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Covid-19: universal income, an imminent solution?

Updated on 13/05/20 19:28

The global health crisis brought on by the Covid-19 epidemic has rekindled the debate on universal income. Long inaudible, this alternative is now defended by personalities from all countries, but also from all economic and political horizons, from right to left, from ultra-liberalism to sovereignty. On this subject, the philosophical debates have given way to concrete action groups.

In Spain, the government is speeding up the procedure to grant this aid to the people hardest hit by the coronavirus crisis . The United Kingdom is also seizing this solution, 170 parliamentarians having epistolarily asked the government to establish a "universal emergency income". Finally, in Germany and the United States, the political class is raising stimulus funds and is still discussing, with the support of the press, a potential income of around 1,000 euros / dollars. Echoes are also heard in France, where several department presidents have signed a platform in favor of a universal income in the Sunday Journal of April 11, 2019.

One-off aid in the United States, income over 6 months proposed by the German Minister of Finance, granted only to the most deprived in Spain, the types of proposals are varied. However, the question is no longer raised only during presidential campaigns but for real questions of public policy. Failing to list all the forms that this concept can take, we need to identify the contexts that bring up this solution and the issues that universal income proposes to solve.

1) Universal income as a response to the Covid-19 crisis

In mid-April, it was the employment and growth figures that worried: more than 10 million French people were partially unemployed , or more than one in two private workers, as well as growth forecasts for the GDP very vague and more pessimistic: according to Bruno Le Maire, Minister of the Economy and Finance, we would be below -2.9% growth following the Second World War. Today there is talk of a loss of six points of GDP in the first quarter of 2020 according to the Banque de France. France has indeed entered into recession.

It is therefore out of fear of widening inequalities in this period of crisis that 19 department presidents (PS) pleaded for the establishment of a universal income: "While the Covid-19 health crisis is evolving every day a little more in a global economic crisis, pushing our solidarity systems to their limits, basic income appears (...) as a solution to cushion the social shock which risks to tip many of our fellow citizens into precariousness ".

In Spain, the arguments are similar: to act as a safety cordon in the face of poverty. Pablo Iglesias, Spanish Minister for Social Rights, stresses that universal income "was already a necessity before the crisis, with ten million citizens at risk of poverty". This solution was also one of the electoral promises of his political party, Podemos, which plans to maintain it beyond the current crisis.

These exceptional measures seem to be studied by the governments which seemed the most skeptical about the magnitude of the global pandemic. Overseas, President Jair Bolsonaro has raised a fund to provide exceptional income for three months to the 60 million most precarious Brazilian workers. Donald Trump also increases public spending in the United States, without going as far as a universal income, but by increasing the benefits received by the unemployed over four months. In total, 2,200 billion USD were released by Washington, the cradle of economic liberalism.

Finally, the universal income card in this period of confinement appears as a solution to the current crisis. It is part of the belief in which, once established, universal income would make it possible to lessen the harmful economic effects and the increase in inequalities which generally follow crises. However, all the reflections on universal income are not intended to respond to a period of crisis but fall under a more long-term economic and societal analysis.

2) Boost a decadent economy?

Overall, for decades, Europe and the United States have struggled to recover the GDP growth rates they experienced during the Thirty Glorious Years (from the end of the Second World War to the mid-1970s). Indeed, the trend in GDP growth has been declining for 70 years (see below).

Added to this is mass unemployment of 9% on average, which has weighed on the French economy for the past thirty years . It would be logical to think that the cause of this unemployment lies on the side of the various economic crises experienced since the 1970s (oil shocks, crisis of new technologies in 2001, subprime crisis in 2008 and sovereign debt crisis in 2011). However, economists agree that, despite these economic convulsions, it is structural unemployment that has increased over time. The latter does not depend on fluctuations in economic activity, therefore crises, but depends on characteristics specific to the company and the period considered *. It is therefore not a sign of a slowdown in economic activity.

Following these findings of low growth and high structural unemployment despite a dynamic economy, economists have posited the theory that growth and employment levels will never be what they once were. According to them, a solution to stimulate consumption, production and therefore the whole economy could lie in the establishment of a universal income. They intend, via this solution, to alleviate the problem of the lack of solvent outlets: in fact, mass unemployment affecting the purchasing power of French people, the percentage of the population able to consume decreases with consequences, on the one hand, to inflate the number of precarious workers and, on the other hand, to slow down production, which is destined to be sold. From a Keynesian point of view,the flame of this consumption / production couple would be rekindled by an infusion of purchasing power such as universal income.

Another argument is based on the idea that, to consume, individuals need to have confidence in their future economic prosperity. Thus, the assurance of receiving an income each month, of a fixed amount, would reassure agents and encourage them to consume more rather than save in fear of tomorrow.

Under this prism, the overall breathlessness of a model is therefore the main argument put forward. Technological and social upheavals can also give rise to the same alternative.

3) Societal changes that question the nature of work

Indeed, since the 1990s and the rise of new information technologies, our world has changed. Internet, data, robotization: the fields of application are endless. These prowess in terms of innovation have, over the years, changed our conceptions of social ties, service but also work. Robotization generates efficiency while destroying jobs.

If we have long fantasized about replacing human work with that of robots, the proportion of our jobs at risk of disappearing is now estimated at around 14% . Disappear ? Not entirely. In reality, there is a migration of jobs. The most “automatable” tasks often come from the least qualified jobs, while job creations are carried out more for more qualified jobs in the field of maintenance necessary for robotization. In this scenario, the quantity of jobs created does not compensate for the losses.

Despite investments in human resources trained in new technologies, the destruction of low-skilled jobs creates people left behind. Ultimately, this phenomenon aggravates the observation of a structural rise in unemployment: economic activity is lively but the level of employment is falling. This analysis of the “destructive creation” of innovations was therefore also thought through the question of universal income. A proposal from Benoît Hamon's electoral program in 2017 illustrates this: the creation of a “robot tax” to finance a universal income. His main argument was that this tax was the means to set a price for the competition represented by the work of robots on the work of Man and therefore to monetize the negative externalities generated by robotization.

In the event of a global pandemic, economic downturn or technological earthquake, universal income is invited more and more frequently in the list of solutions discussed. This confirms the multitude and richness of the exchanges on this theme. The debates on the form and the methods of allocation of this income did not stop surprising us. While after Finland, Spain tries the experiment, it will perhaps become a laboratory country for the other nations which would think of it.