Universal Basic Income (UBI) in Iran was originally implemented in 2011, making it one of the first countries to use such a program. While there have been some opponents to this program, it largely remained successful in comparison to existing welfare programs.
Universal Basic Income and Poverty
Universal basic income is used in developing countries to fight poverty and to promote health and education, where the population does not have enough resources to fulfill these needs on their own. Iran started their universal basic income program in 2011 in the form of cash transfers.
The government started monthly deposits of cash into individual family accounts amounting to 29% of the median household income and 6.5% of the GDP. This amounts to about $1.50 extra income per person per day.
In the 40 years prior, there have been subsidies on bread and energy, so people paid less for bread, water, electricity, heating and fuel. This program was changed to the cash transfer program in 2011 because the government believed that energy subsidies always benefit the wealthy more than the poor and also because energy subsidies encourage more fuel consumption which is detrimental to the environment.
Universal Basic Income and Labor Supply
One of the main concerns people had before this program was implemented was that it would negatively affect the labor supply. It was believed that if people received money from the government unconditionally, there would be no incentive for them to work at all.
However, the only negative labor supply that was affected was people between the ages of 20 and 29. But this age group did not have a strong connection with the labor market even before the Universal Basic Income program in Iran was implemented. This is because Iranians have the choice to enroll in tertiary and graduate education, thus largely preventing this age group from working.
Rationing is prevalent in the market for formal work in the private and public sectors, where jobs are highly sought after. Employees are attached to their jobs and are unlikely to withdraw from their positions. This is apparent even with the population receiving cash assistance.
Positive Impact of UBI
Of the individuals employed in 2010, 88.5 percent remained employed, 4.5 percent lost or quit their jobs and the rest became inactive in 2011. Of the unemployed, 26.3 percent found work in 2011, which is about the same number as those who lost their jobs in 2011. Of those engaged in housework in 2010, 3.2 percent found jobs in 2011, which is fewer than those who left their jobs for housework.
There was a positive impact of the universal basic income program on the service sector. This can be explained by the fact that the service sector is populated by credit-constrained small firms that cash transfers can help expand. Some examples of workers in the service industry are housekeepers, teachers and deliverymen. In fact, their weekly hours had increased by roughly 36 minutes.
The overall conclusion is that the program did not affect labor supply in any appreciable way, according to a paper published by economists in 2011. Universal Basic Income in Iran is a proven program despite the fact it went through modifications. It serves as an example of the benefits a UBI has that other countries can look to for comparison.
– Casey Geier