Tuesday

5th Mar 2024

Analysis

Spain's €20,000 for all 23-year olds: radical, realistic, or ridiculous?

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What would you think if you were told that all young people in your country would receive a one-off public payment of €20,000 at the start of their adult lives?

For Spanish citizens going to the polls on 23 July, this radical electoral proposal from the leftwing Sumar party has caused a stir — and at least prompted debate.

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  • The idea is that everyone deserves a share of the wealth generated by previous generations, regardless of where they were born (Photo: Unsplash)

This policy is known as a 'universal inheritance' and can take different forms depending on whether it is conditional or not, at what age it is granted and how it is financed.

The concept, although radical to the public, has been studied by various researchers and economists, such as Thomas Piketty, who have offered proposals and simulations for various different European countries.

However the Spanish party led by Yolanda Díaz is believed to be the first to have included such a policy of redistributing capital in an electoral programme.

The core argument is simple: there is an increasing inequality in the distribution of wealth, and the intergenerational transfer of wealth (through inheritance and gifts, but not only via these) plays a crucial role when in life prospects.

In Spain, the richest 10 percent of adults have accumulated 60 percent of the country's total wealth. These figures are similar to those in countries such as France.

And, according to an analysis by the World Inequality Lab, holding wealth is more important than ever today.

In rich countries such as France, Germany, Spain or the UK, private wealth has grown more than public wealth in recent decades. This means that governments are poorer, and private wealth has grown faster than incomes.

So the goal is clear: break the cycle of intergenerational inequality and ensure that people have equal opportunities early in life (or at least reduce the impact of their socio-economic background on their opportunities).

Based on these ideas, one of the most controversial points of the proposal is to make it universal — in other words, the wealthy as well as the poor would receive it.

"Unlike other targeted redistribution mechanisms with complicated eligibility requirements, the universality of the measure will ensure that no one is left out," Díaz explained.

As a paper by the Future Policy Lab think-tank explains, making it universal improves the perception of it as a "genuine civil right" — reducing the social stigma of receiving it.

There is another reason, Dr Juan C. Palomino, an associate fellow at the University of Oxford, told EUobserver.

Since most inheritances and gifts are received at a later age, and life expectancy is increasing, universal inheritance at a young age is a "good idea to dynamise the intergenerational distribution of wealth".

The idea is that everyone deserves a share of the wealth generated by previous generations, regardless of where they were born, their family's property or their wealth.

More money = more power

Sumar's plan is to offer advice and guidance to young people who have reached the age of majority, so that by the time they turn 23 they will have €20,000 to start a life project, ranging from buying a house to starting a business or studying abroad.

The proposal is based on that of French economist Thomas Piketty, who advocates a bolder "inheritance for all" of €120,000 to change the structure of bargaining power in society. That way, if you don't have a financial need, you can afford to refuse a job. If you have money for a deposit on a house, you will not have to spend a large part of your income on rent for life, etc.

Although there are other proposals with less modest sums, such as that of the British economist Tony Atkinson, who simulated a possible 'inheritance' of £5,000. [€5,869]

And just as all roads lead to Rome, all these calculations raise the obvious question: where would the money come from to finance such a radical idea? And how economically viable is such a proposal?

For Spain, Sumar has calculated that the cost would be equivalent to 0.8 percent of GDP and would be financed by a new progressive tax on large fortunes, of up to four percent for the richest.

The other source of financing would be a minimum tax on inheritances and donations, set at state level to avoid tax gimmicks.

And just as Piketty speaks of the need to create the "antithesis of the systems dreamt up by private operators", Díaz mentions the reorientation of public banking in Spain. That would be a bank that lends on the basis of the value of the project, not on the basis of guarantees, and in which the state assumes these risks, explains Palomino.

The €20,000, together with this public bank, could act as "leverage" for young people to start these vital projects, Palomino told EUobserver.

In 2019, the Italian forum on inequality and diversity proposed a universal inheritance at the age of 18: €15,000 unconditionally, and financed mostly through a reform of inheritance taxation and gifts, Salvatore Morelli, professor in public economics at the University of Roma Tre, tells EUobserver.

That proposal did not succeed in Italy, and only the future composition of the next Spanish government will determine whether universal inheritance will become a reality this time.

With less than two weeks to go, most polls predict that the Popular Party will win the election, replacing the incumbent socialists of Pedro Sanchez, or at least come out on top. According to a poll conducted in early July, Sumar would emerge as the third political force with 13 percent of the vote, just a few tenths of a percent behind the far-right party Vox (12.7 percent).

"If policies like this could be designed to tackle these problems of lack of opportunity and dynamism and to promote equity and efficiency in the economy, I think there is a very good scope for success," Morelli said.

For Palomino, just having the debate on a universal inheritance alone is already a positive, in terms of understanding the underlying problems of the population.

"Whether you agree with it or not, [the electoral proposal for universal inheritance] makes people think more on a structural level," he said.

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