Momentum for universal basic income grows

On 1st January, Finland’s experiment in universal basic income (UBI) began. A random sample of 2,000 citizens currently receiving unemployment benefit are being given a guaranteed and unconditional €560 (£477) a month for the next two years. The amount will be deducted from any benefits they already receive but crucially, they will continue to get the sum even if they find work. The Finnish government hopes this experiment, which may be expanded to other low-income groups such as freelancers and small-scale entrepreneurs, will cut red tape, reduce poverty and boost employment.

Support for UBI is gathering pace. Other trials are also being planned by governments and local authorities in Utrecht in the Netherlands, Ontario in Canada and some parts of France. In the United States, Silicon Valley incubator Y Combinator is preparing to launch a private test run in Oakland, California. Over the course of a year, between 30 and 50 citizens are to be given a monthly income of $1,500-$2,000, at a total cost of some $1.5m.

Scotland could also be about to join the club, with the councils of Fife and Glasgow considering trials. Even 18 months ago, the idea of a UBI was widely viewed as pretty cranky. Now it is climbing up the political agenda. In mid-January, the House of Commons Work and Pensions Committee is holding an oral session on the idea.

The mounting interest is being driven by two key factors. First, disruptive economic change. For a growing proportion of the workforce, job opportunities have become much more fragile, with rising numbers trapped in low-paid, low-satisfaction and insecure employment. Although expert opinion is divided on the full impact of the new machine age, advances in robotisation and artificial intelligence will unleash widespread upheaval.

Second, the current system of social security is poorly equipped to deal with exploding insecurity. It is heavily reliant on means-testing, has downgraded the role of universal benefits, and comes with a heavy dose of conditionality. With governments exercising greater and greater control over the lives of claimants, the system has become much more punitive and intrusive.

With its built-in income guarantee, a UBI offers a real solution to these problems. It would bring a safety net in today’s precarious working environment, lower the risk of poverty among those in work and reduce inequality. It would boost the universal element of income support, reduce dependency on means-testing and bring an end to sanctioning. These would represent significant gains over the existing system.

Despite this, the idea is controversial. Critics claim a basic income is utopian, too costly and cannot be made to work. Some opponents allege that a UBI would encourage an “ideology of idleness.” But a UBI can co-exist with a strong work ethic. One of the merits of a guaranteed income is that it provides much greater choice between work, leisure (very different from idleness), caring and education. The net effect, supported in part by evidence from earlier studies, is more likely to promote than weaken the incentive to work.

Indeed, incentives will be stimulated by lowering dependency on means-testing. By guaranteeing an income, even a modest one, a UBI would also increase labour’s greatly depleted bargaining power. These are strengths, not weaknesses. One of the merits of the pilot schemes is that they will provide crucial evidence on some of these questions on incentives, costs and behaviour.

There is more than one way to introduce UBI. Some want sweeping change in one go: big bang reform. Others propose a more cautious approach, calling for incremental reform, starting modestly and steadily moving in steps towards a fuller model. One thing is clear. If the pilot schemes are a success, some kind of permanent scheme becomes much more likely. And once one country jumps, others will surely follow.

Stewart Lansley is the co-author (with Howard Reed) of A Universal Basic Income: An Idea Whose Time Has Come?, Compass; and the author of A Sharing Economy, Policy Press, 2016.