Copenhagen 2016 – Pilots and Policies
A Global Look at Basic Income Pilots and Policies
This is a list of previous experiments and policies with basic income with some of their results. The list is far from comprehensive and many details from the experiments are left out. Also, it is not an academic article so references are mostly left out as well, but will be provided upon request.
The article is divided into two parts. The first, Experiments with Basic Income, highlights what have been the most important basic income experiments since the 1960s and some which are being carried out now or projected for the future.
The second part, Policies including Basic Income, describes basic income policies implemented by local or national authorities and certified by law.
A word on the definition of the term “experiment”. In this context, it is used to cover both the academic and the colloquial meaning of the word. In other words, not all experiments listed here are experiments in the strictest scientific sense. They are, however, included to show the diversity of implementations of basic income.
A huge thanks to Karl Widerquist and André Coelho for many helpful suggestions to this article.
Karsten Lieberkind, 2016
Experiments with Basic Income
Basic income experiments or pilots can be traced back to the 1960s. In the USA, they have a prehistory in the 1960s’ civil rights movement that was largely driven by the huge difference between rich and poor that was prevalent despite the upturn in the economy at the time.
Social services and medical care to the poor were already introduced during the Kennedy administration, and, when Johnson assumed office, he addressed the same issue in his State of the Union Speech in 1964, calling for a “War on Poverty”. This policy later led to the formation of the Office of Economic Opportunity which was the agency responsible for most of the program.
In 1968, Johnson established the Commission on Income Maintenance Programs that proposed negative income tax to replace the traditional welfare measures (minimum wage, unemployment insurance funds, etc.).
In the same year, 1,200 economists, including James Tobin and Paul Samuelson, signed a document with a proposal to Congress for a guaranteed income financed by a negative income tax scheme.
Part of the proposal was taken up in 1969 by the Nixon administration in the so-called Family Assistance Plan, primarily to support families with children, whether they were working or not.
The idea had already circulated among researchers under the heading Guaranteed Annual Income (GAI), a designation Nixon, however, opposed, even though it was founded on principles laid down by his own commission. People who are able to work should do so, he said.
Hence, the GAI was only thought to be targeted at families with children and with an obligation for capable breadwinners to take a job.
The Family Assistance Plan was meant to operate according to negative tax principles. As it turned out, it had a majority in the House of Representatives, but was ultimately voted down in the Senate, even though some Democrats like representative William F. Ryan said the proposal didn’t go far enough:
“Guaranteed Annual Income is not a privilege. It should be a right to which every American is entitled. No country as affluent as ours can allow any citizen or his family not to have an adequate diet, not to have adequate housing, not to have adequate health services and not to have adequate educational opportunity — in short, not to be able to have a life with dignity” ( William F. Ryan from a speech in the House of Representatives).
Many Democrats also objected to the work requirement and the very low level of the guaranteed income implied by the proposal.
In 1972, senator and presidential candidate George McGovern came up with an even more radical proposal for a Guaranteed Annual Income. He spoke in favour of following a principle of individuality and also that the provision should be independent of both personal income and assets.
Still, as early as in 1968, the Johnson administration launched the first of a series of four experiments in different areas of the country with a GAI based on a negative income tax model as originally recommended by the economist and Nobel laureate Milton Friedman (described in his book Capitalism and Freedom, 1962). Friedman had suggested this model with the double advantage of both securing the poorest families an income while also increasing growth in the national budget as a result of higher general consumption. An added benefit would be a reduction in bureaucracy.
However, concern was raised that GAI would result in a disincentive to work and perhaps lead to families splitting up.
The four experiments were conducted scientifically with randomly selected target groups and control groups in the United States and with GAI at various levels:
– New Jersey and Pennsylvania 1968-72 (city population)
– Indiana (city of Gary) (measuring the effect of GAI on single parents) 1971-74
– Iowa and North Carolina (rural population) 1969-73
– Seattle and Denver 1971-80 – largest trial – 4800 families
The results were discussed at a conference in 1986 and later published. Here are a few of them:
– Increased birth weight of children from poor families.
– Children performed better in school.
– A moderate decline in paid work participation, however, even if the experimental group worked less than the control group, often both of them worked more than they did prior to the start of the experiment. The largest determining factor in whether they worked was not whether they got the NIT but the overall health of the macroeconomy. The labour market participation rate was not necessarily the most important effect. Its effect on health, school attainment and overall welfare of the recipients was more significant. People who stayed home were mostly those who took longer to find their next job if they happened to lose the one they had.
Young people worked less, but enrolled for higher education and even adults continued to educate themselves.
There is a statistical uncertainty because respondents do not always answer honestly about how much they work and also the pilots were local and time-limited.
