The idea of a Citizen’s Income has been embraced by thinkers from both left and right. But would it work? Malcolm Torry looks at the evidence.
The idea of a Citizen’s Income – an unconditional, nonwithdrawable income for every individual as a right of citizenship – has been around at least since Thomas Paine in the eighteenth century.
In the UK the Citizen’s Income Trust has been promoting debate on the idea for thirty years, but never before have we seen as much interest as we have seen recently. Already there was increasing press interest, but it was the Green Party’s decision to include a Citizen’s Income in their General Election manifesto that generated the substantial rise in interest more recently.
A perhaps historic moment arrived in March when at a conference convened by the Fabian Society and Bright Blue, all three of the entirely independent presentations – by the Fabian Society, the Adam Smith Institute, and the Child Poverty Action Group – contained expressions of interest in Citizen’s Income as a way to solve the problems facing our benefits system.
Our current largely means-tested benefits system is increasingly unable to serve the needs of a diverse and changing society in the context of a diverse and changing employment market: a mismatch made even more obvious by the difficulty that the Department for Work and Pensions has experienced as it has tried to implement a single combined means-tested benefit. The increasing number of National Insurance credits granted to people not in employment is a statement that contributory benefits are no more relevant to our society than means-tested ones. The only candidate left on the table is universal benefits: and, in particular, a Citizen’s Income.
One element of the evidence relates to the logic that a Citizen’s Income would enable means-tested benefits to be either abolished or reduced. Ithis would reduce the known unfortunate effects of means-tested benefits: stigma, invasion of privacy, errors, fraud, and employment market disincentives, to name but a few. Independent research shows that someone who starts a job, or who increases their earnings, might receive only a 4p increase in their net income for every additional £1 that they earn.
Empirical evidence for a Citizen’s Income is provided by large pilot projects in Namibia and India, which have revealed the sizeable positive employment market, income, educational, health, and democratic effects of small Citizen’s Incomes. To take just one example: in the Namibian pilot project, individuals in the lowest income quintile experienced a two hundred per cent increase in own account economic activity, not counting the Citizen’s Income.
There are two significant objections to a Citizen’s Income: that a universal benefit would reduce employment market participation, and that it would not be financially feasible.
Because the disposable income effects of a Negative Income Tax (NIT) and a Citizen’s Income are similar, results from NIT experiments can tell us how a Citizen’s Income might affect employment market behaviour. Such experiments in the United States during the 1970s found very little labour market effect.
Most of the small employment reduction effect was people between employments taking longer to look for their next job, which suggests that they were looking for the right job rather than any job; and some of it was women with children working fewer hours each week, which might also be a good thing.
We can therefore assume that any employment market effects of a Citizen’s Income would be small, and that those that did occur could be useful. On the basis of a similar Canadian experiment we can assume that there would be measurable positive effects on health and on educational achievement.
Much of the recent controversy has been over the question of affordability. Here we must be careful to distinguish between two different kinds of financial feasibility. A Citizen’s Income would be financially feasible if it could be paid for from within the tax and benefits system, and if it would not impose sizeable losses on households.
Two EUROMOD working papers have shown that it would be perfectly possible to implement a financially feasible Citizen’s Income at the level of current means-tested benefits, and that if strict revenue neutrality were to be required (that is, if the Citizen’s Incomes were to be paid for by adjusting only Income Tax and National Insurance Contribution rates and thresholds), then a smaller Citizen’s Income of £50 per week would be feasible.
The evidence suggests that a Citizen’s Income would have positive effects for our society and our economy, and that it would be financially feasible to implement it. The increasing interest is therefore entirely rational.