The scheme of basic income which should be paid in cash in a regular basis without any burden of conditions was thought as a response to a massive replacement of human brain workers by computers, technological challenges, like robotization or self-driving vehicles. Its main aim is not only to diminish poverty, but also to liberate everyone by giving them a moderate income that they can make a choice. The side effects of globalization, like polarizing income and creating winners / losers, and conditional nature of social protections, such as minimum wage legislation and unemployment insurance will increase the precarious jobs with miserable salaries. However, Philippe van Parijs and Yannick Vanderborght argue that basic income will eliminate precariousness and enable everyone to work and smooth extreme poverty substantially. (Parijs, 2017)
The proponents of basic income consider it as a useful scheme to escape from both unemployment and poverty traps, whereas the opponents provide significant practical issues generated by basic income. There are two main criticism of basic income which the former focuses on cost critique and the latter on the work critique. In this article the attention will be given to the critique of work and the possible answers of basic income defenders to the debate.
Regarding the first critique, Simon Cowan as one of the opponents of it, argues that the implementation of basic income model is highly expensive, as it requires additional revenue beyond the scope of suggested tax increases. Capital gains tax or superannuation tax concessions can cover a small percentage of a basic income, therefore, it will require additional funding. He further argues that another main drawback of basic income, is its unconditionality. According to him, welfare state has been based on reciprocity rather altruism which means that for some people paying taxes for the welfare of others can dismantle social solidarity which has been the base of welfare state. He suggests that basic income scheme should consider favourable conditions for taxpayers as well. (Cowan, 2017)
One of the most important arguments of opponents of basic income – regarding the second critique – particularly subsistence-level basic income, is that basic income might encourage people to stop working. They further argue that if a basic income is enough for recipients’ livelihood, then there will be no incentive to find a job. Therefore, a basic income will never have a social and economic feasibility. To give people cash will hurt the economy, cause people to work less by disincentivizing them and distort social cohesion which can be found in work environment. (Yi, 2017)
In response to the critics of lower supply of labour and workless future, the proponents of the scheme argue that if incentives matter, then basic income should be preferred. It can overcome unemployment and poverty traps by encouraging people with low skills to enter the legal part of the market than going to precarity or black market. As an active participant of the debate, Guy Standing puts forward that basic income has a longer-term impact on human capital, rather just organising supply side of the labor market. By proving a modest income for everyone, basic income gives an opportunity to go to part-time work or low-paid internships which young people can acquire further skills required by job market. (Standing, 2017) Furthermore, basic income can organise more relaxed and flexible labor market through unconditionalities where everyone can find his/her dream job. Freeing people to make a choice can be viewed as an investment to economic system rather forcing them to work. (Parijs, 2017)
The supporters of basic income’s work critique exemplify the results of Negative Income Taxes which has been implemented in the U.S. and Canada during 1970-80s. As an unconditional cash program, NITs are equal to basic income in its essence. Loana Marinescu who investigated the wide range literature on unconditional cash programs, argues that in some experiments during the program, the observations of some reductions in work and decline in labour force participation lead the criticizers to claim that basic income can cause a decline in labour supply and incentive to work. They concluded that experiments proved no overall effect on the share of labour market. (Marinescu, 2017)
Through the analysis of NIT experiments, Marinscu finds that although fall in employment rate that caused lots of criticism, the empirical data showed just 4 percent reduction in only one – Seattle/Denver – experiment. (Marinescu, 2017, p. 4) As a response to the decline of labour supply in this experiment, the basic income supporter, Eric Hanushek empirically proved that non-labour supply has perfectly been compensated by rising school attendance and longer job searches. Better and longer job searches enhance matching between jobs and candidates and therefore, lead to the improvement in economic efficiency. (Hanushek, 1987) It means that the minor reduction in labour supply due to basic income would result in increasing quality of works and making a choice of desirable job which will rise happiness index, good perceived health and lower stress level.
The supporters of basic income don’t correlate the small cuts in paid labour which can occur after its implementation, with laziness. Rather, they emphasize that lower labour supply should be analysed from the beneficial longer-term effect which will enable people to find a job better suited to their capabilities and needs. People can improve their skills through part-time opportunities or take the opportunity to better their lives, like studying for a degree. On the other side, basic income can also lead to active labour participation by providing strong incentives to work without any cuts in paid labour as experienced in many cases during U.S., Canada experiments. (Marinescu, 2017) The active participation in labour market can be understood as working at jobs which employees like more (or have intrinsic incentives) rather than being more paid.
