SOME PROSPECTS FOR A BASIC INCOME

SCHEME IN SPAIN1

José A. Noguera
Department of Sociology
Universitat Autònoma de Barcelona
08193 - Bellaterra (Barcelona, Spain)
e-mail: <jose.noguera@uab.es>

Abstract

This article tries to discuss the prospects of a Basic Income scheme in the context
of the Spanish welfare state. It starts reviewing the relationship between Basic Income
and different welfare regimes, and the main features of Spanish welfare policy. Then,
three main issues will be adressed: first, the specific problems of financing a Basic
Income in Spain; second, the problem of the eventual transition from contributory
benefits to a Basic Income scheme; and third, some distributive effects of the reform. It is
argued that, since the main social benefits in Spain are contributory, the second problem
appears as a key one for the future of the proposal.

Author’s biographical details

José A. Noguera is Doctor of Sociology and Lecturer at the Department of

Sociology of the Autonomous University of Barcelona. He has published articles on
social policy and social theory in several Spanish and Catalan journals, including Papers.
Revista de Sociologia, Revista Internacional de Sociología, Revista Catalana de
Sociologia or Revista de Treball Social. He has also written chapters of collective books
like Políticas públicas en España [Public policies in Spain] (R. Gomà and J. Subirats,
ed.; Barcelona, Ariel, 1998), Cambios en el Estado del Bienestar. Políticas sociales y
desigualdades en España [Changes in the Welfare State. Social policies and
inequalities in Spain] (J. Adelantado, ed.; Barcelona, Icaria, 2000), or La Renta Básica
[Basic Income] (Daniel Raventós, ed.; Barcelona, Ariel, 2001). He is member of the
Seminar for the Analysis of Social Policy at the Autonomous University of Barcelona,
and vicepresident of the Spanish Basic Income Network.

1
This article has been possible thanks to a “Batista i Roca” fellowship from the Catalan Government
and to a research project funded by the DGES (Ministry of Education and Science) and carried on by the
Seminar for the Analysis of Social Policy (SAPS, UAB). I also thank the Citizens Income Study Centre
(London) for the help provided during a research stay in London, and Stuart Duffin, Duncan Burbidge,
Jürgen de Wispelaere and John Hills for useful discussions on Basic Income. A shorter version of this
paper was presented at the 8th Congress of the Basic Income European Network in Berlin (6-8 October
2000); I also thank the comments given there by Guy Standing and Luis Moreno, and those given by two
anonymous referees. A previous version was also presented in two seminars at the University of
Barcelona (UB) and the Autonomous University of Barcelona (UAB): I thank the members of the SAPS
and Jorge Calero for the opportunity to discuss the paper then. Of course, the usual disclaimer applies.

1
1. INTRODUCTION

This article seeks to to consider some prospects and implications of the

implementation of a Basic Income in the Spanish state, from the point of view of its
relationships with already existing social protection schemes2. In the following pages I
will assume the ‘standard’ definition of Basic Income (BI), that is: a BI is a monetary
benefit which is paid monthly (or weekly) by the state to each citizen. It is paid to
individuals (not to families or households); on an unconditional basis (that is, it is not
conditioned to work, employment, previous contribution, age, income level, etc.); and
independently of any other income that citizens may receive3.
The advantages of BI schemes compared with present social benefits have been
frequently highlighted by the literature on the matter (see for instance, Van Parijs 1995;
Atkinson 1995a, 1995b; Offe 1993; Fitzpatrick 1999); some of them are the following: a)
BI would make disappear the present fragmentation among recipients of different social
benefits; b) BI would universalize social protection, and would eliminate poverty,
coverage deficits and non-take up problems; c) BI would avoid problems of
stigmatization of some of the recipients of social protection; d) BI would avoid problems
of means-testing, social control of private life of the recipients, and fraud; e) BI would
make disappear the ‘poverty trap’ and the ‘unemployment trap’; f) BI would save
millions in administration and inspection costs, and would simplify social protection; g)
BI would raise the autonomy of individuals, and would fit better to present changes in
family structure, life-styles, labour market, etc.
It is therefore obvious that the introduction of a BI would imply a quite radical
transformation of present welfare systems in advanced capitalist countries. However, the
nature, scope and problems of that transformation may change depending on the specific
kind of welfare regime we are dealing with. The advantages listed above are also more or
less pertinent according to the type of pre-existing welfare system we are facing. It is

2
We will not address here another important issue regarding BI proposals, namely their relationship and
eventual effects on the labour market and on people’s attitudes towards work. For some discussions on
these matters, see Groot (1999), Noguera (2001a) or Raventós (1999).
3
This is the most usual definition of Basic Income, as it can be found, for example, in Van Parijs (1995)
or Raventós (1999).

