The economic model of the 'unconditional basic income' as a tool for social work to produce new insights into the current 'crisis of the welfare state'

Dorit Sing, PhD (PolSc)
University of Applied Sciences of Upper Austria
Campus Linz
Social Welfare and Health Professions
Garnisonstraße 21
4020 Linz, Austria

Keywords: negative income tax, Rawls' law, social justice, unconditional basic income (UBI)


Concisely formulated, the 'system' of social work is described by Peter Fuchs (Fuchs n.d., 3) as follows: '[i]t aims at the restitution of the chance of re-inclusion, but obviously connects this (in principle technical-professional) function with the concept "of helping", by which older semantic pre-forms of this system (e.g. misericordia and caritas) are continued'.1

Together with the increasing and partly even dramatic 'crisis of the welfare state' at the end of the 20th century the insight has arisen that so far only peripherally discussed economic models, which might strengthen the ability for inclusion and restitution of the welfare state, should be taken seriously and introduced into public discussion. Among these models are those which guarantee an 'unconditional basic income', thus helping to prevent or to stop the obvious increase of the social 'precariat'2 by economics. In the following, such a model is presented. I will try to develop and use the model in the sense of a 'economics of social work': it is first represented exclusively from an economic view, but with the subsequent 'realization-leading interest' to show that social work can draw a realization gain from this 'external opinion' in as much as it might now - at least in part - observe itself in a new light.

1 Translation of the German text by Dorit Sing.
2 Precariat is a neologism used in the discourse of a post-industrial sociology. It refers to the two roots "precarious" (in terms of economical and social welfare and security) and "proletariat". Thus, it describes a social sector or "class" in the post-industrial society living under similar restricted conditions as the "working class" in the industrial society.


Considerable changes have been taking place in German and Austrian social politics for some years. Social welfare benefits are increasingly dependent upon a person having a job or on their willingness to accept a job of any kind. A priority for policy makers is to protect and guarantee economic competitive ability within a country's borders. In accordance with the slogan 'no benefits without return', Hammer (2006, 19) states: 'a fundamental transformation of the justice conceptions in the welfare state is advanced especially in the job market and the social welfare sector'.

The paradigm change from 'welfare state' to 'workfare state' is criticised due to the preference of job market versus social politics criteria, the enforcement character ('duty to work'), the stigmatization of people in need, the outmoded concept of wage labour, and the shortcomings in employability.

The idea of an unconditional basic income (UBI) is a reform concept which may revolutionize the current social and employment policies of modern industrial societies and lead to novel concepts by leaving behind the original 'duty to work' idea. Since the end of the 1970s the Belgian scientist Philippe Van Parijs has worked on a model whose effects not only concern economic aspects but also imply an intensive discussion about social justice conceptions (see also Eichler 2001, 88-98).

In this paper, a model of UBI according to Van Parijs is presented in Part 1. I will then try to develop and use this model in the sense of an 'economics of social work'. This is followed by the presentation of an exclusively economic perspective in Part 2, including a discussion on the concept of a guaranteed minimum income and its political effects. In Part 3 the justice concept of UBI will be discussed. My final aim is to discuss these points with regard to social work in order to develop insight from this economic perspective (Part 4). In a final step, a short résumé will be given (Part 5).

  1. The concept of 'unconditional basic income' according to Van Parijs

  2. The concept of 'unconditional basic income' (UBI) originated in the 1980s when even in well-off societies such as Germany or Austria increasingly larger parts of society did not have an existence-securing income. A central problem is recognized in the fact that through technical progress human jobs have been lost. An individual's income, however, depends on their earned income. Claims to the social security system (for instance, rights to a pension, sick pay, etc.) are predominantly based on a previous record of work. Social benefits, as 'a last safety net' of the social security system, are only granted if the referred individual's income is not sufficient to meet socially defined needs. This means that the granting of social benefits depends on a previous examination of the real needs at household level. This assessment is experienced as stigmatizing or discriminating by the applicant. As a consequence, there is strong motivation for the individual to find gainful employment and ways to safeguard their existence independently.

