An inheritance — when you really need it
A party has proposed giving young people aged 18-23 20.000€ irrespective of their income or that of their parents
In Spain, we have what we call "jornada de reflexión," which translates to "reflection day" - a unique day in which political parties are not allowed to hold rallies or do propaganda. While it is less common in English-speaking countries, it is a tradition observed in various other states, including France, Italy, and Argentina. The idea behind this day is to provide voters with a moment of contemplation, free from voting appeals and political messages, before heading to the polls tomorrow.
One thing I personally don't like about campaigns in the era of identity politics and cultural welfare is that policy gets little attention. So I thought it was the perfect day to reflect on one particular policy proposal from this campaign, probably the most original one.
Sumar, the new left party, proposes a universal inheritance of 20.000€ for Spaniards aged 18-23. It was the first time a European political party incorporated a policy proposal that had so far lived in the pages of books on economics.
The proposal aims to tackle inequality of opportunities and wealth distribution, given that the social ladder has become a steep climb for many. Solutions to these problems tend to be nebulous. But a universal inheritance is simple to understand, as is universal basic income, another well-known proposal to tackle growing inequality.
The proposal draws inspiration from economist Thomas Piketty, who, in his best-selling book Capital in the Twenty-First Century, proposes a universal inheritance of 120.000 for all citizens when they turn 25. Sumar's proposal differs in the age of the potential beneficiaries, the amount to be received and, unlike Piketty, Yolanda Díaz's party attaches some degree of conditionality to it: beneficiaries would need to dedicate it to their professional future, be it creating a company, studying in university, for life costs while preparing for a civil servant test, etc.
There is lots to unpack here, so let's go step by step.
Is Spain an unequal country?
While inequality is growing worldwide, Spain is a relatively equal country compared with its European neighbours, with inequality levels similar to those seen in France and lower than in Germany, according to the World Inequality Report. Nevertheless, the wealthiest 10% of individuals still hold 57,6% of the country's wealth.
However, Spain has a lower average national income compared to other member states. And the country is also known for its high unemployment, which is particularly burdensome for its youth. When employed, many struggle to find permanent contracts and decent salaries.
It is not strange to find young people of around 30 years earning little over 1,000€. Many of them were, until recently, in temporary contracts (although many of those are now fixed, thanks to a labour reform introduced by Sumar's leader, Yolanda Díaz, who is the Labour minister in Sanchez’s government). They are part of what some have dubbed the working poor. Of course, this affects their ability to climb the social ladder; they can't leave their parent's home (the average age they do so is 30 years), and they have a hard time buying a house.
Another interesting factor is that Spain has a high rate of wealth inequality driven by inheritance (60%), which puts the country close to the U.S. in that regard.
As in any other developed country, your parent's position-having a high income or holding lots of real estate- impacts their children's social mobility. Consequently, climbing the social ladder is often about starting at the pole position and less about meritocracy and individual effort. Sumar's proposal aims to tackle this by giving young people "an inheritance" when they most need it in life.
Will Spain be able to finance this?
Sumar's proposal needs more detail on how they plan to finance the inheritance. According to the party, its estimated cost is 10,000M or 0,8% of Spain's GDP. All the party says is that they would tax high incomes for a greater redistributive impact.
Taxing the rich is an all-time cliché from the left, but evidence suggests that it is more difficult than it initially seems, partly because the wealthy are quite good at avoiding taxes. Sumar also talks of the need of an inheritance tax at the national level (regions now choose whether to implement it or not).
Future prospects don’t make it easier. Looking ahead, unless Spain experiences an unprecedented period of economic growth, its financial situation will face considerable strain in about a decade. Repaying current debt levels will require dedicating 4% of the country's GDP to interest payments. This is roughly the equivalent of the country's total expenditure on education today.
In his proposal, Piketty advocates financing the universal inheritance through his own system of progressive taxation, a more radical approach than the current ones in developed states.
Why should wealthy families receive 20,000€? Is this really a left-wing policy?
Some argue that this proposal is no left-wing policy. Critics question why young people from wealthy families should receive 20,000€ if they already have access to sufficient financial resources. Wouldn't it be more sensible to direct the funds solely to the low and middle classes?
The key here is that Sumar sees the inheritance as less than a subsidy and more like a social right accessible to all. Thanks to this approach, the transfer of wealth is not perceived as a subsidy or "charity". Of course, critics would also say that she wants to win votes by issuing a proposal that benefits as many in the electorate as possible.
But making this policy universal also has the added value that any future right-wing government would not easily revert it, as they would risk discontent from voters representing the whole political spectrum. A policy that benefits a broader set of citizens is more difficult to repeal. Another added benefit to its universality is that it simplifies the paperwork and the burden on the administration, making it more effective policymaking.
Via @edugaresp comes another interesting argument. Despite its universality, this policy would still retain its redistributive goal. A payment of 20,000€ to a wealthy individual that already has easy access to substantial financial resources will not change their situation much. But it can make quite an impact to a young adult from a poor family.
What do you think about the proposal?