Reference no: EM132964931

Spain's government has started what might just be remembered as the world's biggest economics experiment. On 15 June, spurred by the coronavirus crisis and its economic fallout, it launched a website offering monthly payments of up to €1,015 (US$1,145) to the nation's poorest families. (...)

The move comes at a time of unprecedented economic turmoil brought on by the coronavirus pandemic. Spain was one of the hardest-hit countries in the early days of the pandemic. The nationwide lockdown curbed the spread of the virus, but came at a staggering financial price. Millions of people lost their jobs as the economy shrank rapidly, putting many of the most vulnerable citizens at risk. (...)

The system will allocate a fixed monthly sum to each eligible household, no strings attached. The aim is to provide recipients with enough cash to meet their basic needs without trapping them in poverty in the same way as existing welfare programmes that offer support only to those without jobs or other income, says Spain's social security minister, José Luis Escrivá. (...)

[Analysing] forgotten data from a 1970s Canadian study called the Manitoba Basic Annual Income Experiment, [Evelyn Forget, an economist at the University of Manitoba in Canada, found that when] low-income families from the prairie town of Dauphin received monthly cheques to spend however they liked, mental health improved, teenagers spent an extra year in school and hospitalizations declined by 8.5%.

Escrivá hopes for similar outcomes from Spain's guaranteed annual income project. Its budget is limited to 0.2% of gross domestic product, so Escrivá says the government will target only those households - amounting to an estimated 850,000 - with the lowest incomes.

The funds will be distributed monthly to each household and range from €462 for single adults to €1,015 for larger families. (...)

1 Define what is meant by a universal basic income and explain why the Spanish minimum income described in Extract 1 is not a universal basic income.

2 Outline two advantages and one disadvantage of a truly universal basic income compared to the Spanish system, for supporting financial well-being.

3 Outline what is meant by universal basic services and set out how this differs from a universal basic income.