Basic Income and Social Sustainability in Post-Growth Economies

In 2019 scholars Mikael Malmaeus, Eva Alfredsson and Simon Birnbaum published an article called “Basic Income and Social Sustainability in Post-Growth Economies”.

Their study aimed to identify pathways to how ecologically and socially sustainable economies could reduce inequality and poverty while reducing material consumption. Such approaches and ideas regarding the economy and poverty are connected to “post-growth scenarios”. In their study, the researchers created a model to explore the potential of a universal basic income (UBI) for achieving inequality reduction objectives.

According to their results, by comparing UBI in a “local self-sufficiency” economy to a UBI in an “automation” economy, both scenarios satisfy central sustainability criteria, and the impact of a UBI would differ greatly between these contexts. The main analysis is that a UBI is less compatible with a labour-intensive local self-sufficiency economy than a capital-intensive, high tech economy.

UBI in relation to poverty, ecology and sustainability

According to the researchers, achieving socially sustainable development of our societies requires policies lifting the income and consumption level of people living in poverty, and preventing those in the lower-income brackets from falling into poverty or social exclusion. In such ways, social sustainability is also of “great instrumental importance for ecological sustainability”.

The researchers state that it is unlikely that the relevant environmental targets can be politically legitimised and effectively reached if environmental policies impose unreasonable burdens on disadvantaged groups. For example, green taxes or fees aimed at reducing environmental pressures may be especially burdensome for and therefore are opposed by low-income groups and those living in sparsely populated areas.

The report states that from an ecological perspective, a UBI has long been proposed as a potential measure to counteract driving forces behind environmentally destructive forms of growth and to make a post-growth economy socially sustainable. Furthermore, it states that combining green taxation with a basic income may be a useful strategy to simultaneously achieve ecological and social sustainability by ensuring that the former does not reduce the net purchasing power of the poor concerning vital goods and services.

Also, it is mentioned that basic income could improve the opportunities for people to engage in local and service-intensive activities that rely much less on transports or material consumption but typically require more time. Thereby, the basic income could support the aim of reducing the ecological footprint of consumption by “relocating the economy, by decreasing transportation costs and pollution, and through fostering sharing, pooling, reusing, recycling and repairing”.

Local Self- Sufficiency Versus Automation cases

The study is focusing on comparing two of scenarios — a local self-sufficient scenario and an automation scenario, concerning UBI, social and ecological sustainability.

The local self-sufficiency scenario is built on ideas of strong local communities, decreased global exchange, and the aim of adjusting living standards to the local ecosystems’ capacity to supply resources and absorb emissions. This scenario is based on the fact that people live in rural areas and small towns, and the metropolitan areas have been diluted, with large areas for cultivation.

The automation scenario is based on how the production of goods and services may be carried out with a minimum of human labour, on the trend of dramatic improvements in and application of information and communication technologies and AI which comes with a number of opportunities such as boosting labour productivity, improved health care, job flexibility, plus the radical productivity growth associated with robotisation and digital innovations could enable an economy with a much shorter average working week.

According to the researchers, although a basic income could potentially fit into both of these two scenarios, it is obvious that they constitute very different economies and may indeed be interpreted as offering two radically opposite directions for a post-growth economy, suggesting different pathways for adapting to present ecological challenges. From an economic perspective, one structurally important difference capital-intensive high-tech scenario where the number of working hours has dropped radically.

UBI, inequality and poverty in post-growth scenarios

The starting point of the analysis is an income distribution of labour and capital income per decile that is resembling the 2019 levels of distribution of incomes in the Swedish economy before economic transfers. For the study, it was assumed that a flat 25% income tax is used for government expenditures as health care and education, but did not cover direct economic transfers such as unemployment benefit, social security, student support, and the like.

The researchers state that none of the scenarios does the gross domestic product (GDP) grow, which is in line with the aim of the Beyond GDP growth project in which the scenarios were developed.

In the local self-sufficiency scenario, the size of the economy shrinks in terms of production level (GDP) as a consequence of a reduction in the amount of capital. In contrast, the amount of labour is not increased but stays the same as in the current economy.

While in the automation scenario, the production level is similar to the base case since the increase in capital intensity is compensated by a fall in labour intensity.

Results and discussion

In their study, the researchers analysed whether and how a UBI at the level of a minimum living wage/income could provide a solution for preventing poverty and increasing the economic equality within two different economic futures. The results indicate that there are substantial differences between the two scenarios regarding the financial cost of the basic income and the analysis also shows that there are considerable differences in relative prices in the scenarios between different goods and services.

Although there is a very wide range of possible futures, the local self-sufficiency and automation scenarios represent two alternatives that capture quite different aspects of what may become a reality in a socially and ecologically sustainable future. Tax levels in the scenarios presented in this study amount to 55% (Base case and Automation) and 62% (Local self-sufficiency).

The UBI in the study’s scenarios reduces the overall income inequality but not more than the current system of economic transfers in Sweden. One significant difference between the local self-sufficiency and automation scenarios is the differences in relative prices of goods and services, which in turn are caused by the composition of production factors in the scenarios. Furthermore, the differences in relative prices affect the access/affordability of goods and services for the lower-income groups while in a less productive economy the relatively poor will be poorer also in an absolute sense.

Finally, the study’s analysis suggests that a full UBI is a more realistic option in the Automation scenario than in the Local self-sufficiency scenario, for the reasons indicated above. While the case with the labour-intensive scenario, the need for human labour is relatively high and hence the need for income support from a UBI is less than in the capital-intensive scenario where labour incomes are likely to become reduced or unevenly distributed given that human labour is in less demand.

According to research, the UBI may also constitute a promising strategy for fulfilling social and ecological sustainability.

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Vladan Lausevic

Vladan Lausevic

I am active as a social and policy entrepreneur. SEEDS ambassador. Motto: I have no identity, I have only identities.