As a basis for this series, I am going to use an article from the Guardian of 4 June 2023, entitled, ‘Universal basic income of £1,600 a month to be trialled in two places in England’, by Dahaba Ali Hussen. Also, I will be relying on my own material from the many articles I’ve written over the years. Part I will be very brief and to the point, so let’s get going.
The Guardian article begins with the following,
“A universal basic income of £1,600 a month is to be trialled in England for the first time in a pilot programme. Thirty people will be paid a lump sum without conditions each month for two years and will be observed to understand the effects on their lives.”
We will stop here because both the title, and everything after the letter “A” at the beginning of the first sentence, ensures that the entire article is incorrect. That might set the speed record for a journalist getting something wrong. Somebody contact the Guinness Book of Records.
The basic income trial is not universal
Anyway…
A ‘universal’ basic income is not being trialled in England, nor anywhere else in the world. This might come as a surprise to some, but the programme that is to be trialled is a basic income scheme. Here’s why.
A universal basic income (UBI), and a basic income guarantee (BIG, or sometimes seen as, ‘BI’) are not the same thing. And no, this is not semantics, for two major reasons. Firstly, a universal basic income is, by definition, universal; everyone, both rich and poor, will receive £1,600 per month. A payment of £1,600 per month to 30 people is not universal; rather, it is a basic income payment targeted at a specific segment of the population.
Secondly, you cannot possibly trial the effects of something as wide-ranging as a universal basic income by giving only 30 people some money. It is not the same thing as a revolutionary new drug being tested, or some political poll being done.
In the case of a universal basic income scheme, you simply cannot select a small, balanced representation of society – some disabled, some black, some white, etc. – and then apply the economic results of that restricted trial for 30 people to the whole of the nation.
True universal income
The effects on total consumer spending of giving 30 people a monthly payment of £1,600 are vastly different compared to the effects of giving an entire nation a monthly payment of £1,600. The only way to trial a universal basic income would be to give a £1,600 monthly payment to everybody in the nation for a period of at least 24 months.
Furthermore, you cannot properly trial a targeted basic income guarantee either, simply by studying a small test group. Again, the effects of giving £1,600 per month to, say, 30 pensioners will not necessarily translate to the effects on the whole of the economy were all pensioners to receive the payment. I will address the UBI and total consumer spending later in the series, and get into more technical information where I compare it to the job guarantee.
Also, concerning the tax implications on a universal basic income, it is clear that the moment the central government taxes the payments of a specific group at one rate, and at a lesser rate (or not at all) of another group, the UBI ceases to be ‘universal’ by definition.
Lastly, as a real-world example, social security in the United States is a form of a basic income guarantee, and not a universal basic income, since only a certain segment of the population receives it.
Basic income: terms matter
So, to review.
A basic income guarantee is a programme that is applicable only to a specific group of people; some will receive it, but others will not. This is the actual programme that is “set to be trialled” in England, and not a universal basic income.
A universal basic income is a programme that pays everyone – from the poor to Elon Musk, Mark Zuckerberg, Iain Duncan Smith, Jacob Rees-Mogg, and Keir Starmer – an equal sum of money each month.
So, if you support a universal basic income, but you are opposed to rich people like Musk and Zuckerberg receiving a payment, and you would ensure that the wealthy could not receive the payment, then by definition your proposed universal basic income is no longer universal. You are left only with a basic income guarantee, which will have vastly different effects on consumer spending and the economy to that of a universal basic income.
Terms matter.
For an overview of essential information regarding why a UBI or a basic income scheme are inferior policies to a job guarantee, there’s a 2017 article from ABC Australia by Claire Connelly, entitled: ‘Why a universal basic income is a poor substitute for a guaranteed job’. It features information from Bill Mitchell, Fadhel Kaboub, Pavlina Tcherneva, Steven Hail, and myself and is well worth a read.
Next up: part II – a brief look at automatic stabilisers and their function.
