Is Universal Basic Income a good idea?

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30 November
07:02
December
2016

Campaigners for a Universal Basic Income or Citizen’s Basic Income are calling for the state to give everyone, including rich and poor, earners and non-earners, adults and children, a uniform sum of money each week. It is a simple idea that has wide appeal, not least to those concerned about the impact of automation on jobs and the misery caused to people who must prove their incapacity to work to qualify for income support.

Like most ‘silver bullet’ solutions, its apparent simplicity belies its many contradictions and dangers. Here are some reasons why it is not a good idea.

1. If implemented, UBI would confer huge powers on national governments, which can give and take away. It greatly increases the dependence of people on the state. It does not engage with the need to make governments more accountable or to increase people’s control over state institutions. This is strangely at odds with the rising tide of public distrust for established bases of power.

2. It lets employers off the hook, because it appears to offer an alternative to keeping people in jobs and raising hourly rates of pay. Why hesitate to lay people off, or why give workers a bigger share of profits if they are getting a stipend from the state? As Francine Mestrum has argued, problems of changing labour relations and increasingly precarious employment can’t be solved with a basic income: “What the workers’ movement has done in the past is organise the struggle for decent wages and working conditions.” UBI is more likely to dampen than to fuel active labour movements.

  • Money for nothing and your kicks for free? Some influential people back the Basic Income, including Bill Clinton’s former Secretary of Labor Robert Reich

3. It does not end the indignities associated with claiming benefits. Few protagonists pretend that it is possible to pay enough UBI to live on. According to the Joseph Rowntree Foundation’s 2016 minimum income standard (MIS) is £17,000 a year for a single person and £37,800 for a couple with two children. Yet the most generous UBI scheme envisaged by the UK campaign group, Compass suggests a partial basic income of £3,692 for a single adult and £13,523 for a couple with two children. These figures amount, respectively, to less than a quarter and just under one third of the minimum standard and both are below the poverty line, estimated as 60% of median household income. This means a range of additional benefits would need to be paid to people unable to work – wiping out the much-vaunted promise that UBI ‘simplifies’ the social security system and removes the stigma of claiming. In fact, all it offers is a small hike in the floor above which conditional benefits are required.

  • Before the robots: When all work goes the same way as car manufacture, will we have to take the idea of a basic income for everyone seriously? 

4. It carries staggering financial costs. Suppose everyone in the UK’s population of 61.4 million were paid only half the JRF minimum income for adults (£8,500 a year), the total cost would be in the region of £522 billion, or well over a quarter of the UK’s annual GDP. Of course it is worth spending money to keep people out of poverty, but this does not address the causes and as a curative measure it barely scratches the surface. To achieve even a small hike in the benefits floor, Compass suggests raising taxes to 25p in the £1 on the basic rate, 45p on the higher rate and a new 50p top rate, as well as abolishing personal tax allowances and extending national insurance contributions. Is it worth it? Ian Gough points out that this ‘powerful new tax engine will pull along a tiny cart (a partial and inadequate basic income). Why bother? The underlying belief or dream is that basic income will provide a mobilising theme to bring about radical change. There is no evidence anywhere in the world for this.’ This year the Swiss held a referendum to decide whether every adult should be paid a basic income of 2,500 Swiss francs a month (just over £21,000 a year) and this was resoundingly rejected, with 77% voting against and only 23% in favour.

5. Most UBI supporters agree that a full basic income isn’t viable, but argue that a partial payment is a step in the right direction. But as David Piachaud’s forensic analysis demonstrates, the case for a full basic income is so thoroughly flawed that there is no justification for heading that way in the first place. It fails on philosophical, economic and political grounds. As Piachaud points out, it is merely a possible mechanism for income redistribution, not an end in itself: “Starting from or believing in a mechanism is misguided. It is surely more productive to start from the goals of policy and then consider the best means of achieving them. If the goal is to reduce, or still better eliminate, poverty then I conclude that pursuing the mechanism [of basic income] is heading in the wrong direction.”

  • You can’t have your cake and eat it: Expenditure on UBI would inevitably mean hard decisions about funding hospitals, schools and other social spending.

