Declan Jordan: Covid crisis shows need for basic income scheme

Declan Jordan: Covid crisis shows need for basic income scheme
Earlier this month, Tánaiste Leo Varadkar confirmed that the PUP scheme will run until next April at least

There is no doubt that the Covid crisis has forced governments to contemplate and implement policies that they would not consider in normal times. 

The consensus in the economics profession on the need to hugely stimulate global economies also shows how this crisis is challenging conventional approaches to how we operate our societies and economies.

One of the features of almost all governments’ response to the economic crash associated with Covid is increasing payments to workers and subsidising their wages. 

In Ireland, the Pandemic Unemployment Payment (PUP) was initially set at a higher rate than jobseekers’ benefit.

The payment has persisted, albeit at a lower rate. 

The recent controversy about the loss of the payment for those who have travelled, and so are not available for work, has shown that there is a need for a new mindset in how the state bureaucracy views supports for people in vulnerable situations.

The Covid crisis highlights the need for a new approach to our entire system of social protection and there is an appetite for new economic thinking. 

The speed with which the Irish government, and governments throughout the world, moved so quickly to maintain incomes as the crisis emerged has reignited policy discussions on universal basic income.

A universal basic income is an unconditional payment made to every individual that is sufficient to meet basic needs. 

It is paid at a set rate to all residents and cannot be withdrawn.

There has been growing support for a basic income throughout Europe, and also in Ireland.

In their election manifestos, two of our new parties of government set out clear policies on the introduction of a basic income.

While Fianna Fáil committed to setting up a Basic Income Commission to examine the feasibility of introducing a basic income in Ireland, the Green Party was more definitive.

It proposed to introduce a system of Universal Basic Income for all Irish residents by 2024.

The programme for government was more equivocal. 

In it the Government requires “the Low Pay Commission to examine universal basic income, informed by a review of previous international pilots, and resulting in a universal basic income pilot in the lifetime of the government”.

Green Party leader Eamon Ryan: The Greens want a Universal Basic Income scheme in place by 2024
Green Party leader Eamon Ryan: The Greens want a Universal Basic Income scheme in place by 2024

It is interesting to note that universal basic income is one of the few economic policies that requires comprehensive pilot schemes. 

Informed policy making is welcome, but we rarely hear of pilot schemes for tax breaks or cuts to the provision of social services.

In any event, there have been several basic income pilot schemes which can inform an Irish approach. 

A recent report from four Scottish local councils and NHS Scotland, which comprehensively reviews international evidence, makes a very convincing case for a large pilot scheme. It is supported by the Scottish First Minister, Nicola Sturgeon.

The Scottish pilot study set out in this report would provide very useful evidence for an Irish basic income system. 

It can benefit from avoiding the weakness of previous pilots and partial basic income trials in the US, Finland, and Canada.

The most common objection against a universal basic income is that it would undermine the incentive to work. 

This argument questions why someone would work when they are guaranteed an income each month from the state.

This attitude to social transfers is why existing unemployment payments, and more recently the pandemic unemployment payment, have included requirements that recipients are available for and actively seeking work. 

A significant effort is made by the state to help unemployed people seek work through training and/or other labour market activation efforts.

Similarly, a significant effort is made to monitor those social protection payments to prevent fraud.

There would be no such requirement attached to a basic income. 

Would this mean many people would decide to sit at home and opt out of the labour market? Well, the evidence says not.

The evidence from the limited number of pilot tests indicates there is limited or no impact of basic income schemes on participation in paid work. 

There are some groups who show a reduction in work participation, which primarily means a move from full-time to part-time work or a return to education.

Instead of being a problem with basic income, the effects it has on work participation perhaps show up one of its most important features. 

Those who are trying to juggle work and a caring role would find their lives less of a struggle. Picture: Imagestate
Those who are trying to juggle work and a caring role would find their lives less of a struggle. Picture: Imagestate

Indeed, some people may decide to leave their current jobs if they could rely on receiving a basic income from the state.

Those who are trying to juggle work and a caring role would find their lives less of a struggle. 

Carers in the home would receive the basic income. Whether this care is for one’s children or an elderly relative, or a person with a disability, we have for a long time put very little value on this important role.

There are many people who struggle with these caring roles while also working, probably part-time, to generate an income.

Society, and the person receiving care, benefit from people taking on these caring roles. 

It is right that we would allow carers to work with dignity and not worry about the impact on their incomes.

Since the basic income is paid to every resident, not every household, it is also an important resource for those who may find themselves financially reliant on a coercive or abusive partner, and feel unable for financial reasons to leave that situation.

There are other activities from which we benefit as a society that are also under-provided because of the inability of people to rely on a guaranteed basic income. 

Most artists must supplement their income from their artistic work, and with greater time and security could dedicate themselves to more creative pursuits, which would benefit all of us.

How many more successful authors, painters, or rock stars could we produce if we freed up young artists to focus on their work?

A basic income would also be a substantial stimulus for entrepreneurship. 

Someone setting up a new business, whether it is a coffee shop or a new gaming company, risks a lot to make their business survive or thrive. 

At the same time, this entrepreneur will have rent and bills to pay which may mean the business and the jobs it could have created never materialise.

Currently, entrepreneurs do not receive any direct income supports from the state. 

Of course, there are start-up grants and business supports, but an entrepreneur cannot use these to fund day-to-day expenses.

The substantial drop in income is a substantial disincentive to trying, and often failing, and trying again.

We often use our graduate numbers to attract foreign investment.
We often use our graduate numbers to attract foreign investment.

There is also evidence that a basic income makes it easier for people to remain in or to return to education, boosting skills levels in our society. 

For example, it could have a transformative effect on the uptake of doctoral studies in Ireland, removing the barrier of finding funding. 

We often use our graduate numbers to attract foreign investment.

There are savings in our current system from a basic income scheme. 

Every year close to €800m is spent on administration in the Department of Social Protection, including pay.

Just under a quarter of a billion euro is spent on non-pay administration. 

This is due to the complexity of the range of social protection payments; from jobseekers allowance, pensions, child benefit, carers allowance, to wage subsidy schemes.

Each allowance has a strict set of guidelines to determine eligibility. Each payment can be withdrawn or reduced at the stroke of a minister’s pen. 

A universal basic income reduces the need to monitor the payment, since it is unconditional and paid irrespective of a person’s employment status.

This means there is no need to check if the person receiving the payment is really looking for work, is really caring for an ill relative, or has made sufficient PRSI contributions to earn a contributory pension.

The unfair treatment of women who have lost their entitlement to a full pension because they left the workforce to care for children would not be an issue under a basic income scheme.

It has been argued that the universal aspect of a basic income scheme would be unfair. 

Why should the very highly paid receive the same basic income as poorer people.

However, basic income is taxable, just like all state transfers, reducing substantially the net amount received by higher paid workers.

It’s time for Ireland to embrace a universal basic income, to enhance the health, prosperity, equability, and happiness of all of our citizens.

Dr Declan Jordan is senior lecturer in economics at Cork University Business School

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