Universal Basic Income: who’s laughing now?

Eddy Adams

By Eddy Adams, on March 10th, 2017

> Read Eddy Adams's articles

A few years ago, many cities would have laughed at the idea of introducing a Universal Basic Income. Fast forward to today, and the concept is being tested in neighbourhoods and cities across the EU, from Barcelona and Copenhagen to Stockholm and Utrecht.

The Catalan Joke

As a Scot, I’ve given my various Catalan friends lots to laugh about over the years. The weather, the state of our respective economies, gastronomy – and of course football: the sources of their collective mirth are plentiful.

Most recently though, two Barcelona friends were laughing about something different. Over drinks, I was explaining to them their own city’s plans to introduce a Universal Basic Income (UBI) pilot. Leaving out the colourful language, their conclusion was that “It will never work here!”

When I pushed them to explain, their main reason came down to notions of democracy and citizenship. “Our democracy is too new. Most people still mistrust the state. If they give you money for doing nothing, most people would take them for fools. It might work in Copenhagen or Stockholm, but in Barcelona it’d be a disaster. “

URBinclusion logo URBACTA couple of days later, I spent time with the people in charge of Barcelona’s Basic Income pilot. They are leading URBInclusion, a new URBACT Implementation network focused on new ways to tackle poverty. On a bigger scale, they are embarking on B-Mincome, an ambitious pilot to introduce UBI to the city’s poorest neighbourhoods, in a partnership that includes the Young Foundation. Funded through the Urban Innovative Actions (UIA) programme, this reflects the city administration’s commitment to tackling chronic urban poverty in different ways. In doing so they acknowledge something many of us know: that despite the huge capital sums invested in Europe’s cities, inequalities continue to widen.

The piloting of UBI is part of a radical new approach, which has the Basic Income concept as a keystone. Other elements of the co-ordinated package will include the introduction of a local currency scheme, extensive use of social clauses in public procurement and the creation of supported pathways to employment including volunteering.

During our discussion with the Barcelona URBACT team, I decided to share my Catalan friends’ skepticism about the chances of success for the UBI pilot in Barcelona. The city experts’ response was interesting. “They might be right. It may fail. But what we have done in the past has not addressed the problem – so we need new thinking, we need new ideas. Innovation is all about taking risks. If we don’t try it, we’ll never know.”

Basic Income: An idea that keeps on growing

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Just over a year ago, I wrote about Dutch city Utrecht’s plans to introduce a three-year basic Income pilot. At the time, I wondered whether UBI would be one of the big ideas of 2016. But I really didn’t expect it to take off the way it has, not only in Europe, but around the world.

In the intervening year, the Utrecht pilot has continued, with a formative evaluation running alongside to test the impact on three groups: the first, remaining on their previous welfare benefits; the second on modified welfare benefits and the third on a universal basic income of €960 per month.

In the meantime, the concept has gained widespread traction. As I write, plans are either in train or already under way to test the concept in Finland, Scotland, and Canada, amongst other places. Each of these approaches has adopted its own version of the UBI concept. Key issues include calibrating the level of payments and the age threshold. Another is the optimum spatial level that such a model can operate at. Glasgow, Barcelona and Utrecht all make the case for this being the city or neighbourhood level.

So, why the sudden interest in Basic Income?

At the heart of this debate is the question of how we tackle poverty in the 21st century. The UBI concept itself is not new. As long ago as the 18th century, Thomas Paine, radical revolutionary was advocating it. More recently, evidence has emerged of an ambitious UBI pilot in Manitoba Canada in the 1970s which was buried by an incoming conservative administration. So why does it appear to be gaining so much traction now?

A number of specific issues are in play. But one overarching reason is that in a period of uncertainty, disruption and transformation, ideas that were once radical fringe notions are getting more airplay. Within this – particularly in urban policy circles – there is an acceptance that much of the previous investment failed to address the root causes of poverty.

