Many economists see a universal basic income as a potential solution to the shortcomings of existing income support programs, but, however conceptually elegant, a UBI raises many practical questions. Would just handing out cash turn us into a nation of layabouts? Do poor people really respond rationally to changes in program design? Do economic incentives need to be supplemented by administrative work requirements?
We will get some answers from several well-designed experiments now getting away around the world, cogently summarized in a new report from BIEN, the Basic Income Earth Network.
- A program in Finland will compare the existing unemployment program with a basic income that will provide approximately the same benefits to a group of previously unemployed workers. Members of the experimental groups, unlike those in the traditional program, will continue to get their payments even after they begin working. The program should provide key information on the relative strength of income and substitution effects.
- Ontario’s Basic Income Pilot Program will provide more generous support than the Finnish experiment and will not be conditioned on work participation. Since it will include a 50 percent benefit reduction rate, it is better described as a negative income tax than a true UBI. However, it, too, will provide useful data on income and substitution effects.
- A set of experiments at the municipal level in the Netherlands will explore the relative effects of economic incentives and administrative work requirements. The Netherlands now conditions the receipt of welfare benefits on participation in job search and training. Control groups will continue in existing programs while experimental groups will receive the same level of payments without mandatory job search and training.
- An ambitious effort already underway in Kenya will test something closer to a true UBI than any of the above experiments. Households will receive an unconditional income equal to about half of average rural incomes for up to 12 years. Unlike experiments that target low-income households, those in Kenya will provide payments to all the residents of selected villages, regardless of their income.
Controlled field experiments are the gold standard. We look forward to learning a lot.