Is the unconditional basic income a utopia or a costly catastrophe?

A basic income was explored in Ireland as early as the 1970s when experiments with UBI were taking place around the world.

When Lambert, a director of EcoMerit, which helps companies improve their environmental performance, began to delve deeper into UBI, he was so convinced of its merits that he joined Basic Income Ireland in 2015, which advocated the launch of UBI used for decades.

“It seemed counterintuitive at first, but when you look closer it isn’t,” says Lambert, who is now Basic Income Ireland’s steering group coordinator. “I think it’s a great idea.”

This “big idea” has certainly made its way into the mainstream. Applications for a basic income pilot for artists and creatives were opened on Tuesday last week and later this quarter the Low Pay Commission, which normally makes recommendations on the minimum wage, is due to report to Enterprise, Trade and Employment Minister Leo Varadkar on how a broader Universal Basic Income pilot project could be designed and implemented in Ireland.

The once-radical idea of ​​UBI no longer seemed so unorthodox when the 2020 pandemic hit and the government rolled out the Pandemic Unemployment Benefit (PUP) for hundreds of thousands of people whose jobs were disappearing.

Supporters of the UBI point to the mass experiment PUP as proof that a basic income works for everyone.

The last payments of the PUP, which cost the state more than 9.1 billion euros, were made at the end of March.

“In the longer term, the PUP will be seen as a redefinition moment for Irish society,” says Micheál Collins, an economist at the UCD School of Social Policy, Social Work and Social Justice who is interested in income redistribution policies like UBI.

“It has very quickly provided an income floor for an enormous group of workers who would otherwise be unemployed. To some degree it was as close to a widespread basic income as we had in our society. If (Ireland) started building a welfare system from scratch, (UBI) would be a no-brainer.”

The Green Party secured a commitment to a UBI pilot project while the current government was alive when it formed a coalition with Fine Gael and Fianna Fáil in 2020.

Last year, Varadkar formally asked the Low Pay Commission to investigate the issue, and the commission commissioned ESRI to review UBI processes that have taken place internationally and investigate the risks and tax implications of UBI.

Meanwhile, 2,000 artists and cultural workers will receive €325 a week for three years under the Basic Income for the Arts pilot scheme unveiled earlier this month.

For Collins, the “strongest argument” for UBI is that it offers every citizen some degree of financial stability at a time when the end of life jobs and the advent of the gig economy have led to greater precariousness in the world of work.

Also, “we already have a lot of basic income building blocks,” Collins says. “Child benefits are a basic income for children, there is a basic income of benefits for people with long-term illnesses and disabilities, and on the other end there is a near-universal state pension for individuals. But there is a gap in the working-age population.

“There are also challenges in the current system in the form of unemployment traps that discourage people from taking up more work.

“Some are more psychological than financial: some people are afraid of losing their health card and having to pay for their own health care or to use expensive private health care.”

Supporters of the UBI — albeit for different reasons — range from left-wing governments and social justice activists to libertarian economists like Milton Friedman and tech billionaire Elon Musk.

The latter backed Andrew Yang, a candidate for the 2020 Democratic US presidential primary, whose signature policy called for a UBI of $1,000 a month to offset job losses caused by automation and AI.

But most proponents believe that a basic income makes economic sense because it would sustain people while they invest in education to get higher-skilled, well-paying jobs, to care for children or the elderly. That would relieve the state – and increase the willingness of citizens to take entrepreneurial risks without being afraid of social benefits.

Various versions of the system have been tested worldwide. A Finnish pilot project conducted in 2017 and 2018 paid 560 euros a month to 2,000 people receiving unemployment benefits.

The study – which has been criticized for its metrics – found that while income did not change employment levels, recipients were happier, less stressed, had better cognitive functioning and had higher confidence in the future.

Last year Wales announced that it would introduce a UBI pilot scheme. In Alaska, the state set up a permanent fund 40 years ago to ensure oil revenues were not wasted. Each year it pays residents a dividend from oil royalties, allowing Alaskans to save money for children’s education or spend cash in local businesses, creating a domino effect in the local economy. The proposed payment for this year is $2,600 (€2,400), including a one-time energy credit.

But critics have long argued that UBI creates an incentive to work and that the cost of providing an unconditional basic income for all could stretch public finances to the limit.

Brian Keegan, who has a PhD in behavioral economics and is director of public policy at Chartered Accountants Ireland, says: “We have a hierarchy of needs when it comes to what the public purse can support and it cannot support a good chunk of what people paid a good chunk of change every week.

“However, we have to recognize that some areas of economic activity — like art — are difficult to commercialize, and we could look at individual sectors and see if there’s a valid case for a basic income there.”

The cost of a universal basic income would depend on factors like the rate at which it’s paid and how it’s structured, Collins says.

Social Justice Ireland, whose CEO Seán Healy has been investigating and calling for the UBI for decades, recently proposed a rate of €208 a week.

Ireland’s basic income pilot for artists “is not a pilot for UBI because at a rate of €325 for three years it would not be affordable for everyone because the government could not fund it,” says Colette Bennett, an economic and social analyst at Social Justice Ireland. “It’s too expensive to scale.”

Social Justice Ireland and other advocates say a UBI could be funded through tax reforms and cutting red tape associated with administering existing welfare benefits, from jobseeker benefits to child and single parent payments to state pensions, all of which would be bundled together into a single basic payment.

Any income above the UBI payment would be taxable.

“We estimate that the state has lost over 15 billion euros in tax spending that is not part of the budgetary process and where there is no budgetary oversight,” says Bennett. “We see from previous analysis of the budget that (the money) goes proportionally to the better off and we would advise reducing it.

“It’s about pension credits – if you’re a good earner you get pension credits and you can apply for top-ups, and people who can afford to pay top-ups are higher earners.

“There are reliefs on the corporate tax side as well, like the proportion of multinationals that don’t pay corporate tax rates because they have a recoverable R&D tax credit, so we would try to reverse some of that. We also need to expand the tax system.”

Keegan believes that while a basic income could be applied to more sectors, many of the arguments for a universal basic income overlook the fact that Ireland is a “relatively low-taxed economy” and that the UBI would be prohibitively expensive because it would lead to higher taxes and PRSI contributions.

“That would have to mean higher taxes,” he says. “Look at the problem of raising the retirement age. I remember a poll conducted in February following the Pensions Commission’s recommendations on how to keep the retirement age at 66 and a large majority said they were not in favor of raising the retirement age and a majority were unwilling to pay for it for it (via increased PRSI contributions).

“There was agreement there on the benefits of a low retirement age, but there is no consensus at the electoral or political level on how to achieve that.”