Adjusted basic income

What Is Adjusted Basic Income?

Adjusted Basic Income (ABI) refers to a conceptual framework for providing regular income payments to individuals, where the amount or eligibility is modified based on specific criteria, rather than being universally unconditional. This contrasts with a pure Universal Basic Income model, which typically distributes a standard amount to all citizens without means-testing or work requirements. ABI proposals fall under the broader umbrella of Economic Policy and aim to address issues such as poverty line reduction, wealth distribution, or the impact of automation on the labor force. The "adjustment" component of an Adjusted Basic Income introduces flexibility to tailor the program to specific policy goals or budgetary constraints. Such adjustments might include varying payment amounts based on regional cost of living, household size, or integrating with existing social support systems.

History and Origin

The concept of a guaranteed income has a long and varied history, predating the modern discussion of universal or adjusted basic income. Early ideas advocating for a foundational income date back centuries, with proponents like Thomas More in his 1516 work "Utopia" and Thomas Paine in the late 18th century proposing systems for wealth redistribution. The modern discourse around basic income models, including those that might be "adjusted," gained significant traction in the 20th century. During the 1960s and 1970s, the idea saw a second wave of support, with notable figures like economist Milton Friedman proposing a "negative income tax" as a form of guaranteed income¹².

In more recent times, interest in basic income concepts, including variations that could be considered Adjusted Basic Income, has surged due to concerns about technological unemployment and increasing income inequality. Pilot programs experimenting with guaranteed income have been conducted globally, from North America to Europe and Asia. For instance, Finland conducted a two-year basic income experiment from 2017 to 2018, providing 2,000 unemployed citizens with a monthly payment. Initial findings from the Finnish Social Insurance Institution (Kela) indicated positive effects on participants' well-being, stress levels, and ability to concentrate, though the impact on employment was small¹⁰, ¹¹. These real-world experiments provide data that policy makers could use to design an Adjusted Basic Income model.

Key Takeaways

• Adjusted Basic Income (ABI) refers to income payments with variable amounts or eligibility criteria, distinct from a purely unconditional universal basic income.
• ABI models aim to achieve specific policy objectives, such as poverty alleviation or economic stability, by tailoring the support provided.
• The adjustments could involve means-testing, tiered payments based on need, or integration with existing social safety net programs.
• Designing an effective Adjusted Basic Income program requires careful consideration of its potential impact on work incentives, tax revenues, and economic output.
• Proposals for Adjusted Basic Income often emerge from discussions on how to make basic income more fiscally sustainable or targeted than a fully universal model.

Interpreting the Adjusted Basic Income

Interpreting an Adjusted Basic Income involves understanding the specific criteria and goals behind its adjustments. Unlike a flat, universal payment, the design of an Adjusted Basic Income program is crucial. For example, if the adjustment is based on a household's existing income, it functions more like a negative income tax, where payments decrease as earned income increases. This design aims to provide a safety net while still incentivizing work. If adjustments consider regional cost of living, the goal is to ensure the payment maintains adequate purchasing power across diverse geographical areas.

The effectiveness of an Adjusted Basic Income can be assessed by its impact on poverty rates, financial stability among recipients, and broader economic growth. Analysts would examine whether the adjustments successfully target those most in need without creating disincentives to work or causing significant inflation. The success metrics would depend heavily on the specific policy objectives of the program's design.

Hypothetical Example

Consider a hypothetical "Adjusted Basic Income" program implemented in a country facing high income volatility among its low-wage workers. The government decides to implement an Adjusted Basic Income that provides a base monthly payment of $500 to every adult. However, this payment is adjusted based on reported monthly income above a certain threshold.

Here's how it works for three individuals:

• Scenario 1: Unemployed Individual

  • Sarah is unemployed and has no other income. She receives the full $500 Adjusted Basic Income. This provides a crucial safety net for her basic needs.

• Scenario 2: Part-Time Worker

  • David works part-time and earns $800 per month. The program stipulates that for every dollar earned above $500, the Adjusted Basic Income is reduced by $0.50. David's earnings exceed the threshold by $300 ($800 - $500). His ABI is reduced by $150 ($300 * 0.50). Therefore, David receives $350 ($500 - $150) in Adjusted Basic Income, plus his $800 earned income, for a total of $1,150. This gradual phase-out aims to avoid a "welfare trap" and encourages David to continue working.

• Scenario 3: Full-Time Worker

  • Maria works full-time and earns $3,000 per month. Her income significantly exceeds the threshold. Under the program's rules, her Adjusted Basic Income would be completely phased out or reach a minimum floor. For instance, if the phase-out continues until the ABI reaches zero, Maria would receive no Adjusted Basic Income, as her income is sufficient.

