What might improve? Could there be negative effects?
Even ideas that sounds great can sometimes cause unintended problems. Below we look at the evidence as to the possible impacts of a global basic income. We find that people keep going to work, prices usually stay stable, and people don't spend their basic income on bad habits. We also find that a basic income is likely to create new work opportunities in struggling economies, reduce global inequality, and make people's live better in myriad ways.
Would people stop going to work?
The evidence to date suggests the opposite - basic incomes (at least at the low level we are suggesting) actually make people more likely to work.
- In Namibia's basic income pilot, the unemployment rate dropped from 60% to 45% in just one year.
- In India, households receiving the basic income were twice as likely to have increased their work or productivity compared to other households.
- Malawi's Social Cash Transfer scheme was found to change the way people worked - rather than doing low-paid wage labour for others, people chose to work more on their own farms to increase production.
- In Kenya, 'cash transfers increase investment in and revenue from income-generating activities', and have helped to create a 34% increase in earnings.
Does basic income cause price inflation?
If people have more money, but there are only as many goods to buy as there were before, then prices may increase. Some economists have asserted that cash transfer schemes could cause inflationary problems like this. The evidence is mixed:
Global basic income is not a scheme to create more money - it just moves existing money around. Therefore at an aggregate level, a global basic income should not cause inflation. However, as with any action that improves people's livelihoods (including job creation schemes and minimum wage laws, against which the same arguments about inflation have been made), local changes in prices are possible. Equal Right may also explore the potential of debt-free international money creation as a method for boosting global UBI. The management of inflation will be a key area of interest in any such research.
The examples given above are encouraging, as they suggest that in most cases, producers and retailers are able and incentivised to increase supply to meet new levels of demand, therefore keeping prices stable. It is also worth noting that even where inflation did occur, it was not so high as to neutralise the beneficial effects of receiving the cash - only a small part of it was lost by paying higher prices, and even then that money circulated in the local economy, as it tended to be spent on livestock and other goods supplied by local workers and farmers.
- A study of a Mexican food aid programme compared the impact on prices of receiving cash, food parcels or nothing. In general, giving people cash did not increase prices, except in very remote villages where there was a very small price increase for some products.
- In Uganda, refugees returning to their home villages were given lump sum cash transfers, which they broadly used to buy livestock. The very sudden and significant increase in demand led to temporary inflation of livestock prices of 10-30%.
- A study of cash transfers in seven African countries pointed out that as long as local producers are able to increase production (which they often are, in the context of more paying customers), there is unlikely to be any significant inflation as a result of cash transfers.
- Syrian refugees in Lebanon who were given cash transfers were not charged higher rents by landlords than other local people.
- A World Bank commentator noted, 'Local markets from Somalia to the Philippines have responded to cash injections without causing inflation'.
Global basic income is not a scheme to create more money - it just moves existing money around. Therefore at an aggregate level, a global basic income should not cause inflation. However, as with any action that improves people's livelihoods (including job creation schemes and minimum wage laws, against which the same arguments about inflation have been made), local changes in prices are possible. Equal Right may also explore the potential of debt-free international money creation as a method for boosting global UBI. The management of inflation will be a key area of interest in any such research.
The examples given above are encouraging, as they suggest that in most cases, producers and retailers are able and incentivised to increase supply to meet new levels of demand, therefore keeping prices stable. It is also worth noting that even where inflation did occur, it was not so high as to neutralise the beneficial effects of receiving the cash - only a small part of it was lost by paying higher prices, and even then that money circulated in the local economy, as it tended to be spent on livestock and other goods supplied by local workers and farmers.
Would we waste it on alcohol and cigarettes?
On the whole, worldwide, people with more money (including salaries, share income, etc) tend to spend more on alcohol, treat foods and other 'vice goods'. Some people have predicted that therefore any money given unconditionally to people would be spent unwisely. However, the evidence - at least among people with low incomes - seems to point the other way:
- A review of nineteen studies of cash transfers in ten countries found that 82% saw no increase in spending on vice goods. Of the rest, in many cases the increases were tiny - one had an average increase in alcohol spending of less than one penny.
- The evaluators of Namibia's basic income pilot explain, "Alcohol abuse exists in Otjivero-Omitara as in any other community in Namibia. The BIG [Basic Income Grant] is not able to solve the problem, but there is also no evidence that it aggravates it."
- UNICEF's report on India's basic income pilot states, "a slightly higher proportion of households in basic income villages in both sets of pilots said they were buying less alcohol than before."
$1 becomes $2... How basic income can boost local economies
With your basic income, you might buy vegetables from a local farmer or clothes made by your neighbour on her new sewing machine, or you might pay a local tradesperson to fix your roof or cut your hair. If everyone has money to spend, there are likely to be more work opportunities, so as well as becoming better off by receiving a basic income, people can often earn more money through work as well.
These effects may balance out to have no effect on economic growth, or they may cause more or less total global growth. However the impacts of global UBI on growth are not a key topic of study. At Equal Right, we believe that the success of societies and economies should be measured in terms of whether they achieve social goals within ecological limits, rather than whether or not GDP increases.
- A study of Mexican small farmers who received 'Procampo' cash transfers in the 1990s found that, "On average, a $1 transfer resulted in $2 of additional income [for farming households]."