2
quite obvious that some features of some welfare regimes are closer than others to the
underlying philosophy and assumptions of BI proposals.

2. BASIC INCOME, WELFARE REGIMES AND THE SPANISH WELFARE

STATE

2.1. ARE SOME WELFARE REGIMES MORE ‘BI-FRIENDLY’ THAN OTHERS?

We may consider two different classifications of the welfare regimes to elucidate

this point. The first is the well-known distinction made by G. Esping-Andersen (1990)
between three welfare models: the liberal-anglosaxon, the conservative-continental, and
the socialdemocratic-nordic one. The second one has been developed by Philippe Van
Parijs (1994), who distinguishes between a beveridgean solidarity-centred model, a
bismarckian insurance-centred one, and a painean-basic income system. In general terms,
we can equate Esping-Andersen's liberal-anglosaxon model with van Parijs's beveridgean
one, as well as Esping-Andersen's conservative-continental regime with van Parijs's
bismarckian system. This would leave us with four possible welfare regimes: the liberal-
beveridgean, the continental-bismarckian, the socialdemocratic and the painean-basic
income one4. More recently, Goodin (2001) has defended the existence of a fourth,
‘post-productivist’ welfare regime (the main example of which would be the
Netherlands) which is very close to Van Parijs’ painean regime; in the same terms,
Fitzpatrick (1999) has also compared basic income schemes with the traditional welfare
regimes. Table 1 shows a summarized comparation of some of the main ideal-type
features of this four welfare models, as they arise from the quoted literature.

4
The wide discussion on Esping-Andersen’s typology (see Castles, 1995; Castles & Mitchell, 1990;
Esping-Andersen, 1999; Ferrera, 1996; Goodin et.al., 2000; Leibfried, 1993; Lewis, 1992; Moreno,
2000a; Rhodes, 1997; Sarasa & Moreno, 1995) has often highlighted the possible existence of other
different types, as for example the Mediterranean, Latin American, Post-Communist or Pacific Rim
regimes. We are not concerned here with this debate as long as its implications for Basic Income
schemes are quite secondary: the question is not how many welfare regimes do exist, but rather which
specific features of any of them are closer to BI’s underlying philosophy. Nonetheless we will make
some reference later to the ‘Mediterranean’ regime with regard to the Spanish welfare state.

3
4
 Table 1
BI and Welfare regimes

Level of Weight of Dependency on

Welfare regime Leading protection Redistributive means-tested Work contributions Main recipients Weight of the
principle (coverage of effect of benefits benefits requirements rather than taxes (units) private sector
basic needs)

Liberal – Assistance, No Low High High Low Those in need or High

anglosaxon solidarity not able to work
(households)

Conservative- Insurance It depends on the Medium Medium Medium High Employed people Medium
continental previous (households)
contribution

Almost all, because

Social- Moderate Yes High Low Medium-Low Medium of full employment Low
democratic egalitarianism (households and
individuals)

Post-
Productivist or Radical Yes Very high None Very low or none Very low or none All (individuals) Any
Basic Income egalitarianism
Regime Autonomy

Source: own ellaboration from Esping-Andersen (1990), Van Parijs (1994), Fizpatrick (1999) and Goodin (2001).

4
 I will not discuss in much detail the nature of these different models, as they are
well-known; my aim here is rather to analyse how close (or how far) are they to BI
proposals. In spite of ideal-type classifications as such, the real fact is that every welfare
state is based upon some combination of beveridgian and bismarckian programs, that is,
of contributory income-maintenance schemes and non-contributory means-tested ones.
Even the social-democratic regime is characterized more by its high-quality non-cash
services (health, occupational training, or social and personal services), and by the social
alliance between working and middle class, than by a shift-away from the contribution
principle or the work performance principle, which is not the case (see Goodin et. al.,
2000, or Goodin, 2001). The same can be said of an hypothetical BI or ‘post-
productivist’ regime: it would not necessarily exclude the other three principles for the
provision of some specific type of transfers or services (Van Parijs 1995; Fitzpatrick
1999). Rather, the more important differences between BI and the rest of regimes are
two: a) a universal, non means-tested benefit would be paid to every individual; b) no
work or income contribution would be required in order to receive that benefit. The
underlying philosophy of these scheme is to give people both an income guarantee over
the level of poverty and personal autonomy to decide their life-style, so they can freely
shape their relationship with the labour-market, the family or the community.
Are some of these regimes more suitable than others to the implantation of a BI
scheme?. Different types of funding (out of taxes or of contributions), degrees of
unconditionality, or the level of decommodification of the benefits are factors which get
each regime closer or further to the underlying philosophy of BI. But it should be noticed
that every regime would be structurally affected in some of its core principles if a BI
were to be introduced. For instance, BI would surely suppose a radical transformation of
the liberal regimes, as long as it would abolish means-testing and establish
unconditionality as one of its core assumptions. And from another angle, BI would be
close to some principles of the socialdemocratic regime, like decommodification or
individualization, but at the same time would undermine the full employment principle
and the job-commitment which are central to these regimes.
However, a far more important problem appears when we think of the transition
from the continental regime (or from any contributory scheme) to another which relies

