Replaces UBI social security

Unconditional basic income: a lot of approval, but also great rejection

The unconditional basic income has been discussed for many years. It is intended to solve problems that can arise from demographic change, digitization and automation. With regard to the details, very different concepts are the basis for the discussion. It is not clear what level such a basic income should have, what social benefits it can replace and, above all, how it is to be financed. In practice it was carried out as a field experiment in Finland. The main question asked here was to what extent the basic income triggers or weakens work incentives for the unemployed.

The vision of an unconditional basic income (UBI) can be assigned to a "narrative" which is able to influence the behavior of people and thus also the economy and perhaps also to shape it in the not so distant future.1 A UBI that every citizen will remember for life Individual living - and poverty-avoiding - income granted without a priority obligation to pursue gainful employment, as well as without using existing personal or family income or wealth resources is as radical as it is controversial at the same time. It is justified from the context of liberal as well as social and egalitarian concepts of justice2 and would, in modern constitutional states, supplement and materially support the freedom and equality rights granted to every citizen as a further basic right to guarantee a living minimum, socio-cultural subsistence level enable individual notions of a successful and good life.3 Currently, two main discourses, some of which overlap, can be identified, in the context of which the UBI is seen as a future solution:

  1. As a result of demographic change, it will be more difficult in future to finance the social systems, which are financed equally through employee and employer contributions. The tax-financed share of social security benefits is already around 40%.
  2. The second discourse relates to the supposed end of the working society as a result of automation, digitization, the use of robots and, more recently, the use of artificial intelligence in professional activities and the progressive release of human labor

In science, the topic is still extremely controversial and the positions of supporters and opponents of an unconditional basic income are usually not in a conciliatory way.5 For some time now, different model variants have also existed in Germany, 6 which differ primarily with regard to the question who should be entitled to receive a UBI, how high a monthly amount should be, which of the current social security benefits should be partially or fully replaced, which incentives are set for exercising an employment and - often considered to be central -, How and with what types of taxes such a UBI should be financed.7 In order to objectify the debate, there is currently a lack of concrete experience with at least temporary testing of a UBI that allows reliable generalizations, so that there are many stereotypes and less empirical evidence shapes the arguments of both proponents and opponents.

Current overview studies on the UBI

The Annual Review of Economics enriches the debate with a symposium8 on the UBI. One of the three contributions provides an overview of the effects of a UBI in developing countries as well as the results of large-scale pilot projects. In developing countries, for example, a UBI can be used to refer to empirical experience and evidence of poverty reduction, lowering of malnutrition and increased educational activities for children. But attempts to implement the UBI on a permanent basis often lead to conflict when former supporters no longer have political responsibility

Another contribution is devoted to completed field trials in the USA that are currently being prepared, as well as developed economies that aim to supplement or substitute previously existing social security systems for specific subgroups.10 In doing so, they present a number of central parameters that have been tested in the USA Basic income approaches, but also recently completed or in preparation UBI field experiments for a comparative consideration are in the foreground: amount of guaranteed income, amount of the maximum transfer, amount of the transfer from which a transfer withdrawal occurs during employment, amount of the transfer withdrawal rate, restrictions of the reference groups.

Such a differentiation also makes it possible to compare partial elements of a UBI, such as the granting of a negative income tax in the USA, for which corresponding pilot proposals have already been made in Germany 11. When discussing individual empirically verified findings, the authors admit that due to the lack of a large-scale implementation or even a comprehensive pilot project, it must always be taken into account that the state of knowledge, in addition to politically similar measures such as a UBI, primarily relates to work on the job offer and are based on their assumption-based model parameters. In their critical assessment of a comprehensive implementation of a UBI, the authors refer to a main advantage of an unconditional granting of benefits compared to a needs-based granting of benefits. An unconditional entitlement makes it easier to include all citizens, since non-entitlement due to social shame, stigma or ignorance is excluded. If the UBI were granted universally, however, high costs would arise. These will be about twice as high as the budget of all social benefits currently paid out in the USA and would raise the question of what amount and, above all, what type of additional tax revenue will be generated and which benefits will still have to be paid in the future. The authors welcome the fact that future field experiments would substantially increase the level of knowledge about changes in the labor supply, involvement in (further) education, income distribution as well as well-being and health, but this probably only affects short-term adjustments and changes in behavior. The authors remain skeptical and suspect that time-limited field experiments can contribute little to long-term changes in behavior.

