This new basic income experiment will give money to both rich and poor

It’s a true universal basic income, given to everyone in two test neighborhoods in Barcelona, regardless of earnings.

By Talib Visram

Original article:

Last June, Spain rolled out possibly the world’s largest basic income program across the entire country. The minimum subsistence income aimed to provide support for Spain’s poorest families via payouts of up to 1,015 euros (roughly $1,100) per month for 850,000 households, representing some 2.3 million people.

However, critics have pointed out flaws in the plan, including red tape and strict enrollment criteria that have hindered people from getting the aid. It’s also not universal, so a large portion of Spanish citizens don’t qualify. In response, the autonomous Spanish region of Catalonia is planning a two-year pilot program that the regional government hopes to implement by December 2022. Different from the many targeted basic income pilots popping up around the world, it will be truly universal, giving money to every resident in a chosen community, regardless of income bracket.

“The current pandemic and the government’s response has created a proper scenario for expanding the idea of basic income,” says Sergi Raventós, who’s running the Pilot Plan for the Basic Income of the Generalitat de Catalunya. Though the payout hasn’t been confirmed, the pilot is considering 900 euros (about $1,000) per month for a single person, perhaps scaled to 1,350 euros (about $1,500) for a two-person household, for 5,000 individuals over the course of two years—and it’ll be funded entirely by the Catalan government, not by private individuals or nongovernmental organizations.

“We want to test a real policy,” Raventós says, “not a philanthropic millionaire’s one-off venture.”

Longtime basic-income advocate Guy Standing, a professor of economics at SOAS University of London, and author of several books on basic income, is advising the pilot’s design, implementation, and evaluation, at the president of Catalonia’s request. Standing says giving the cash to an entire community is modeled on past pilots in Namibia; India; and Ontario, Canada, rather than many in the U.S. that have used a random selection process. The Catalan team will likely choose two random neighborhoods in Barcelona where all residents will receive the cash disbursements.

This approach should facilitate the evaluation of the pilot at the end of the two year test period, because it allows for neighborhoods that didn’t receive the cash transfers to be used as controls for comparison. The study will examine what the effect of the money is on people’s financial situation, and if there could be positive knock-on effects: Due to better mental and physical health, there might be less demand on public services, which improves the delivery of those services and in turn produces a happier and more productive workforce.

Standing was drawn to the project in part as a reaction to what he views as the bad design of the Spanish income assistance program. Jordi Sevilla, an economist and early proponent of basic income in Spain, noted last November that the rigorous application process meant only 10% of 900,000 applications had been accepted five months on from the June launch. “This threatens to leave without coverage too many potential beneficiaries who nevertheless have major problems meeting the requirements,” Sevilla wrote in his evaluation.

Raventós says that during the pandemic in 2020, Catalonia increased its public expenditure more than any other region in Spain: health by 10%, education by 18%, and social services by 15%. However, he says, a truly universal basic income would have helped people who’d lost their jobs or homes, or who were working in the informal sector.

In contrast, this universal pilot does not require specific criteria for eligibility, nor does it use means testing to assess income levels before extending payments. Targeted or conditional payments have several bureaucratic pitfalls: They require applications that people may not understand or have the language skills to fill out paperwork for. Others may avoid asking for money due to stigma, or because they don’t want to be told how they should spend it.

Standing says means testing can also lead to the so-called poverty trap: Often, people need the extra income but don’t qualify because they’re above an arbitrary threshold. That penalizes someone for trying to work, and can discourage people from working for fear of losing their welfare. “The person loses nearly as much income from lost benefits as gained from the job,” he says.

“If you try to identify the poor through means testing, you always result in high-exclusion errors, even in countries with sophisticated administrative systems.”

This is markedly different from some of the recent American pilots, which are more commonly known as “guaranteed income” rather than “universal.” For instance, the Stockton, California, pilot, one of the most influential in the U.S., targets residents at or below the city’s median household income level; one in Compton, California, is for inhabitants who earn less than twice the federal poverty threshold. (Even so, these, like Catalonia’s, are unconditional, meaning recipients are not forced to spend the money in prescribed ways.)

Of course, this means even the wealthy would receive payments, which is seemingly counterintuitive to the ultimate goal of narrowing wealth disparities. But universal basic income advocates note that it makes the system simpler for the entire population, avoiding the establishment of complicated and controversial eligibility rules.

Raventós makes it clear that if a pilot were to become permanent in the future, it must not replace welfare but rather strengthen it. “In a world where the rich are getting richer and the poor are getting even poorer, social policies have to be made in favor of the majority, and universal basic income is one of them,” he says. “It would increase people’s freedom to choose the life they really want—and not be blackmailed into a miserable wage.”

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