Evidence shows the social and economic benefits of a tangible universal basic income

2 Oct 2022

A universal basic income would help cushion working class communities against the disruptions associated with transitioning away from a fossil fuel-based economy in years ahead. A tangible, dependable source of income arguably would have greater value – and appeal – than promises of ‘retraining’ and ‘reskilling’ for jobs that may never materialise.

Think of Alaska and we picture scenic icy wastes and hardy loners. But one of its best-kept secrets is the basic income scheme it has been running since 1982. Each year, all residents get an equal share of returns from an investment fund that is financed from the state’s oil revenue.

This year, the payment amounts to about US$3,200.

The take-up rate is over 90% and it’s estimated that without the payment at least a third more Alaskans would be living in poverty. It has had no inhibiting effect on the labour market, possibly because the increased spending stimulates job creation.

Findings from numerous basic income studies and analogous cash transfer schemes reiterate that experience and support the expectation that a universal basic income (UBI) would trigger elemental, but vital improvements in people’s lives.

They show the payments reduce poverty and household debt, support income-generating activities and community-focused work, and broaden people’s life choices. They also improve nutrition and health (especially for mothers and children), boost educational attainment, and support people’s mental health (probably because having dependable income reduces the stress associated with relying on elusive, erratic and low-pay work).

None of the studies supports concerns about recipients opting out of the labour market, or spending the income on “temptation goods” (such as alcohol, cigarettes and narcotics).

Closer to home, a small basic income of 100 Namibian dollars per month was paid from 2008 to 2009 to residents in the Namibian town of Otjivero-Omitara, near Windhoek. The percentage of residents living in poverty dropped from 76% to 37%, and among those who did not take in migrating family members, it fell to 17%.

School drop-out rates fell sharply, with 90% of school fees paid in full, and cases of child malnutrition declined from 42% to 17%.

Recipients also became more active in income-generating activities. Similarly, basic income pilot projects in India found that the nutrition levels of recipient families improved, school attendance rose markedly, especially for girls, and debts were reduced. Encouraged in part by these findings, the India Economic Survey in 2017 recommended that a UBI be made available to all women in India.

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A UBI should be part of preparing to mitigate the climate crisis

What might we expect a modest universal basic income payment to do in South Africa where, even before the Covid-19 pandemic, more than half the population was surviving on less than R1,000 per month and 25% were living in food poverty?

We already know that the situation would have been even worse were it not for the relaxed eligibility and greater take-up of social grants (especially the child support grant). Those grants have significantly reduced poverty levels in places with high poverty rates, in female-headed households and in rural areas.

Economist Asghar Adelzadeh has modelled the effects of various versions of a universal basic income if paid to all adults aged 18-59 years. Within five years, the payment would reduce the poverty gap by 66% (if set at Statistics South Africa’s lower-bound poverty line of R882 per month in 2021) and by 85% (if set at the upper-bound poverty line of R1,331).

It would also significantly increase the disposable income of the poorest 40% or so of people, money that is spent on locally produced, labour-intensive goods and services – which should have a kick-on effect on job creation, economic growth and community resilience.

This is going to be ever more important as climate change disruptions intensify.

According to the latest International Panel on Climate Change report, our already arid region will experience extended dry seasons and more severe droughts, along with more intense and frequent flood events. This will destabilise the production and prices of basic foods. And living off the land will become even less viable for the 2.3 million households who practice some form of subsistence farming, typically on degraded land and in conditions that are highly vulnerable to climate change.

For them, a UBI would add a precious layer of security.

More generally, a UBI would help cushion working class communities against the disruptions associated with transitioning away from a fossil fuel-based economy in years ahead. A tangible, dependable source of income arguably would have greater value – and appeal – than promises of “retraining” and “reskilling” for jobs that may never materialise.

It could also strengthen the bargaining power of low-skilled workers. Critics dispute this and warn that if a basic income is too small, many people would still have to accept demeaning, low-wage work for the sake of survival. A UBI would then effectively be subsidising low-wage employers and undermining wage demands.

That reasoning might hold in industrialised settings, but it seems less applicable in South Africa. For many millions of people here, not having paid work is the default reality, not a worst-case prospect. A UBI that increases their ability to survive in that reality can also steel them against having to take up dangerous, super-exploitative jobs (under threat of hunger and homelessness).

Having the freedom to say “no”, even only occasionally, to demeaning, abusive work could foster a countervailing power among workers who are typically credited with none.

The evidence suggests that a UBI would, at a minimum, reduce the extent and severity of poverty, improve people’s physical and mental health, and strengthen community resilience. It could function as part of a safety net for communities hard-hit by climate change shocks, and aid those who are disrupted as the economy transitions away from its reliance on fossil fuels.

The payment would, in effect, remunerate and value unpaid care and volunteer work, and subsidise participation in community activities, social solidarity and income-generating ventures. It may also boost the bargaining power of low-skilled workers, by enabling them to turn down dangerous, exploitative jobs.

But a UBI is not a silver bullet. Even if set at a modest amount, it would substantially reduce the extent and depth of poverty – but it won’t single-handedly dislodge the dynamics that generate poverty and inequality.

Unfortunately, over the past 40 or so years, income support schemes and other social policy tools have been detached from overarching development strategies. Instead, they’ve been paraded as stand-ins for derailed or abandoned strategies, or as “catalysts” for new, amorphous ones. For maximum benefit, a UBI would have to function as part of – not a substitute for – a broader set of macroeconomic, industrial and social policy changes that can turn our society in a more viable direction.

It’s not a stand-alone fix. DM/MC

This is the third in a series of articles by Hein Marais exploring Universal Basic Income. Read Part One here; and Part Two here. The next article in this series looks at whether it might make more sense to channel income support directly to the people who need it the most (making it much less expensive) or tie it to certain conditions (making it even more socially useful).

Hein Marais is the author of In the Balance: The Case for a Universal Basic Income in South Africa and Beyond, published by Witwatersrand University Press. The book is available wherever books are sold and as an open access download.

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A UBI should be part of preparing to mitigate the climate crisis