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Wednesday 29 November 2023 Dublin: 1°C
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Universal basic income

Universal basic income could help low-paid workers but it may not target those most in need

The Economic and Social Research Institute has published a report detailing the pros and cons of UBI.

THE INTRODUCTION OF universal basic income (UBI) in Ireland could help low-paid and precarious workers and compensate unpaid work like parenting, but it may also fail to target those most in need.

That’s according to the Economic and Social Research Institute (ESRI), which has published a report detailing the pros and cons of UBI.

UBI is as a universal, unconditional, regular cash payment, which is sufficient to live on, is not means tested and carries no work requirements.

The report, which was funded by the Low Pay Commission, outlines the findings of pilot UBI studies, and how they could possibly translate to an Irish pilot.

It said UBI could eliminate the stigma surrounding social welfare payments, and it would involve lower transaction costs for both the recipient and the government.

It may also reduce the number of welfare recipients who choose not to work to retain their means-tested payments. It could give workers the security to turn down or leave precarious or exploitative jobs to pursue better working conditions.

The report noted that unpaid work such as parental childcare is mostly done by women, and UBI would provide a form of compensation for such work.

However, a number of drawbacks to UBI were identified. The report said such a scheme may not target those who need it most, as since the payment is universal, a large proportion of recipients would be high earners already.

The cost associated with a UBI scheme is also high, even if it were to replace existing schemes such as jobseeker’s benefit.

The report also noted that the net impact of UBI on labour supply is not clear: there are both positive and negative potential consequences to the labour market arising from a UBI scheme.

The authors of the report flagged that several pilot studies did not use the generally accepted definition of UBI. The report examined four possible approaches to a UBI scheme:

  • A “baseline UBI” of a non-means-tested, universal payment equivalent to 60 per cent of the median disposable
    income (€14,387 in 2019, or €1,200 per month)
  • A payment equivalent to a lower cut-off of 50 per cent of median annual income (€11,989 in
    2019, or €1,000 per month)
  • A payment equivalent to the current social welfare rate of €208 per week (€10,816 per year, or €901 per month)
  • A €10 billion fund for UBI, with calculations as to how it could be divided up for UBI payments

Dr Paul Redmond, one of the authors of the report, said: “The idea of a Universal Basic Income receives a lot of attention in the public debate. However, very little is known about the impacts of such a policy.

“In this work, we review the international evidence on universal basic income and highlight the main issues for consideration in the design of any future UBI pilot in Ireland.”

Previous research in the 1990s indicated that an income tax rate of up to 50 or 60 per cent would be required to finance a UBI scheme. More recent policy proposals suggest replacing the lower rate of tax (20 per cent) with the higher rate (40 per cent).

The authors said that a pilot study, along with further analysis of the tax and benefit system, would provide further evidence on the wider impacts of implementing a full UBI roll-out in Ireland.

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