Designing a basic income guarantee: targeting, universality and other considerations

Type Report
Title Designing a basic income guarantee: targeting, universality and other considerations
Edition 1
Volume 3
Publication (Day/Month/Year) 2021
Publisher Institute of Economic Justice
City Johannesburg
Country/State South Africa
The question of how a Basic Income Guarantee (BIG) is designed is as important as its adoption. The key flaw of targeting a basic income grant at a specific vulnerable group – whether through employment status or income levels – is that this does not translate to reaching them in practice. This is due to administrative burdens, unwarranted exclusions, stigmatisation, and constant changes in eligibility of recipients. In contrast, universality (where all regardless of income or employment status qualify) minimises these risks while appropriate taxation measures can ensure that only those in need receive a net benefit. Targeting has the added risk of creating new forms of social exclusion and tension, whereas universality builds social cohesion, improves psychological wellbeing, and generates increased political support for the policy. Contrary to received wisdom, economic modelling shows that providing larger grants to fewer people does not necessarily result in improved poverty-alleviating and
distributional outcomes. Universality can have a more positive impact on household income, even if provided at lower amounts than certain targeting options. The assertion that social assistance creates dependency or discourages labour market participation is disproved by the evidence. In fact, it is targeted grants which can reduce incentives to seek employment and raise earnings due to the potential loss of the BIG. A universal basic income, even at a relatively low level, has a greater impact on poverty than a targeted unemployment grant set at a significantly higher level, because it reaches a range of adults of different employment statuses living in low-income households, who are thus able to pool their income. Universality, because of its relative administrative simplicity, allows far more expeditious implementation of a BIG to address the current socioeconomic crisis with the urgency required. The implementation of a Universal Basic Income Guarantee (UBIG) at meaningful
levels is affordable.

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