How Much Does Basic Income Cost? Modelling Basic Income as Universal Life Annuity

Wee Chung Gan

doi:10.1515/bis-2019-0014

Article

How Much Does Basic Income Cost? Modelling Basic Income as Universal Life Annuity

Wee Chung Gan

Published/Copyright: November 16, 2019

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From the journal Basic Income Studies Volume 14 Issue 2

Abstract

The cost of basic income is typically estimated for a particular year. However, to assess the financial feasibility of basic income, it is also important to consider how much basic income will cost in the future. This is especially important in countries experiencing an ageing population, where the proportion of workers is expected to shrink. This article considers basic income as a universal life annuity and develops two models based on actuarial concepts to estimate the flat tax rate required to finance basic income. The first model considers the cost of basic income over the lifetime of the current population and the second model additionally considers changing population dynamics. The proposed models are conceptually simple, providing a straightforward way to assess the financial feasibility of basic income. Using Singapore data, the models show that the monthly cut-off income separating net contributors and net recipients is around $2710 and benefits around 39 % of adult residents. A tax rate of around 22 % is required to support a basic income of $600.

Keywords: basic income; cost estimate; life annuity; actuarial science; flat tax rate

Appendix

Estimates of residents at each age using data from Singapore Residents by Age Group, 2016

Age	Residents	Age	Residents	Age	Residents
0	37,504	40	62,790	80	11,767
1	37,422	41	62,745	81	11,266
2	37,416	42	62,695	82	10,739
3	37,411	43	62,639	83	10,185
4	37,407	44	62,577	84	9599
5	40,307	45	60,398	85	5789
6	40,304	46	60,325	86	5372
7	40,302	47	60,245	87	4941
8	40,299	48	60,157	88	4501
9	40,297	49	60,058	89	4056
10	41,507	50	63,406	90	3612
11	41,504	51	63,277	91	3174
12	41,500	52	63,135	92	2750
13	41,495	53	62,978	93	2345
14	41,490	54	62,803	94	1965
15	47,971	55	60,379	95	1616
16	47,964	56	60,170	96	1301
17	47,955	57	59,940	97	1024
18	47,945	58	59,689	98	786
19	47,935	59	59,414	99	587
20	52,195	60	50,970	100	425
21	52,183	61	50,694	–	–
22	52,171	62	50,396	–	–
23	52,159	63	50,073	–	–
24	52,146	64	49,719	–	–
25	56,029	65	40,360	–	–
26	56,014	66	40,015	–	–
27	55,998	67	39,640	–	–
28	55,982	68	39,230	–	–
29	55,965	69	38,776	–	–
30	57,149	70	21,433	–	–
31	57,130	71	21,126	–	–
32	57,110	72	20,792	–	–
33	57,089	73	20,426	–	–
34	57,067	74	20,020	–	–
35	60,455	75	18,601	–	–
36	60,430	76	18,135	–	–
37	60,402	77	17,632	–	–
38	60,372	78	17,088	–	–
39	60,339	79	16,498	–	–