    Such a proposal was put forward by Philippe Van Parijs at the beginning of the 1980s. His proposal was based on older concepts of the French socialist Charles Fourier from 1848, as well as on the ideas of John Stuart Mill (Van Parijs 2000). Philippe Van Parijs stated, 'If you really care about freedom, give people an unconditional income'. In order to be free, he proposed an 'unconditional basic income' (UBI) for all citizens of a given country.3

    The idea of a social redistribution of material resources by the partial uncoupling of income and gainful employment has been considered several times since then. In 1986, the Basic Income European Network (BIEN) was founded. It expanded its scope from Europe to the World in 2004. Additionally, basic income networks have been organized. In Austria, the Austrian network for unconditional income and social cohesion (also Austrian Member of Basic Income Earth Network) was founded in 2002 ( In Germany the 'Network Basic Income' was established in 2004 ( The first German-speaking Basic Income Conference was held in October 2005 in Vienna, followed by a conference held in Basel in October 2007 (

    At both national and global level, the UBI is characterized by four criteria:

    1. It is unconditional: The basic income is a civil right in the sense of the Human Rights Declaration of 1948. Its granting may not depend on conditions (for instance, duty to work, obligation to undertake non-profit activity, or the assumption of family tasks (such as children's education, care of family members, etc.). Thus social interferences are avoided in personal life planning and/or individual freedom.
    2. It is universal: It is to be granted to everyone living permanently in a given country. The extent of the basic income may differ for adults and children.
    3. It is personal: Since the unconditional basic income is understood as a citizen's right, it is to be disbursed to all persons - without examination of a need. Exactly herein lies the substantial difference to the existing system: There is no necessity for the proof of financial need. Stigmatization and discrimination are avoided.
    4. It should secure the basic needs: This enables participation in social life (in a material, social and cultural context) (Appel 2007, 56-64).

    The objective of a basic income is not only the formal but also the material conversion of the right to liberty in choosing one's own lifestyle in combination with social security. Thus, a significant point is the strengthening of the 'negotiating position' and/or 'negotiation power' of the individual in the job market. No one would be forced to accept precarious conditions of employment 'at any price' anymore.

    Supporters of the concept of an unconditional basic income argue that the individual freedom to choose one's own lifestyle would increase social coherence in society (Netzwerk Grundeinkommen und Sozialer Zusammenhalt 2006). An essential issue in this respect might be changes in the job market caused by introducing an unconditional basic income.

    3 In addition to this concept there is also the proposal of a Global Basic Income, by which all people in the world would receive a basic minimum income (i.e. for survival) ( This concept is not discussed in this paper.

    According to Marx & Peeters (n.d.), proponents of the concept argue that a UBI would lead to reduced levels of unemployment due to different dynamics:

    1. A considerable number of people might reduce their labour supply by working less and creating opportunities for unemployed people to enter into the labour market.
    2. Labour participation would increase due to the unconditional character of UBI, which eliminates unemployment and poverty traps: 'the fact that individuals are guaranteed a minimal level of income would increase the attractiveness of relatively poorly reimbursed service activities to formal employment' (Block 1990, 207).
    3. A UBI might not only decrease unemployment but also stimulate entrepreneurial activity and in this way contribute to economic growth. Within this context it is argued that a UBI would create incentives to set up businesses.
    4. It is argued that the introduction of a UBI would change the concept of work by rewarding non-waged work, such as care for the elderly and children and voluntary work.

    The idea that a UBI would lead to more available jobs and to a better distribution of labour supply is not shared by all. Opponents predict quite the opposite: 'because granting everyone a "free lunch" would lead to massive shortages on the labor market. Also with regard to labor demand, opponents see negative social results, since they reason that a BI would encourage the growth of unattractive jobs' (Myles 1988, cited in Block 1990). Hence, regarding both labour demand and labour supply, there are strong disagreements as to the consequences of introducing a UBI. However, examples from the USA between 1968 and 1980 (New Jersey, Denver, and Seattle) show that the wish for gainful employment was not significantly reduced as a consequence of introducing a negative income tax (Opielka 2004).

    To anticipate both the positive and negative effects of an unconditional basic income it is important to analyse different models of a guaranteed minimal income. Some of the models will be highlighted in the following.