A certain increase in the number of divorces, especially in Carter’s presidential period in the late 1970s. As it turned out, this was a stumbling block and led to his welfare program not being successful. In 1990, researchers found that the number of divorces was probably due to a statistical error and no subsequent studies have witnessed this effect.
By the end of the 1970s, the experiments had met with such strong Republican opposition – probably due to a somewhat exaggerated view on the effect they had on labour supply – that by 1980 they were finally terminated.
The Mincome experiment
The now almost famous Mincome experiment initiated by the municipalities of Winnipeg and Dauphin, the province of Manitoba, in 1974-78. In Dauphin alone around there were about 10,000 participants.
The experiment was based on negative income tax and with a break-even point at 60 percent of the level of low-income groups.
Any earned income above the Mincome amount was offset by 50 percent, so for every dollar a person earned, the Mincome amount was reduced by 50 cents.
As with the American experiments, Mincome was originally a social experiment. Among other things, they wanted to see what influence the experiment had on work incentives, especially in Winnipeg involving only employable individuals.
In Winnipeg, the families were, like in the US experiments, randomly chosen together with control families who knew nothing of each other. This scheme offered a couple of advantages: the negative tax setting could be varied and the direct impact of the Guaranteed Annual Income could easily be assessed.
In Dauphin, all city residents were covered, and comparisons were made with nearby villages. The methods were partly quantitative and statistical and partly qualitative including personal interviews.
Only the Winnipeg experiment was analysed by the researchers at the time because its was cancelled before completion.
Total cost of the experiments: 17 million dollars.
The Canadian government believed that the experiments would eventually lead to an actual Unconditional Basic Income (UBI) along the lines of the general health insurance, but the oil crisis and a general recession led to an abandonment of the whole idea.
In 1986 and onwards, several governments tried to revive something that bore a resemblance to basic income, but in vain.
As to the Mincome experiments, there was no money to analyse the data (almost 2000 boxes of documents). And even basic income supporters were afraid to analyse them because they feared that the results would not benefit their cause.
In 2009, Evelyn Forget, a Canadian professor of health sciences at the University of Manitoba, got a permission to examine all the data, initially the health care data as the Canadian authorities had already made databases of them in 1974. She studied how Dauphin had developed compared to other cities in the same area. The results were published in 2011 and a few of them are presented here.
Primary results of the Mincome experiments:
– 8.5 percent fewer hospital visits, especially related to mental disorders, but also physical injuries.
– More young people attending high school because of not being forced to work at an early age. In general, the participants didn’t work less, only mothers with small children stopped working.
– UBI was used as a stepping-stone for a better job.
– Improvement in the opportunities to pursue education without the benefit being deducted.
– Also, participants who didn’t directly benefit from the scheme (people with good income or savings), regarded it favourably as an insurance scheme.
The results were so good that the Canadian government is again considering the implementation of a basic income scheme, simply because it will save money in the health sector and elsewhere.
The conservative former senator Hugh Segal has recently spoken out in favour of bringing together all social services in UBI.
Following the election of the liberal Prime Minister Justin Trudeau, the country has witnessed a surge of interest in carrying out experiments with basic income and the government of Ontario is at the forefront of this new wave. In their Budget 2016 Statement, they said that:
One area of research that will inform the path to comprehensive reform will be the evaluation of a Basic Income pilot.The pilot project will test a growing view at home and abroad that a basic income could build on the success of minimum wage policies and increases in child benefits by providing more consistent and predictable support in the context of today’s dynamic labour market. The pilot would also test whether a basic income would provide a more efficient way of delivering income support, strengthen the attachment to the labour force, and achieve savings in other areas, such as health care and housing supports. The government will work with communities, researchers and other stakeholders in 2016 to determine how best to design and implement a Basic Income pilot.
A Basic Income Grant (BIG) project from 2007 to 2009 in which everyone under 60 years of age in a particular province (Otjivero-Omitara) received N$100 / month (approx. 6 euros). People over 60 years already received a state pension and were therefore not included in the project. It was conducted by the Namibian Basic Income Coalition and covered around 6000 people.
The results were similar to those obtained in the Madhya Pradesh basic income pilot.
The idea has been taken up again by the Minister for Poverty Eradication and Social Welfare, Zephania Kameeta, a long-time proponent of basic income. Meetings have been held with representatives from all regions of Namibia for the eradication of poverty and a fairer distribution policy.
A pilot project on a very large scale has been conducted in the state of Madhya Pradesh, 2010 – 2013, led by the labour union Self-Employed Women’s Association (SEWA) and funded by UNICEF. Guy Standing, research professor at the School of Oriental and African Studies (SOAS), University of London, has functioned as its scientific leader and advisor.