In terms of timing, UBI is also gathering momentum because it potentially tackles some of the most wicked issues of our age, whilst addressing long-standing inequalities, for instance around gender. Let’s examine them now.

Automation and the challenge of 21st Century labour Markets

robot automation URBACTWill a life of full time salaried work soon be a reality for a small minority of European citizens? This is no longer the realm of science fiction that it seemed until quite recently. Huge strides in automation and digital advances continue to hollow-out urban labour markets, encroaching on occupational sectors once considered untouchable. A recent study estimated that as many as 47% of occupations were at risk of automation. The Bruegel thinktank has extended this analysis to the EU labour market and concluded that those countries with a higher proportion of low-skilled jobs (notably Romania and Portugal) are particularly at risk, although none are exempt.

These tectonic shifts create great challenges although they will also provide opportunities – if we can take them. On the one hand, they may free us up from the yoke of employment. Erik Brynjolfsson, an MIT professor and co-author of The Second Machine Age, argues that provided we retain control over these high-tech tools, great benefits can arise. With robots doing our heavy lifting – as well as much of our brainwork – he envisages a “digital Athens” with more time for recreation, as the ancient Athenians had for sport and the arts.

On the other hand, many observers hold a more dystopian view. They raise questions about how the majority will earn a living and, more fundamentally, what a purposeful life means without work.

In this shifting scenario, UBI has a potentially important role to play in cushioning the impact of this huge post-employment transition. It may also provide an important part of the new landscape where transitions between jobs becomes the norm, with all the uncertainty this implies.

Precariousness – the new normal

The digital revolution is creating huge opportunities for cities. Several URBACT projects are busy exploring the implications of this. Techtown is targeted at the role of digital tech in driving innovation and business growth, particularly in small and medium-sized cities. At the same time, Interactive Cities is focused on the impact of digital platforms on urban governance and commerce.

On the flipside, Gen-Y City examines the challenge of retaining talent in an economy where young people often have to migrate to find opportunities. Whilst this benefits Europe’s big urban digital hubs, other cities struggle to retain the best and the brightest. This is partly because these projects operate in a context where young people have been – and continue to be – the biggest casualties of the Global Economic Crisis of 2008 and its consequent fall out. The youth unemployment figures remain stubbornly high in southern Europe particularly. Struggling with debt, falling real incomes and rising housing costs, Europe’s youth face a much harder transition to adult life than their parents did.

This new labour market of increasingly casualised short-term employment particularly affects the young and the low-skilled. The rise of digital business platforms is also a growing factor in this shift – especially in many urban labour markets. Uber, Deliveroo and others offer consumer convenience but at a price for those providing the service. Across Europe, legal cases are under way try and protect workers’ rights in this new world of Gig Economy jobs. In the meantime, the net effect is higher levels of precariousness and uncertainty – particularly in the low-skilled levels of the job market.

Interestingly, some of the most ardent champions of UBI are Silicon Valley billionaires like Elon Musk. This, in itself, is enough for some to suspect the concept, and to perceive it as a mechanism to encourage employers to pay low wages, subsidised by the state. For others however, UBI offers a layer of social and financial protection to those most vulnerable in the labour market; the group that Guy Standing has labeled the Precariat.

Gender inequality and the new work-life balance

care women URBACTA third, and more long-standing, aspect of this debate relates to the question of gender inequality within the labour market. Despite policy commitments and legislation to provide for equal pay and conditions between men and women, huge disparities remain. The most recent EU data shows that on average women earn 16.3% less for doing the same work.

Those who see UBI helping to address these issues identify two specific objectives that it could support. The first is encouraging more women into the labour market (although others argue the opposite is more likely). The second is recognising the value of care – at both ends of the generational spectrum – which disproportionately falls on women. As the proportion of older people in Europe rises, the question of paying for care is climbing the political agenda everywhere.