5
on BI and egalitarian assumptions. I will consider this problem later in the specific case
of Spain. But it is worth noticing now that the prospects for BI will strongly depend on
the degree in which each welfare regime is committed to the contributory principle. The
more continental the regime is, the more strong the link between welfare rights and the
labour market, the higher the public reproduction of previous income inequalities, and
the deeper the worker's internalization of a contributory and meritocratic philosophy, the
more difficulties we will find for the transition to BI.

Table 2
State funding vs. contributions in social protection in the EU (1995)

Country Weight of state Weight of Contributions / GDP

funding in social contributions in
protection social protection
Denmark 71.0 23.4 1.6
Ireland 62.8 36.3 5.2
United Kingdom 49.5 39.4 6.4
Sweden 48.4 43.2 14.1
Luxemburg 46.1 48.8 11.7
Finland 44.7 48.9 14.7
Portugal 39.4 48.9 11.5
Austria 34.5 64.8 15.9
Italy 29.8 66.8 13.1
Spain 29.6 67.6 12.6
Germany 26.9 70.9 18.3
France 21.1 76.9 19.3
Belgium 20.2 67.2 15.8
Netherlands 15.8 68.4 19.0
EU average 31.2 63.7 15.0

Source: Ferreras Alonso (1999), Urbanos & Utrilla (1999) and own calculations.

In this respect, we can make a simple classification if we look at how much of

social protection is financed out of contributions by employers and workers, and how
much is financed out of taxes or other state resources (see Table 2). In the EU, the
countries less committed to the contributory principle are Denmark and Ireland; the UK,
Sweden, Luxemburg and Finland are in a second group of relatively high state funding of
social protection (although the last three also rely on contributions in a significant
degree); and in the rest we find that less than 40% of social benefits expenditure comes

6
from the state, being the most contribution-committed countries the Netherlands,
Belgium, France and Germany. In Spain, Italy, or Austria the level of state funding is
arround 30% (the average of EU is 31.2), although the weight of contributions in Spain
is similar to that of Belgium. This pattern is very similar if we look at the weight of social
contributions in the GDP (also in Table 2): low weight is for Denmark, Ireland and the
UK. Medium weight is between 10% and 15% (for Spain, Luxemburg, Italy, Finland,
Portugal and Sweden) and the rest are over the EU average (like France, Germany, or
the Netherlands).
So we can conclude that, although BI would always entail radical shifts and
transformations (which would have to do, for example, with the work ethic and the work
performance principle), liberal anglosaxon regimes and nordic-socialdemocratic ones are
somehow better prepared to it than the continental and Mediterranian ones, because the
contributory principle which is hegemonic in these countries would rise two fundamental
problems: first, to transform a high amount of contributions into taxes or direct state
resources; and second, to fight the perception of acquired contributory rights shared by
the contributors. These problems are of course to be expected if a BI would ever become
a real possibility in the Spanish political agenda. But let us first have a look at some
specific features of the Spanish welfare system.

2.2. IS SPAIN A GOOD GROUND FOR THE IMPLEMENTATION OF BI?

Spain has often been included within a fourth type of welfare regime called
Mediterranean. I will not enter in the discussion on its existence or coherence in
taxonomical terms: in fact, if we strictly apply the criteria used in Esping-Andersen’s
original typology, Spain counts clearly as a continental-conservative welfare state (see
Esping-Andersen, 1999). However, and irrespective of whether this fourth regime is
consistent in itself, it is quite clear that most of the main features which are usually
adscribed to that ideal-type suit perfectly the Spanish case: fragmentation of benefits and
programs, low means-tested protection and low contributory benefits, low social
expenditure and low levels of redistribution, high degree of familiarism, and importance
of other welfare providers like the Catholic Church or the family (Ferrera, 1996;
Leibfried, 1993; Moreno, 2000b, 2001; Rhodes, 1997).

