{"id":13494,"date":"2021-07-28T09:50:58","date_gmt":"2021-07-28T08:50:58","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=13494"},"modified":"2022-02-04T13:29:29","modified_gmt":"2022-02-04T13:29:29","slug":"could-universal-basic-income-work-in-wales","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/could-universal-basic-income-work-in-wales","title":{"rendered":"Could universal basic income work in Wales?"},"content":{"rendered":"\n

Wales has historically had the highest poverty rate of all UK nations. Before the pandemic, one in four adults and one in three children were living in poverty<\/a>. This has likely increased since Covid-19, with unemployment up 75%<\/a> since March 2020.<\/p>\n\n\n\n

The full effects of the pandemic have not been seen yet. Many households at risk of falling into poverty are currently being protected by the government\u2019s furlough scheme and\/or a \u00a320-per-week increase in Universal Credit. But in September, both policies will come to an end, which may further increase poverty in Wales and across the UK.<\/p>\n\n\n\n

Evidence shows that poverty is strongly linked to low levels of reported life satisfaction, mental and physical health, and social trust. As such, questions about how to provide security from poverty will become even more important as current support winds down. Earlier this year, the Welsh Government proposed piloting a universal basic income scheme as a potential solution. In the pilot<\/a>, the Welsh government has suggested focusing on people leaving care, in a bid to support the most vulnerable. While these plans may be welcome news to many, a group of organisations recently campaigned<\/a> against the proposal, arguing that a more representative sample of the population would provide more reliable evidence on how UBI could affect society in general.<\/p>\n\n\n\n

What is universal basic income?<\/h3>\n\n\n\n

Unlike means-tested benefits, universal basic income (UBI) provides a set amount of money to everyone regardless of their financial situation. An earlier Economics Observatory article<\/a> discusses the costs of such a scheme, plus a discussion of its possible effects on recovery from the Covid-19 crisis.<\/p>\n\n\n\n

Recent research<\/a> shows that 70% of the population were in favour of UBI in Wales. Proponents argue that its introduction could help alleviate poverty by guaranteeing an income to the poorest in society, without requiring them to \u2018jump through the hoops\u2019 of the current means-tested benefits system, which has received criticism for being overly bureaucratic.<\/p>\n\n\n\n

But, one major concern is that it could disincentivise unemployed workers from seeking paid work, as they will have an income without needing to work or look for a job.<\/p>\n\n\n\n

What does the evidence from economic research tell us?<\/h3>\n\n\n\n

To get an idea of how successful a UBI in Wales may be, we can learn from past examples. Many countries have experimented with universal basic income. For instance, Barcelona<\/a> improved wellbeing by giving between \u20ac462 and \u20ac592 to the poorest members of society from 2017 until 2020. And more recently, the UBI launched in Stockton, California<\/a> last year in response to the pandemic has measurably improved wellbeing, job prospects and financial stability after just one year. However, Finland is the only country to complete a trial at a national level with recipients selected at random. These conditions allow us to draw reliable conclusions from the results.<\/p>\n\n\n\n

From January 2017 to December 2018, 2,000 unemployed Finns were given a modest payment of \u20ac560 per month (\u00a3490), instead of standard means-tested benefits of a similar amount. They were then surveyed across the two-year period on a range of financial and well-being measures.<\/p>\n\n\n\n

The survey results provide strong evidence that UBI could be a powerful tool for sheltering people from poverty and the associated negative effects on well-being. For example, the proportion of people perceiving their financial situation to be at least \u2018Ok\u2019 was eight percentage points higher amongst those receiving UBI. In addition, the group receiving the payment experienced substantially higher reported life satisfaction, mental and physical health, and social trust.<\/p>\n\n\n\n

Figure 1: The effect of UBI on various wellbeing indicators<\/strong><\/h4>\n\n\n\n
Change from January 2017 \u2013 December 2018, UBI recipients vs control group<\/h5>\n\n\n
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