There are some general comments/downsides to asset/wealth limits as a means test of any kind of welfare program:
Asset tests can create a disincentive to
save among families who might subsequently qualify for benefits. Sometimes one
additional dollar of assets can result in the
loss of thousands of dollars per year in
public assistance benefits. This raises the
question: Do asset tests actually discourage
savings and reduce asset accumulation
among families who might qualify for public assistance benefits? At least one influential paper says yes. Hubbard, Skinner, and
Zeldes, in their 1995 article, interpret the
low levels of wealth accumulation among
low-income households as a rational,
utility-maximizing response to asset-based, means-tested welfare programs.
Note however that often a combined assets and means is used in current US programs... (The quote is not exaggerating the influence of that study; it has over 1,500 citations in Google Scholar. Potentially there is a lot more research on this then. I'm not terribly familiar with it though.)
A more recent (2015) study, also focused on the US, analyzes the optimal trade-off point:
This paper quantitatively determines the asset limit in income support programs which minimizes consumption volatility in a lifecycle model with incomplete markets and idiosyncratic earnings risk. An asset limit allows allocating transfers to those households with the highest utility gains from extra consumption. Moreover, it serves as substitute for history and age dependent taxation. However, a low limit provides incentives for high school dropouts to accumulate almost no wealth. Consequently, they miss self-insurance and suffer from high consumption volatility. For an unborn, these effects are optimally traded-off with an asset limit of $145,000.
So perhaps a fair program (at least in the sense of balancing incentives) can be devised. The latter study also notes that
Partly driven by these
concerns, recent reforms greatly relaxed the asset means-test (see Federal
Budget, 2011). However, some level of means-testing may actually increase
social welfare, because it allocates transfers to those households which have
the largest utility gains.
I'll also note that the OECD does measure asset poverty. Furthermore they measure separately liquid asset poverty.
- Considerable overlap between income and asset poverty (~75% on avg.), though the
degree of coincidence varies across countries;
- Many of those who are not income poor lack adequate ready assets to buffer
economic shocks. Economic vulnerability is typically at least three times as high as
- Great cross-country variation in both liquid asset poverty and economic vulnerability
At least the middle bullet there is an argument to consider asset-based means tests. But also note the substantial overlap with income poverty (1st bullet).
Asset poverty rates are critically sensitive to the type of assets (liquid financial
vs net wealth) and the length of the spell considered (3 vs 6 months).
The larger the concept of wealth and the longer the spell, the higher the asset
On average, liquid asset poverty is 3 times higher than net worth poverty
So that's another issue with asset-based tests, they seem quite sensitive to how wealth is measured.
General patterns. Liquid asset poverty is highest for households headed by:
Poorly educated people;
What appears from this is that liquid-asset-based basic income may end up subsidizing a lot employees, so that may be objectionable to some.
And basing on net worth may have other problems, regional housing price variation for one. That would have to be corrected for.