The rise of the universal basic income (UBI) concept has surprised even its advocates. It is a radical and disruptive, yet possible, innovation that could reinvent the labour market.
The concept of UBI was considered utopian for a long time but is now taken seriously in public debate. How do you explain this development?
Philippe Van Parijs. In the 1980s, the idea of an unconditional basic income (UBI) aroused the curiosity of a few philosophers but received little interest from policymakers. The concept has since spread gradually, and more quickly in 2016 with the announcement of the experiment in Finland, the Swiss referendum, and the victory of Benoît Hamon during the primary elections of the French left. Soon after, there was the campaign of Andrew Yang for the Democratic Party presidential nomination in the United States and more-or-less specific and thoughtful statements from various personalities such as Mark Zuckerberg, Yanis Varoufakis, Beppe Grillo and even more recently, Pope Francis.
So, where is this growing popularity coming from? Fundamentally, from the fact that people no longer believe that the acceleration of growth can provide a structural solution to solve the problem of unemployment and poverty. As people get worried about the health of our planet and the wellbeing of its inhabitants, the disarmingly simple idea of paying each and every one of us an unconditional basic income seems all the more promising. It could free us both from the employment trap and from the unemployment trap. Then the Covid-19 pandemic happened, creating a situation where paying each citizen an income without any conditions or requirements was no longer considered so shocking after all – even in Trump’s America! Many people all over the world realised that with the floor provided by such an income, our societies and our economies would be better equipped to face this shock and those that lie ahead.
You insist on the necessary distinction between existing social benefits and a universal basic income (UBI). Can we compare their amounts and the proportions of GDP that they represent?
We can, but the relevance of such a numerical exercise is limited if we are to discuss the economic or political feasibility of UBI. The share of GDP required to pay every individual a given amount is, of course, a multiple of the GDP share needed to supplement insufficient primary incomes up to that amount. But this gross cost is not the most important thing. Rather, in a developed social and fiscal state, UBI would replace both lower social incomes as well as the lower bracket of all higher social incomes on the one hand, and tax exemption of the lower brackets of all personal income on the other. For these two reasons, a modest UBI – let’s say €600 –, which could not entirely replace conditional social welfare, would be largely self-financed. Since some households stand to gain, in particular part-time workers, there would be a net cost to be covered by increasing some taxes. But this net cost is very low compared to gross cost. In the case of France, this type of calculation was done by Marc de Basquiat, for example.
Against the background of this purely static exercise, we can speculate about the impact of the measure on the behaviour of economic agents and thereby on GDP: the possible real economic cost. The crucial issue is not labour supply but human capital. While introducing UBI cuts effective tax rates on very low incomes, it necessarily increases them in higher brackets, and it can therefore be supposed to decrease the financial return of additional education. However, it would also facilitate the flow in and out of employment, unpaid work (especially parental duties) and education, throughout life. How will this impact human capital? It is impossible to say, without knowing how our education systems will adapt to the demands of the 21st century.
The concept of UBI opens a breach in representation whereby our income correctly reflects our wealth or social assets that we produce as individuals. This change of representation which recognises the “collective” share in production is inspiring. But do we have the means to quantify it?
We do not and we never will. Wealth today is the combined product of material resources provided by nature or created by our predecessors, technologies developed over time, knowledge and skills transmitted through education and the work we provide. It is not only empirically but also conceptually impossible to assign a precise proportion of the final product to each of these factors. However, it is not difficult to realise that the share of our income which we can claim to fully deserve because it is attributed solely to our work is very modest at best. As the Nobel Prize winner Herbert Simon noted, “When we compare the poorest with the richest nations, it is hard to conclude that social capital (technology, and especially organizational and governmental skills) can produce less than about 90 percent of income in wealthy societies » It follows, he wrote, that, if we established a 70% linear tax to fund a universal basic income and all other public expenditures, “this would generously leave with the original recipients of the income about three times what, according to my rough guess, they had earned”.
One of the arguments often pushed forward against UBI is the “disincentive” to work. Have we identified in our societies an amount above which the desire to work drops abruptly? We have not and we won’t. The incentive to work certainly does not depend solely on the amount of money we have aside from work. It also depends on marginal income. And it depends even more on the meaning that labour can have for workers. The universal basic income is a tool that the market can use to eliminate so-called ‘bulls**t’ jobs. On the other hand, there are occupations with such an intrinsic quality that very or irregular modest salaries suffice to attract many workers even if they have the means to provide for their needs independently. These are the jobs that are systematically promoted by a UBI.