Nizamul Islam - Universal basic income and the condition of not having a wealthy partner

  • Presenting author: Nizamul Islam (Luxembourg Institute of Socio Economic Research(LISER))

  • Authors: Nizamul Islam (LISER, Luxembourg. Email: and François Maniquet (LIDAM/CORE, Université catholique de Louvain, 34 Voie du Roman Pays, 1348 Louvain-la-Neuve, Belgium, and LISER, Luxembourg. Email: francois.

  • Session: B02C - Basic Income - Tuesday 11:00-12:30 - Senate Hall

In OECD countries, unemployment and social assistance benefits bring financial resources to those who do not earn incomes. These benefits, however, are conditional. There are differences among countries but unemployment benefits are typically conditional on having worked in the past and being ready to take a job when one becomes available, and social assistance benefits are conditional on being ready to take a job when one becomes available, not having alternative personal sources of income and not living with a wealthy partner. These conditions are the reason why partners of working women and men are not eligible to any benefit when they decide to quit the labor market. Creating an unconditional basic income (UBI) is a debated reform in both academic and policy making circles. It consists of lifting all the abovementioned conditions when offering access to some amount of minimal personal financial assistance. It is argued to be a way to alleviate poverty, increase fairness, provide real freedom, and more. Such an increased generosity of the redistributive system obviously requires to collect more taxes (or decrease the provision of public goods). UBI proposals, therefore, typically go together with proposals to change the taxation system, to the extend that it is often unclear whether the welfare consequences of the proposals come from the lifting of benefit conditions or the changes in the taxation system. In this paper, we concentrate on the combination of the conditions 1) of being ready to take a job whenever one becomes available, and 2) of not having a wealthy partner. If these conditions is lifted together, one-breadearner couples, that is couples in which one partner is out of the labor market, would become eligible for a benefit, whereas some working partners would pay more taxes. We are interested in the welfare consequences of such a reform. The reasons to focus on the effect of the lifting of these conditions are that 1) conceptually, all conditions are independent and reforms could focus on lifting any combination of some condition(s) and keeping the other(s), and 2) the largest effects of UBI would be by far the effect of lifting these conditions together, because a) non working partners are much more numerous than any other group of potential beneficiaries, b) the labor supply effects of UBI are likely to be larger among couples, where the labor supply elasticity of the second bread earner is the largest, than among singles, and c) one-bread-earner couples are on average richer than two-bread-earner couples, so that whether a UBI reform would be progressive or regressive entirely depends on its effect on the labor supply and the way tax are increased so as to cover the additional public expenses. In this paper, we measure the consequences on labor supply and incomes of couples of introducing UBI and reforming the tax system in such a way that the additional expenses are covered. More precisely,

  • using the European Union Statistics on Income and Living Conditions (EU-SILC) survey data, we estimate, for Belgium, France, Germany, Italy, and Luxembourg a model of second-bread-earner labor supply in a way that is consistent with the current condition on being ready to take a job required to be eligible for unemployment or social assistance benefits,
  • using EUROMOD 1 version [3.6.2], we simulate the effect on labor supply of lifting the willingness to work and the non-wealthy-partner condition, as a function of the amount of UBI,
  • when the additional public expenses are covered by different fiscal reforms, from the basic reform in which all those who do work contribute positively to covering the new expenses to the other extreme reform in which as many people as possible benefit from the UBI reform so that only the richest contribute positively to covering the new expenses,
  • for all those reforms, we identify those who gain and those who lose,
  • for all those reforms, we identify the impact of social welfare, for different notions of social welfare consistent with the norm that individuals should be compensated for their wage rates but should be responsible for their preferences.