [Accessed 25 November]

[13] Olli Kangas, ‘First results from the Finnish basic income experiment, ESPN Flash Report 2019/17’ (European Social Policy Network (ESPN), Brussels: European Commission, 2019)

[14] kela.en. (2020) ‘Results of Finland's Basic Income Experiment: Small Employment Effects, Better Perceived Economic Security and Mental Wellbeing - News Archive for Customers’ [online] Available at: <https://www.kela.fi/web/en/news-archive/-/asset_publisher/lN08GY2nIrZo/content/results-of-the-basic-income-experiment-small-employment-effects-better-perceived-economic-security-and-mental-wellbeing> [Accessed 14 December 2020].

[15] Terra Allas, Jukka Maksimainen, James Manyika, and Navjot Singh, (2020) ‘An experiment to inform universal basic income’ Available at: <https://www.mckinsey.com/industries/public-and-social-sector/our-insights/an-experiment-to-inform-universal-basic-income#> [Accessed 10 December 2020]

[16] Alatas, Vivi, Abhijit Banerjee, Rema Hanna, Benjamin Olken, Ririn Purnamasari, and Matthew Wai-Poi, ‘Self-Targeting: Evidence from a Field Experiment in Indonesia’ (Journal of Political Economy 124(2), 2016)

[17] Tyler Smith, (2020) ‘The promise of conditional cash transfers’ available at: <https://www.aeaweb.org/research/cumulative-impacts-conditional-cash-transfer-indonesia> [Accessed 5 December]

[18] Ibid, Rema Hanna in ‘The promise of conditional cash transfers’ (footnote 97)

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