7
 There can be no doubt that in the last twenty years Spanish welfare policies have
covered an important distance in the journey towards convergence with the core
countries of the European Union (Gutiérrez Junquera, 2000; Moreno, 2000a, 2000b;
Muñoz del Bustillo, 2000). However, there is still a lot to do to complete that journey:
many authors have emphasized that, despite the effort made in the last two decades,
several important deficits persist in the design and implementation of Spanish welfare
(Adelantado, 2000; Ayala, 1994; Gomà & Subirats, 1998; González Calvet, 1997;
Noguera, 2000c; Rodríguez Cabrero, 1998). Some of these deficits make BI proposals
specially interesting for Spain, but, at the same time, others may become a problem for
that proposals.
Let us just summarize which features of the Spanish welfare system and social
structure could play a significant part either in favour of or against the development of a
BI scheme; among the first we may list the following:
1) High level of poverty and unemployment (Ayala & Martínez López 1999;
Adelantado & Noguera 1997, 1999; Lapuente & Ortiz, 2000).
2) Low level of monetary benefits and low coverage of unemployment benefits
and minimum income programs (Ayala, 1994; Adelantado et.al., 1998;
González Calvet, 1997; Noguera, 2000a, 2000b; Rodríguez Cabrero, 1998).
3) De-regulated labour market: arround one third of the working population
have short-term work contracts (Lapuente & Ortiz, 2000).
4) Strong pressure over the family (and over-charge of women) to provide care,
along with the absence of significant child benefits.
5) Slight and often opaque redistributive impact of the main social policies
(Bandrés, 1990; Calero, 2001; Gimeno, 2000; Millán, 1995).

All these features could raise the urgency of reforms in the path of universal and
unconditional protection, the sort of protection BI can give. But some other factors, on
the contrary, may in principle render difficult the introduction of a BI scheme:
1) The strenght and large scope of the contributory system. We will refer to this
problem later, but let us say now that there is a growing gap between well-
positioned workers who will have contributory benefits (and who may well be

8
 hostile to BI), and precarious ones who will only be entitled to social
assistance, if anything.
2) The low level of social expenditure (still one of the lowest in the EU: Garde,
1999; Adelantado, 2000).
3) The low fiscal pressure (and high fiscal fraud), as much as the fierce
opposition to any increase in income tax.
4) The administrative fragmentation of the minimum income programs, which
specificity depends on each regional government (Ayala, 2000; Aguilar et. al.,
1995).
5) High familiarism and low level of individualization of benefits (Moreno,
2001).

Among these problems, the most striking ones are undoubtedly those which deal
with how to finance BI and with the eventual transition from contributory schemes.
These will be the topics of the next sections, along with the possible distributive effects
of a BI scheme.

3. IS IT POSSIBLE TO FINANCE BASIC INCOME IN SPAIN?

Different ways of financing BI have been proposed by its defenders, but almost
all of them point towards three main possible sources: a) the savings for the abolition of
present cash benefits (sometimes including contributory ones); b) the abolition of other
budget expenditures, like administrative costs, some employment policies, subsidies to
employers, etc.; c) of course, the tax system, in three different ways: abolition of all tax
allowances and exemptions, introduction of new taxes, or reform of the income tax (for
instance with the introduction of a flat rate).
If the aim is to grant a level of BI sufficient to live outside the labour market, then
this aim cannot be achieved only by raising the income tax, because the tax rates that
would be necessary for that would made the proposal politically unfeasible (see
Mercader, 2001). On the contrary, if we rely only on the abolition of cash benefits and
other present expenditures without touching the tax system, then the distributive effect of
the reform would be clearly regressive, because we would be distributing between the

9
whole population a cake which is today mostly appropiated by the less favoured. So the
strategy for financing BI should by force be a mixed one, which relies both on tax reform
and on savings in present expenditure.
There are still very few estimations of the possible amount of a BI in Spain (some
of them are Iglesias 1998; Noguera, 2000d; Pinilla, 2001).This relative absence is
surprising if we think that the amount of BI is not a secondary question, but one of the
key issues to discuss. With a low amount, BI may not be able to empower individuals to
live out of the labour market, so many of its virtues could disappear.
Let us venture an estimation of the potential resources which may be available to
finance a BI in Spain, and after that calculate the resulting amount. Let us suppose for
the moment that the income tax rates are kept the same (which of course cannot be real
at all for distributive reasons). Of course, it would be necessary to abolish most of
existing cash benefits, and to canalize this resources into the BI scheme. The key
question here is: should contributory schemes be also abolished in order to finance BI?,
should they be maintained partially? or should they not be affected at all?. Anyway, it is
obvious that to keep non-contributory benefits would not make much sense once BI was
established. Table 3 shows a shamelessly optimistic valuation of the potential resources
which presently might support the introduction of BI in Spain.
Under the assumption displayed in Table 3, all present public cash benefits should
be abolished, and would finance almost one third of BI. Almost another third would be
provided by changes in other public expenditure items (like employment and
occupational policies, social services, or subsidies to the employers), which would likely
lose much of their sense if a BI was introduced. The rest of the BI bill would be financed
out of present tax allowances, increases of some special taxes, and the introduction of
some new indirect ones, but without raising direct income taxation (let us bear in mind,
however, that Spanish tax burden is one of the lowest in the EU). It is obvious that many
of these figures have only an approximate or rough value: some of them are probably
underestimated (like fiscal fraud), some others are probably overestimated (like new
taxes revenues), and all of them are taken into account only from a static point of view:
of course the introduction of a BI would press up or down most of these amounts.

