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25/09/2016

Universal basic income debate gains traction in the EU

Social Europe & Jobs

Universal basic income debate gains traction in the EU

Poster installed in Geneva as part of the campaign for the universal basic income. According to Guinness World Records, it is the largest poster ever installed.

[Julien Gregorio/Flickr]

Against the backdrop of the “fundamental transformation of the world of work”, Commissioner for Employment Marianne Thyssen is paying close attention to “free money” experiments ahead of a discussion next year with member states on how to improve social policies.

“It is crucial to look closely at these changes and ask ourselves how we can reinforce our labour law, social protection and labour market institutions to stand the test of the digital economy and support people to make the best out of the opportunities it offers,” Thyssen told EurActiv.com.

Despite the fact that the European Commission cannot propose legislation on an issue such as the universal basic income, Thyssen commented that the executive “is following with great interest the developments” of a pilot project run in Finland.

The Finnish experiment, which will take place in 2017, is expected to involve between 5,000 and 10,000 citizens. They will get paid a basic income of €500 to €700 a month – at least one fourth of the average income in the country.

Finland to test unconditional basic income for Finns in 2017

Finland is looking to experiment in 2017 with a basic monthly income for Finns, a universal and unconditional monthly payment seen as a way to reform the welfare system and cut spending, Finnish authorities said Tuesday.

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The Netherlands will also conduct a similar experiment next year. These real-life trials follow the steps of the referendum held in Switzerland last June, where voters rejected a proposal for an “unconditional monthly income” that its proponents wanted fixed at 2,500 Swiss francs.

However, politicians did not support the idea, while some warned that the scheme would attract thousands of foreigners to the rich nation.

Swiss reject guaranteed basic income plan after ‘robot debate’

Swiss voters rejected by a wide margin yesterday (5 June) a proposal to introduce a guaranteed basic income for everyone living in the wealthy country after an uneasy debate about the future of work at a time of increasing automation.

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Elsewhere, the idea is supported by a wide spectrum of political forces, from libertarians to socialists.

Digital startups are also among the backers, and some are running their own experiments.

In the US, Y Combinator will give each family between $1,000 and $2,000 a month, for up to a year, with no conditions on spending.

The right incentives

The Finnish experiment would bring some useful insights to the debate, as it focuses not on the welfare dimension of the idea, but rather on the impact on whether “basic income promotes employment”, according to the Finnish government’s announcement.

In particular, it remains to be seen whether these schemes would help people find better jobs for their skills, without discouraging them from looking for a job because of the unconditional money provided.

Thyssen also highlighted that universal basic income could eliminate some bureaucratic roadblocks and gaps in coverage.

But, in her opinion, the elimination of disincentives to work requires a broader package of reforms, including for social and tax policy.

“We have to learn to understand the new world of work to design well-functioning social systems,” the Commissioner explained.

Review of social policies

As part of this effort, the executive is conducting a consultation on whether EU social rights should be improved or updated in light of the impact of the technological changes, but also other societal trends, like Europe’s ageing population.

EU “has the power” to put in place a universal basic income

From Martin Luther King to Erich Fromm, the universal – or unconditional – basic income (UBI) has always had its supporters. The idea is not new. But the economic crisis has brought it back to the forefront “as a solution” to the most pressing issues facing the EU today.

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In this context, the Commission will look at “adequate minimum income schemes” as part of the strategy to combat poverty and social exclusion.

Once the responses to the consultation are assessed, the institution will hold a formal discussion with the member states next year to see “how to make social policies fit for the 21st century”.

In the leaders’ menu

The impact of the fourth industrial revolution and proposals such as the universal basic income have been discussed over the last months in leaders’ gatherings such as the World Economic Forum (WEF) in Davos or the St Petersburg International Economic Forum.

“Although we don’t necessarily support the universal basic income, we do find that it is an interesting idea that needs to be explored further,” Jennifer Blanke, chief economist at the WEF told EurActiv.com.

She echoed concerns such as the incentives for employment, or how to finance such an “extremely expensive policy”.

Universal basic income paid by a 'robot tax' is a bad idea

Although the digitalisation of industry is a top priority among EU decision makers, Europe should not be concerned about job losses caused by growing automation. Instead, member states should teach the new generations the skills required for a digital future, believes the VDMA chief, Thilo Brodtman.

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“The trick with the universal basic income is to set it high enough to bring everyone to a given income level, but low enough that it doesn’t distort decisions to work or invest. And it is not clear whether this is possible,” she explained.

Though guaranteed income has become a trendy topic, companies and national governments are struggling to position themselves on the subject.

BusinessEurope declined to comment on this idea, as the organisation has not adopted a position yet.

Maxime Cerutti, Director of Social Affairs Department, agreed that “a key challenge” in the years to come is to adapt employment and social policies “to better meet the rapidly evolving labour market needs generated by the digital economy”.

“This includes more autonomy and flexibility in work organisation, more possibilities to balance work and private life, improved health and safety, and more learning opportunities,” he added.

Meanwhile, officials from the ministries of Economy and Finance of Spain, France and Germany declined to comment on the issue.

A spokesperson of the German Ministry of Economy ruled out that the digitalisation of the economy would cause massive job losses.

“It is more likely that technological revolutions do have positive long-term consequences on labour demand”, the German official added, pointing out to a recent study by the Centre for European Economic Research (ZEW) suggests.

Industry 4.0: The future of manufacturing is here

The European Commission is preparing an action plan for publication in April to mobilise an estimated €25 billion to harness the potential of the fourth industrial revolution, EurActiv.com has learned.

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Germany embarked on an ambitious plan to support its industry’s transition toward the digital revolution.

To date, some of the most vocal supporters of universal basic income are found in Silicon Valley. Asked by EurActiv during the St. Petersburg Economic Forum, Shervin Pishevar, co-founder of Sherpa Capital, said that the universal basic income “has to become the global standard in parallel with the speed of the automation process”.

Positions

Dr. Terry Gregory and Dr. Ulrich Zierahn, senior researchers at ZEW's department "Labour Markets, Human Resources and Social Policy" said: "the scenario of massive job losses as a potential argument for an UBI is rather unlikely. Some researchers argue that 47 per cent of jobs in the US are at 'risk of computerization' in the U.S., others provide similar figures for other countries in the EU. This has led to public fears that many jobs might be lost due to digitalisation. However, we at the Centre for European Economic Research (ZEW) have shown recently that these figures likely are overestimated (study available at http://www.zew.de/PU78183). In addition, UBI as a possible suitable instrument in order to safeguard the potential 'losers of digitalisation' would need more financial resources than the current social security systems in the EU member states."

Background

According to Basic Income Earth Network (BIEN), a basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways:

  • It is being paid to individuals rather than households;
  • It is paid irrespective of any income from other sources;
  • It is paid without requiring the performance of any work or the willingness to accept a job if offered.

Some arguments to back the proposal are: more liberty and equality, equal sharing in the benefits of technical progress, the flexibility of the labour market and the dignity of the poor, the fight against inhumane working conditions, the promotion of adult education, and more autonomy from bosses.

Among the disadvantages, there are risks of creating more structural unemployment, as more people will decide not to join the labour market, the massive cost to finance such a proposal and potentially higher inflation rates, which would affect the living conditions of the poorest.

Further Reading

  • 'Unconditional basic income Europe' website.