Findings from the Finnish field experiment

The first analyzes of a Finnish field experiment, which has now been completed, show that progress in knowledge can nevertheless be drawn from temporary field experiments. In 2017 and 2018, 2,000 Finns, unemployed, between 25 and 58 years old and receiving social transfers, were randomly selected (treatment group) .12 Over a period of 24 months, their behavior was compared with a control group of unemployed in the existing system, the quite similar to the Hartz IV regulations that apply in Germany. The treatment group was paid 560 euros per month for two years: The participants then had the choice of whether they were satisfied with the amount or whether they wanted to take up gainful employment without any deductions and earn something in addition. The income was unconditional because the social authorities did not ask any questions or conditions during this time.

The study therefore allows statements to be made on questions such as: What happens when the state supports but no longer demands and there is no longer any obligation to work and to end unemployment? Do people then tend to be more industrious or lazy? That is why it was widely discussed internationally as a test of an unconditional basic income. The German-speaking media public reported on it in many cases, although the test only allows general conclusions to be drawn for a comparatively small target group. Although the final report of the Finnish field experiment is not due to be presented until the beginning of May 2020, the interim results of the study published in early 2019 were surprising, 13 according to which the unconditional granting of basic security benefits makes the unemployed happier and leads to fewer mental health restrictions. The second hypothesis, however, according to which the unconditional payment of income makes them “lazy” - as at least common job supply models assume - could be falsified. A political expectation that could not be classified as naive but could not be fulfilled, of course, that the unemployed would take up employment more often as a result of the payment; The expectation is naive because it is the declared aim of a basic income to no longer force people to accept unpopular temporary jobs. The final report of the Finnish study will significantly improve the existing knowledge on the incentive effects on the long-term unemployed.

Effectiveness of sanctions

The groundbreaking ruling on the sanctions in the Hartz IV system of the Federal Constitutional Court (BVerfG) of November 5, 2019 is also related to the UBI, 14 as the basic right to a decent subsistence level has been strengthened. In its judgment and the detailed justification, the court also states that the actual effect of sanctions has not yet been comprehensively investigated empirically. There are many unanswered questions. It is not enough to rely primarily on plausible assumptions when taking measures that restrict constitutional rights. On the one hand, the existing knowledge gap can be described as ignorance of whether higher sanctions will lead to more sustainable labor market integration. On the other hand, there is currently a lack of empirical evidence as to whether more “negative freedom” 15 - that is, the absence of state control - and additional positive incentives might motivate the long-term unemployed more to take up work. In this context, reference should be made to a nationwide project that will presumably be able to provide empirical findings on this shortly. The "HartzPlus" 16 project offers a total of 250 people who have been sanctioned with Hartz IV guarantees - in the sense of compensation payments - against sanctions. The project is financed for three years17 and aims to research the consequences of sanctions.

Table 1
Attitude to the unconditional basic income in Germany from 2016/2017 to autumn 2019
All in all, would you be against or for such a basic income in Germany?ESS, wave 8
2016/2017
SOEP-IS-BUS
2017
SOEP-IS-BUS
2018
SOEP-IS bus
2019
Total-westeastTotal-westeastTotal-westeastTotal-westeast
GermanyGermanyGermanyGermany
Very much against it121210171713161711161811
On the other hand404233282826292927293027
Therefore373642333431383537333334
Very for that8810161525161524151323
Not specified335674441674
Share supporters454352504856555061484658
A total of100100100100100100100100100100100100

