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ESRI identifies pros and cons of universal basic income

The possible future introduction of a universal basic income (UBI) would have both positive impacts and drawbacks, according to a new study from the Economic and Social Research Institute (ESRI).

A UBI is defined as a universal, unconditional payment that is made regularly, is sufficient to live on, is not means tested and carries no work requirements.

The new ESRI study, funded by the Low Pay Commission, reviewed the international evidence on UBI and identifies issues for consideration ahead of any possible future pilot scheme in Ireland.

On the positive side, the research finds that a UBI could reduce the stigma associated with welfare receipt and reduce the administrative complexity of the current welfare system.

It would avoid situations where people are discouraged from work due to the risk of losing means-tested welfare payments and could give people the financial freedom to leave insecure or exploitative work and seek out improved opportunities.

A number of potential drawbacks were also identified.

As a UBI involves a universal payment to every person irrespective of income, it does not proportionately target income to those that are most in need.

It could lead to some individuals withdrawing from the labour market and could also likely lead to some low-income households being financially worse off who may then require supplementary welfare top-ups.

The cost of implementing a UBI would be very high, with the ESRI estimating that in 2019 it could have involved a gross cost of close to €50 billion per year.

It would also require substantial changes to the current tax and welfare system.

“Previous work for Ireland in the 1990s indicated that an income tax rate of up to 50 or 60 per cent would be required to finance a UBI,” according to the ESRI report.

“More recent policy proposals suggest replacing the lower rate of tax, 20%, with the higher rate, 40%,” the report states.

The ESRI 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.

“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,” said Dr Paul Redmond, an author of the report.

“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,” Dr Redmond said.

Article Source: ESRI identifies pros and cons of universal basic income – Brian O’Donovan – RTE

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