Could A Basic Income Stop People Being Pushed From Work?
- Workers who are better educated tend to work longer before retiring, research shows
- They are also more likely to be pulled out of work voluntarily, rather than being pushed involuntarily
- This research underlines the influences on how/when we work, which is becoming more relevant with growing basic income schemes
“As soon as you come up to 18, you’re in control of your life. What am I going to do?”
Speaking on leaving care and being pushed out into the world, Rhian Thomas expresses the thoughts she had when she was suddenly expected to become financially independent.
But earlier this year, the Welsh government began providing £1600 a month to 500 teenagers leaving the care system even if they began earning a salary, becoming the first place in the UK to provide a form of basic income. This two-year long experiment will trial a single social benefit payment rather than separate allowances (i.e. housing, food, childcare etc.) which does not diminish if and when they take up work.
Choosing these young adults was no accident; the experiment is aimed at testing the impact that providing a regular sum of money each month can have on the receiver’s standards of living, irrespective of their personal means. As a result, this is better done on a section of society that is, unfortunately, considerably disadvantaged.
In Wales, the basic income of £1600 a month is hypothesised to help these 18-year-olds, who have grown up in a difficult system, gain a firm grounding from which to launch their adult lives – be in in further education, employment or otherwise.
If the trial proves a success, it will undoubtedly lead to further experimentation in other areas. The First Minister of Wales has already hinted at making the project universal; no matter your background, your income or your wealth, everyone would be provided with the same additional monthly social benefits payments. Rich and poor alike.
Already opinions and models are circulating to predict an answer to the same questions: what can we expect from the experiment in Wales? What will it teach us? Looking forward, how will the basic income impact a care leaver’s future prospects?
At the other end of the scale, Drs Jana Mäcken and Lea Ellwardt from the University of Cologne have researched what is almost a mirror to the experiment in Wales. Conducted by their Institute of Sociology and Social Psychology, employment figures from 15 different European countries were analysed to investigate when and why people retire.
The study underlines the clear causes that led to the retirees leaving work, reaching back in their careers to when they themselves were only 18-years-old. Looking backwards, what were the key factors which led to earlier or later retirement?
Their research found that not only do people who are less educated remain in a poorer socio-economic class with lower paying jobs, but they tend to permanently leave work (i.e. through retirement) at a much younger age. People with a higher level of education, on the other hand, work longer into their older years, and keep on developing.
The influences that take people out of work are classified by the researchers as “Push” and “Pull” factors. For the former, the reasons that involuntarily push people out of work can be linked to changing skillsets, slow economic growth, or even health; factors which force an employee to be let go because they, reluctantly, cannot be kept on. On the other hand, employees can be pulled out of work by enticing opportunities such as a good pension arrangement and attractive social benefits. If an employee finds more benefit in voluntarily leaving work rather than remaining, they have been pulled into their retirement. If they leave because they have no other choice, they have unfortunately been pushed.
The stereotype of the better-paid, early-retirement job is challenged to an extent. The research shows the better your education the longer you are more likely to work, and with a better job no less. But this does not suggest that those who do work later into their years do so for any other reason than because their work provides a better prospect than retiring earlier would – there’s nothing pulling them into leaving employment.
But for the most part, none of the findings go against common sense. Those with better starts in life (better education for example because they grew up in better environments), tend to gain higher positions in their working lives and go on to have more secure, well-paying jobs that are unlikely to push then out their careers before they choose to leave. Workers without that solid grounding, and typically with less of an education were shown to be more likely to be pushed out into an earlier retirement, than better educated workers, often because if a low skill-set or health and ability concerns.
For those faced with being pushed, what can be done to help them cling on? The researchers say that providing investments in job-related education, such as courses and workshops to obtain new skills, can help to prolong working lives – especially for lower educated workers. “Not only education in early life, but also further on-the-job training later can help to reduce the social gradient in involuntary work exit,” Dr Mäcken says.
Indeed, with niche skills like coding rapidly becoming more and more necessary, is it any surprise that those who entered the working world previously, or without additional qualifications are becoming so quickly expendable? Most relevant here is the long-term benefit in a stronger start; despite working their entire adulthoods, those less educated finished their careers with less decision-making power than those who were voluntarily pulled out of work.
It is that decision-making power, to have options, paths and choices, that is so vital at both ends of the working-life cycle. At the very beginning, care leavers commonly lack an external support system at 18 years old, having been part of a difficult system for enough of their lives. Typically, such lack of support can also limit their options when it comes to gaining further skills or gaining employment opportunities through which they can grow, and their path into poverty is higher than the average young adult. Towards the later years, those pushed into an earlier retirement for lack of a better option are also left worse off than those who had more of a choice.
The two are connected. Drs Mäcken and Ellwardt’s research shows that the first steps we take as adults have consequences well into our retirement. With this in mind, the basic income trial for Wales’ young care leavers gives recipients an opportunity to save money, gain stability and invest in their futures by pursuing their studies. No doubt this will, theoretically put them in a stronger position later in their lives. Perhaps they can become one of the pulled, rather than the pushed.
But what if everyone was afforded this additional income regardless? What if the more educated participants in Drs Mäcken and Ellward’s research, who chose to work for longer, had the given additional income to fall back on also? From their paper, we can conclude that a basic income scheme would be highly motivating pull factor, but would this make them more likely retire early, or allow them to make even higher amounts income. Would a universal basic income truly uplift the most in need, or just maintain inequalities?
The trial in Wales will cost £20 million in total, and that’s just for 500 people. Wales has a population of more than 6000 times this, at almost 3.2 million. The UK at over 67 million.
While the scheme is helping these care leavers, there’s no escaping that it is costly. Does such an investment pay for itself in the longterm?
Dr Mäcken’s and Dr Ellwardt’s findings provide insights into why people retire, but also shows us the many more areas that must be considered if a basic income is to become more widespread. In the short-term, the money will free up some time and relieve some stress for the 500 participants. In the long run, they’ll have more of chance to get to a position where they can be pulled into opportunity rather than pushed away from it; when they won’t have to fear what ill-health or limited education might mean for their financial security.
Rhian Thomas, the former care leaver from whom this article’s opening quote comes from, spoke to UK national media on what this money will do for the recipients. Quite simply, “They’ll be able to have that little bit of money to start of in life.”
That additional £1600 a month will make a world of difference to the 500 recipients, supporting both their immediate needs and long-term choices.
And, if we are to believe Drs Mäcken and Ellwardt, providing this type of social safety net, with more funding and choice, can only leave people more able to contribute to their jobs – and therefore to society for a longer period of time – both limiting the need for social benefit payments and boosting the economy through their expertise. Beyond this, the study found early work exits lead to higher costs considering unemployment benefits, besides pension claims.
With this type of support, individuals can also choose to focus on careers that bring them more fulfilment, which research shows can lead to better, more effective business.