Rachael Hochman is an intern at the University of Bath Institute for Policy Research, and a Welfare Benefits Adviser at Citizens Advice Bucks.
Discussion of universal basic income (UBI) as an alternative means to traditional methods of social security reform has risen greatly over recent years. As policymakers display a renewed interest in improving the stability of their social security systems in response to the COVID-19 pandemic, could UBI - a guaranteed income cash transfer - be the answer?
Basic income consists of five characteristics:
- Periodically paid, that is not a one off-grant,
- cash payment, that is not a payment in kind (e.g., free rent),
- individual, that is not paid to households,
- universal, that means it is not means-tested, and
- unconditional, that means not in exchange for a task or behaviour (e.g., no requirement for children to attend school).
By satisfying these characteristics, UBI can work towards the aims of poverty alleviation and increasing financial security.
To determine whether UBI serves its aims, trials into its effectiveness have been carried out across both advanced and developing economies. The results from 13 of the most prominent UBI, and near-UBI, trials are presented below across a series of nine dimensions: employment, education, female empowerment, health, food security, finance, housing, relationships, and life satisfaction.
A fear commonly associated with the implementation of UBI is the creation of the ‘free-rider’ who withdraws from the labour market as they receive a guaranteed income. Whilst this fear was proven true in several trials, positive and null results on employment were also observed.
In the US, the SEED trial saw full-time employment increase from 28% to 40%. Here, UBI removed the barriers faced by recipients to find full-time work as it reduced time spent on part-time and gig-economy work. Despite these positive findings, the guaranteed annual income study, ‘Mincome’, in Dauphin, Ontario, Canada, found that cash transfers reduced labour market participation by 11.3% points. This reduction has been attributed to social interaction in response to the payments and to younger people delaying their entry into the labour market by remaining in education.
Educational outcomes in response to the implementation of UBI experienced a significant improvement. The bi-annually distributed Eastern Band of Cherokees Casino Dividend (USA) saw an additional $4,000, between 25% and 33% of recipients’ household income, increase educational attainment by a whole year. In India, girls were found to benefit more than boys as UBI freed them from unpaid caring responsibilities and household duties, which increased female secondary school attendance by 30%.
Women also experienced significant improvements in gender equity and overall female empowerment. In India, the additional income increased the authority of women and their ability to influence decisions about household finances. The Namibian trial found that the cash transfer reduced women’s dependence on men, increased their control over their bodies, and reduced the pressure experienced by women to engage in transactional sex.
Across the trials, improvements in health outcomes occurred in: (1) Impacts on children; (2) hospital admissions, and (3) mental health and overall wellbeing. Children in India experienced a dramatic increase in their normal weight-for-ages. The proportion of children with a normal weight increased from 39.2% to 58.7% over the 17-month trial. Hospital admissions in Dauphin experienced an 8.5% reduction during the Mincome period whereas, in Namibia, there was an increase in the uptake of healthcare facilities. A health centre costing N$4 per visit experienced an increase in income from N$250 per month before the trial began to N$1300 per month when payments were received, showing that additional cash allowed households who previously did not have the income to seek medical treatment to do so. Improvements in mental health occurred in the US SEED trial through a reduction in Kessler-10 scores, a scale that measures psychological stress whilst in Kenya a 1.2 reduction in CES-D scores illustrated a similar result.
Increased food security helps to strengthen positive health outcomes and prevents children from going to school hungry which can affect their learning. In India, spending on food rose from 52% to 78% and a greater variety of goods were purchased that widened participants diets including, meat, vegetables, pulses, and eggs.
Improved financial security, reduced debt levels, increased consumption and adjustments in savings occurred across the UBI experiments. 73% of transfer recipients in India experienced a reduction in debt levels and there was an overall increase in consumption of goods including motorcycles and school materials. The cash transfers in Iran caused opposing results amongst the rich and poor in terms of savings with the former saving more and the latter savings less. The poorest households likely reduced their savings as they had less need to save for unexpected expenses as the cash transfer provided an income safety net. Households also spent their additional income on home improvements. Here, 43% of households in the Indian trial made upgrades to their housing.
One of the least investigated outcomes across the experiments was the effect of additional income on recipients’ relationships and family. Whilst more difficult to quantify, the Cherokee Casino Dividend reported that the additional income improved parent-child relationships, presumably due to fewer financial pressures.
The ability of UBI to improve life satisfaction was tested. In Finland, the treatment group returned a life satisfaction score of 7.32 out of 10 whilst the control group reported a result of 6.76 out of 10. This shows that UBI has the potential to greatly improve life satisfaction.
Current research on the long-term effects of UBI is limited and it is recommended that future research focuses on longitudinal studies to observe the intergenerational effects of UBI, such as the implications on child development and the labour market. More research into the effects of UBI at the community level would also be useful to secure a better understanding of the social responses to the cash transfers.
Overall, the trials return vastly positive results across the nine categories and illustrate how UBI can alleviate poverty and improve financial security. Further research into the longitudinal implications of implementation is imperative before considering UBI an alternative means of social security reform.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath. Learn more about our research on UBI.