Universal basic income

There are different definitions of universal basic income (UBI), reflected in the different types of experiments in UBI that are taking place. Two common characteristics of a UBI are ‘the aim of reaching a vast portion of individuals/households in society… in an “unconditional” way (or under a very broad conditionality)’ (Francese & Prady, 2018: 6). There are UBI-type schemes covering nearly the whole population in Alaska and Iran, as well as a project in India defined as ‘universal basic share’ (Colombino, 2019: 7).

The pros and cons of UBIs is a topical debate in countries of all income levels. Proponents of UBI look to their potential to ‘achieve redistributive objectives, i.e., to tackle poverty and inequality, and to broaden the coverage of income-support programs’, responding to weaknesses of current social protection models (in particular, issues of leakage and under-coverage) (Francese & Prady, 2018: 6, 8). The main arguments in support of UBI are that:

Compared to means-tested programmes, UBI can have lower administrative costs, more transparent transfer systems, and fewer opportunities for fraud, third-party capture or political manipulation (Francese & Prady, 2018: 6–7; Colombino, 2018: 6).
UBI is an increasingly pertinent option to respond to today’s changing world of work, which has seen automation and globalisation resulting in job losses, high job insecurity and other systemic risks that current social protection models and funding struggle to respond to (Colombino, 2019: 2; Francese & Prady, 2018).
UBI can generate public and political support for structural economic reforms by mitigating adverse impacts on low- and middle-income households (Coady & Prady, 2018: 4; Francese & Prady, 2018: 7).

Concerns about UBI schemes include whether it would discourage people from working while leaking scarce resources to wealthier households, thereby increasing the fiscal cost of a UBI (Francese & Prady, 2018: 7). There is also a discussion on whether UBIs would incentivise or discourage people to seek employment. Such effects will depend on design details such as who benefits (the coverage), by how much (the size of the benefit), and how progressive the policy is overall (ibid.). Another concern is that while ‘some UBI proposals have the potential to advance equity and social justice… others may result in a net welfare loss’, with impact on poverty and inequality depending ‘on the level of benefits and the source of funding’ (Ortiz et al., 2018: v).

In sum, policymakers have to consider trade-offs along the following key dimensions when considering the relevant mix of social protection instruments (including UBI) for a particular country context: ‘[C]overage at the bottom of the income distribution versus leakages to richer households; generosity of transfers versus incentives and economic distortions; fiscal cost versus alternative use of scarce fiscal resources’ and ‘how to reconcile objectives and implementation challenges’ (Francese & Prady, 2018: 21).

Experience and research on UBI in low-income countries is limited. Colombino (2019: 7) reports that results from UBI experiments in India, Namibia and Uganda include strengthening recipients’ sense of autonomy and responsibility (avoiding paternalism or stigma effects), increasing labour supply and productive activity, and improvements in human capital (education, occupational choice and health). Banerjee et al. (2019: 22) report that an analysis by programme advocates of the UBI pilot in Namibia 2008–2009 (with all residents younger than 60 and registered as living in the programme area received monthly, unconditional transfers) found poverty and child malnutrition decreased while rates of income-generating activities and children’s school attendance rose. However, another study by Hanna and Olken (2018), analysing evidence from Indonesia and Peru, found that ‘despite the imperfections in targeting using proxy-means tests, targeted transfers may result in substantially higher welfare gains than universal programs, because for a given total budget they deliver much higher transfers to the poor’ (Hanna & Olken, 2018: abstract).

There are evidence gaps. There is no ‘systematic comparison of administrative costs (monitoring, delivery, litigation) of UBI compared with conditional or means-tested policies’, and robust evidence on income effects is limited (Colombino, 2019: 9).

Key texts

Colombino, U. (2019, March). Is unconditional basic income a viable alternative to other social welfare measures? IZA World of Labor 2019: 128.
This article sets out the motivations for exploring unconditional basic income (UBI) options, looking at global trends transforming the world of work. It discusses the pros and cons of UBI, and the challenges to implementing a UBI policy. It also summarises the available empirical evidence on UBIs.

Francese, M., & Prady, D. (2018). Universal basic income: Debate and impact assessment (IMF Working Paper WP/18/273). Washington, DC: International Monetary Fund.
This paper sets out the definitions of a UBI, the arguments for and against, and proposes an analytical framework. It explores key design dimensions of: ‘coverage, generosity of the program, overall progressivity of the policy, and its financing’ (abstract).

Other resources

Conference/seminar/webinar: Informality and income insecurity: Is basic income a universal solution? (2016). UNRISD. (A series of presentations is available)

Video: ‘Basic income works!’. Reaching the unreachable and self-employed people in the informal economy in India. (2014). Social Protection and Human Rights Platform. (12m:52)

Article/blog: Gentilini, U., & Yemtsov, R. (2017). Being open-minded about universal basic income. World Bank.