Trialling basic income: A help or a hiderence?

Every basic income trial is fundamentally flawed before it starts

Photo by Adrián Tormo on Unsplash

Last week the political spin machine went into overdrive for both supporters and opponents of basic income. It was reported in the media that a highly publicised “basic income” trial in Finland was being abandoned, as politicians opted instead for a more aggressive UK style of means-tested benefits.

In fact as we now know, the Finnish trial will run its full course as planned until 2019, and any conclusions will not be published until after the trail has ended. So nobody on either side of the debate should yet be using this example to score points.

Nevertheless, it seems the right time for a deeper and more thoughtful debate about whether we should be pushing for general trials of basic income at all. Can limited trials actually tell us anything useful about what a truly universal and permanent basic income would deliver?

Like many others, I have been caught up with enthusiasm for new trials appearing around the World. In February an excellent “Basic Income” day run by the London School of Economics included speakers on cash transfer programs from Finland, India, Canada, Namibia, Kenya, Uganda, Rwanda, Serbia, Iran, Scotland, and Holland. To these we could of course add Alaska’s long-standing Permanent Fund Dividend, and isolated private trials being worked on in America. This is all very exciting for those who believe passionately in basic income, because we are assume that if we can just get enough trials running, the huge benefits of UBI will soon become self evident.

However, I think we should take this moment to debate and focus our thinking more precisely. Trials are the key moment when the rubber really hits the road between the fundamental principles of UBI, and the hopelessly messy world of state income redistribution.

Whatever we do, we can be certain that the results will be highly politicised and, if badly conceived, trials could even be used to turn public opinion against a basic income. To make matters worse, most politicians are only interested in quick-win political results, and will inevitably distort trial plans to suit their own agenda, as was clearly the case with the Kela trial in Finland.

If we want a reasoned debate about what we can and should be seeking to achieve in future trials, then we need to recognise some of the following realities:

  1. Every basic income trial is fundamentally flawed before it starts. No time-limited trial can replicate the huge transformational changes which will come from applying a universal basic income across an entire economy. The most we can hope to achieve within trials is to modify the individual incentives for a very small number of trial participants. These very personal incentives will only ever be tested in a job market and local economy that remains exactly the same as today, immediately negating many of the biggest community advances of a true basic income. We clearly cannot expect trials to demonstrate transformational results, if we are not bringing about a wider transformation in our economy at the same time.
  2. Even the individual effects of a basic income on behaviour cannot be properly replicated in a time-limited trial. Consider someone already living on generous unemployment or disability benefits in Finland. How many would seriously consider putting this income at long term risk by taking up an insecure or low paid job during a 24 month trial? Participants will be only too well aware that trial funding is likely to be withdrawn at the end of the scheme (as will clearly now happen in Finland next year) leaving them potentially stuck in an insecure job with no way forward, but little better off financially than they were on benefits. We cannot expect a short term trial to remove the negative incentives of the “poverty trap” which only a permanent basic income can address.
  3. Trials are repeatedly being cut down by politicians to focus only on measures designed to get the unemployed back into paid employment — precisely what happened in Finland! Yet in most G20 economies official unemployment is only a few percent. The biggest number of beneficiaries of a future basic income would not be the unemployed, but low paid workers with inadequate or insecure income. The question of what those already in these jobs would do with an additional monthly payment, on top of their existing earnings, is probably the most important question to answer. Yet many trials specifically exclude this group entirely.
  4. Before we can accurately assess the full benefits of a basic income, we have to change our economic thinking and targets. Economists and politicians are still wedded to outdated ideologies of GDP growth, and labour productivity. The only measures of success they are interested in are traditional targets of workforce participation and economic output. 
    But these measures are completely blind to the long term social value of giving a basic income to care-givers in the home, or mature students in college. They place no value on empowering citizens to choose their own work priorities instead of just taking any job they can get to survive. Until we have meaningful measures of social capital and engagement in our local communities, any trials of UBI can only be assessed on 20th century targets that bear little relevance to human progress in the 21st century.

