Spain’s Minimum Vital Income – a deceiving UBI
Arnaud Sadzot // 9 February 2021
The COVID-19 crisis has not only led to a health disaster, but has also profoundly affected our economies and lifestyles. The European economy has experienced its biggest decline since World War II as a result of the repetitive lockdowns, curfews, and business closures.
While the EU has already agreed on its largest stimulus package ever to boost recovery, European governments have also envisaged alternative instruments to reshape their national economy. The Universal Basic Income (UBI) resurfaced as the favourite tool to rebuild societies in the eyes of several politicians. Indeed, this tax-funded scheme through which a government gives an unconditional payment to all citizens has been recently considered by French parliamentarians, Bundestag’s members, the Scottish First Minister, and even the Pope.
Amid the growing debate in the European political spheres, Spain became the first country to take a concrete step towards UBI. On May 29, 2020 the coalition government led by the Socialist Party (PSOE) and the left-wing Unidas Podemos approved a guaranteed minimum income scheme called the ‘Minimum Vital Income’ (MVI).
Nonetheless, despite its name and the media coverage surrounding it, the Spanish system holds absolutely no similarity with the concept of UBI. Only poor individuals living alone, or heads of vulnerable households (maximum of two per household), meeting certain conditions are eligible for the MVI. Thus, the system contradicts the universal character of the UBI. The beneficiary could receive between €469 and €1,033 a month depending on criteria such as family assets or income. For instance, individuals or household members working a low-paid job can still receive the difference between their current income and the threshold that applies to them.
Therefore, while a UBI is supposed to be indiscriminatory and unconditional, the Spanish MVI deliberately excludes citizens and is means-tested, like the UK’s Universal Credit and similar schemes across Europe. Unlike a fixed UBI, the amount also varies depending on the beneficiary’s conditions and comes with certain obligations.
Moreover, a UBI aims at ensuring a decent life for all, while at the same time eradicating all state support, such as unemployment or housing benefits. It is also supposed to make state bureaucracy simpler and less costly. This trade-off arguably makes the scheme economically sustainable and provides citizens with complete autonomy over their consumer choices and professional activities. Job regulations such as a minimum wage should disappear in parallel.
However, the MVI does not replace Spain’s social benefits; it only complements them. Indeed, the MVI’s calculation includes most subsidies, such as the 17 regional minimum income schemes already in place. Consequently, the country will never experience the shift of incentives and the labour market’s liberalisation that UBI is supposed to trigger.
While some UBI advocates see the MVI as a promising step towards a national UBI, others perceive it as a temporary instrument that is miles away from the ideal scheme. Sadly, the misrepresentation of the Spanish MVI as a universal basic income will further distort the UBI debate. Whether Spain’s experiment becomes a failure or a success, wrong generalisations will be made in order to either support or oppose the UBI in the future.
Nevertheless, it remains to be seen how this additional public expenditure will help boost the economic recovery of what the IMF expects to be the 16th most highly indebted country in the world. It also raises the question of how this measure will affect the labour market of the country with the highest level of youth unemployment in the EU. The only certainty is that the marketing strategy that sold the MVI as a UBI ersatz helped many Spaniards accept what would simply become an added layer to the Spanish welfare system.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).