Universal Basic Opportunity Fund: A Step Towards Universal Basic Income
The Opportunity Fund is a transition to Universal Basic Income at a time of political turbulence
By Anthony Painter, Jake Thorold and Jamie Cooke
Follow Anthony, Jake and Jamie on Twitter @anthonypainter, @thorold_jake and @JamieACooke
This article is an extract from the RSA report Universal Basic Opportunity Fund: Pathways to Universal Basic Income
Evidence from elsewhere suggests that if given the means and freedom to make changes to their lives, people are far from lazy. Early results concerning the large cash transfer programme run by GiveDirectly in Kenya and Uganda show numerous examples of recipients using the payments for useful purposes, such as starting a business or expanding an existing one. Similarly, 72 percent of Alaska Permanent Fund Dividend recipients report using their income for useful things, including education or repayment of prior debt. In a 1970s Basic Income experiment in Dauphin, Manitoba, a slight reduction in working hours by recipients was accounted for by use of the income to access educational opportunities, care for relatives and to shift to more manageable working hours among those who were overworked.While the UK context is admittedly different, these results offer encouragement that recipients would use the Opportunity Fund to make positive interventions in their lives.
The UBOF provides a mechanism with which to test further these already known impacts of key Basic Income principles, such as unconditionality and regularity. Its major strength is the opportunity it provides for people to exercise control and autonomy over their lives by providing a modicum of financial security.
The Fund is however not merely a stop-gap on the road to a full Basic Income. It is a policy entirely justifiable on its own merits. From an assessment of existing literature on unconditional cash transfers and more, we believe that the instigation of a UBOF could offer the following impacts:
Greater freedom
For many citizens receiving payments made on a monthly basis up to a total of £5,000 per year could be the catalyst to making major positive changes to their lives. For those on low incomes in particular, the burdens of essential expenditures on rent, mortgages, dependents, food and more make entertaining a change of path or even job a frightening or even impossible proposition. While £15,000 for a family of three is not enough to provide economic security in the long-term (with housing and other support on top as needed), it could provide an escape route to those that currently feel trapped in unfulfilling work yet unable to make changes due to their financial obligations.
Providing people with roughly two and a half months’ worth of income in addition to housing support could be the helping hand that many need: to leave an existing job to provide time to look for a better one[5], or to undertake a vital piece of training to re-enter the workforce at a higher level. For others, one or more payments of £5000 could constitute the seed fund for a business idea not yet realised due to financial constraints.
In short, the UBOF could provide a baseline of security permitting people to take risks that they would not otherwise be able to take.
Opportunity to change path
We live in a world of rapid change, where economic volatility, technology and global connectivity have meant that change is a constant. Individuals should also be able to transition into different forms of work — the days of entering a job on leaving school and staying there until you retired are long gone (if, indeed, they ever really existed for the majority). Instead, individuals are expected to be able to adapt and evolve to a changing labour market, to be able to respond to new opportunities as they arise.
Worryingly, the expectation that people be adaptable within the labour market comes at a time when funding for further education has undergone a series of funding cuts. As automation gathers pace it primarily will be those in low-skilled work expected to change course despite often being the least well equipped to do so. A recent report from the World Economic Forum called for mass programmes of re-skilling to cope with anticipated technological disruption and displacement of work. Alongside funding for re-skilling, they call for stronger systems of income support whilst re-skilling is taking place to make it feasible. UKOF is designed to do precisely this alongside other interventions such as widening the application of the Apprenticeship Levy to wider up-skilling.
The Fund would provide a means to support participants with these changes. It is important that the Fund remains unconditional to enable individuals and households to make choices best aligned with their needs; however, it could be utilised in a way that provided additional support for areas of national need (ie a top up payment for those retraining in areas of skill shortage). The recent introduction in France of personal training accounts could provide a good model for this, allocating funding to those taking accredited training courses approved and valued by the state and employers to fill particular areas of need.
Better health and wellbeing
The UBOF could alleviate some of the insecurity experienced by those in low-paid work. It could also, as described above, provide a route away from the kinds of low-paid, insecure work associated with poor wellbeing. Previous Basic Income type initiatives or experiments have suggested a link between unconditional payments and positive health outcomes. A minimum income experiment conducted during the 1970s in Dauphin, Canada found that an unconditional income resulted in a statistically significant reduction in physician contacts related to mental health as well as fewer hospital admissions for “accident and injury.” Mental health diagnoses in Dauphin also fell. Once the experiment ended however, these public health benefits evaporated.
