What changes, when people receive an unconditional basic income? A new experiment is underway to find out
Oct 22, 2020
Volunteering to be a guinea pig in an experiment has rarely been as popular as it is in this project. In just three days, one million applications to take part in the Basic Income Pilot Project were submitted. Now at least 120 people will receive 1200 euros a month, just like that. All they have to do is fill out a questionnaire every six months.
Other than that, the money comes in every month without fail. The purpose of the experiment is to provide reliable answers to questions about unconditional basic income that have been debated for many years. What effect does it have on people when they are given enough money to live on? Does it have a liberating effect, or does it make them lazy? Do they go to work, or do they simply enjoy their free time?
Supporters vs. Skeptics
“Most of the arguments and model calculations are based on clichés. We want to put them to the test,” says Jürgen Schupp, a sociology professor at Freie Universität who is one of the principal investigators of the new field study. Schupp points out that the idea of a universal basic income arose in the United States in the 1970s, and it has been the subject of heated discussion among researchers ever since. In the summer of 2016, when a large majority of voters in Switzerland rejected an unconditional basic income of CHF 2,500, it was not a major setback for the proponents of the idea. Schupp says that since then, interest has been growing steadily, especially among young researchers. He points out that in Germany, surveys indicate that supporters and skeptics are split in roughly two equal camps.
One Trillion Euros per Year
In economics, skepticism continues to prevail. Many economists consider basic income to be simply unaffordable. If all Germans were to receive 1,200 euros a month, it would cost more than a trillion euros a year, which is a good third of Germany’s gross national product and significantly more than the total amount of taxes received by the federal, state, and local governments. That does not mean that it would be impossible to fund. The costs would be offset by possible savings, for example, through the reduction of tax exemptions and of welfare payments and numerous other government transfers.
Proponents have produced about 20 different models to pay for basic income, ranging from an increase in VAT to a wealth tax. It is a lot of money, “but if a society wants to finance a basic income, it will find a way,” says Schupp. However, no financing model can work, if a large number of people stop working, as skeptics fear. At the same time, a basic income is hardly worth the high costs, if the benefits that proponents expect from it do not materialize.
So far, the debate has lacked a solid empirical basis. Some research has been done on basic income – for example, on the oil dividend that all Alaska residents receive as an annual one-off payment, or a recent study on unemployed people in Finland. “We are not starting from scratch,” says Schupp.
So far, the debate has lacked a solid empirical basis. There is some research available on the basic income, for example, on the oil dividend that all Alaska residents receive as an annual one-off payment, or a recently completed study of the unemployed in Finland. "We are not starting from scratch," says Professor Schupp.
The Basic Income Pilot Project is the first study to systematically track the effects of an unconditional basic income high enough to cover the costs of living in a working-age population. To this end, the million-strong pool of applicants will be reduced to a generalizable cross-section of German society. Then a lottery system will select 120 applicants to receive the basic income. There will also be 1,380 other participants in the study who will be as similar as possible to those in the test group. These “statistical twins” will fill out the same questionnaire for a period of three years, but will only receive a small sum as compensation for expenses. This makes the study almost like a laboratory experiment. It is possible not only to measure what has changed, but also to determine whether it was the basic income that really made the difference. “We are doing the basic research using the best methods available to empirical social science,” says Schupp.
Project Financed through 150,000 Individual Donations
A special feature of the pilot project is the financing. Rather than coming from taxes, the money paid out in the experiment – at least 1.7 million euros per year – comes from almost 150,000 individual donations to the Mein Grundeinkommen nonprofit association, which campaigns for the idea and has initiated the study.
It is an unusual partnership. Jürgen Schupp sees it as a sign of a cultural transformation that is often described with the term “citizen science.” He says, “Research is coming down from the ivory tower to work together with civil society.” The project maintains strict adherence to scientific standards: Members of the research team do not receive any payment from the association and work independently at their research institutes.
The aim of the pilot project is to determine whether and how much the study participants engage in paid employment, whether they continue their education, or go into business for themselves. It is also about everyday life: Do people watch TV, read books, or go to parties? And, finally, how are they feeling: Are they satisfied with their lives? Are they worried about the future?
“These are classic questions that have been asked in other studies over many years,” says Jürgen Schupp. One such study is the Socio-Economic Panel, SOEP for short, which is based at the German Institute for Economic Research (DIW Berlin). Schupp was director of the SOEP from 2011 to 2017 and has helped shape the study over the course of several decades. The SOEP data show what changes are typical over a three-year period and what changes are more unusual. They also provide the basis for some initial assumptions. For example, when asked what they would do if they were suddenly given 10,000 euros, only a minority of SOEP respondents said that they would spend the money immediately; most said that they would put it aside. If this is confirmed in the basic income study, it would mean that a basic income is of little use as an economic stimulus measure. Nevertheless, it could still have important effects. “The feeling of security that money conveys might be more important than the money itself,” says Schupp.
Such a feeling of security is a central argument of the Mein Grundeinkommen association. For years, the association has been giving away annual, donation-financed basic income, and it has been collecting numerous reports from participants who have fewer worries, who have dared to take the leap into self-employment, and whose health is improving. To Jürgen Schupp, a social scientist, these reports can only be considered anecdotal evidence, but they form a plausible basis for hypotheses. “Worries about downward mobility can be detrimental to health. And to take risks, you have to be able to afford them,” says Schupp.
If things go according to plan, the pilot project will be able to provide evidence confirming or refuting many of its hypotheses after three years. And with a little luck, you might even find out how unconditional basic income changes your own life before that: Applications to participate are still being accepted up to November 10.
This text originally appeared in German on October 4, 2020, in the Tagesspiegel newspaper supplement published by Freie Universität.
Prof. Dr. Jürgen Schupp, Professor of Sociology at Freie Universität Berlin and Senior Research Fellow at the German Institute for Economic Research (DIW), Email: email@example.com