Cyprus’ Guaranteed Minimum Income plan and the basic income

Last week, Cyprus unveiled an plan to implement a 'guaranteed minimum income for all citizens' by july 2014. A different and weaker proposal than the one of the unconditional basic income, but still by principle, a good step towards a better welfare in Cyprus.

“Beneficiaries will be all of our fellow citizens who have an income below that which can assure them a dignified living, irrespective of age, class or professional situation,” Anastasiades, Cyprus' president said in a statement to the press.

So, what does this tell us? Please note this is a worthwhile and much needed reform although it has some disadvantages that Basic Income doesn’t have. Also note that the principle of the minimum income was actually included in the Memorandum of Understanding (pdf) between the Cypriot government & the Troika. Three specific points deserve some attention.

The problem of means-testing

Because the proposed Guaranteed Minimum Income (GMI) is not unconditional nor universal, it requires a means-test which, if not carefully designed, could create a poverty trap and threshold effects. Typically, if the beneficiaries have to prove that they are 'poor enough' to merit the income support, it creates a barrier in their efforts to get out of the benefit scheme. 

Why working for 300 euros/month if the GMI is 200? The incentive to work may not be enough and therefore people have a finacial incentive to live on the benefits (or working on the black market). However with careful planning there could be a way to balance those too without losing the incentive. An unconditional basic income do the job better, because you don't lose it when you start working, you can cumulate it (a worker would get 200+300 = 500€).

Beware of the stigma effect

Secondly, having to apply for it, creates a stigma. Like it is the case in France, many people will choose to live in poverty rather than to ask for it. There is a way out of it too: don’t expect people to apply. Just give it to those that need it. You can build the taxation system around this problem. With the same logic you can get rid of the bureaucracy and minimize the added cost of it.

Basic income and participation in society

Lastly, we should remember that the goal of both a Basic Income and a Guaranteed Minimum Income should be to get people out of extreme poverty and to participate in society. Hence the idea of ensuring that basic needs are met.

As basic income proponents, we beleive that "participation in society" should be seen in a wider sense than rather paid work. In this sense, the GMI proposed in Cyprus is disappointing, since "the single but absolutely necessary precondition is that they don’t refuse to accept offers for employment and to participate in the policies of continuous employment that are determined by the state" Anastasiades said. Again, a fully universal and unconditional basic income would fulfill better this goal.

It is however a brave step in the right direction and the people who carry the responsibility to implement it should be helped in any way possible in order to make the welfare in Cyprus more emancipatory.

Credit picture: Terry Hassan