Not quite Universal Basic Income: the new selectivity

UBI is universal when it provides for everyone in a category, without further conditions; basic, when it is only the starting point, and people are free to add income from other sources; income, when it is paid periodically.   The Basic Income Earth Network identifies five main points:

1. Periodic—It is paid at regular intervals (for example every month), not as a one-off grant.
2. Cash payment—It is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not, therefore, paid either in kind (such as food or services) or in vouchers dedicated to a specific use.
3. Individual—It is paid on an individual basis—and not, for instance, to households.
4. Universal—It is paid to all, without means test.
5. Unconditional—It is paid without a requirement to work or to demonstrate willingness-to-work.

There is more to being ‘unconditional’ than not having a work test – benefits that are restricted to people with disabilities or care needs have to impose a test, and to that extent they are selective.  UBI tries to avoid the pitfalls of selective benefits, which have three great problems: complexity, the difficulty for claimants of knowing whether  or not they will be entitled, and potential stigma.  Selective benefits commonly fail to reach many of the people who ought to be receiving them.

Arguments for Basic Income have captured the imagination of many people.  I have my reservations about them, and those reservations are serious, but I’m sympathetic to the core objectives: providing people with a foundational income that is consistent, reliable,  and as simple as possible.

It seems, however, that some recent programmes have departed somewhat from the script. In Wales, a ‘basic income’ experiment is being conducted for 500 young people leaving care.  The programme is linked to advice and support relating to financial management, education, employment and welfare.  That’s the right way to go about supporting vulnerable people, but it’s three steps removed from ‘Basic Income’: it’s selective, time-limited and not just a cash payment.  In San Francisco, there are three such programmes.  The first is the “Abundant Birth Project“, which offers a ‘Basic Income Supplement’ to pregnant women who are African American or Pacific Islanders, mainly for the duration of their pregnancy and shortly afterwards.  Next is the Guaranteed Income Pilot for Artists, supporting two cohorts of 60 artists, nominated by partner organisations.  The third, and most recent, is the Guaranteed Income for Transgender People, offering both cash support for 55 transgender people and ‘wrap-around’ support (including medical care, case management and financial advice).  Again, these initatives are time-limited.

These programmes don’t have much in common with the idea of Basic Income.  They’re selective, short-term, and eligibility is highly restrictive; they are linked, beyond cash, to other forms of support; and their target groups are highly visible.  I don’t think we can draw any lessons from them about how Basic Income might work, or how people might adapt to a UBI.  It’s interesting, however, to see that arguments for UBI have influenced the development of highly targeted, selective benefits – for example, this paper on supporting transgender people.  We’re seeing, not a commitment to universality, but a new selectivity.

How selective benefits affect people who are not being targeted

A technical study for the World Bank challenges one of the central arguments for ‘targeting’ the poorest – as well as posing a major challenge to conventional economic theory.  The report is snappily titled General equilibrium effects of targeted cash transfers: nutrition impacts on non-beneficiary children.   The first effect of cash benefits to selected poor people was substantially to improve the extent to which their children were able to get protein rich foods.  There were marked improvements in nutrition, particularly on stunting – the effect that malnutrition has over time, in limiting children’s growth.

However, the policy also had a side-effect: the relative price of that kind of food increased. That, in turn, had a further effect: it reduced the access of other children, children in families who were not getting benefits, to protein-rich foods.  The effect was clearest in poorer villages where more people were getting benefits.  “We find that weight-for-age is significantly lower and the likelihood of being underweight significantly higher in program villages that have high rates of saturation. Average height-for-age is also lower and stunting rates higher …”

There are two major implications.  The first is about targeting.  One of the key problems with selectivity has always been that a line has to be drawn somewhere: the effect is that people a little above the line are not necessarily being treated fairly relative to those who are just below it.  The way to avoid this is to make the benefits universal – which is what has been happening with basic health care and universal primary education.

The second implication is about one of the received principles of economic theory, ‘Pareto optimality’.  Most economic analyses about of suppose that welfare is increased if at least one person is made better off, and no-one is worse off.  I’ve argued in previous work (for example, my book Reclaiming individualism) that this cannot happen, because prices are relative to resources.  This  study demonstrates the effect very clearly.

The IMF takes steps to scupper universal benefits

A  report from Stephen Kidd about Mongolia and Kyrgyzstan tells us that the IMF have been forcing governments to limit the scope of universal benefits for children.  At a time when the evidence for universal programmes in less developed countries has rarely been stronger – see, for example, S Davala, R Jhabvala, G Standing, S Mehta, 2015, Basic Income –  this is deeply depressing.

I discuss the issues about targeting briefly on my social policy website.  If “targeting” means that there’s a choice of group (for example, payments to pensioners or nursing mothers), it can work.  Targeting “the poor” is much vaguer and more difficult to do effectively.  The process is complex and hard to do with any precision; some favoured methods, such as geographical selection, really don’t work well.  A report by Australian Aid,  Targeting the poorest, found that for poor people the process could seemed bizarrely random, with outcomes that they attributed to luck or divine judgment.  The evidence suggests that selectivity is rather more effective at stopping people from getting benefits than it is at getting them to the people who need them most.  By contrast, universal benefits work.  Arguing to scrap benefits that work and replace them with rules that don’t makes very little sense.