Sources: 2016/2017: European Social Survey, wave 8 - German subsample n = 2852 (of which western Germany n = 1915, eastern Germany n = 937), adults aged 15 and over (weighted data); 2017: SOEP-IS-BUS module BGE, German-speaking population n = 2031 (of which western Germany n = 1692 and eastern Germany n = 339), adults 14 years of age and older (weighted figures); 2018: SOEP-IS-BUS module social inequality, German-speaking population n = 2031 (of which western Germany n = 1700 and eastern Germany n = 331), adults 14 years of age and older (weighted data); 2019: SOEP-IS-BUS module BGE, German-speaking population n = 1930 (of which western Germany n = 1567 and eastern Germany n = 363), adults 14 years of age and older (weighted data).

Approval and rejection of a UBI

As differently as the UBI is assessed in scientific debates, the proportions of supporters and opponents in the population have also differed greatly for years. The results presented in Table 1 are based on several representative surveys that were carried out at the turn of the year 2016/2017 and in each case in autumn 2017 to 2019 and determined the degree of approval or rejection of a UBI (see Box 1). The survey results show that from the turn of the year 2016/2017 to autumn 2018, the approval rate for the introduction of a UBI was largely stable and tending to rise, with a value between 45% and 55%. In the last survey carried out in autumn 2019, the approval rate for a UBI was a few percentage points lower than in the previous year at 48%. In East Germany the level of approval was 58%, in West Germany it was 46% of the adult population. As differentiated analyzes according to socio-demographic characteristics show, 18 consent to a UBI is often associated with a young age, a high level of education and also a low income as well as a politically more left-wing attitude.

Box 1
Surveys on Unconditional Basic Income

Database
The European Social Survey (ESS) is a cross-border cross-sectional survey that has been carried out every two years since 2001 as a personal computer-aided interview. The ESS primarily collects data on recruitment in over 20 European countries. Every autumn (August to September) 2017 to 2019, data on the acceptance of a UBI was collected as part of the innovation sample of the socio-economic panel at DIW Berlin. The German-speaking population aged 14 and over is surveyed. The survey is computer-assisted by trained interviewers from the Kantar Public Institute as part of a multi-topic survey. The three test surveys are a random selection with an average margin of error of 1.4 percentage points (for a proportion of 5%) to 3.1 percentage points (for a proportion of 50%).

Attitude to the unconditional basic income
The presented results on the acceptance of a UBI are based - regardless of which of the listed surveys they come from - on the following question: “In some countries, the introduction of a basic income is currently being discussed. I'll ask you in a moment whether you are against or for such a basic income. But first, a few details about it. Such a basic income includes the following points:

  • The state pays everyone a monthly income that covers all basic living expenses.
  • This will replace many existing social benefits.
  • The goal is to guarantee everyone a minimum standard of living.
  • Everyone receives the same amount, regardless of whether they work or not.
  • One can also keep income from employment or other sources.
  • The basic income is financed through taxes.

All in all, would you be against or for such a basic income in Germany? "

The respondents were then asked to classify the degree of their approval or rejection using the four-point scale “very much against”, “against”, “for”, “very much for”.

At the same time, when interpreting the approval rates, it is not necessarily assumed that the willingness to reform towards a UBI can be derived from this. On the one hand, the explanation of the internationally comparable survey question (see Box 1) does not make explicit which specific amount of a basic income would be associated with it, which social benefits will be canceled in the future and which will be retained, how much of the gross earnings can still be kept and answered after the introduction of a UBI of course not which taxes would probably have to be increased to finance a UBI.

