Blog and news
October 13, 2020

Universal Basic Income is Entering the Mainstream

The Prime Minister has opened the door to UBI. The First Minister of Scotland says the case for UBI has been ‘immeasurably strengthened’, and her Spokesperson for Work and Pensions has written to the Chancellor with a proposal, citing our work. Chris Pissarides and Anna Thomas argue that further emergency measures are needed, and different options for Universal Basic Income should now be costed up for serious debate.

The pandemic has revealed structural weaknesses in our labour market which cannot be redressed by the Self-Employment Income Support and Job Support Schemes. The Chancellor’s efforts to protect 80% income of those in regular employment and many in freelance work - which we strongly supported - is proving hard to implement. Many are excluded, not by design, but because of the variety and extent of precarious and atypical work across the UK. Recent analysis shows that 57% workers not entitled to government support have experienced a reduction in pay, and 49% anticipate problems paying basic bills.

Our interviews suggest high levels of angst from people in similar financial circumstances but working on different employment contracts, concerned about different entitlements, or none, under the income support schemes.

The extent of economic insecurity felt across the UK is set to exacerbate inequalities of health and work. This is likely, in turn, to compound divisions between classes of worker as the pandemic - and cracks in the new income support schemes - unfold.

So what has gone amiss? The UK’s flexible labour market - the ability of labour to respond to changes in market conditions and a source of pride to consecutive governments - is not a weakness in itself. A flexible job market can be a huge benefit to the economy at times of transformation, when it is combined with adequate social protection. This winning combination, which supports job creation and workers together through change, is exactly what the country needs to respond to the pandemic and build social and economic resilience in the face of uncertainty.

Covid-19 has hit the economy in the midst of one of the biggest technological transformations experienced since industrialisation. Now, automation will be accelerated as businesses dramatically reconfigure and repurpose: reducing labour-intensive work, redesigning jobs, restructuring to enable online functions. We have seen how many of us are working successfully from home. Huge shifts in demand for certain kind of work have begun. And the economy will suffer a downturn which is likely to be unprecedented in its scale and pace, even in the aftermath of the global financial crisis.

With these changes, we will see unemployment rising through the pandemic and its aftermath. The strained system of Universal Credit, struggling with over 1 million new claimants, cannot measure up to new demands. Against this background, we will need a reorientation of our welfare support system to support the surge in unemployment: people seeking to move jobs between firms and sectors as the labour market transforms.

The old argument that UBI may act as a disincentive to work is now academic. A pilot carried out in Finland (2017-18) demonstrated that people were not put off working as a result of the basic income, but they did become happier. If any doubt remained, the pandemic should have laid it to rest. The problem people are facing is that there is a reduction in work. It is telling that no-one we have interviewed has indicated that they wish to work less, or even be furloughed on a temporary basis.

Covid-19 has demonstrated the value of caring work as our frontline NHS and social care staff who use the most essential, human skills, are cheered and thanked. As we move on from the peak of the crisis, the question for policy-makers will become: how can we express this sense of increased value, how can we institutionalise our newfound appreciation of caring workers? As PM’s partner Carrie Symonds put it on Easter Sunday : ‘I cannot thank our magnificent NHS enough. I will never, ever be able to repay you and I will never stop thanking you.’

We think one of the best ways the PM might be able to repay key and other workers - many of whom earn less than the Living Wage - is a form of UBI. It’s not a silver bullet. But it is a social policy that rewards caring work, including unpaid caring work of families and dependents at home. To reward unpaid caring work is one of the best ways to recognise the value of all caring work, in and outside the NHS. Covid-19 has taught us the value of simplicity and universality too, of healing divisions and supporting all workers and the new unemployed through the crisis. This may well help the UK build social and economic resilience for an uncertain future, as well as stimulate demand for good and services.

So we recommend:

1.     As a crisis measure, Government should offer an interim minimum income floor of 80% NMW to every low-income worker excluded from the existing compensation schemes, including those experiencing a significant reduction in hours of pay, for period of 6 months. UBI cannot be set up in a rush, so this will need to be rolled out through existing welfare institutions.

2.     Following the crisis intervention, options for a revamped system of social support should be set out in a White paper. This should now include different options for UBI, costed up during the emergency period. UBI would probably need to be accompanied by a rise in marginal tax rates whereby a person on average income pays additional tax equal to the UBI level, and people on lower incomes are subsidised by those with higher incomes. UBI should be structured against the tax system, and would require a new registration system.

3.     The Government should establish a cross-department Disruption Council, with representation from business, unions, academia and third sector, to consider UBI alongside other options to support the new unemployed and worker transition. This should be a key part of developing an Exit Strategy - and plan to build a better future of work.

Author

Anna Thomas

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