Vysoká Škola CEVRO Institut Master's Thesis Bc

Vysoká škola CEVRO Institut Master’s Thesis Bc. Pavel Martínek Prague 2020 Vysoká škola CEVRO Institut, z.ú. The Potential Implementation of Universal Basic Income and its Actual Development Bc. Pavel Martínek Study Program: Philosophy, Politics and Economics Specialization: Austrian Economics Adviser: Mgr. Ing. Pavol Minárik, Ph.D. Master’s Thesis Prague 2020 I hereby declare that this master's thesis is my own and autonomous work. All sources and aids used have been indicated as such. All texts either quoted directly or paraphrased have been indicated by text citations. Full bibliographic details are given in the reference list which also contains internet sources containing URL. This work has not been submitted to any other examination authority. Prague, 29. 7. 2020,………………………….. Abstract The universal basic income model has gone through a long theoretical and practical development. This is evidenced by the interest of theorists dating back to the sixteenth century and several launched and still ongoing pilot projects and experiments around the world. The theoretical part of this work describes the theoretical development of the concept of basic income and compares the approaches of different schools of economic thought to this model of redistribution of income and wealth in society. The empirical part answers the question of whether the implementation of universal basic income increases the welfare of society. The research focuses on projects that have been launched in Namibia, Finland, Iran and India. Based on the used comparative analysis of the conclusions stemming from the projects and the experiments, it can be stated that universal basic income positively affects the welfare of society. In addition to the mentioned analysis, the last part of the thesis focuses on the possible ways of funding universal income. This comparison shows that funding of universal basic income through income taxation or creating new money is unsuitable. On the contrary, taxation of consumption and private financing appear to be preferable alternatives. Keywords: Universal basic income, Welfare, Basic income experiments, Socioeconomic factors, Transfer policy Acknowledgment This master’s theses would not have been possible without the support of many people. I would like to thank my thesis adviser Mgr. Ing. Pavol Minárik, Ph.D., who helped me to a lot, gave me really valuable advice and read my numerous revisions. I would also like to thank the rector of CEVRO Institute prof. Ing. Josef Šíma, Ph.D., who formed a great international PPE program and made it possible to study with the best in the heart of Europe. And finally, I would like to thank my family who always offered me the support and endured this long process with me. Contents Preface......................................................................................................................7 1. Theoretical part....................................................................................................9 1.1. Definition & Characteristics of Basic Income..............................................9 1.2. History of Unconditional Income Ideas......................................................10 1.3. Different Types of Subsidies (UBI vs Other Transfer Policies)..................14 1.4. Negative Income Tax Model.......................................................................17 1.5. Socialist Approach to UBI..........................................................................21 1.6. Libertarian Approach to UBI......................................................................26 2. Empirical Part.....................................................................................................33 2.1. Pilot Projects & Experiments......................................................................34 2.1.1. The Namibian Case..............................................................................34 2.1.2. The Finnish Case..................................................................................38 2.1.3. The Iranian case...................................................................................42 2.1.4. The Indian Case....................................................................................47 2.1.5. Other Cognate Projects........................................................................51 2.2. Comparison Among Projects – Results & Impacts.....................................55 2.3. Possible Instruments of Financing..............................................................60 2.4. Impact on Welfare of Society......................................................................64 Conclusion..............................................................................................................66 References..............................................................................................................68 Preface The theoretical development of unconditional basic income dates back to the sixteenth century. It has gone a long way from the idea of providing a safety net for the socially disadvantaged individuals, to the socialist social dividend, to the model of negative income tax, and, ultimately, to the form that is widely discussed and studied by adherents of the left and the right today. The increased interest in the concept of universal income is also evidenced by a number of experimental and pilot projects launched at the end of the twentieth and the beginning of the twenty-first century around the world. The universal basic income model is often proposed as a more efficient and just replacement for the current social security and unemployment benefits systems. It is also discussed as a potential way of the distribution of resources in the case of replacing manual work by means of the automation of processes of production. However, opponents cast doubt upon its financial sustainability and warn of demotivation to work or other economic activity that its implementation may bring. This thesis focuses on the practical impacts of the implementation of such a model on economic and social situations of universal income recipients. Among other things, it analyzes the effect on the substitution of work for leisure time, which is often perceived as a potential risk associated with the implementation of universal income. The main research question of the thesis is whether the implementation of universal basic income increases the welfare of society. The research seeks to answer this question by using a qualitative meta-analysis of secondary data. The data were obtained from studies that explore the socio-economic impacts of the implementation of universal income in unique pilot projects and experiments. The text of the thesis is divided into the theoretical and the empirical part. The first part determines the concept of unconditional basic income, compares its characteristics and theoretical impacts with other alternative transfer policies and 7 describes its historical development. Its final section describes the socialist and libertarian approaches to the concept of universal income. The empirical part of the thesis analyzes the impacts of pilot projects that have been launched in Namibia, Finland, Iran and India. This part seeks to answer the research question through the comparative analysis of the impacts of the individual projects. In additional, this chapter also describes various options of funding the universal income and analyzes the impact of the implementation of universal basic income on the welfare of the societies affected. 8 1. Theoretical part The first chapter is focused on the definition and basic characteristics of unconditional basic income (UBI). The following text describes its theoretical development reaching from Thomas More, John Stuart Mill, James Meade, to Milton Friedman. The next section categorizes and compares alternative transfer policies such as the Bismarckian social security system, Negative Income Tax, Basic Endowment or the concept of conditional basic income with UBI. The final part of this chapter describes the socialist and libertarian approach to the universal income model. 1.1. Definition & Characteristics of Basic Income It is necessary to define the concept of unconditional income in order to correctly understand how this income model works in practice. UBI can be most clearly defined as the income of an individual that is a transfer from the government. It is paid at given intervals and in the same amount to all members of society. It is also delivered unconditionally.1 There is simple categorization created by a worldwide organization BIEN (Basic Income Earth Network) which can be used for a more detailed definition. The organization set out five basic characteristics according to which it is possible to distinguish the UBI model from other socioeconomic tools used by governments: • It is paid on an individual basis. On the contrary, it is no typical UBI model if the distribution and designation of income is specifically for households, a certain entity or region. • Basic income has to be paid in the form of a widely accepted medium of exchange, such as money. The income is not subject to the obligation to 1 WIDERQUIST, K., A Critical Analysis of Basic Income Experiments for Researchers, Policymakers, and Citizens, Palgrave pivot, Cham, 2018, pp. 15-18. 9 use it for a limited range of goods and services (such as vouchers or food stamps). • The income is paid unconditionally. That is, without any work requirements or proving afford to get a job. This is

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