Sunday, March 15, 2015

Three Practical Hurdles to a Universal Basic Income

The campaign for the introduction of a universal basic income (UBI) has been gaining ground in recent years. What was once a slightly obscure proposal, beloved by certain political theorists and welfare reformists, is now being embraced as a potential solution to the threat of technological unemployment. I myself have written about it on several occasions, mainly focusing on different political and philosophical arguments in favour of its introduction. These arguments focused on the normative/political grounding for the UBI. They rarely, if ever, focused on the practicalities of the UBI. How would it be introduced? Would this be an easy thing?

In this post, I want to take up some of those practical questions. In particular, I want to consider a pragmatic argument in favour of the UBI, one that is often trotted out by its supporters. Then, I want to consider some potential pragmatic hurdles to the introduction of a UBI. In doing so, I draw upon an article by Jurgen De Wispelaere and Lindsay Stirton entitled ‘Practical Bottlenecks in the Implementation of a UBI’. In that article they look at three specific hurdles to the introduction of a UBI, ones that supporters of the policy should consider.

1. The Under-consumption of Welfare and the Simplicity of the UBI
Most welfare entitlements are selective. That is to say, only certain people qualify for those entitlements. For example, jobseekers allowance is a selective entitlement: you are only entitled to it if you are an adult who is actively seeking work. Similarly, childcare benefits are selective: they are only available to those who have dependent children. Sometimes, there are multiple dimensions to the selectivity. For instance, childcare benefits might be means-tested, meaning that only those with children and with incomes below a certain level, are entitled to the benefit. These selective policies can be justified on various grounds, but their selectivity can give rise to certain practical problems. Chief among these practical problems is the problem of under-consumption.

This problem is widely discussed in the literature on welfare entitlements. It arises whenever people who are genuinely entitled to a welfare payment fail to receive it. This is a significant failure of policy: the rationale behind selective welfare programmes is that they provide benefits to people who are genuinely in need of them (who genuinely deserve them). If they fail do this, then there is a significant “justice gap” associated with their implementation.

Under-consumption may be attributable to any number of causes, but it is generally believed to increase whenever the programme includes complex sets of rules and guidelines, whenever the entitlement criteria are vague, whenever the programme requires the applicant to pass a means test, or whenever the criteria of entitlement are associated with some negative prejudice (e.g. the “unemployed”). Selective entitlement programmes tend to exhibit these properties to greater or lesser degrees, which means they often suffer from the problem of under-consumption. Furthermore, there is a limit to how fast and effective bureaucracies can be at tracking people as their life circumstances change (e.g. their employment status, marital status, parental status). Since these life circumstances often determine eligibility for selective entitlements, it follows that selective programmes will always have to contend with a significant risk of under-consumption.

There are other practical problems associated with selective programmes. As you might imagine, the bureaucratic costs associated with policing the boundaries of entitlement are often significant, and sometimes entail humiliating and morally costly intrusions into the lives of those trying to claim the entitlements. It would be better if we could minimise those costs.

This is where the pragmatic benefits of the UBI are typically touted. Irrespective of its moral, political or economic credentials (which are nothing to be sniffed at) the UBI seems attractive because of its administrative simplicity. If it is truly universal, then there is no need to police the boundaries of entitlement. There is no need for costly bureaucratic structures to assess those who make claims, no need for complex rules and guidelines, or prejudicial criteria of entitlement that might dissuade people from making a claim. The problems of bureaucratic cost and under-consumption can be addressed in one fell swoop.

If only things were that simple. Although the UBI certainly has some practical advantages over its more selective peers, it also comes with its own practical hurdles to implementation. As de Wispelaere and Stirton point out, the sheer size and scale of a UBI would be unprecedented. Setting up the infrastructure for its administration would be no small feat. Indeed, there are at least three hurdles that would need to be cleared. Let’s examine them all.

2. The First Hurdle: Maintaining a ‘Cadaster
The first practical hurdle for the UBI is:

Hurdle (1)- Identifying all eligible claimants: If the UBI is to be made available to everybody (or at least every adult or citizen) in a given society, then it is essential that we have some way of identifying all these people. In other words, it is essential that we have some universal register or ‘cadaster’ for eligible claimants.

Many people don’t perceive this as a problem. This is because they think the main problem with selective entitlement programmes is that they struggle to identify the ineligible, i.e. to exclude those who don’t meet the criteria for the programme. Consequently they tend to think that the UBI, because it removes most criteria of ineligibility, solves the problem of identifying eligible participants. But this is incorrect. Just because we no longer have the same number of criteria of exclusion, does not mean that we will magically succeed in including everyone entitled to the UBI. Identifying every person (or adult or citizen) in a given state is itself a significant administrative task.

So how could we do it? De Wispelaere and Stirton look at two possibilities. First, we could try to construct a register from scratch. In other words, introduce some new scheme for tagging and identifying every person (adult or citizen) in an administrative area. This is likely to be a costly endeavour. When the UK proposed to introduce a ID card scheme in the 2000s, the original government estimates were that this would cost approximately £5.6 billion. Later independent estimates suggested that the true cost could be anywhere between £10 and £20 billion (these figures are cited in De Wispelaere and Stirton’s paper). Furthermore, there may be great cultural differences in the willingness of a populace to put their names on such a register. People may not trust the government, and people may worry about how their personal information would be used (beyond simply determining eligibility for the UBI).