There are two main aspects of basic income in the provision of active labour participation. Firstly, people who are unemployed could find encouragement to improve their skills through part-time work and other trainings in order to find a full-time job. As all kinds of work are valuable in basic income, their work in part-time or training also contributes to labour supply. Secondly, people who are employed full-time, but don’t satisfy with their job, will find time to better search for the job that more applicable to their competences. Here the incentives matter more in the active labour participation of basic income, because high enthusiasm towards their career will make employed people find their dream job. In the environment where everybody engages with the work which satisfies them, the happiness and health indexes and trust in future will increase which will lead to a sharp rise in the economic efficiency.
Experiment in Finland
The purpose of the basic income experiment in Finland was to investigate “whether a social security model based on a basic income could promote more active participation and provide a stronger incentive to work than the present system” (Kangas, et al. 2019). Through this experiment, the Finnish government aimed to answer the question whether basic income hinders labor market participation rates by stopping losing benefits in exchange for employment. Even though, the experiment targets solely the unemployed population which is only a fraction of the society; thus, this experiment is rather a partial basic income experiment than a universal basic income experiment. The subjects were unemployed individuals from which 2000 were randomly selected to the treatment group and the control group consisted of 173,222 unemployed Finns. The 2000 Finns aged 25–58 years received an unconditional 560 euros stipend per month free from obligations and tax which corresponded to the monthly net amount of the basic unemployment allowance and the labor market subsidy provided by the Social Insurance Institution of Finland (Kangas, et al. 2019).
The preliminary results show that there is very little difference between the treatment and the control groups regarding employment after one year. The number of days spent with employment were 49.64 and 49.25 days on average respectively (Kangas, et al. 2019). Even though, the increase in days spent in employment is slightly bigger in the treatment group, the two groups show very different results for which the effectiveness of basic income was actively criticized by the media.
Source: Finnish Ministry of Social Affairs and Health, 2019
However, it is questionable whether this indicator really measures the target outcome. Days spent in employment does not necessary correspond with the employment rate. If the government goal is to increase labor force participation rate, it might be closer to investigate the ratio of persons that are employed part -time or full time since it is possible that more people work for shorter time in the control group which gives the same result as if fewer people worked for longer hours. According to the survey results, out of the total employed people at the time of the survey, more people worked part-time in the treatment group (31 percent) compared to the control group (25 percent). The ratio of part-time workers was higher in the treatment group than in the control group, 38 percent and 30 percent respectively which may offer some evidence to that one of the possible beneficial outcome of basic income is that people are more likely to engage in jobs that they truly prefer and more open for voluntary work, part-time and self-employment (Parijs & Vanderborght, 2017; Kangas, Jauhiainen, Simanainen, & Minna, 2019). Interestingly, when part-time workers were asked, if they would rather work part-time or full-time, 68.6 percent of them in treatment group while only 58.2 percent of the control group responded they would rather work full-time. This might imply that people receiving basic income had the incentive to engage in part-time while they would prefer working full-time since they were not facing the risk of losing their monthly stipend while people without basic income would have to wait for job offers that cover their monthly expenses.
The self-reported well-being was generally larger in the treatment group than in the control group. Participants in the prior group reported higher self-perceived health, ability to concentrate and not surprisingly, lower perceived bureaucracy. In addition to this, people receiving basic income were more optimistic about their future and finding job in the upcoming year. This implies that the intervention had positive affect on people’s well-being which might also have positive effect on their performance at work. These results can also explain how basic income reduces the stress caused by lack of employment and help people break the vicious circle through the lowered level of uncertainty.
This experiment fails to address some other issues such as the possible benefits for workers who depend on precarious employment; temporal, insecure, and discontinuous forms of work since these people may not be receiving unemployment benefits; and thus, were excluded from the experiment. What is more, universal income would cover the entire society while the subjects of this experiment were not selected randomly from the society. They were randomly selected from unemployed people that can differ from employed people in many ways which means the external validity of this experiment is quite low, its conclusions cannot be applied for the entire population. The experiment fails to observe how basic income would affect the employed people. Furthermore, it is impossible to draw conclusions for the long-run based on the first -year results. It is possible that more positive results would arise on the labor market and it is also possible that increasing well-being was solely the result of the intervention and not sustainable for the long-run. Overall, the experiment did not answer its proposed question completely, and raised a few more which should be further investigated. Experiments on truly universal income, given to all people in a certain town may offer better insight for the debate on basic income.