The limitations of the current welfare model

Central to all three of these arguments is the state of the welfare system in Europe. Although a diverse picture, there are some general trends. One is that the systems are tightening, with increasing numbers living in poverty, despite the EU2020 target. In much of northern Europe, with a post-1945 contributory welfare model, there is divergence between those in secure, well-paid jobs and others in casual, low paid positions. The systems themselves were largely predicated on a contributory model with an assumption of full or near-full employment. Clearly, this is very far from where we are now.

We have already considered the growing precariousness of the labour market. In practice, this means that the relationship to work is increasingly likely to be on-off-on-off. The pattern is likely to be one of mass underemployment. For some in society – people with mental health issues; those with caring responsibilities – it was ever so. But these people are no longer the small exception – and may soon be the rule.

Against all this, Basic Income sounds brilliant…so what’s the drawback?

Universal Basic Income is not universally loved. Although there are clear potential benefits, the model is not without risks. And as the coalition in favour of the concept is a broad political spectrum – ranging from anti-poverty campaigners to Alt-Right billionaires – so too is the opposition.

Although there is support for the concept within many parts of the traditional Left, there are high profile sceptics. Benoit Hamon, French Socialist party candidate has included it in his manifesto and the UK Labour Party has set up a working group to examine its feasibility. But senior figures in the UK Labour Party worry that it will only worsen levels of political apathy amongst working class voters. In a recent radio interview, veteran MP Jon Cruddas warns that a left-wing embrace of the policy would constitute an electoral gift to the United Kingdom Independence Party (UKIP), dismissing it as “a form of futurology which owes more to Arthur C Clarke than it does to Karl Marx”.

The Trades Unions are equally split, seeing UBI as a potentially divisive policy which will undermine workers’ conditions. In Finland, Ilkka Kaukoranta, chief economist of the Central Organisation of Finnish Trade Unions (SAK), which has nearly 1 million members, concluded that “We think it (UBI) takes social policy in the wrong direction”. He explains that the policy might restrict the labour market by discouraging particular groups – including mothers and older people – to take up employment. He also worries that low level jobs will be unfilled. In Finland the Social Democrats, the main opposition party, oppose it as they think it will dilute the national minimum wage legislation.

UBI negative Jump the political divide and the picture is equally messy. So, whilst the Finnish centre-right government has launched the UBI pilot, the UK Conservatives are dead set against it. For traditional conservatives, Basic Income rewards laziness and is ‘public money for doing nothing.’ They also worry about the costs – and they are not the only ones.

In June 2016, Swiss voters rejected the introduction of a UBI model in a national referendum, with affordability a big factor. The proposal was to pay 2,500 Swiss Francs (€2329) for adults and SF625 for children. The country’s federal assembly had calculated an annual funding shortfall of 25bn Swiss Francs which it suggests would have to be bridged by tax increases. Although this was contested by supporters, it seems that voters were unconvinced. 77% of voters rejected the proposal at the ballot box.

Whatever happens next, cities will be centre stage

Whether you are pro or anti, perhaps one of the best things about the UBI concept is that it is forcing people to debate fundamental questions about our society. How do we address the increasing precariousness of working life? If we are committed to social cohesion, how will we manage the hemorrhage of jobs that is the result of automation? Perhaps, most importantly – what does it mean to be a citizen in the 21st Century? What rights and responsibilities does this involve?

Beneath these questions we can separate most people into two camps. In one, we have the incrementalists who believe that this is the next stage of gradual evolution. In response, we should adapt our current policies and practices to meet societal transitions we have seen before. On the other side are those who see technology and globalisation creating a major step change, requiring radical responses. In their analysis, an already unequal world, is being made even more so by these developments and we cannot sit impassively by while this happens.

Those on the cusp of implementing the Barcelona pilot are in the latter camp, together with radical thinkers throughout Europe. Risk and innovation are at the heart of their proposed approach. Who will have the last laugh? Only time will tell.

 

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