10
 Table 3
Potencial financing of BI in Spain (1999)
(Optimistic assumption)

Amount Amount Percentage

Source (in million (in million of Spanish
pesetas) euros) GDP

Public cash benefits (including 11,384,976 68,378 13.25

contributory ones)1
Other public expenditures (senseless 7,797,950 46,834 9.05
with a BI)2
Other possible financial funds and 3,441,489 20,669 4.00
savings3
Tax allowances, fraud & rise in tax 9,985,398 59,972 11.14
revenues4
New taxes (or rise in existing ones)5 3,247,229 19,502 3.74
Total 35,857,042 215,357 41.87

Resulting amount of BI in the Optimistic Assumption:

Percentage of BI payed Amount Amount Percentage of average

to the underaged (pesetas/month) (euros/month) wage (1999)
50% 82,901 498 39.09
33% 85,884 516 40.49

Sources: Spanish State Budget (1999 and 2000); Spanish Ministry of Work and Social Affairs (MTAS);
National Institute for Statistics (INE); Family Budgets Survey, INE (1995); El País Yearbooks
(1998 and 1999); CES Report (1998); BBV Report (1998); INVERCO Report (1999); Aguilar,
Gaviria & Laparra (1995); Barea (1996); Barrada (1998); Calero & Bonal (1999; Díaz Chavero
(1999); Garde (1999); Labandeira (1998); Noguera (2000a, 2000b).

(1) Includes: contributory and non-contributory pensions and unemployment benefits, rural benefits
(PER), minimum incomes in the Autonomous Communities, short sick-leaves, severance payments,
family benefits, educational grants, civil servant pensions, and active-income for long-term
unemployed.
(2) Includes: most employment policies, occupational training, social services, administration of social
protection, subsidies to private schools, subsidies to labour hiring, other subsidies to employers,
compensation to the electric firms for the liberalization of the energy market, 25% of EU agrarian
subsidies and 25% of spending in medicaments.
(3) Includes: Social Security surplus, employer’s debt to Social Security, Social Security’s additional
earnings in 2000, INEM’s (National Institute for Employment) surplus, savings of 10% in civil
servant’s wages, estimated savings in fight against crime, prisons and courts of justice, and
reduction of 10% of national debt interests.

11
(4) Includes: all tax allowances and exemptions, estimated tax fraud and estimated rise in tax revenues
due to legalization of black economy.
(5) Includes: tax on transactions in financial markets, ecological taxes, one-point rise in VAT, tax on
vast fortunes, one-point rise in tax on capital gains, tax on private pension funds, tax on big
companies’ spending in early retirements, ‘windfall tax’ on privatized companies, and rise in tax on
alcohol, tobacco and gambling.

Anyway, the resulting level of the BI in this assumption is quite respectable and
would enable many citizens to live outside of the labour market. But, as it is evident from
the table, this calculation relies on very demanding and optimistic assumptions which
make impossible its realization in the short-mid term. Let us think only of some of the
problems implied: some of the items are not to be consolidated in the budget (like Social
Security surplus, or the employers' debt to Social Security); the state would have to
abolish all cash benefits, all subsidies to employers, all employment and social services
policies, and at the same time it would be necessary to make disappear fiscal fraud and
introduce many new taxes. It is quite obvious that no Government could successfully
undertake all these actions at once, in a relatively short period of time.
We may of course think of a less optimistic assumption, in which only a certain
percentage of many items in Table 3 would be included for the financing of the BI. This
is what Table 4 shows.
In Table 4, some items which appeared in Table 3 are supressed or cut down.
Only 50% of the value of contributory benefits is included, so that these schemes would
be maintained to some extent together with the BI. The same applies to other monetary
payments the replacement of which by BI is not self-evident (like severance payments or
short sick-leaves payments). Other public expenditure items which are linked to
employment and social protection (like employment policies, occupational training or
social services) are also kept to a certain extent, assuming they would cover some social
needs that a BI would not satisfy. Additionally, we would not trust so much in the ability
of the state to collect taxes, to fight fiscal fraud, or to face up to the Army, the Church or
some big private companies.
The resulting amount of the BI in this second assumption is much lower than the
first one, but it is still not negligible: it is higher than present non-contributory benefits
and than the poverty line; it is also higher than the ‘life minimum’ for a single person
without children which was established by the present Government in income tax;

12
nevertheless, it is lower than the minimum wage and the average contributory benefits. It
is likely to think that a BI established at this level would still strongly encourage most
citizens to perform waged work in the labour market.