  3. Selected financing models of guaranteed minimum income

  4. In connection with a guaranteed minimum income, different financing models are discussed and partly also used internationally. In addition to the UBI, for example, the social benefits with their advantage of securing existence for individuals in need have been mentioned, but at the same time also the stigmatizing and/or discriminating effects. Since this model is well known, I will not discuss it in detail. More relevant to the context of social work is the concept of a negative income tax (NIT). This was developed in the 1940s by the British economist Juliet Rhys-Williams (Initiative Grundeinkommen 2007; Milton Friedman specified this model for the USA at the beginning of the 1960s and introduced it almost nationwide (Friedman 1962). Also, in Germany, some well-known scientists of the 'Kronberg Circle' and the 'Ulm Circle' have supported this model (Eichler 2001, 164-175). A further approach for financing a guaranteed minimum income is exclusively based on the increase of sales tax. The model of a negative income tax, the UBI as a particular case of negative income tax, and also the increase of sales tax for financing a guaranteed minimal income will be discussed in the following.4 Common to all three is that a guaranteed minimal income will increase both the effectivity and efficiency of social security (Stutz & Bauer 2003).

    4 Further models are those of tax credits, wage subsidies, and 'Sozialerbschaft' ('Citizen's stake'), of which the latter was developed by US scientists Ackermann and Alstott. The latter model was discussed in Germany by an expert group under the auspices of the Heinrich-Böll-Stiftung (Heinrich Böll Fiundation) (Grözinger et al. 2006). This group recommended giving all adult citizens a 'Citizen's stake' of EUR 60,000. Conversely, all other transfer services from the state, both in cash and in kind, would be abolished (see the criticism from Hammer 2006, 20).

    Negative Income Tax (NIT)

    NIT is aimed at securing a certain level of income for all citizens. To achieve this, people earning a lower income will receive the difference (i.e. in their income compared to higher levels of income) in the form of a negative tax from the state: '[i]f the difference is positive, a tax needs to be paid. If it is negative, a benefit (or negative tax) is paid by the government to the household' (Van Parijs 2000). This is supposed to guarantee that everybody has an existence-securing amount of money. As shown in Fig. 1, taken from a Swiss study, incomes under a certain 'break-even level' - in this case 2000 Swiss Francs - are not fully taken into account as an incentive to work. Substantial characteristics of this model are therefore the objectives of the fight against poverty, the maintenance of an incentive to work, and the goal of reaching high cost-efficiency.

    Fig. 1: The effects of a Negative Income Tax (NIT).

    Francs per month

    Income per month

    Note: UBI in the amount of 1000 Francs; NIT at the height of 50%; positive income tax of 50%; break-even level 2000 Francs.

    Source: Stutz & Bauer (2003, 17).

    So far, the model of NIT as a 'universal sociopolitical instrument' has not yet been put into practice (Stutz & Bauer 2003, 17).5 In addition to four social experiments in the USA in the 1970s, also theoretical computation models also have shown that this model - if the poverty line is considered as a basis - will substantially increase costs for a state. For instance, in Germany, increasing the current tax-exempt amount to an existence-securing break-even-level would lead to considerable tax losses. The overall costs for 1995 were estimated to increase from 2% to 5.5% of the Gross Domestic Product (Stutz & Bauer 2003, 18).

    Further, supporters of the UBI state that negative income tax does not eliminate the problem of stigmatization or discrimination. The central status of gainful employment would remain: the employed persons would have to function as taxpayers, and the unemployed or low-income earners would receive national transfers as part of the fight against poverty (

    5 Earned Income Tax Credit has existed in the USA since 1975. This is not a basic income due to its dependance on the employment of a family member. A similar negative income tax bound to the employment of a family member also exists in Great Britain.

    Unconditional basic income

    According to Van Parijs' (2003, 5), UBI is:

    an income paid by a government, at a uniform level and at regular intervals, to each adult member of society. The grant is paid, and its level is fixed, irrespective of whether the person is rich or poor, lives alone or with others, is willing to work or not.

