New ESRI research examines the international evidence on universal basic income (UBI) and identifies key issues for consideration in the design of any future UBI pilot for Ireland
A universal basic income (UBI) is defined as a universal, unconditional payment that is made regularly, is sufficient to live on, is not means tested and carries no work requirements. Despite the mainstream interest in UBI, little is known about the design and consequences of such policies. Even the definition of a UBI appears to be poorly understood. A new ESRI study, funded by the Low Pay Commission, reviews the international evidence on UBI and identifies key issues for consideration in the design of any future UBI pilot in Ireland.
Based on the existing literature, there are a number of potentially positive impacts associated with a UBI.
- A UBI could reduce the stigma associated with welfare receipt and reduce the administrative complexity of the current welfare system
- A UBI would avoid situations where people are discouraged from work due to the risk of losing means-tested welfare payments
- A UBI could give people the financial freedom to leave insecure or exploitative work and seek out improved opportunities
- People in informal and unpaid work, such as childcare and eldercare, would be provided with an income
- The evidence from existing pilot studies also shows evidence of positive health impacts following the implementation of a UBI
However, a number of potential drawbacks have also been associated with a UBI.
- As a UBI involves a universal payment to every person irrespective of income, it does not proportionately target income to those that are most in need
- Its impact on labour supply is not clear, as it could lead to some individuals withdrawing from the labour market
- The cost of implementing a UBI is very high. We estimate that the implementation of a UBI in Ireland in 2019 could have involved a gross cost of close to €50 billion per year
- The introduction of a UBI could likely lead to some low-income households being financially worse off. This would require the introduction of a supplementary welfare top up for such families
Given its cost, implementing a UBI would require substantial changes to the current tax and welfare system. Previous work for Ireland in the 1990s indicated that an income tax rate of up to 50 or 60 per cent would be required to finance a UBI. More recent policy proposals suggest replacing the lower rate of tax (20 per cent) with the higher rate (40 per cent).
A pilot study, along with further analysis of the tax and benefit system, would provide further evidence on the wider impacts of implementing a full UBI roll-out in Ireland.
Dr Paul Redmond, an author of the report said:
“The idea of a Universal Basic Income receives a lot of attention in the public debate. However, very little is known about the impacts of such a policy. In this work, we review the international evidence on universal basic income and highlight the main issues for consideration in the design of any future UBI pilot in Ireland.”
Ultan Courtney, Chairperson of the Low Pay Commission, commented: