Is Spain about to introduce Universal Basic Income?
Much of the world is in an extraordinary economic situation at the moment. Some employers are laying off staff, and others are furloughing their employees (which has come to mean demanding that workers take unpaid leave). Additionally, many self-employed people are unable to work at all, or are experiencing severely reduced earnings.
Drastic circumstances sometimes require drastic measures, so the British government has announced that it will subsidise up to 80% of the salary of employees who are facing unemployment. Denmark and Australia have proposed similar schemes. However, these are proving very difficult to police (how can a firm prove that it would otherwise make its staff redundant?), and do not apply to the self-employed.
A more comprehensive plan is Universal Basic Income, or UBI, which is apparently about to be implemented in Spain. This radical proposal entails paying a fixed monthly amount to every citizen or household, regardless of wealth or employment status. This single payment may replace unemployment benefit, food stamps, invalidity assistance, state pensions and so on. It’s not a new idea, but it has been back in the news recently thanks to iconoclastic US Presidential candidate Andrew Yang. The entrepreneur, whose supporters call themselves the Yang Gang, made UBI a cornerstone of his manifesto.
Some benefits are obvious. Welfare administration is streamlined because recipients no longer have to prove that they are disabled, or looking for work, for instance. Homelessness and crime should decrease. The enormous financial burden of means testing is bypassed, and with it the cost of detecting and punishing fraud.
However, the idea is counter-intuitive on other fronts. Wealthy families will also receive the stipend, which doesn’t seem fair, or affordable. That’s until you reflect that a large chunk of the payment will get returned to the treasury via taxes (rate increases for the higher tax bands may be necessary for the system to function optimally). It’s also possible to imagine someone so lazy that UBI removes any incentive to work. In fact, most of us would continue to try to augment this meagre revenue in some way. A few may decide to lounge around, or dedicate their life purely to art or pleasure. So long as they recycle their hand-out in the country of issue, this is not a big problem; and they are unlikely to be able to afford foreign beach-houses or international cruises.
Modelling suggests that distributing wealth in this direct way is more beneficial to society at large than using tax credits or traditional entitlements. So, at a time when we are facing rocketing unemployment figures and increasing poverty even among the workforce, UBI could become Spain’s USP.