Similarly striking results occurred in North Carolina during the 1990s, where a longitudinal study traced the impacts of an unconditional $4,000 per year casino dividend paid to Cherokee families. Children whose families received the payments showed significantly better emotional and behavioural health by age 16 relative to their non-tribal peers, who did not receive payments. Parents also reported that the drug and alcohol intake of their partners decreased after the payments began. These reported changes among adults were uncontrolled observations, but the researchers noted no other major policy changes during the study.
While the link between income inequality and bad health outcomes has been well established, the actual mechanism driving this is little understood. Shafir and Mullainathan describe a process of cognitive ‘bandwidth scarcity’ whereby scarcity of resources impedes sound decision making with clear potential for negative health outcomes. The complexity of the welfare system as currently configured, with its tripwires of arbitrary conditions and punitive sanctions, can result in high levels of stress driving bad health outcomes. Similarly research has indicated that the stress associated with being in low-paid, insecure work may have more damaging health impacts than actually losing employment. Lack of certainty over income and personal agency is understandably stressful, producing a range of negative effects from unhealthy lifestyle choices in the short run and conditions such as higher blood pressure longer term.
Significant portions of working population live precarious lives, in a position where one life event (illness, unemployment, changes in mortgage or living costs) would be enough to severely undermine their wellbeing. Ability to take part in the Fund as necessary, particularly after initial bedding-in stages have been completed, would provide individuals with a knowledge that they had an alternative source of income available when required. This can create improved wellbeing (precariousness being a clear contributor to reduced physical and mental wellbeing), and greater resilience for individuals in responding to shocks. According to RSA-commissioned data, 32 percent of a representative survey of UK workers have accessible savings less than £500 and 41 percent have less than £1,000.
A further health and wellbeing benefit that the UBOF could address relates to caring. Carers Trust reports that there are currently around seven million people with caring responsibilities in the UK, with one in eight workers being a carer. Of those carers not working, a fifth have given up work and therefore income to become a carer. The UBOF could provide support for people to fulfil their duties towards loved ones at crucial moments, perhaps even taking time off work to do so. As well as a better quality of life for the person being cared for, the financial support available through the payment could prove invaluable at relieving stress caused by a need to juggle caring responsibilities with generating an income. This also will help the UK more effectively meet its wider care needs, ie not just through relatively expensive state services.
Economic impacts
A status quo of low-paid, low-skill work is a key factor in the UK’s poor productivity growth rate. This is further compounded by a diminishing commitment among employers to providing training, which contributes to overemployment and unfilled vacancies. Recent statistics detail the decline since 2000 of numbers of employees taking training courses or working towards some kind of qualification.
The UBOF potentially provides an opportunity to reverse these trends, by offering recipients the means with which to upskill themselves and thus offer more value at the workplace, which should ultimately drive up productivity. It is entirely plausible that an investment in people along the lines of the UBOF would be good for business and good for economic growth. It could kickstart a cyclical process whereby economic growth produced by a more skilled and fulfilled workforce could drive up living standards, producing a healthier and happier workforce able to push further economic growth. While the initial debt taken on by the government to fund the UBOF is significant, a potential impact through induced economic growth could stand to make it a sensible long-term investment as opposed to a costly expenditure.
Arguably, with the right support, the UBOF could support wider innovation strategies, at the margin at least, by providing the means through which creative citizens could invest in starting a business, developing prototypes or developing skills. By tapping into some of the creative potential that we believe to be inherent in every human being, again the UBOF could potentially prove to be a savvy piece of financial investment, on top of all of its other benefits. As Box 1 below details, the Enterprise Allowance Scheme introduced by Margaret Thatcher’s government in 1982 shared parallels with the UBOF, with positive economic impacts.
This article has summarised how the fund could help the UK transition to Universal Basic Income. It details the anticipated impacts such a fund could have on individuals and the economy.
We present how the fund would be administered in in another article — The Technicalities of the Universal Basic Opportunity Fund
To find out more about our research, please contact Anthony Painter
For full references and bibliography please visit the RSA website to download the full report