    The income could be financed by income tax or other resources, e.g. sales tax. The income tax would start from an income level above the basic income. This means that tax would have to be paid from the first dollar, EURO or Swiss Franc earned by gainful employment. Fig. 2 shows the effect of basic income in a simple model, again from a Swiss study. In this example the net transfer equals 1000 Swiss Francs per month. A (positive) tax rate of 50% is charged on an income, starting with the first Franc. The 'break-even level', i.e. the zero-effect, is a monthly income of 2000 Francs. In sum, UBI can be regarded as a special case of NIT (Stutz & Bauer 2003, 27) in which the negative tax rate equals zero and the transfer amount is paid ex ante to all citizens independent of individual income.

    Fig. 2: Example of the effects of a UBI.

    Francs per month

    Income per month

    Note: UBI in the mount of 1000 Francs; positive income tax of 50%; break-even level 2000 Francs (net effect = 0).

    Source: Stutz & Bauer (2003, 29).

    Nevertheless, Van Parijs (2000) distinguishes his model from NIT by emphasizing the following points:

    1. First, any NIT scheme would have the desired effects on poverty only if it was supplemented by a system of advance payments sufficient to keep people from starving before their tax forms are examined at the end of the fiscal year...
    2. Second, although an NIT could in principle be individualized, it operates most naturally and is usually proposed at the household level. As a result, even if the inter-household distribution of income were exactly the same under an NIT and the corresponding UBI, the intra-household distribution will be far less unequal under the UBI. In particular, under current circumstances, the income that directly accrues to women will be considerably higher under the UBI than the NIT....
    3. Third, a UBI can be expected to deal far better than an NIT with an important aspect of the 'unemployment trap' that is stressed by social workers but generally overlooked by economists. Whether it makes any sense for an unemployed person to look for or accept a job does not only depend on the difference between income at work and out of work. What deters people from getting out to work is often the reasonable fear of uncertainty. While they try a new job, or just after they lose one, the regular flow of benefits is often interrupted. The risk of administrative time lags - especially among people who may have a limited knowledge of their entitlements and the fear of going into debt, or for people who are likely to have no savings to fall back on - may make sticking to benefits the wisest option. Unlike an NIT, a UBI provides a firm basis of income that keeps flowing whether one is in or out of work. And it is therefore far better suited to handle this aspect of the poverty trap.

    According to Van Parijs (1995), the objective of UBI is not only to secure a minimal level of financial existence in terms of the fight against poverty but also the achievement of 'real freedom for all'. Since UBI is not bound to conditions (such as family work or civic engagement) Van Parijs' UBI would also allow lifestyles with no 'productive contribution' to society as a whole. A striking example is the Californian surfer (introduced by Van Parijs) who, as a 'lazy bones', has the same social participation rights as a workaholic or as someone working as a social volunteer.

    Since Van Parijs' model is associated with immense financial redistribution within society, the justification for these redistributions which do not result from the do-ut-des6 principle or reciprocity is in need of broad consensus in society (Solow 2001). The issue of whether the model of the UBI corresponds to social justice conceptions will be discussed in section 3.

    Despite intensive political and scientific discussions in numerous countries, international analyses show that so far only in Alaska national payments take place at a rate of USD 680 per year. This money originates from the country's oil drillings and does not cover the existence level. However, from a purely computational point of view a system change would be possible (see e.g. Strengmann-Kuhn n.d.). On the one hand, this could results from an increase of the positive income tax. On the other hand, in principle numerous other social transfers could be avoided (child allowance, unemployment benefit, etc.). Moreover, a proportion of a UBI might be financed by an increase in sales tax. I will discuss briefly the effects of an increase in sales tax in the following.

    6 Latin for "I give so that you also might give".

    Sales tax

    The Swiss initiative 'Basic income' suggests financing an unconditional basic income solely on the basis of taxation on consumption (sales tax) ( Economists stress, however, that particularly for distribution-political reasons, financing via income is preferential (Strengmann-Kuhn n.d.). On the one hand, a 'fair distribution' concerns primarily a fair and just distribution of resources (in this case, income) in order to grant equal participation chances. On the other hand, the redistribution effects via income are larger than those via consumption. An economic reason for this is the rate of saving: rich individuals spend less of their income on consumption than poor ones. This means that especially people with low incomes are disproportionally affected by an increase in the prices of consumer goods or an increase in sales taxes. Moreover, regarding the implementation of a UBI, Strengmann-Kuhn (n.d.) raised the issue that a UBI financed by sales tax would need a much longer transitional period than a model financed via income.