This hypothetical Adjusted Basic Income system demonstrates how adjustments can target support to those with lower incomes while maintaining an incentive to engage in paid employment.

Practical Applications

Adjusted Basic Income models find practical application in various economic and social policy discussions. Governments and policymakers explore ABI as a means to streamline complex existing social welfare programs, potentially reducing administrative overhead and increasing efficiency in distributing aid. For example, some argue that a well-designed ABI could replace a patchwork of welfare benefits, providing more direct and dignified support to individuals⁹.

These adjusted programs are also considered in contexts where the nature of work is changing rapidly due to automation and the growth of the gig economy, leading to increased income volatility⁸. An Adjusted Basic Income could provide a stable floor, ensuring that even those with unpredictable or low-paying jobs maintain a minimum standard of living. Pilot programs in places like Stockton, California, and Minneapolis, Minnesota, have experimented with guaranteed income, demonstrating positive effects on participants' financial stability and well-being, often with a focus on specific low-income populations⁶, ⁷. These localized experiments provide valuable data for the potential implementation of broader, adjusted basic income programs. A large-scale study by OpenResearch showed that monthly cash payments helped recipients spend more on basic needs, take better jobs, and engage in entrepreneurial activities⁵.

Limitations and Criticisms

While Adjusted Basic Income aims to address some of the criticisms leveled against a purely universal model, it still faces limitations and its own set of critiques. One primary concern, similar to that of Universal Basic Income, is the overall cost and how such a program would be funded without substantial tax increases or cuts to other vital services. Funding a large-scale Adjusted Basic Income could necessitate significant shifts in fiscal policy⁴.

Another critique revolves around the potential for work disincentives, even with adjustments. While designed to mitigate this, critics argue that any guaranteed income, even if adjusted, could reduce the motivation for some individuals to seek full-time employment or pursue higher-paying jobs², ³. Furthermore, implementing complex adjustment mechanisms might reintroduce some of the bureaucracy that basic income concepts aim to eliminate, complicating eligibility determination and payment calculations. The effectiveness of an Adjusted Basic Income program is highly dependent on the specifics of its design and how it interacts with existing social support structures. Some commentators also express concern that if not carefully implemented, such programs could inadvertently lead to inflation, eroding the purchasing power of the income provided¹.

Adjusted Basic Income vs. Universal Basic Income

The key distinction between Adjusted Basic Income (ABI) and Universal Basic Income (UBI) lies in the conditionality and variability of the payments.

Confusion often arises because both concepts involve regular, recurring cash payments from a government or similar entity. However, the term "adjusted" highlights the deviation from the "universal" and "unconditional" aspects that are fundamental to pure UBI models. An Adjusted Basic Income seeks to fine-tune the basic income idea to fit specific budgetary realities or policy targets, acknowledging that a one-size-fits-all approach may not always be feasible or desirable for certain policy objectives.

FAQs

What is the main difference between Adjusted Basic Income and a regular Basic Income?

The main difference is that an Adjusted Basic Income introduces specific criteria or conditions that modify the payment amount or eligibility, whereas a regular or pure Basic Income (often synonymous with Universal Basic Income) is typically distributed as a fixed sum to all eligible citizens without conditions.

Why would a basic income be "adjusted"?

A basic income might be "adjusted" to make the program more fiscally sustainable, to target support more precisely to those with the greatest need, or to integrate with existing social safety net programs. Adjustments could account for factors like a recipient's other income, household size, or local cost of living.

Could an Adjusted Basic Income replace all other welfare programs?

Whether an Adjusted Basic Income could replace all other welfare programs depends entirely on its design and the level of the payments. If the adjusted amount is set high enough to cover basic needs for all recipients, it might consolidate some programs. However, many Adjusted Basic Income proposals aim to complement, rather than completely replace, specific welfare services like healthcare or housing assistance.

How is the Adjusted Basic Income funded?

Like other large-scale social programs, an Adjusted Basic Income would typically be funded through various means, including general tax revenues, new taxes, or potentially by reallocating funds from existing welfare programs it might replace or streamline. The specific funding mechanism would depend on the policy choices of the implementing government.

Does Adjusted Basic Income affect work incentives?

The impact of an Adjusted Basic Income on work incentives is a key debate point. Advocates argue that by providing a stable income floor, it could enable people to pursue education, training, or entrepreneurship. Critics, however, suggest that any guaranteed income might reduce the motivation for some individuals to work, especially if the adjusted payment is significant. The specific design of the "adjustment" mechanism, such as how benefits are phased out as earned income increases, plays a crucial role in mitigating potential work disincentives.