Universal basic income: a solution or an illusion?

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A short press review of the conference that took place the 10th of October 2019 at Solvay Brussels School.     

The conference was about establishing a universal basic income (UBI). The speakers were Mr Bruno Van Der Linden and Mr Ive Marx respectively from the Université catholique de Louvain and from the University of Antwerp.  The main questions were about the way that UBI could be financed, its effect on the labour supply and if it should or should not be targeted on special households.

Firstly, the definition of a basic income is an income paid by a pubic authority on a regular basis and that allows its owner to use it freely. A UBI could help solve some labour market’s failures such as the technological progress which leads to job losses and the weaknesses of social security system. The first question that could be asked concerns the funding of this basic income; it could result in a huge financial expenditure.

To evaluate if a universal basic income is welcomed, it is important to measure the dynamics of adjustments of all economic agents and take into account the UBI’s immediate impacts (on poverty, inequality,…), to use a clear welfare criterion in addition to different tools such as micro analysis.

Secondly, concerning the effect on the labour supply, many studies have been made and they allow to conclude that the effect is small or inexistent. In a study made in Alaska by Jones and Marinescu (2018), the attribution of a permanent income results in an increase of part-time workers. Thanks to other investigations, it is showed that this leads to a decrease of the employment rate and an increase of part-time among the tradable sector only. However, this study is specific.  Moreover, to reach an optimal redistribution, a criterion based on individual utility levels should also be considered. 

To conclude, it is hard to say if a universal basic income is a solution or an illusion. It could be difficult to implement because a lot of factors should be taken into account, and each country is different as well as its population.

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