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
38 FINANCE & DEVELOPMENT | December 2018
What Is Universal Basic Income?
Proponents hail simplicity and equity; skeptics worry about fiscal cost and incentives
Maura Francese and Delphine Prady
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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