The Politics of Universal Basic Income

The Universal Basic Income (UBI) has a long history. The idea to provide all citizens with an unconditional and regular income cash benefit without means-test or requirement[1] has been discussed as far back as the 18th century[2].

Thinkers on the right are attracted to its simplicity, which contrasts with the current complex welfare state arrangements in most advanced economies, its minimalism and its low adverse effects on work incentives, since it is paid irrespective of labour market participation.

On the left, people emphasise its universalism and unconditionality which would reduce the gaps in coverage of current benefits and ensure labour is decommodified, thereby increasing the power of workers to bargain for better working conditions and wages.

Its detractors are similarly located across the ideological spectrum. Many liberal economists see UBI as prohibitively expensive and inefficient insofar as it directs resources to those who may not need them.

Others on the left see UBI as a dangerous legitimisation of capitalism and an implicit acceptance that not everyone will be provided a job. They also emphasise UBI’s limited ability to address all the social risks that individuals face in a market economy.

Finally, some trade unions, particularly in Bismarckian welfare regimes, oppose what they see as releasing employers of their social responsibility. Trade unions also voice concerns that this will reduce their institutional power which lies in their key role in managing the administration of social insurance benefits.

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New article on "Associational Networks and Welfare States in Argentina, Brazil, South Korea, and Taiwan"

Cheol-Sung Lee (2012)

This article investigates the structures of civic networks and their roles in steering the political choices of party and union elites regarding the retrenchment or expansion of welfare states in four recently democratized developing countries. Utilizing coaffiliation networks built upon two waves of World Values Surveys and evidence from comparative case studies for Argentina, Brazil, South Korea, and Taiwan, the study develops two explanatory factors that account for variations in welfare politics: cohesiveness and embeddedness. In Argentina and, to a lesser degree, in Taiwan, party and union leaders’ cohesive relationships, being disarticulated from the informal civic sphere, allowed them to conduct elite-driven social policy reforms from above, by launching radical neoliberal reforms (Argentina) or by developing a generous transfer-centered welfare state (Taiwan). In Brazil and South Korea, however, party and union leaders’ durable solidarity embedded in wider civic communities enabled them to resist the retrenchment of welfare states (Brazil) or implement universal social policies (South Korea) based on bottom-up mobilization of welfare demands. This article demonstrates that elites in the formal sector make markedly different political choices when confronting economic crisis and democratic competition depending upon their organizational connections in formal and informal civic networks.

Upcoming Summer conferences

SASE 24th Annual Conference – Global Shifts: Implications for Business, Government and Labour. June 28-30, 2012 – Massachusetts Institute of Technology, Cambridge. Program available
ILERA 16th World Congress – Beyond Borders: Governance in a Global Economy. Philadelphia, Pennsylvania, USA in 2012. Draft papers
10th Annual ESPAnet conference .September 6-8 2012, School of Social and Political Science, University of Edinburgh, Scotland. List of streams

World ranking in Unemployment Benefit replacement rates

In times of crisis, the ability of workers who lose their jobs to retain their purchasing power has important social and economic implications. A high replacement rate (ratio of unemployment benefits a worker receives relative to the worker’s last gross earning) ensures that the negative effects of rising unemployment on aggregate demand are mitigated. It also prevents workers from falling into poverty when they lose their jobs.
The table below shows the gross replacement rate in the first year of unemployment for as many countries as is available. The data is taken from a recent IMF working paper (see end of post for full reference). I have ranked countries from highest to lowest (restricting the sample to those countries which replacement rate is superior to 0). 

An interesting finding is that European countries did not have the monopoly of high replacement rates in 2000. This challenges the notion that high economic development is a necessary or sufficient condition for protection fo workers to be high. Indeed, workers who have unemployment insurance in non-EU countries sometimes score higher. For instance, in the top 10 one finds Ukraine, Algeria, and Taiwan, while Russia, Tunisia, Romania and Hong Kong make it into the top 20.
The Anglo Saxon countries rank poorly: UK (46th), Australia (43rd) and Ireland (39th); US (31st) i.e.: coming after Venezuala, Azerbaijan, Egypt, Belarus… The picture for Eastern European countries is more mixed with Bulgaria (16th), Romania (18th), Ukraine (9th) doing ok, whereas others do not do so well: Estonia (48th), Poland (41st), Czech Republic (42nd).

