Basic Income from the Perspective of Minimum Living Security

2021/04/21

This is a theme assigned by the editorial department, but to state the conclusion first, basic income (hereafter, BI) alone cannot fulfill the function of minimum living security. At this point, BI can be viewed as "radical thinking for incremental reform" (Shogo Takegawa, 2005 "Translator's Foreword," T. Fitzpatrick, 1999 "Freedom and Security") rather than an alternative means to the social security system.

According to Fitzpatrick's definition, BI is "an income paid unconditionally to every man, woman, and child, every week or month, as a right of individual citizenship, regardless of occupational status, work history, willingness to seek work, or marital status." In particular, if the benefit amount is "sufficient to live on by itself," it becomes a full BI, or a minimum income guarantee in its "pure form."

With the realization of a full BI, it is expected that a sufficient income can be guaranteed even for those who cannot obtain sufficient benefits from social insurance, or those who do not apply for public assistance due to resistance to asset investigations or inquiries into support from relatives. It is hoped that this will replace existing social security and further liberate people from labor.

However, it is difficult for even a full BI to provide minimum living security. There are three reasons for this.

First, a "minimum income guarantee" is different from "minimum living security." Minimum living security is intended to realize the right to life under Article 25 of the Constitution: "All people shall have the right to maintain the minimum standards of wholesome and cultured living." Even if a minimum income is guaranteed, minimum living is not secured if it is difficult to obtain medical and nursing care services with guaranteed quality and quantity, support for self-reliance, or welfare services that support the social participation of people with various disabilities or difficulties in living. In other words, it is difficult for a full BI alone to replace the current social security system that provides these services.

Second, it is difficult to set the benefit amount for a full BI on a household basis. There are several estimates for a Japanese version of BI, but most are on an individual basis, and there are large discrepancies in the benefit amounts. Even experts struggle to determine what amount would guarantee a minimum income on a household basis, even taking the services provided by existing social security as a given. In fact, the Ministry of Health, Labour and Welfare's "Study Group on the Development of New Verification Methods for Public Assistance Standards," chaired by Kohei Komamura of the Faculty of Economics at this Juku University and in which the author also participated, held discussions over a period of two years (for details, please refer to the recently published final report).

Based on those discussions, for example, even if one calculates the full BI benefit amount per person and simply multiplies it by the number of household members, surpluses or shortages will inevitably occur in the household-based BI due to economies of scale within the household and differences in living needs specific to each age, region, and household type. How should these surpluses and shortages be adjusted as a system? This is one example of the difficulty in setting benefit amounts on a household basis.

Third is the difficulty of securing financial resources. Suppose for a moment that 50% of the average income is appropriate as the minimum income guarantee (full BI) for an average household. And let the tax rate required for public expenditures other than the full BI be x%. As A.B. Atkinson pointed out over 30 years ago, the required average tax rate, including the funding for BI, would be 50 + x%. The high tax rate required to realize a full BI—that is, the difficulty of securing financial resources (and reaching a political consensus)—is one reason why a full BI has yet to be realized, despite the idea of BI itself being born over 200 years ago. In fact, even a BI of 70,000 yen per person per month, which is lower than the public assistance benefit amount when housing benefits are taken into account, would cost 106 trillion yen per year, reaching a scale of 90% of the total current social security benefit expenditures, including medical and nursing care.

Ideas have been proposed to continue issuing deficit-covering bonds to secure the necessary funds for BI, provided that inflation does not occur. However, if that prerequisite collapses and inflation occurs, the real value of the BI will decrease. Furthermore, under inflation, additional deficit-covering bonds cannot be issued to maintain the real value of the full BI. Consequently, a BI based on this funding method would be an unstable system from the perspective of a minimum income guarantee.

Now, when asked about measures for those in need during the COVID-19 pandemic, the Prime Minister answered at the end of January that there is ultimately a mechanism called public assistance. In fact, leading up to public assistance, new systems for minimum living security that differ from existing social insurance and public assistance have been established in recent years, such as the Self-Reliance Support System for Persons in Need (including Housing Security Benefits) and the Pensioner Support Benefit. Issues with the public assistance system, where benefit amounts are reduced upon employment, are also being addressed through the revision of work income deductions and the establishment of employment self-reliance benefits. The revision of the operation of inquiries into support from relatives when applying for public assistance was also carried out at the end of February. The minimum wage has also been raised to reach the level of public assistance. Furthermore, existing social security benefits provided unconditionally to people with specific attributes, such as children or people with disabilities, can be classified as "partial BI." Considering these, it can be said that the incremental reform of minimum living security and the radical thinking of BI share the same direction.