Estimates of employed residents’ income at each age

Age	Working Residents	Yearly Income	APV of Lifetime Income	Age	Working Residents	Yearly Income	APV of Lifetime Income
21	13,016	22,505	796,124	61	31,964	37,776	382,265
22	13,013	22,505	820,226	62	31,776	37,776	367,318
23	13,010	22,505	845,789	63	31,573	37,776	351,566
24	13,007	22,505	872,901	64	31,349	37,776	334,987
25	45,225	43,475	901,655	65	17,182	30,420	317,523
26	45,213	43,475	909,919	66	17,035	30,420	306,959
27	45,201	43,475	918,680	67	16,875	30,420	295,904
28	45,187	43,475	927,988	68	16,701	30,420	284,353
29	45,174	43,475	937,868	69	16,507	30,420	272,321
30	47,433	58,466	948,352	70	2464	24,784	259,774
31	47,417	58,466	943,593	71	2429	24,784	252,711
32	47,401	58,466	938,566	72	2391	24,784	245,486
33	47,383	58,466	933,245	73	2349	24,784	238,137
34	47,365	58,466	927,621	74	2302	24,784	230,743
35	50,106	66,648	921,677	75	2250	24,784	223,324
36	50,085	66,648	906,714	76	2194	24,784	215,857
37	50,062	66,648	890,874	77	2133	24,784	208,316
38	50,037	66,648	874,112	78	2067	24,784	200,735
39	50,010	66,648	856,388	79	1996	24,784	193,178
40	52,144	67,263	837,657	80	1919	24,784	185,654
41	52,106	67,263	817,204	81	1837	24,784	178,111
42	52,065	67,263	795,574	82	1751	24,784	170,502
43	52,018	67,263	772,699	83	1661	24,784	162,863
44	51,967	67,263	748,505	84	1565	24,784	155,301
45	50,335	62,853	722,917	85	1464	24,784	147,909
46	50,274	62,853	700,515	86	1359	24,784	140,648
47	50,207	62,853	676,824	87	1250	24,784	133,522
48	50,133	62,853	651,765	88	1138	24,784	126,539
49	50,051	62,853	625,274	89	1026	24,784	119,695
50	51,010	52,970	597,265	90	914	24,784	112,977
51	50,906	52,970	578,131	91	803	24,784	106,362
52	50,792	52,970	557,919	92	696	24,784	99,812
53	50,666	52,970	536,581	93	593	24,784	93,263
54	50,525	52,970	514,059	94	497	24,784	86,616
55	44,056	45,166	490,285	95	409	24,784	79,715
56	43,903	45,166	473,466	96	329	24,784	72,315
57	43,736	45,166	455,739	97	259	24,784	64,019
58	43,553	45,166	437,038	98	199	24,784	54,184
59	43,352	45,166	417,301	99	148	24,784	41,729
60	32,138	37,776	396,448	100	108	24,784	24,784

Future population estimates

Age in 2016	Residents	21 in Year	Estimated Residents	APV of Basic Income
20	52,195	2017	52,183	4,963,469,742
19	47,935	2018	47,914	4,300,381,511
18	47,945	2019	47,914	4,057,819,348
17	47,955	2020	47,914	3,828,900,247
16	47,964	2021	47,914	3,612,822,787
15	47,971	2022	47,914	3,408,870,757
14	41,490	2023	41,434	2,781,385,026
13	41,495	2024	41,434	2,624,290,425
12	41,500	2025	41,434	2,476,018,918
11	41,504	2026	41,434	2,336,101,238
10	41,507	2027	41,434	2,204,045,948
9	40,297	2028	40,223	2,018,659,487
8	40,299	2029	40,223	1,904,510,343
7	40,302	2030	40,223	1,796,815,984
6	40,304	2031	40,223	1,695,211,413
5	40,307	2032	40,223	1,599,384,345
4	37,407	2033	37,325	1,400,282,224
3	37,411	2034	37,325	1,321,179,898
2	37,416	2035	37,325	1,246,558,562
1	37,422	2036	37,325	1,176,163,667
0	37,504	2037	37,325	1,112,023,697

Future workforce (of 21 years old) estimates

Year	Working 21 Years Old	APV of Lifetime Income
2017	33,037	24,812,948,216
2018	30,334	21,493,344,835
2019	30,334	20,276,740,411
2020	30,334	19,129,000,387
2021	30,334	18,046,226,780
2022	30,334	17,024,742,246
2023	26,232	13,888,972,151
2024	26,232	13,102,803,916
2025	26,232	12,361,135,770
2026	26,232	11,661,448,839
2027	26,232	11,001,366,830
2028	25,465	10,075,313,714
2029	25,465	9,505,012,938
2030	25,465	8,966,993,337
2031	25,465	8,459,427,677
2032	25,465	7,980,592,148
2033	23,631	6,986,413,839
2034	23,631	6,590,956,452
2035	23,631	6,217,883,445
2036	23,631	5,865,927,779
2037	23,631	5,533,894,131

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Published Online: 2019-11-16

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Articles in the same Issue

https://doi.org/10.1515/bis-2019-0014

Keywords for this article

basic income; cost estimate; life annuity; actuarial science; flat tax rate