Institute for Policy Research

IPR Report: Exploring the Distributional and Work Incentive Effects of Plausible Illustrative Basic Income Schemes

In line with a dramatic resurgence of interest in basic income in recent years, there have been a number of studies analysing the fiscal and distributional consequences of specific basic income schemes. These ‘microsimulation’ studies use representative household surveys to examine the effects of hypothetical reforms at the national level and for specific demographics.

Among the many concerns about universal basic income (UBI or basic income), two of the most commonly expressed are that it would have undesirable distributional consequences (by failing adequately to compensate the recipients of withdrawn benefits) and that it would erode work incentives (via higher tax levels). This paper addresses these concerns, building on our previous working paper The Fiscal and Distributional Implications of Alternative Universal Basic Income Schemes in the UK in two main ways:

  • By exploring the distributional consequences in greater depth
  • By exploring outcomes of UBI schemes in relation to static financial work incentives

We examine three schemes, argued to be the most plausible of those modelled in the previous working paper, and pitched at three levels of generosity. These are:

  • UBI set at the level of the tax saving implied by personal income tax allowance (PITA)
  • UBI set at the level of existing benefits
  • UBI set at the level of existing benefits with premiums for individuals determined as disabled or severely disabled

Dr Luke Martinelli, IPR Research Associate

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Release date: May 2017