Given all these barriers, what can we conclude about design principles for future trials?

Firstly we must dispense with the idea that there can be any kind of meaningful miniature, or time limited test of a true basic income. It is simply not possible to replicate in a trial the full effects of a such a huge change to the base of our entire economy.

The most we can hope to gain from cut-down UBI trials are useful insights on logistical issues — to do with security and ID checks, how to deal with participants who don’t have access to bank accounts (particularly in low income countries), how to manage overlaps with existing benefits and healthcare systems, and so on. These practical insights will be useful, but we should never assume that we can use a generalised trial to assess all the potential future benefits of a universal basic income.

Instead, we need to focus much more clearly on designing trials to answer very narrow and specific questions. For example, if the intention was to show that a basic income could overcome disincentives to work created by means tested benefits in Finland, they could have used a very different approach. Firstly, don’t give the unemployed, who already enjoy very generous basic benefits in Finland, new money to make them more comfortable. Equally, don’t design your trial so that participants know they are likely to lose that extra money after 24 months when the program ends, possibly leaving them worse off than before.

A far better idea would have been to guarantee that any existing benefits they were receiving before the trial, would be matched and maintained for the next ten years, regardless of any extra income they managed to earn in that time. This of course is not a basic income. However, it would have evaluated the potential benefits that a basic income might achieve, by negating the effects of means testing and the resulting negative incentives to work.

Other areas of focus could include specific trials giving additional income to low paid workers, again for the longest time period possible (5–10 years at least) to measure how they respond, either by reducing hours of work, changing jobs, starting a business, or spending more time in education, or at home caring for family.

Analysing changes in household earning and spending patterns from this group (including effects on household savings or debt) might also reveal interesting effects on poverty that would be achieved by a future basic income. Using these results we could then project what the true economic multiplier of money given through basic income would be (economic benefit derived from each pound, euro or dollar invested). We should certainly expect the resulting ratio to be very much higher than for quantitative easing, or for corporation tax cuts which have been eagerly applied across most G20 nations.

Trial designs must also be very carefully tailored to local economic conditions. The approach for a country like Finland, which already has very advanced levels of government income redistribution, will clearly be very different to that taken in rural India. A country like the UK already has free universal education (at least to age 18) and free universal healthcare, but suffers from exceptionally high cost of accommodation. This might make affordable housing an equal priority for funding alongside UBI. By contrast most non-metropolitan areas of America don’t have a housing problem, but still lack funding for basic healthcare and education programs, so might prioritise universal services before tackling UBI. All these local social and economic factors are bound to have a big impact on predicted behaviour of individuals when trials modify their incentives.

Although the principles of basic income are the same around the World, the design of trials must be very carefully tailored to a local context, and are unlikely to be directly transferable to other countries without major adjustments. Many more trials will be required to develop the most effective design for a universal basic income, but their success will depend on asking very specific questions, and then carefully designing a properly controlled process to answer them, one question at a time. Once all these insights can be brought together from around the World we may at last be able to state clearly, with supporting evidence, what a basic income can achieve for The Global Race, and how best to design it.

In my view, we do need to challenge the assumption that generalised trials will be the most important gateway to implementation of a basic income. No country would be capable of moving overnight into a full UBI that offered liveable wage levels in any case. A far more likely scenario is to start in a very small way with schemes to establish the principle of regular dividend payments to every citizen at a modest level. Over a number of years this could be gradually expanded by incorporating selected welfare payments, tax breaks, and finally more ambitious wealth redistribution schemes. Over the years this is likely to take, any number of studies can be run on the economic and social effects of the “citizens dividend” as these payments increase in value.

The advantage of this approach is that no long term trials are needed to start. Simply the political conviction to establish the base program. Indeed, this strategy might even make us question whether our main focus should be on pushing for more UBI trials? Our energies might be better directed at establishing the principle of universal citizen payments first, perhaps by arguing on environmental grounds for a “carbon fee and dividend”. But that’s a whole other story.

Robert Bruce, author of ‘The Global Race’.