- A study of cash transfer programmes in seven African countries found that every $1 given out generated between $0.27 and $1.52 in the local economy, so even households who didn't receive the transfer ended up better off.
- A simulation of a proposed cash transfer scheme for Cambodia did not find a significant multiplier effect, although the authors concede that this might emerge in the longer term as people's capital investments, and improvements in health and education, begin to pay off.
- Zambian farming families receiving a child grant used it to help increase farm profits by more than double the value of the grant.
- Cash transfers given to Syrian refugees living in Lebanon found that, "Each dollar of cash assistance generates $2.13 of GDP for the Lebanese economy."
- A review of studies into social protection (i.e. cash transfers by governments, such as pensions and family benefits) noted, "Overall, there is clearly a positive contribution from social protection programs to economic growth."
These effects may balance out to have no effect on economic growth, or they may cause more or less total global growth. However the impacts of global UBI on growth are not a key topic of study. At Equal Right, we believe that the success of societies and economies should be measured in terms of whether they achieve social goals within ecological limits, rather than whether or not GDP increases.
Redressing world inequality
World inequality is astonishingly high, and still rising fast. We need a new mechanism to address inequality and bring wealth back down to the grassroots. A global basic income has great potential to do this. The potential impact on inequality of redistributing US$75 billion into people's pockets every month has not yet been calculated, but it is likely to be substantial.
And of course, once in place, the global basic income scheme would be ours to adjust. If we want to reduce inequality even further, we can use the funding mechanisms to collect more wealth from the upper reaches of the world economy, and share it out through a bigger basic income.
Reduced inequality may make the world a nicer place to live for all of us, including people who are already well-off. It may reduce crime, ill health, and financial crises, and improve education, social cohesion and individual happiness.
And of course, once in place, the global basic income scheme would be ours to adjust. If we want to reduce inequality even further, we can use the funding mechanisms to collect more wealth from the upper reaches of the world economy, and share it out through a bigger basic income.
Reduced inequality may make the world a nicer place to live for all of us, including people who are already well-off. It may reduce crime, ill health, and financial crises, and improve education, social cohesion and individual happiness.
Making our lives better
The real aim of global basic income is to make people's lives better, all over the world. We all have the right to life, and it is very difficult to live a decent, happy and satisfying life when you are struggling to cover your basic needs. A global basic income would give people a reliable source of income, which everyone can spend on whatever they think will make the biggest contribution to their life and happiness.
There is already extensive evidence that basic incomes and other cash transfers help to reduce life problems, and give people the choices and chances to pursue a life they enjoy.
There is already extensive evidence that basic incomes and other cash transfers help to reduce life problems, and give people the choices and chances to pursue a life they enjoy.
- In India, during the basic income experiment, far fewer households lacked enough food (down from 48% to 22%) and people ate better, with more vegetables, milk, fish and eggs. Many people improved their homes, fixing leaky roofs and installing toilets. More children stayed in school, especially girls - 66% of girls in the basic income villages were in secondary school by the end of the pilot, compared to just 36% in the control villages. Women and people with disabilities said they got more of a fair say within the household. Most recipients said their health had improved, with 16% saying they had less anxiety.
- South Africa's Child Support Grant has greatly reduced malnutrition, enough to make children 3.5cm taller on average. It has also helped to reduce risky behaviour among teenagers, with a drop in teenage pregnancy and drug use.
- In Brazil, the government's cash transfer programme has helped 36 million people escape extreme poverty. One enormous cause of suffering - the loss of a child - has been hugely reduced: in areas with high programme coverage, child mortality from diarrhoea has dropped 46% and deaths from malnutrition have fallen by 58%.
- Kenyan recipients of GiveDirectly's cash transfers were happier and more satisfied, and had significantly lower levels of the stress hormone cortisol. Meanwhile, families receiving the Kenyan government's Cash Transfers for Orphans and Vulnerable Children were able to grow and eat more food, set up their own small businesses, and send their children to school more often.
- Zambia's child grant generates significant positive impacts in sanitation and health, including a 15% increase in households owning a latrine, and a 26% rise in using LED torches or candles for indoor lighting rather than air-polluting open fires. The grant allowed farming families to buy tools, animals, seed and fertiliser, leading to an 81% increase in crop sales.
- For Syrian refugees living in Lebanon, cash transfers meant children didn't have to be send out to work (there was a drop of 50% compared to control villages). Families receiving the money reported significantly fewer arguments at home, and tensions within the local community were also reduced.
- In Namibia's basic income pilot village, the poverty rate fell from 76% of households to 36%, and fell to just 16% of households not affected by inward migration (the improved circumstances of people in Otjivero-Omitara led family members living elsewhere to move in with them, spreading the basic income more thinly within the household - this is unlikely to occur if people everywhere received the basic income). Child malnutrition rates fell from 42% to 10%, and there was a 36.5% drop in crime.
- A United Nations meta-study concluded that, "In the countries studied, even the small amount of cash improved livelihood choices," with people able to choose among better-paid and more varied work options. Furthermore, the report notes that, "there was generally a clear positive impact on beneficiary well-being," and notes many examples. A 13 year old could now bring friends home from school, as the family had enough food to offer them dinner. An elderly widow could hire local people to help weed her crops. Children now sleep under blankets rather than grain sacks. Neighbours have become friends, as they no longer suspect the other is coming only to beg.