Table 4
Potencial financing of BI in Spain (1999)
(Moderate assumption)

Amount Amount Percentage

Source (in million (in million of Spanish
pesetas) euros) GDP

Public cash benefits (including only 6,209,222 37,292 7.21

50% of contributory ones)1
Other public expenditures (senseless 4,056,401 24,362 4.70
with a BI)2
Other possible financial funds and 1,680,794 10,094 1.94
savings2
Tax allowances, fraud & rise in tax 7,985,398 47,960 8.80
revenues3
New taxes (or rise in existing ones)4 2,280,541 13,696 2.62
Total 22,212,356 133,407 25.94

Resulting amount of BI in the Moderate Assumption:

Percentage payed to Amount Amount Percentage of average

the underaged (pesetas/month) (euros/month) wage (1999)
50% 51,354 308 24.21
33% 53,202 320 25.08

Sources: see Table 4.

(1) Includes only 50% of all contributory benefits, and of short sick-leaves, severance payments and
civil servants pensions. The rest remains as in Table 3.
(2) Include only 50% of most of the amounts shown in Table 3.
(3) Includes only 50% of estimated tax fraud. The rest remains as in Table 3.
(4) Reduces or suppresses some of the taxes shown in Table 3.

We can also conclude from Tables 3 and 4 that in order for BI to reach an
acceptable (even if not very generous) level, at least one third of present GDP would
have to be channelled into the scheme. On the contrary, an amount below 20% or 25%

13
of the GDP would finance a low BI which would not avoid many of the shortcomings of
present welfare system5.
This does not sound very promising for BI’s future, as 25% of GDP is a huge
amount of money. But let us bear in mind that we have not still touched income tax
rates. In fact, any consistent proposal of BI would have to rely on some degree of tax-
benefit integration (Atkinson, 1995a; Jordan et. al., 2000; Parker, 1989). Let us then
take the above calculations only as a mental experiment and get the positive conclusion
of this section: even if income tax rates would be kept the same, the resulting BI would
be over the poverty level and would improve present non-contributory cash benefits.

4. THE PROBLEM OF CONTRIBUTORY SCHEMES

Let us turn our attention now to other serious problem for the introduction of a
BI in Spain, a problem which has been already mentioned through the above sections: the
conflicting relationship between BI and contributory schemes of social protection. Let us
suppose that we seek the higher sustainable BI: then it seems clear that BI should replace
contributory benefits as long as non-contributory ones (as in Table 3). But in this case
we should deal with a serious political problem.
The main difficulty would be how to carry out the transition from the
contributory schemes to the BI, and, above all, how to justify it on political and social
grounds. A sudden transformation which channelled all the contributions into the
payment of a BI would of course be widely seen as unfair by most of past and present
contributors, whose opposition would likely defeat the proposal. The widespread idea of
the ‘acquired rights’ because of the previous contributions would collide strongly with
BI assumptions. Of course, the idea is somehow misconceived: contributory benefits are
not paid out from one's past contributions, but from present quotations on the workers
and employers, so in fact the same pot of wages and profits is always financing
contributory as much as non-contributory benefits (be it in the form of taxes or in the
form of social quotations). The fact that the accounting of each level is separated from
the other, as well as the rules of calculation of contributory benefits, lead workers to

5
P. Van Parijs has pointed out that a BI at a suitable level would require to spend arround 40% of GDP
in an advanced european country; this is more or less the result of our first assumption (Table 3).

