A targeted basic income solves better than a universal one because it avoids the need to cut existing social programs.

Proponents of a basic income (BI) claim that it could bring significant reductions in financial poverty, on top of many other benefits, including greatly reduced administrative complexity and cost. Using microsimulation analysis in a comparative two-country setting, we show that the potential poverty-reducing impact of BI strongly depends on exactly how and where it is implemented. Implementing a BI requires far more choices than advocates seem to realize. The level at which the BI is set matters, but its exact specification matters even more. Which parts of the existing tax-benefit system are maintained, and which parts are abolished, modified or replaced? The impact of a BI, be it a low or a high one, thus strongly depends on the characteristics of the system that it is (partially) replacing or complementing, as well as the socio-economic context in which it is introduced. Some versions of BI could potentially help to reduce poverty but always at a significant cost and with substantial sections of the population incurring significant losses, which matters for political feasibility. A partial basic income complementing existing provisions appears to make more potential sense than a full basic income replacing them. The simplicity of BI, however, tends to be vastly overstated. 1. Introduction As poverty persists in advanced welfare states some are advocating a radical change in approach. Long dismissed as utopian, a basic income (BI) as a potentially ironclad protection against financial poverty has gained more and more traction. This paper examines what would happen if we introduced various versions of a BI in Belgium and the Netherlands, ranging from a modest one complementing most existing provisions to a generous one replacing many existing provisions. Could a BI reduce or even eliminate poverty in both countries? What would a BI do for the people who are financially worst off? Who would gain and who would lose? Using sophisticated microsimulation analysis, we examine in detail a range of BI schemes and compare their potential impact in Belgium and the Netherlands, countries that share some important characteristics but also differ significantly in some other respects, notably their tax benefit systems and labour market institutions. This analysis is relevant to basic income debates worldwide. It is also relevant for debates on the potential harmonisation of social protection across EU member states. In contrast to common claims, it is not simply the case that the higher the BI the “better” the distributional consequences are, especially if income inequality and poverty reduction are goals. A low, “partial” BI may make more sense than a fully-fledged one that replaces most of what exists.