Spain to Bring in Basic Income Scheme to Mitigate Coronavirus Impact

UTC by Teuta Franjkovic · 3 min read
Spain to Bring in Basic Income Scheme to Mitigate Coronavirus Impact
Photo: Pixabay

The Spanish government will approve a basic income program which will provide a guaranteed income for poorer Spaniards. The scheme’s introduction has been accelerated by the coronavirus pandemic.

Some citizens of Spain could receive extra financial help as the government urges the first nationwide basic income proposal. There are certain doubts this action will decrease high levels of unemployment and inequality. The Socialist-led coalition government plans to spend approximately 3 billion euros ($3.29 billion) each year to support impoverished citizens. The basic income intends to reach 850,000 households and 2.5 million citizens of Spain. Spain has a population of about 46 million people and this plan isn’t something that is entirely new. The plan to implement a basic income was actually a pre-electoral promise.

However, it had to be done at a much faster pace than previously intended due to the COVID-19 outbreak and its economic fallout.

Households will, therefore, get a financial aid package based on their income and the number of children or dependent persons in it. Government officials were proposing the minimum amount an adult will get should hover around half the minimum wage, which is 1,108 euros per month. However, the final details will be decided on, this week in parliament.

This Doesn’t Encourage People Not to Work

Some experts think that it will not help.

He said that the focus isn’t supposed to mean gracing people with the possibility to stay home and work nothing. Quite the opposite, the stimulus should focus on those who lost their jobs or on companies to enable them to keep their workers.

In an interview last week, Spain’s Social Security Minister Jose Luis Escriva stated the new basic income should not discourage people from searching for jobs.

He said:

“It is compatible with having a salary. In Spain, there is a significant portion of workers having a very, very low salary or sub-employment.”

Spain has one of the highest levels of unemployment in the euro area and this became even worse after coronavirus shattered the economy and lockdown prevented people and companies from working. At the end of March, 14.5% of Spain’s working population was unemployed.

Finland and Italy have worked on similar programs, however, there is no proof their approach lessened unemployment levels.

Basic Income Scheme in Spain Should Come with Pledge for Reforms

Also, we shouldn’t forget the fact that Spain has one of the highest levels of inequality in Europe as a result of the sovereign debt crisis of 2011.

Federico Steinberg, a senior analyst at the Elcano Royal Institute think tank in Spain, commented last week that there are two simultaneous debates: one on whether the basic income will be enough to address the economic reality; and a second one over its impact on public finances.

He said that the new policy “is a good idea” as inequality has grown, but it should come with some pledges for reforms.

He noted:

“We have a polarized political system, but it is well diagnosed we need fiscal reform.”

The International Monetary Fund announced in March that “sustainable fiscal measures are crucial for reducing elevated public debt over the medium term and addressing the persistent deficit in the pension system.”

Meanwhile, the Bank of Spain reached for a gradual adaptation plan so the government would be able to restore public finances in the outcome of the pandemic.

Check out other coronavirus updates here.

Market News, News, Personal Finance
Teuta Franjkovic
Author Teuta Franjkovic

Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.

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