14
think that they are now ‘saving’ part of their salary for the future. It is important to
notice that we are here confronting a political and social perception rather than an
economic problem in itself (Van Parijs & Genet 1996). But, be it as it may, if BI replaces
all cash benefits (including contributory ones), it may not be politically feasible, because
of the claims of past contributors who would see disappear the link between their rights
and previous contributions.
Let us check if the hypothetical fears of the recipients of contributory benefits are
justified in the Spanish case, taking for our analysis the two hypothetical assumptions
about the amount of a BI which were displayed in the previous section. We can start by
comparing this two assumptions with present cash benefits in Spain. This is showed in
Table 5.
A look at the Table will easily show that even if all contributory benefits would
be replaced by BI, the situation of most of the recipients would be improved. If we take
the optimistic BI assumption, we can see that only 30% of the recipients of contributory
retirement pensions would lose (although as we shall see this is not always real). If we
take the moderate assumption, this percentage goes up to 60%, but we must remember
that 50% of contributory benefits would be now maintained, so the real percentage of
recipients whose situation would be worsened under this second BI (between brackets in
the table) is in fact very similar to that under the first assumption. Most recipients of
survival pensions would improve their situation under both assumptions (and of course,
as we saw, the same can be said about 100% of the recipients of non-contributory
benefits). Although we could not collect data regarding to the contributory
unemployment benefits, it is likely to imagine that the number of recipients whose
situation is improved by BI would be lower than in the case of pensions; anyway, the loss
of some recipients would be surely compensated by the unlimited duration and the
unconditional nature of BI compared with present unemployment benefits.

15
 Table 5
Basic Income compared with present cash benefits in Spain

Benefits Euros / % of recipients % of recipients

month below below
Optimistic BI Moderate BI
*(plus 50% of
contributory
benefits)
Basic Income
Optimistic assumption 516
Moderate assumption 320
Contributory benefits
Average unemployment benefit (1997) 583 n.d. n.d.
Average retirement pension (1997) 486 70 40 *(68)
Average survival pension (1997) 294 93 80 *(91)
Non-contributory benefits
Unemployment benefit (1997) 300 100 100
‘Active income’ for long-term 270 100 100
unemployed (2000)
Minimum income (PIRMI, 1999) 264 100 100
Rural benefit (PER) (1995) 240 100 100
Non-contributory pension (1997) 210 100 100
Other indicators
Minimum wage (1999) 414
‘Life minimum’ for a single person 276
without children in IRPF (2000)
Poverty line (50% of average 300
disposable income) (1997)

Source: own calculations and Noguera (2000a, 2000b).

But the above calculations have still to be completed in one way: it should be
noticed that, as BI is payed to individuals and not to households, the real gain for an
average pensioner's household would be much higher than Table 6 may show, and that
many loses would be in fact gains if considered at a household level. In Spain, for
example, more than half of the pensioners live with their spouses, most of which are
housewives not entitled to any benefit; if a BI would be approved, even under the
moderate assumption, the total income of a typical couple of old people would certainly
increase, as they would receive two benefits instead of just one. This shows that in order
to analyse BI's impact on equity and distribution it would be necessary to work taking
into account family structure and considering households rather than individuals.

16
 To sum up, BI, even if not very high, would improve the situation of most of the
recipients of present social protection, including those who receive contributory benefits
(and assuming, in the moderate assumption, that these benefits are replaced only
partially). The obvious conclusion is that the political opposition to BI would probably
not come from present recipients but rather from present contributors to social insurance
systems. As the value of their future benefits is uncertain, it is difficult to decide whether
their situation would be improved by BI; they would probably feel that BI is going to
worsen their expectations (although, if BI was linked to prices or to other indicators, this
would be far from obvious).
To face the problem of the transition between contributory schemes and BI, it is
possible to think of three different strategies. The first -radical and politically very risky-
would be just to change social quotations into taxation on capital and wages (following
the path of the General Social Contribution introduced in France by the Rocard
Government in the early nineties, but to a much larger scale). We have already discussed
above the obvious difficulty of this radical strategy: it is only necessary to remember the
recent protests of many public workers whose pension funds were to be integrated within
general Social Security, to imagine what might happen if the whole contributory level
was to be abolished and replaced by a BI of equal amount for everyone. So we can
consider a second, more moderate, strategy: to keep a certain level of contributory
benefits together with the BI, and transform only partially the contributions into taxes.
This is probably more acceptable in the mid-term. But we can also think of a third
strategy: a gradual replacement of contributory schemes to be developed in the mid-long
term. It may be possible to introduce, for instance, a temporary and provisional system of
compensations for contributors during a transitional period of, say, 10 or 15 years; all
through this period, contributions would be gradually transformed and integrated with
the tax system, and at the same time BI would be gradually introduced. Sevilla (1999) or
Offe (1992, 1997) see this gradual transformation as feasible. But this strategy is not
riskless: the introduction of BI might be stopped and even reversed before arriving to
and end, and socio-political struggles during this transitional period would make more
uncertain the final result of the process.