  5. The justice concept of UBI

  6. Economists differentiate between allocative and distributive efficiency. While the criterion of allocative efficiency can justify national intervention in the market to correct 'market failures', distributive efficiency deals with aspects of justice. For instance, considerations of justice within a market-economy organized society might also justify interventions of state in the competition mechanisms.

    In the Federal Republic of Germany different definitions of justice exist within different social systems: the principle of justice of individual achievement in the old age pension insurance (someone who has paid more into the system will get more out of it) or the principle of equal opportunities (e.g. equal access for all to the education sector). With regard to securing of the costs of living on the basis of economic need, the principle of subsidiarity is of central importance.

    In comparison to the existing sociopolitical instrument of social welfare assistance the UBI model essentially differs on three points: while social welfare deals also with securing the cultural minimum existence level there are differences in the issues that are 'unconditional' (i.e. without conditions versus a common duty to work), 'universal' (for all versus only in cases of need) and 'personal' (individual versus household). Due to the changed basic conditions with fewer and fewer employment chances in the present job market, it seems quite justified to challenge the welfare system and the existing justice conceptions.

    Van Parijs (2000) argues that the advantage of his model of UBI, with its concept of 'real freedom for all', is based on his concept of justice:

    The main argument for UBI is founded on a view of justice. Social justice, I believe, requires that our institutions be designed to best secure real freedom for all. Such a real-libertarian conception of justice combines two ideas. First, the members of society should be formally free, with a well-enforced structure of property rights that includes the ownership of each by themselves. What matters to a real libertarian, however, is not only the protection of individual rights, but assurances of the real value of those rights: we need to be concerned not only with liberty, but, in John Rawls's phrase, with the 'worth of liberty'. At first approximation, the worth or real value of a person's liberty depends on the resources the person has at their command to make use of their liberty.

    Van Parijs' model of UBI guaranteeing 'real freedom for all' was developed from discussions on different principles of distributive justice proposed by different philosophers (Füllsack 2004). Especially the concept of the liberalist philosopher John Rawls has to be mentioned in this context.

    According to Rawls it is the task of the principles of justice to distribute equally within a society the rights and duties of the individual as well as fundamental goods. As goods to be distributed, Rawls explicitly distinguishes rights, incomes, fortunes, and chances.7 Rawls (1971) argues in his principles of justice that behind a 'veil of ignorance' self-interested rational individuals would choose two general principles of justice to structure society in the real world:

    1. Each individual should have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others (p. 60).
    2. Social and economic inequalities should be arranged so that (p. 303):
      1. offices and positions have to be open to everyone under conditions of fair equality of opportunity
      2. they have to be of the greatest benefit to the least-advantaged individuals of society (the difference principle).

    According to Rawls, the two principles relate to each other in hierarchical order. This means that it is not permissible to cut the fair equality of opportunity in order to promote the difference principle. According to the difference principle social inequalities are only justified if and as far as they still have some benefit even for the worst-off members of society.

    In order to reach consensus regarding the distribution of goods within a society John Rawls states in A Theory of Justice (1971) - in which he often defines justice as fairness - from the hypothetical situation (i.e. 'the veil of ignorance') that members of society have to agree on the future state of society and its social order. The 'veil of ignorance' refers to the fact that in the current situation nobody knows for sure what his or her later position will be in the new social order.

    All society members act as self-interested rational individuals and optimize their benefits by preferring more in terms of rights, etc. rather than less of them. Regarding distribution of these goods, they decide on the basis of self-interest - however covered by their 'veil of ignorance'. Everybody decides in such a way that he or she might maximize their benefit under the assumption of the worst-case (maximin strategy8). In the end, all society members under observance of these principles will come to the same result regarding the distribution of primary goods9. At this point the concept of justice comes to an end. How the fairly distributed (or compensated) resources and chances are put to use by the individual person (consumptively or productively) is not within the state's realm of influence, according to Rawls and Van Parijs.