Country  Gross Replacement Rate, year 1   Ranking
Netherlands 0.7 1
Switzerland 0.687 2
Sweden 0.685 3
Portugal 0.65 4
Spain 0.635 5
Norway 0.624 6
Algeria 0.612 7
Taiwan 0.6 8
Ukraine 0.56 9
Italy 0.527 10
Denmark 0.521 11
Russia 0.505 12
Tunisia 0.5 13
Finland 0.494 14
France 0.479 15
Bulgaria 0.473 16
Canada 0.459 17
Romania 0.45 18
Hong Kong 0.41 19
Austria 0.398 20
Belgium 0.373 21
Argentina 0.354 22
Germany 0.353 23
Greece 0.346 24
Azerbaijan 0.338 25
Egypt 0.329 26
Venezuela 0.325 27
Belarus 0.313 28
Israel 0.307 29
Japan 0.289 30
United States 0.275 31
Kyrgyzstan 0.255 32
New Zealand 0.254 33
Latvia 0.253 34
India 0.25 38
Korea, South 0.25 37
Uruguay 0.25 36
Uzbekistan 0.25 35
Ireland 0.238 39
Hungary 0.235 40
Poland 0.226 41
Czech Republic 0.225 42
Australia 0.21 43
Turkey 0.206 44
Albania 0.202 45
United Kingdom 0.189 46
Brazil 0.152 47
Estonia 0.132 48
Lithuania 0.117 49
Chile 0.115 50
Georgia 0.09 51

Data taken from: Mariya Aleksynska and Martin Schindler (2011) Labor Market Regulations in Low-, Middle- and High-Income Countries: A New Panel Database. IMF Working Paper.

The role of actors in welfare state development

The role of political parties, unions and business in driving welfare state change is a contested issue in political economy. 
Recent work by Emmeneger and Marx (2011) challenges the notion that employers favoured higher protection of employment in Germany. This is important because Germany represents the ideal type of a coordinated market economy. The Varieties of Capitalism (Hall and Soskice, 2001) literature would therefore make us expect that employers had an important role in promoting higher jobs protection. This followed the functional needs of the firms to solve the coordination problem that surrounds investing in non-transferable/specific skills. This interest of the firm in developing welfare state policies is for instance historically apparent in a cross class alliance between certain firms and labour (see for instance Swenson 1991).
This follows in the footsteps of Korpi (2006) that argued that employers were at best passive in accepting new welfare state policies. In the traditional Power Resource Approach, labour strength is a key driver of welfare state development.
As important is Jensen’s (2011) contention that unions and left parties may have different social policy preferences. The former primarily favours labour market policies while the latter prefers familly and old age policies. Within the labour movement more generally, labour has been increasingly divided between insider s and outsiders (Rueda, 2007) and there has been a breakdown between high and low skill workers (Iversen and Soskice, 2009). While class politics is itself a contested issue (Weakliem, 2011), these divisions have led to a dualisation of welfare state policies (see Bruno Palier’s work).

Thus, there are multiple potential dividing lines in the actors that are purported to push for more welfare state policies. It will be interesting to analyse how the current economic and financial crisis is affecting the role actors can play in welfare state development.

Manufacturing and the welfare state

Rodrik on why deindustrialisation may be a problem…It is fair to say that the implications for the welfare state are not positive either. 
Politically, deindustrialisation removes one of the major constituency behind the expansion of the welfare state. It also makes it harder for trade unions to organise labour.
From an economic perspective, earlier literature had pointed out the role of industrialisation in the emergence of the welfare state. Limited unemployment makes it easier to introduce unemployment insurance. Productivity growth formed the basis for wage increases thereby expanding the revenues of governments.

The State

“It grows everywhere, whatever the poitical method a nation may adopt. Its expansion is the one certain thing about our future”  [Page 294 Schumpeter (1952) Capitalism, Socialism and Democracy. London, Allen and Unwin.]

Total public social spending as % of GDP

Are public sectors jobs to blame for our fiscal problems?

With the current fiscal problems and the emerging agenda proning ‘austerity’measures, there has been a tendency to argue that we’re having these issues because the public sector has grown beyond any reasonable limits. Hence we now need to cut back. Leaving aside the fairly obvious point that part of the budgetary  problems we face are cyclical (i.e.; automatic fiscal stablisers or discretionary expansionary policies), is there any evidence that the public sector is too big?
One way to look at this issue is to analyse the number of public sector jobs per 1000 individuals in the OECD and see whether there has been any drastic change in the past three decades. The first thing which is blindingly obvious is that few countries have experienced significant increases once you adjust for population growth: Though some (Spain and Finland for example) have experienced increases, the UK and Canada have seen important falls in the adjusted number of public sector jobs. And while there were non-trivial increases in Greece and Portugal, but the level in  comparative perspective remains low. Last but not least, the UK, Ireland and the US which currently face particularly acute fiscal problems do not stand out in terms of public jobs as profligate.

Source: Tableau de bord de l’emploi public, Situation de la France et comparaisons internationales. Amélie Barbier-Gauchard, Annick Guilloux, Marie-Françoise Le Guilly. DÉCEMBRE 2010, Centre d’analyse stratégique.