# What is the real cost of unconditional basic income for germany compared to social spending

I would like to know if the idea of a basic income of 1000€ per person each month is more costly than the system we currently have in Germany and how much it would differ presumably.

In Germany we have about 82,000,000 inhabitants. About 15 per cent are under 18 years old and would in most concepts of basic income not get any revenue. That makes

`1000€ * 82,000,000 * (1-0.15) * 12 = 836,400,000,000 €`

Following the graphic on social spending in Germany the social spending costs: 888.2 billion. But I guess not all social spending would cease when basic income would replace unemployment compensation and the like?

Furthermore Germany has a average yearly basic income product per person of approximately 42,000 €. Assuming Germany would switch to a static tax rate. How high would the tax rate need to be? In the Canadian basic income experiment they used a 50% tax rate (see negative income tax).

Let's assume a tax rate of 40% and no earnings ceiling / social security contribution ceiling. Than germany would have `82,000,000 * 42,000€ * 0.40 = 1,378 billion €` so another 543 billion € to spent to other projects ;)

• The problem about unconditional basic income is that it has a lot of probable implementations. Depending on the method chosen, a lot can change, and not only different programs. Maybe this article will be of interest to you. (BTW, Milliarde = 10^9 = billion) Feb 2, 2017 at 9:53
• "But I guess not all social spending would cease when basic income would come into force?" Most basic income proposals actually do propose exactly that. A basic income guarantees that everyone has enough to live without depending on welfare, so welfare-related transfer payments would either disappear completely or only apply in some very exotic edge-cases where even basic income isn't enough to cover the cost of living a humane life.
– Philipp
Feb 2, 2017 at 10:05
• By the way, regarding citizens under 18 in Germany: They already receive a small unconditional basic income ("Kindergeld").
– Philipp
Feb 2, 2017 at 10:10
• @Philipp the grafic "social spending in Germany" includes 211 * 10^9 € for health insurance. This item would probably stay intact. Feb 2, 2017 at 10:11
• Would guaranteed basic income be blanket payments of that amount to all citizens, or payments of that amount to anyone not already earning that amount? Feb 2, 2017 at 15:42

## 2 Answers

First of all, there is no one idea of guaranteed basic income. There are various models which disagree regarding implementation details and lead to completely different outcomes (How high exactly? Does it include children? How about the different types of foreigners? What do we do with all the pension funds people paid into for decades?).

But many ideas are based on the idea that all forms of welfare spending are abolished and replaced with a fixed monthly payment which covers the cost of living a decent human life (with different interpretations of "decent").

That means instead of our very differentiated and complicated welfare system where everyone might or might not be entitled to dozens of different forms of transfer payment depending on countless factors, everyone receives the same amount of transfer payment from the government. Our welfare system was carefully calibrated over decades with the intention to give everyone exactly as much money as they need to survive. How well that works is a topic for a discussion which doesn't belong here, but for sake of argument let's just agree that this mostly works out. Basic income replaces all that complexity with a simple "everyone gets the same" system, so unless you want a minority of people who already have it bad to live an even worse life than before, the overall payout must be higher than before. That's just basic math.

So how can a basic income be financed?

Remember that the average working citizen now has a basic income plus their normal wage. That means it is now possible to increase taxation in a way that their actual disposable income is reduced back to what it was before the introduction of basic income. There are different ideas how that can be done, like increasing income tax, increasing value-added tax, increase tax on employers in exchange for reducing employee protection laws which are now no longer required, or a combination of these.

Most of these calculations assume that the amount of working population and their productivity stays the same. It is hard to predict how basic income will affect employment numbers. Critics of basic income argue that fewer people will work when they don't have to. Proponents, however, predict that even more people will work, because the current welfare system actively discourages welfare receivers from taking small jobs (if you make less money per month than you get welfare, that money is subtracted from welfare, so you end up with the same amount of income whether you work or not) and that the reason for unemployment is rather lack of jobs than lack of people's motivation to take them. Who of them is right is unfortunately impossible to predict.

• This is a great answer, but one thing possibly missing is that there iirc were pilot programs at small scale for BIG, so their results may be worth examining. Feb 2, 2017 at 15:28
• Do you aggree that increasing sales tax makes no sense because then everybody would need to spent more money for less goods and undermine the sense of basic income? Feb 2, 2017 at 16:38
• @velop No, because in Germany there are different amounts of VAT on different kinds of goods. Basic needs (like food) have reduced VAT, luxury goods an increased VAT. Rent on living space (usually the largest cost factor for lower-class citizens) usually has no VAT at all.
– Philipp
Feb 2, 2017 at 16:59
• The payout as received by the recipients would surely have to be higher as you say, a good question is whether UBI will result in any reduction of administrative overhead, which is one of the points argued by many of its supporters. Mar 21, 2019 at 22:19

I would like to know if the idea of a basic income of 1000€ per person each month is more costly than the system we currently have in Germany and how much it would differ presumably.

there is a beautiful theory behind the basic income concept. i think in the end, you will find reality much different from that theory used to market it to you.

end of the day, you will see the welfare state to continue to expand, with elements of the system today to co-exist with basic income post implementation, and their likely expansion.

it is one more way to redistribute income / wealth. more money in the pockets of the state and less in your pocket.

• Well this answer didn't answer the question and is also a bit obscure because basic income is aimed to make redistribution more transparent and fair. Feb 2, 2017 at 16:34