A few keywords to describe the pilot:
- Duration: 18 months
- 6,000 individuals receiving cash transfers
- 8 UBI villages
- 12 control villages
- 1 tribal village
- 1 tribal control village
- Unconditional Cash Transfer – monthly
- Randomized study (Randomised Control Methodology)
- One half of the villages were active SEWA villages
The cash grant was:
– Universal, that is, for everyone, with children getting 50% of the grant given to adults, and the amount could be used freely. Often allowances targeted at the poor are administratively costly and prone to error.
– Unconditional – earmarked funds or other conditions are inefficient and lead to corruption
– Individual – personal autonomy, especially for women and the elderly
– The amount was fixed at between 20 and 30% of the income of families in the lower-income scales
A few of the observed results from the experiment in headlines:
– Improvements in housing and sanitation
– The overall nutritional condition improved, especially for young girls
– There was enough money for food, and the diet became more varied, with more fruits and vegetables
– Money was not spent on tobacco, alcohol, etc.
– The participants experienced fewer diseases
– The participants bought more or higher quality medicine
– Health insurances were signed and private hospitals were visited more frequently
– Disabled people were included as an active part of society
– Increased and more regular schooling
– The students got higher scores
– More children were sent to private schools as a result of the pilot
– Work outside school hours had less influence on learning
– People worked more, earned more and were more productive
– There was a transition from paid employment to self-employment and entrepreneurship
– Some participants invested in machinery, livestock and seed corn.
– A number of participants got out of debt and were able to save more.
The villages receiving UBI and associated with SEWA fared best of all. The results show that the emancipation and empowerment of women is important.
A local UBI-based donor-funded project, organized by ReCivitas, has been established in Quatinga Velho, a small and poor community near Sao Paulo.
ReCivitas was founded in 2006 and is led by Bruna Augusto Pereira and Marcus Vinicius Brancaglione. They are convinced of the value of UBI and don’t want to leave it to words, but rather implement it directly and locally: “The basic income model should be consistent with the libertarian spirit and should be formulated not as aid but as a universal human right to social security”.
The implementation trial has led to improvements in health and nutrition, housing, etc., but most importantly also to a sense of self-esteem and confidence in the future.
As of December 2015, the 150,000 inhabitants of Maricá, near Rio de Janeiro, receive a small monthly UBI paid in a digital local currency called Mumbuca, to stimulate already existing solidarity initiatives like cooperatives of landless peasants and sales of products to Madhya Pradesh, the state in India that already saw the implementation of a UBI pilot project.
The project is partly financed by oil revenues off the coast and a Factory of Recycled Material, also a source of funding for a basic income.
The local currency, which can only be used for specific purposes, is designed to prevent the kind of abuse that has occasionally occurred in the Bolsa Família project.
Micro-loans with low interest rates to entrepreneurs and business owners have also been introduced.
All of this has led to greater consumption, jobs and economic growth in the community.
Eduardo Suplicy believes it can pave the way for a UBI throughout Brazil and has proposed to the current president Dilma Rousseff the formation of a working group of scientists to investigate the matter.
In a recent experiment, randomly selected vulnerable (poor and unemployed) youth received a cash lump sum of $400 (equivalent to their normal annual income) for training and entrepreneurship. They invested the money in tools and materials, but also to learn a trade.
After four years, one half of the participant had learned a skill and there was a 57 percent increase in investments, 17 percent in working hours and a 38 percent increase in income compared to the control group. The change was most significant among women because they were poorer to begin with. No antisocial behaviour was detected.
One and perhaps overlooked reason for this change in behaviour is likely surplus energy and an increased sense of well-being – physical as well as mental. People without resources do not have the energy to pursue education or look for other work opportunities.
The experiment was part of a new policy called GiveDirectly based on direct cash transfer. To quote from the initiative’s homepage: GiveDirectly is driving a re-evaluation of the assumptions underlying international philanthropy with a provocative model: we deliver donations directly to the extreme poor and let them decide what to do with them. The experiment was a side project to test whether the method was working.
The same charity is now moving closer to an actual UBI model. They are going to implement UBI on a fairly large scale in Uganda.
In 2009, an experiment took place among homeless people in London. 15 homeless men received 3000 pounds in cash each with no strings attached. Within one year, 11 of them had a shelter, were in education or in treatment for addiction. No one spent the money unwisely.
