What Is Universal Basic Income?: Proponents hail simplicity and equity; skeptics worry about fiscal cost and incentives

• Author: Maura Francese - Delphine Prady
• Position: Senior economist - Economist in the IMF's Fiscal Affairs Department
• Pages: 38-39

38 FINANCE & DEVELOPMENT | December 2018

ART: THE NOUN PRO JECT / MA SSUPA KAE WGAHYA

What Is Universal Basic Income?

Proponents hail simplicity and equity; skeptics worry about fiscal cost and incentives

Maura Francese and Delphine Prady

MANY GOVERNMENTS PAY

pensions to elderly people,

or unemployment benefits to those who lose their

jobs, or child benefits to famil ies. Cash transfers to

households are common in most countries. W hat

is a universal basic inc ome, and how is it different

from these programs?

Universal basic income is an income support

mechanism ty pically intended to reach all (or a

very large portion of the populat ion) with no (or

minim al) conditions.

Discussions around universal basic income can

be heated, both in a scholarly context and in public

discourse, and there is no established common under-

standing. Very different income-support programs are

often labeled “universal basic income,” even when they

have little in common or do not aim at the same goal.

Many ongoing and prospective exper iments with

universal basic income arou nd the world refer to

very different interventions. Ex amples include cash

transfers to a selected group of unemployed people

for a short time in Finland, to adults for 12 years

in Kenya, and to randomly chosen households in

California.  is diversity reflects the absence of a

unified definition and a ssessment methodology in

both the literature and policy d iscourse.

Programs typica lly grouped under the universal

basic income umbrella have a mix of key fe atures (see

chart). Does it replace or complement other social

protection programs? Is the recipient an individua l

or a household? How is the pool of beneficiaries

defined? What is the timing of the payment? Are

there cond itions attached ?

Depending on how these key featu res are chosen

and combined, scholars have proposed various

forms of universal basic income (see chart).

omas Paine’s (1797) “ground-rent” resembles

a categorical capita l grant (for example, a one-time

endowment to a specific group of people) aimed

at fighting the transmission of poverty from one

generation to the next. Milton Friedman (1968)

saw the “negative income tax” as a way to replace

the entire American welfare state to overcome

administrat ive inefficiencies. Philippe Van Parijs

(1992) advocates a regular, universa l, unconditional,

and generous cash tra nsfer. Anthony Atkinson’s

(1996) “participation income” complements exist-

ing social program s and the minimum wage and is

conditioned on a form of “social” participation—

contributin g to society th rough employment, educ a-

tion, childcare, or other activities. A cross this broad

spectrum, however, two common traits cha racterize

and differentiate universa l basic income-type pro-

grams from others:

•

Universality— or very large—covera ge of indi-

viduals i n society

•

Unconditionality—or very broadly conditioned

provision—as is the ca se of Atkinson’s “partici-

pation income”

Proponents and opponents of universal basic

income have highlighted several aspects, and argu-

ments in its favor mirror those opposed. Some advo-

cates point out that it does a better job of reaching the

poor than means-tested programs—that is, programs

that determine individual or family eligibility for

government assistance based on an income or asset

test. Many factors can keep means-tested programs

from reaching the intended recipients—for exam-

ple, administrative capacity, high information and

administrative costs, poor performance of targeting

mechanisms, and social stigma.

In principle, simple universal basic income pro-

grams could save adm inistrative costs a nd increase

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