Is it time for a Coronavirus Basic Income?

In Week 3 of the WISE blog series, Jim Campbell and Naveed Hakeem pick up the long running debate on Citizens’ or Universal Basic Income and place it in the context of the economic impact of Coronavirus, arguing that response and recovery measures present a renewed opportunity to introduce a basic income.

 

Is it time for a Coronavirus Basic Income?

In recent years there has been renewed interest in a Citizens Basic Income (CBI) or Universal Basic Income (UBI). This is a periodic cash payment unconditionally delivered on an individual basis without means test or work requirements. A number of feasibility studies have been carried out in Finland and the Netherlands. While in Scotland, local authorities in Glasgow, Edinburgh, North Ayrshire and Fife are in the process of undertaking pilot projects.

Why the renewed interest in CBI?  In part, it is a response to the changing nature of the labour market and the growing crisis in the social security system in many western countries, which has been exacerbated by the global financial crisis and the austerity policies, which followed. There is a perception that the welfare system is no longer providing an adequate level of security. More recently, the Coronavirus pandemic highlighted the inadequacies of welfare provision. This led some to advocate the introduction of CBI as a response to the crisis; Pope Francis in an Easter letter to leaders of social movements around the world argued that:

“This may be the time to consider a universal basic wage which would acknowledge and dignify the noble, essential tasks you carry out. “(Pope Francis 12/4/20)

In Spain members of the coalition government have advocated the introduction of a basic income to combat the economic impact of the coronavirus on the poorest households with it expected to cover around one million households.  Although this does not constitute a CBI, since it is not universal, is limited to workless households and is conditional in that recipients need to look for work,  it could be seen as a step on the road to a CBI since the suggestion is that this would be a permanent rather than a temporary measure.

In the UK 110 Members of Parliament and the House of Lords signed a letter to the Financial Times calling on the introduction of a recovery UBI to limit the economic fallout from Covid-19 (Financial Times 22/4/20).

Similarly, in line with other countries the UK reacted to the growing Covid-19 pandemic by imposing social distancing which has required the shutting down of parts of the economy including; non-food retail, hotels, restaurants and leisure facilities. Recent research suggests this will have a gendered impact and follow existing lines of inequality, with young women and low earners being more negatively impacted than men and high earners (Joyce & Xu, 2020). The gendered nature of the impact is further exacerbated by the over representation of women in low earning occupations.

The UK government has also announced a financial package costing £350 billion pounds which will put in place a number of short–term mitigating measures for employees, self-employed and business to try and protect people from the financial consequences of the economic slowdown (OBR, 2020). The expectation is that the decline in output caused by Covid-19 will be temporary and things will return to ‘normal’ when lock down is removed.

However the return to ‘normal’ could well be a slow process and indeed there is a strong argument not to return to ‘normal’ and repeat the same mistakes experienced under previous economic crisis such as the austerity measures introduced after the Great Recession. There is an opportunity to do something different and a CBI presents as that opportunity.

A CBI could be a means of ensuring aggregate demand is buoyant and citizens have economic security in the aftermath of the economic crisis. It would restore an adequate safety net in the UK social security system where problems have been apparent for years but have been cruelly exposed by Covid-19. The system does not act as a safety net against poverty, given the increase in the numbers suffering from poverty particularly the growth of in-work poverty. The UK social security system was designed for a world of full employment, where work was full time and permanent, not for an economy characterised by low pay and precarious employment.

However, a CBI should not be viewed simply as a fix to the current system but:

“Rather, the concept itself involves the acceptance of a whole new way of thinking about social security policy in terms of the functions it can, should and does perform. If understood in these terms, a CBI is more representative of a radical idea than a welfare reform proposal… perhaps we need to consider the CBI proposal as an opportunity to reshape our thinking around the question – what makes a good society?   (McKay 2013:99)

 

Financial Times 22/4/20 available at https://www.ft.com/content/6fdaf216-8324-11ea-b555-37a289098206

Pope Francis letter 12/4/20 available at https://cruxnow.com/vatican/2020/04/pandemic-is-time-to-consider-universal-basic-wage-pope-says/

Joyce, R, & Xu X. (2020) Sector shut down during the Coronavirus crisis: Which workers are most exposed. IFS Briefing Note BN278. Institute for Fiscal Studies April 2020. Available at  https://www.ifs.org.uk/publications/14791

McKay  A. (2013) Crisis, Cuts, Citizenship and a Basic Income: A Wicked Solution to a Wicked Problem. Basic Income Studies 8 (1) 93-104 Available at https://ideas.repec.org/a/bpj/bistud/v8y2013i1p93-104n5.html

Office for Budget Responsibility (2020). Coronavirus reference scenario. The OBR’s coronavirus analysis. Available at:

https://obr.uk/coronavirus-analysis/

 

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