17
 Of course, this process could be politically justified in terms of distributive justice
and appealing to egalitarian principles (Noguera, 2001b). What is at stake here is in fact
the opposition between meritocratic (‘to each according to his contribution’) and
egalitarian (‘to each according to his need’) principles of distributive justice. In this
respect, Van Parijs (1995) or Offe (1992, 1997) have pointed out that a BI would be
more equitable even according to meritocratic principles, because of present spreading of
unpaid work in our societies (housework, voluntary work, etc.). In addition, formal
employment is today an scarce good and is unfairly distributed, so that there is not an
equal opportunity to ‘contribute’: in Spain, 34% of men and 64% of women over 18 and
under 65 are excluded from the labour market (Lapuente & Ortiz 2000), not to mention
the temporary or short-term workers, who have only an episodic relationship with jobs.
But in spite of how justified a BI may be on normative grounds, its political
Achilles' heel in Spain would be the likely opposition of 14 million of present
contributors to the abolition of contributory benefits (and let us think, in addition, that
the Toledo Agreement strengthens even more the contributory principle). Of course
those who would take benefit from the BI would be more than 14 million (including
many people among present contributors), because of its radical redistributive impact;
but probably they are less powerful and less able to organize a successful social
movement. This does not intend to sound discouraging for BI, but only for some ways of
implementing it or some political paths towards it. So my conclusion is that the prospects
for BI in Spain are strongly depending on whether we are able to solve the problem of
the contributory principle, and of the political perceptions this principle is promoting
among present contributors. Acknowledging this can only lead us to think of new
imaginative architectures for the welfare state, in which BI may play a central part, but
probably not isolated from other public principles of income allocation.

5. TAX-BENEFIT INTEGRATION AND SOME DISTRIBUTIVE EFFECTS OF

A BI SCHEME

So far we have discussed the political difficulty of replacing the whole

contributory system by BI, as long as the distributive effect that different BI amounts and
schemes would have among present recipients of cash benefits in Spain. But of course

18
there is still an important question left, namely: which would be the global distributive
effect of BI on Spanish society?; who would win and who would lose with the
introduction of a BI?
The answer has to be clearly “it depends”. It depends on how BI is financed, on
its amount, and on the degree of tax-benefit integration. As it has been said before, a
reform of income tax has to be a fundamental source of financing of any BI scheme, and
this reform should include the integration of BI with the tax system. This means that the
distributive effect of the overall reform would mostly depend on where do we place the
so-called break-even point in present income distribution; this point may be defined as
that level of income above which net income goes down by virtue of the reform, because
one pays more income tax than the amount of BI; conversely, below the break-even
point, net income grows with the reform, because one receives more by virtue of BI than
the taxes one pay. Consider the following example: in Spain, the average tax-payer pays
14% of his income by virtue of income tax; suppose we introduce a flat rate of 28%; if
we introduce also a moderate BI of, say, 50.000 pesetas (about 300 euros), this means
22% of the average wage, so a worker who earns this wage would in fact pay now only
6% of his income. This worker would fall below the break-even point, because the raise
in taxes is for him largely compensated by the BI.
The most usual version of tax-benefit integration is the BI/Flat Tax proposal,
although by no means the flat tax is the only possible alternative for integrating income
tax and BI: a progressive tax rate is also possible (see Sanzo, 2001), but if the BI is high
enough, a flat tax may have a more progressive effect than many of the present
progressive rates. It is for these reason that many concrete BI proposals have relied on
the flat tax (Atkinson, 1995a; Barbeito, 1995; Lerner et. al., 1999; Mercader, 2001)6. In
all these simulations, the usual distributive pattern which results is the following: about
two thirds or more of the population win and the other third or less lose (that is, fall
above the break-even point). So the conclusion is very simple: with a BI financed with a

6
A simulation program developed at the Autonomous University of Barcelona by M. Mercader and
other researchers, ESPASIM, allows to test this proposal for the Spanish state. A demo-version of
ESPASIM can be downloaded from http://selene.uab.es/mmercader/ESPASIM/indexcast.html. At the
same time, the Spanish Socialist Party is seriously considering the introduction of the proposal in his
political program.

19
flat tax and the saving of cash benefits, the rich will be worse off and the poor will be
better off; that is to say that the reform has an overall progressive effect on the
distribution of income.
These are only a few examples or how BI is a simple way of achieving a more
progressive distribution of income in society. With a consistent BI scheme, not only most
of the recipients of present cash benefits would win, but most of the population would
too (because everyone who does not receive an income today would receive it on an
individual basis with a BI). It is for these reasons that the problems BI will have to face
are probably more political and psychological than economic ones. And it will be possible
to overcome these problems only on the basis of a moderate and imaginative strategy
regarding the financing of BI and its relationship with present contributory benefits.

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