Andrew Yang’s Universal Basic Income Plan Has Already Gotten a Test Run—In Italy

September 22, 2019, 1:00 PM UTC

What does an Ivy League educated, Taiwanese-American entrepreneur have in common with an Italian-born, millennial college drop-out? Both head political movements whose popularity is built upon the promise of automatically putting extra cash in your bank account every month, ostensibly to boost the purchasing power of the most economically vulnerable families.

U.S. presidential candidate Andrew Yang and Luigi Di Maio, head of Italy’s populist Five-Star Movement, are both big believers in the notion of every eligible citizen receiving a universal basic income—or, as Yang calls it, the “freedom dividend.”

There’s nothing new about national basic income proposals. The idea first arose in 16th-Century Europe when humanists began arguing that noble families—the one percent of the day—should bear a greater responsibility for taking care of the poor, not solely leaving it up to the church.

It’s been on the periphery of mainstream economic theory ever since.

In more recent decades the idea has been tested in a few dozen small-scale trials. For a pilot in Stockton, Calif., 100 area residents are receiving $500 each month. In Finland, 2,000 homeless people were given around $620 a month. And a plan in Namibia gave $15 a month (the equivalent to around a week’s wages at the time) to 1,000 people under the age of 60. The longest running of such schemes can be found in Alaska, which Yang cites often on the campaign trail, where the state has been sharing profits from oil revenue since 1982, giving Alaskans what usually amounts to between $1,000 and $2,000 per year, depending on the price of oil.

But what sets the Yang plan and the Italy initiative apart is the ambition. They’re not just pilot projects or studies orchestrated by social scientists. They’re official fiscal policy—or could be if Yang manages to defy the odds and get into the White House.

The Italians: more stingy than Yang

Italy’s reddito di cittadinanza (or, citizen’s income) plan went into effect earlier this year.  While it’s not a carbon copy of the plan Yang envisions for the U.S., there may be some valuable lessons to be learned from how the Italians pulled it off—and what’s far from perfect about it.

Here’s how it works in the bel paese:

To qualify, you must be an Italian or EU citizen and have an annual income under €9,360 (roughly $10,320), which would put you, officially, under the poverty line. (There are other conditions: you cannot have more than €6,000 in savings or a second property valued at above €30,000). The ample fine print means the benefit helps only certain segments of the population.

Each month, a beneficiary’s income is automatically topped up to €780 via a special government-issued prepaid debit card. If you work, and earn less than that, you get the difference between your wage and €780. You get the full €780 if you are unemployed or retired with no pension.

Everyday life in Italy is built around red tape. This is no exception. The benefit must be renewed every 18 months.

According to Marco Leonardi, an economist specializing in labor and welfare for the State University of Milan, the Italian plan is probably mislabeled. He thinks it carries too many limits and conditions for it to be considered a true universal income plan. Given that it’s only available to people who are unemployed or who earn less than a certain amount, he said, “it would be more accurate to call it a kind of unemployment assistance, or low-income assistance.”

When it was being developed, the Italian program was closer to the classic, theoretical universal income plan, which, according to Israeli-American author and analyst Yuval Levin, requires something closer to a no-strings-attached policy to realize the widest possible societal impact.

Such a plan “must give people resources and authority and greater freedom to find new and more effective ways to lift themselves up from poverty,” Levin said, which is pretty close to the way Yang describes the potential for his initiative.

In contrast to Yang’s proposal, the Italian plan tries to incentivize specific behaviors such as looking for work, which planners believe is more constructive in an economy where the rates of employment and labor competitiveness have lagged well behind other G7 nations. Yang’s has no such strings.

Andrea Ciarini, an economic sociologist at La Sapienza University in Rome, notes debt-stricken Italy cannot afford a true universal income along the lines of Yang’s. (Even before the Italian plan was ratified, the country repeatedly ran afoul of rules for members of the euro currency zone that limit large budget deficits and government debt as a percentage of gross domestic product).

“A lack of cash is what’s required Italy’s plan to be so limited,” Ciarini said. “But even as it is, nearly 1 million Italian families are receiving some kind of assistance, which is enough to have some impact in Italy’s slow-growing economy.”

Rules and conditions apply: No Netflix or Spotify

The hope, according to the architects at the Five-Star Movement, is that its initiative will stimulate growth while improving the outlook of the poorest Italians. Economists say it will be another year before such impacts can be measured.

The estimated cost for the Italian plan is roughly $33 billion, though the actual budget for this year is far smaller—under $10 billion. That is still a lot of money for Italy’s cash-strapped government, but it is a rounding error compared to the $3.8 trillion price-tag that non-partisan analysts say Yang’s “Freedom Dividend” would cost.

To put that in perspective, Yang’s idea is about 380 times more expensive than Italy’s; the U.S. is about five times as populous.

Yang says he would pay for his plan by taxing tech companies like Amazon, Uber, and Facebook, companies, he worries, that are championing automation at the expense of blue-collar jobs.

Italy’s program is paid for by taxpayers—in the form of more deficit spending.

That may explain why the fine print of the Italian plan can be so maddening. Italians can use the debit card to pay for life’s necessities: things like rent, clothes for work or school and food. They cannot use it to buy liquor (wine is okay) or pay their Netflix or Spotify subscription, however.

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