In the survey of autumn 2019, following the not very specific question about the approval or rejection of a UBI, the question was asked whether one personally assumes that after the introduction of such a UBI one would probably have less net income, about the same or more. Around 40% of all respondents stated that they probably had more money available, while 26% assumed that they had less money and around a third stated that a basic income would not do them better financially. Unsurprisingly, more than half of the supporters believe that they would have more net income available after the introduction of a UBI. But even among those rejecting a UBI, around 26% expect that they would have more income available, while 45% of those rejecting a UBI expect less.

outlook

Obviously, the population is keen to think about basic alternatives to the existing system of social security. If this system were to be expanded to include elements of unconditional rights19 in the future, this harbors the potential of a superior alternative to our previous system of social security. Because this requires increasing bureaucracy with many applications and is - as a number of empirical studies show - characterized by a very high proportion of non-utilization despite the fulfillment of the eligibility requirements.20

An objectification and constructive further development of the civil society debate about the BGE21, which has already been lively for a long time, could succeed if the parties represented in the Bundestag agree to set up a study commission for the next, i.e. the 20th legislative period, in this legislative period. In this way there would be an opportunity for research, politics, the media and the general public to develop an informed factual basis for a politically and factually difficult and complex issue. It would have to be clarified whether at least elements of a UBI would be practicable for any pending welfare state reforms and how taxes, transfers and levies can be better coordinated, especially in the lower income segment22. Different financing models could be weighed up and a time and phased plan for a possible implementation phase could be developed. In such a place, the consequences of a constant refusal to discuss and implement a basic income could also be discussed.