In 2014, an IT professional, Michael Bohmeyer from Berlin, got the idea of crowdfunding one year’s supply of basic income of 1000 euros per month for one person. Lots are drawn to find the lucky winner and anyone can participate in the lottery for free so as to remain in the spirit of it being “unconditional”. The project is called Mein Grundeinkommen, and enough money has already been collected for quite a few of people to receive basic income for one year.
Inspired by this experiment, a similar one was launched in November 2015 in USA, coached by Michael Bohmeyer.
The Finnish government plans to launch a basic income pilot as one element in a number of social experiments to be carried out for two years from the beginning of 2017. A consortium has been formed consisting of universities, think tanks, municipalities and social institutions to explore various models for the implementation of a basic income. The consortium is led by the Finnish Social Insurance Institution Kela which will present its recommendations to the government in November 2016. A preliminary report has already been published.
The models under consideration are 1) a full basic income of 1000-1500 euros a month, replacing all benefits, including insurance-based ones 2) a partial basic income, replacing all but the insurance-based benefits, of about 550 euros a month, or at the level of the present minimum benefits, 3) a negative income tax model, 4) other models like, for instance, a participation model.
The experiments will be targeted at a sample population of at least 5000 households (rather that individuals), randomly selected from the entire population and with control groups. Also more regional experiments will be carried out in order to view typical local effects like networking.
The basic income proposal enjoys pretty strong support from the Finnish population. According to a survey (2015), 69 percent support the idea of a basic income of at least 1000 euros a month. Also, most major parties are supporting the initiative. Prime minister Juha Sipilä says that the experiments are designed to reveal whether a basic income will make the system more participatory, strengthen work incentives, e.g. by reducing income traps, and reduce bureaucracy in the social security system, while also being financially sustainable.
The long-term goal is a reduction of unemployment, and it is expected that unemployed with a basic income can afford, and will, take a job at a lower wage. There is currently a nine percent unemployment in Finland.
Kela believes that significant savings can be expected through the integration of previous benefits.
It is, however, also very expensive. A nation-wide basic income implementation is calculated to cost around 52 billion euros out of a budget surplus of 49 billion.
It may also fall hard on those who rely on allowances that may disappear, like, for instance, housing or special needs.
It will remove some of the stigma of unemployed, though, according to Kela.
The Dutch Ministry of Social Affairs has called on cities that are interested in basic income to come up with a plan.
30 Dutch municipalities have shown interest for a study of basic income, especially Utrecht, Tilburg, Wageningen, Nijmegen and Groningen which have already come up with various drafts. This interest is motivated by the fact that the current benefit system of workfare, while being humiliating for the recipients, is also very expensive, so new ways are sought to eliminate both the obligation to work and sanctions for not living up to this obligation.
In Utrecht, several different models will be tested, beginning in January 2017, targeted at those who are already receiving benefits. The recipients will be divided into five groups.
One group will receive benefits with no strings attached while another will receive a bonus for doing volunteering work, and yet another will lose it if it fails to do so. There will also be a group receiving UBI while being allowed to take a job and earn a little extra on top of it. A control group will follow the standard procedure for benefits including workfare, control, sanctions, etc.
The experiments are a result of years of prior grassroots work, but have so far mostly aroused interest from professional social workers and academics.
Policies including Basic Income
The state has since 1976 paid out an annual dividend of its oil revenues and other natural resources to all permanent residents from the so-called Alaska Permanent Fund. The dividend is called the Permanent Fund Dividend and the amount varies between $800-2000 a year per citizen.
The Cherokee tribe
In 2001, a Cherokee tribe in North Carolina introduced an Unconditional Basic Income that was handed out to all tribal members in the area. It was funded by the revenue from a casino run by the Cherokees themselves. The annual dividend was modest to begin but is today more than $10,000 per person.
Among the findings:
– A forty percent decline in the number of children with behavioral disorders due to poverty
– A decrease in reported legal offenses
– Young people seeking better education
– A decrease in the number of drug addicts
– Significant budget savings
Former senator Eduardo Suplicy, Ph.D. in Economics, co-founder of the Brazilian Workers’ Party, has been the driving force in having Brazil be the first country in the world to introduce a social welfare program targeting poor families and including both direct cash and conditional transfers.This happened in 2004.
The program is called Bolsa Família, or family allowance.
Suplicy’s original intention with this constitutional requirement was actually an unconditional basic income, whenever funds would have been available, but he didn’t succeed in getting enough support for this motion.
Bolsa Família was at the very core of Lula da Silva’s social policy and perhaps crucial to his being elected president.
The program has received worldwide recognition, even from the World Bank, but also some criticism from people believing that the money may not be used wisely or could lead to laziness.
It could, however, also have the opposite effect in that a safety net would allow people to take higher risks and perhaps start their own business.
© Karsten Lieberkind