The other possibility is that we make use of pre-existing registers. Obvious examples would include registers of social security numbers or voting registers. The problem with these is that they are often far less universal than people suppose. Social security registers tend to work pretty well for people whose births are registered in a particular state but not for those who move to a state later in life. They usually need to apply for a number, and some are either unaware of the need to do so, or simply cannot be bothered to do so. The same holds true for voting registers. I can speak from personal experience on this front since there have been several times in my adult life that I failed to register to vote and so my name was missing from the register. Use of overlapping, but pre-existing, registers might be a possibility but this too would come with costs and would be likely to contain gaps.

I would make one point about this practical hurdle. While I agree with de Wispelaere and Stirton that we shouldn’t ignore the practical hurdles associated with the UBI, I also think it is important not to overstate them. As with every policy, the assessment of the UBI should be conducted comparatively, i.e. by comparing it to its rivals. No welfare policy will completely avoid the problem of under-consumption, or be free from all administrative costs. What matters is whether it is preferable to its rivals and whether these problems can be minimised. The importance of this observation holds in relation to the other two hurdles as well.

3. The Second Hurdle: Ensuring Robust Payment Modalities
The second practical hurdle is an obvious one:

Hurdle (2)- Ensuring that everyone gets paid: It is key to the ethos behind the UBI that everyone receives their income grant, but how can you ensure that this is the case? In other words, how can you ensure that the payment modalities are sufficiently robust to include all eligible claimants?

As I say, this is a pretty obvious practical hurdle to implementation. There are many different payment modalities in modern societies. Not everyone is able or willing to access to all of them. In their analysis, de Wispelaere and Stirton consider a few options.

The first is to use the existing taxation system. This would involve disbursing the basic income grant as a tax deduction (or “negative income tax”). The advantage here is that you could piggyback on top of pre-existing administrative structures. The disadvantages are multifold. First, not everyone participates in the formal economy, or is capable of or willing to submit a tax return. Furthermore, this system is often disliked by feminists on the grounds that taxation systems are often set-up for households as opposed to individuals, and men have tended to control the household. This might impact on the alleged benefits of a UBI for women. Finally, and perhaps most importantly, there is the fact that taxation systems often operate on a “once a year” basis, meaning that the income grant may only be supplied in one large annual lump sum. It is arguable that a more regular system of payments would be more beneficial to vulnerable members of society.

But if there is to be a more regular system of payments, how would it be disbursed? Direct payments to bank accounts might be problematic on the grounds that some people may not have bank accounts, and direct cash payments would have significant administrative costs (i.e. the need to have large, well-staffed payment centres where people could go to pick up their payments on a weekly or monthly basis). A more innovative solution would be to introduce a system of basic income debit cards for all eligible persons. These could be used to make payments or to take out cash from approved ATMs. But problems arise when it comes to: (a) ensuring that people actually get these cards; and (b) setting up and maintaining the IT systems that would be used to administer this payment system.

Again, these problems could be overcome (with some inevitable errors or gaps), but the costs should not be underestimated.

4. The Third Hurdle: Maintaining an Effective Oversight Mechanism
The third hurdle arises even if we can clear the other two:

Hurdle (3)- Maintaining effective oversight: Once a UBI is implemented it will be still be important to ensure that everyone is receiving their income grant and that no one is being left out.

This is again about ensuring that we avoid under-consumption. You might wonder why the focus is solely on under-consumption. Surely, you might say, there is also a problem associated with potential overconsumption (or “double-dipping”)? We don’t want people to get more than their fair share of the income grant, do we? I would tend to agree with this but de Wispelaere and Stirton deliberately avoid this issue in their analysis. Nevertheless, it seems fair to say that an oversight mechanism would also be needed to avoid the problem of over-consumption.

So what kinds of oversight mechanism could we have? In the public administration literature, two general types of oversight mechanism are discussed. The first is a “police patrol” mechanism. This requires some centralised administration, specifically a group of enforcers, to investigate and ensure proper enforcement and compliance with the terms of the policy. This is typical of traditional selective entitlement programmes involving means-testing. Since the absence of such a centralised system of enforcement is usually thought to be an advantage of the UBI proposal, it is unlikely that UBI advocates would be keen to create such a system. Furthermore, given the size and scale of the UBI, it is pretty clear that any such system would represent a massive and unprecedented intrusion into our private lives. Maybe we are willing to tolerate that; but recent scandals about government data collection suggest otherwise.

That leaves us with the second type of oversight mechanism. This is the “fire alarm” mechanism. This doesn’t require a centralised group of enforcers. Instead, it relies on individuals self-reporting the problems they are having with the system (e.g. failures to receive entitlements). The complaints from individuals would then be processed by some agency, which could help to ensure optimal levels of consumption.

There are at least two problems with the fire alarm mechanism. The first is that it is unlikely to work in identifying possible incidents of over-consumption. People who are receiving more than they are entitled to will have few incentives to report this problem (though, of course, some honest souls might do so). Resolving this by getting people to “spy” on one another seems like it could lead to some unpleasantries. The second problem is that even though it might work better when identifying incidents of under-consumption, it is likely to face some practical costs. There will need to be some bureaucratic agency for processing complaints, and people will need to feel comfortable trusting this agency with their problems.

5. Conclusion
In sum, although the UBI may represent a gain in terms of social justice and economic efficiency, it will not be without its practical costs. Three costs, in particular, were discussed in this post. The first is the cost associated with identifying all the eligible claimants; the second is the cost associated with setting up some reliable means for disbursing the income grants; and the third is the cost associated with maintaining some ongoing oversight mechanism. Although every policy is likely to have some costs and some inevitable flaws in consumption, it is important that UBI advocates don’t ignore the costs that are unique to it.

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