Skip to content

The Macroeconomics of Basic Income

Interest in basic income is increasing, spurred by concerns such as rising inequality, the nature of tax and welfare reforms and concerns that automation might destroy jobs. While there is growing work on the small-scale (micro) impacts of basic income on people and households, there is much less that considers how such policies might affect an entire economy.

This new research by Cambridge Econometrics through the Cambridge Trust for New Thinking in Economics looks more closely at the economy-wide (macroeconomic) effects of basic income as it might operate in the UK.

The economic modelling research tackled two questions:

  1. How might small basic income schemes (of the kind often proposed) operate in the UK? Is there any evidence of negative outcomes in terms of GDP, jobs or inflation?
  2. In a scenario of widespread technological unemployment from automation, might a basic income be effective in stabilising household incomes without further negative effects like inflation?

The second question took particular interest in the possible role of debt-free sovereign money as a way to fund the basic income.

REPORT Basic income
Macroeconomic Implications of A Basic Income

Cambridge Trust for New Thinking in Economics

Download the Report

 

Key Findings

1
Small basic income schemes (which typically redistribute money around the economy) tend to put more money in the pockets of lower-income households, leading to higher spending. This can (slightly) increase GDP and employment, even if basic income weakens incentives to work.
2

Automation that leads to job losses can lower GDP because it erodes household income, lowering spending. Basic income funded by debt-free sovereign money appears effective as a way to fill that gap in the absence of jobs.

Get in Touch

CT (5)

Chris Thoung

Executive Vice President (US)

t: +44 1223 544 100

e:ct@camecon.com

View Profile