  • 1 “Basic Income” is assigned to the so-called Perennial Economic Narratives in the current book by Nobel Prize laureate R. J. Shiller, see R. J. Shiller: Narrative Economics, Princeton 2019.
  • 2 For a comprehensive overview see T. Reuter: The unconditional basic income as a liberal draft. Philosophical arguments for more justice, Wiesbaden 2016.
  • 3 For a current overview of the 500-year history of ideas and a collection of basic texts on the BGE P. Kovce, B. P. Priddat: Unconditional Basic Income, Berlin 2019.
  • 4 See R. J. Shiller, op. a. Cit., P. 209 ff. The federal government is currently not pursuing a UBI in the context of digital change; see the reasoning in: A. Ebert, S. Rahner: Why the Unconditional Basic Income is not an answer to the digital change, in: Federal Ministry of Labor and Social Affairs (Ed.): Werkheft 04 - Sozialstaat im Wandel, Berlin 2017, p. 174-181.
  • 5 Cf. as an example the contemporary talk published in 2013: The Unconditional Basic Income - a sustainable concept ?, in: Wirtschaftsdienst, 93rd Jg. (2013), no. 9, pp. 583-605, https://www.wirtschaftsdienst.eu /inhalt/jahr/2013/heft/9/beitrag/das-bedingungslose-grundeinkommen-ein-tragfaehiges-konzept.html (7.2.2020); or the reader: C. Butterwegge, K. Rinke (Ed.): Basic income controvers, Weinheim-Basel 2018; or Roman Herzog Institute (ed.): The unconditional basic income: for and against a socio-political reform concept, Munich 2019.
  • 6 R. Osterkamp (ed.) Offers an overview: On the test stand: An unconditional basic income for Germany, Baden-Baden 2015.
  • 7 Cf. the currently controversial proposal by B. Schloen: Basic income and human dignity, Wiesbaden 2019; and S. Bergmann: In ten steps to the BGE, Norderstedt 2018; as well as the somewhat older compilation by R. Osterkamp, ​​op. a. Cit., Pp. 225-245.
  • 8 Cf. M. Ghatak, F. Maniquet: Universal Basic Income: Some Theoretical Aspects, in: Annual Review of Economics, 11th Jg. (2019), pp. 895-928, https://www.annualreviews.org/ doi / abs / 10.1146 / annurev-ec-11 (7.2.2020), the article arranges the normative and fundamental questions of a UBI from an economic point of view.
  • 9 A. Banerjee carried out experimental field studies in this research field together with E. Duflo, for which both were awarded the Nobel Prize in Economics in 2019. A. Banerjee, P. Niehaus, T. Suri: Universal Basic Income in the Developing World, in: Annual Review of Economics, 11th year (2019), pp. 959-983.
  • 10 H. Hoynes, J. Rothstein: Universal Basic Income in the United States and Advanced Countries, in: Annual Review of Economics, 11th year (2019), pp. 929-958.
  • 11 A. Spermann: Basisgeld plus tax credits instead of Hartz IV, in: Wirtschaftsdienst, 99th year (2019), no. 3, pp. 181-188, https://www.wirtschaftsdienst.eu/inhalt/jahr/2019/ booklet / 3 / contribution / basisgeld-plus-tax-credits-instead-of-hartz-iv.html (7.2.2020).
  • 12 In 2016, a referendum was held in Switzerland for the general introduction of a UBI, which only received approval from around 22% of the Swiss population. An ambitious multi-stage experiment was designed in Finland. The then incumbent center-right government was only prepared to try out a target group-specific model variant for two years.
  • 13 O. Kangas, S. Jauhiainen, M. Simanainen, M. Ylikännö: The Basic Income Experiment 2017-2018 in Finland. Preliminary results, in: Ministry of Social Affairs and Health (Ed.): Reports and Memorandums of the Ministry of Social Affairs and Health, No. 9, Helsinki 2019.
  • 14 Federal Constitutional Court: Principles on the judgment of the First Senate of November 5, 2019, https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/DE/2019/11/ls20191105_1bvl000716.html (January 21, 2020).
  • 15 A term coined by Isaiah Berlin. I. Berlin: freedom. Four attempts to Frankfurt a. M. 1995, p. 201 ff.
  • 16 HartzPlus: The study on unconditional basic security, https: //hartz-plus.de/studie (7.2.2020).
  • 17 The study is being carried out with funds from civil society, on the one hand, through crowdfunding by the association “Sanktionsfrei” and through the Basic Income Foundation, https://www.stiftung-grundeinkommen.de/ (7.2.2020).
  • 18 See in detail J. Adriaans, S. Liebig, J. Schupp: Consent for an unconditional basic income is more likely to be found among boys, the better educated and in the lower income groups, in: DIW-Wochenbericht, 86th year (2019), H. 15, pp. 264-270.
  • 19 For example, by further developing the benefits for children into a basic child benefit; cf. also C. Breuer: A basic income for children, in: Wirtschaftsdienst 98th Jg. (2018), no. 7, pp. 481-488, https://www.wirtschaftsdienst.eu/inhalt/jahr/2018/ booklet / 7 / contribution / a-basic-income-for-children.html (7.2.2020).
  • 20 It can be seen that around 60% of those entitled to basic social security - extrapolated around 625,000 private households - do not make use of the basic security; See H. Buslei et al .: Severe failure to take advantage of basic social security indicates high levels of hidden poverty in old age, in: DIW Wochenbericht, Volume 86 (2019), H. 49, pp. 909-917.
  • 21 See the “Expedition Basic Income” initiative, which intends to hold referendums in several federal states in Germany in order to initiate scientifically supported trials of a UBI, see https://expedition-grundeinkommen.de/ (7.2.2020).
  • 22 The SVR has also identified that there is an urgent need for reform of the tax and transfer system for employable people at this point; Expert council for assessing macroeconomic development: Mastering structural change, annual report 2019/20, paragraph 648-723, Wiesbaden 2019.

Title: Unconditional Basic Income: Much Approval, But Also Much Rejection

Abstract: Unconditional basic income has been discussed for many years. It is intended to solve problems that may arise as a result of demographic change, digitalization and automation. Very different concepts form the basis for the discussion. For example, it is not clear what level such a basic income should have, which social benefits it would replace and, above all, how it would to be financed. It was originally carried out as a field experiment in Finland. The main question to be answered: to what extent would basic income trigger or weaken incentives to work?

JEL Classification: D63, I38, H23

© The Author (s) 2020

Open Access: This article is published under the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/deed.de).

Open Access is funded by the ZBW - Leibniz Information Center for Economics.