    7'The basic list of primary goods [...] has five headings as follows:

    1. basic rights and liberties, also given by a list;
    2. freedom of movement and free choice of occupation against a background of diverse opportunities;
    3. powers and prerogatives of offices and positions of responsibility in the political and economic institutions of the basic structure;
    4. income and wealth; and finally,
    5. the social bases of self-respect.
    [...] We can, if need be, expand the list to include other goods, for example, leisure time, and even certain mental states such as freedom from physical pain'. (Rawls 1993, 181 ff)

    Exactly at this point the UBI is heavily disputed. Especially the aspect of unconditionality is criticised, i.e. the fact that members of society do not have to do anything to obtain the benefits of UBI. The opponents of UBI argue that rights of members of society are in principle the duties of other members of society towards those who ask for these rights, and vice versa. This means that rights and duties exist only in reciprocity to each other. In contrast, Van Parijs considers a basic income as a compensation for a loss of participation in scarce resources and chances. A basic income is therefore a quid pro quo or a service in turn for something lost (see also Füllsack 2004).

    Another question is why a basic income should be paid also to those who have paid work and belong therefore to the well-off within society. For Van Parijs this is an important criterion for justice because stigmatizing or discriminating effects due to the dependence of granting an income based on need would be abrogated. Moreover, in his opinion this procedure is justified in economic terms, since a basic income given to all citizens would reduce the costs for bureaucracy. Moreover, redistribition effects would arise in such a way that the costs for a basic income would not be higher than in existing systems (see also Füllsack 2004).

    8 In a more original sense used in game theory, maximin strategy refers to making the best of the worst possible outcome, regardless of the actual probability of that outcome occurring.
    9 According to Rawls, UBI can be justified by the differentiation principle (see Rawls 1975, 309). Rawls himself is a supporter of NIT.

  7. Importance of the concept of UBI for social work

  8. Besides the aforementioned criticism, additional objections to UBI are formulated from the view of social work:

    • The value of gainful occupation within society should not be underestimated or disregarded. The majority of society members experience social acknowledgment as a consequence of gainful employment. Employment structures everyday life, provides a feeling of self-worth and also (financial) security - also since UBI only covers the existence minimum. By introducing UBI there is a risk that it will become an 'income for the excluded' and therefore neoliberal ideas with respect to decreasing the job market will be supported.
    • In contrast to the previous point, Van Parijs argues that his model of UBI separates existence-security from gainful employment. In his point of view it is only a question of time until the employment/job orientation of members of society is replaced by more purposeful orientations. One can argue that only very few people, such as artists, will be able to live a free life filled with creativity and self-determination on the basis of a basic income. Most people will not be able use their creativity for defining their own goals. In this sense a 'basic income is the most convenient and cheapest solution for more exploitation, untouched richness and power for the very few and a final end to participation of all on welfare' (
    • Another important issue is the possibility that the advantages or compensations of the 'worst-off' probably will not be sufficiently high to compensate for individual natural disadvantages (for instance, in the case of a disability) (Eichler 2000, 97). Since the UBI model aims for a monetary level, i.e. the right to social participation is monetarized and the problems are individualized, financial compensations may even worsen the situation for the persons concerned.
    • The implementation of a basic income will also have negative effects for different groups of women. According to Robeyns (1998),

    The real issues that concern feminist critics of a basic income are the gender-related constraints on choices and the current gender division of labour, which are arguably both playing at the disadvantage of women. It is argued that those issues are not adequately addressed by a basic income proposal alone, and therefore basic income has to be part of a larger packet of social policy measures if it wants to maximise real freedom for all.

  9. Conclusions

  10. The introduction of an unconditional basic income can yield positive effects only if it is embedded in an integral concept which secures and develops a welfare state comprehensively - and is not only reduced basically to paying money. For instance, the 'Mindestsicherungs ABC' of the Austrian Poverty Conference postulates - besides an improvement of the quality of job market politics - a solidary insurance of life risks and the right to social and public services. The latter point is in a very concrete sense also within the scope of social work, which has been confronted with financial cuts and substantial savings in recent years (Armutskonferenz 2005).


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