6. Protagonists appear take no account of the trade-offs, or what cannot be funded if money is poured into UBI. For Piachaud, “Priority should be given to social policies that improve education, health and housing, which are capital investments in people’s opportunities.” And as the New Economics Foundation has argued, while it is certainly possible for governments to find substantial extra resources, these are needed not only to improve public services but also - and urgently - for measures required to cut emissions and avert environmental “Tax revenues are needed for investment in environmentally sustainable infrastructure (such as renewable energy generation and zero-carbon housing and transport systems) and in all possible measures to enable society and the economy to exist within planetary boundaries.” It would be profoundly unsustainable to blow any additional resources on UBI.

7. UBI is an individualistic, monetary intervention that does nothing to encourage social solidarity or address the underlying causes of poverty, unemployment and inequality. These are systemic problems that need to be addressed by people getting together and building shared control over local economic development, wage bargaining and decisions about national investment in industry and infrastructure. According to Cruddas and Kibasi, UBI “institutionalises the gap between the disproportionate and increasing rewards for the few and stagnant wages and poor prospects for the many… Issues of class, economic ownership and the productive capacity of the economy are collapsed into lazy utopian remedies.”

  • Even the Financial Times is taking the idea seriously. But as Anna Coote warns, Basic Income could become “another nail in the coffin of the post-war welfare settlement”

8. Right-wing advocates see it as a route to dismantling welfare regimes and maintaining a docile population of shoppers. The idea sits comfortably with the neoliberal idea that services are better when markets provide and customers choose. But collectively provided public services, available to all according to need, give better value for money than commercialised services; they are more likely to be inclusive and egalitarian. They represent a very substantial ‘virtual’ income that is highly redistributive. Oxfam has estimated that on average across OECD countries, public services are worth 76% of the post-tax income of the poorest groups, and just 14% of the richest: this social income reduces income inequality by 20%. Many left-wing protagonists insist they also want to defend public services but pay no attention to how public services can be strengthened or improved, and ignore the very obvious danger of robbing Peter to pay Paul. In today’s political climate, a basic income could threaten resources currently devoted to public services and serve as another nail in the coffin of the post-war welfare settlement.

9. This apparently neat and simple silver bullet is nothing of the sort. It is a deceptively attractive decoy, drawing political energies away from the need to defend, transform and promote collectively provided services. As Piachaud says, its most frustrating feature is that “it represents a diversion from the task of promoting more feasible and sensible reforms. There is a desperate need for more investment in human capital for the least advantaged and promoting more equal opportunities for all, there continue to be pressing issues of inheritance and social inequality and there continue to be employment and childcare problems for those who are neither lazy nor crazy.”

10. Finally, there are viable alternatives that have far stronger claims – in philosophical, economic and political terms - to address the challenges of poverty and inequality. Just for starters, it is worth considering a minimum income guarantee combined with more generous child benefits and a system of credits for carers based on the principles of time banking, as well as a secure ‘social wage’ consisting of essential public services. It is on these and other strategies that we should be focusing our campaigning energies and political resources.

Anna Coote is Principal Fellow of the New Economics Foundation

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December
2016

Absolutely, if it is global, and pays each adult human willing to sign a social contract an equal amount from the same place.

It is simple to find fault with something non-existent by attributing unattainable requirements. 

Anna Coote tells us: "Starting from or believing in a mechanism is misguided"

Consider this mechanism though: Require sovereign debt to be backed with Commons Shares, that may be claimed by each adult human on the planet, exclusively for deposit in trust with their bank, as part of an actual social contract.

1. If implemented, UBI would be collected and paid extra governmentally. Government's involvement is simply making their debt payments to an aggregation and distribution account that distributes the interest directly to Share accounts. This places each government in debt to its citizens. With each shareholder owning a Share on deposit in a local bank, we know from experience that government will be more responsive to each, as these deposits and income leave with their owners, and these deposits are the source of credit at a controlled and sustainable interest rebate.

2. In this form, UBI would be interest payments from a trust fund accquired by contract, and while employers would be aware of this, there is no reason to expect that to provide any more leverage for employers than employees, who will be more empowered to seek other employment, or engage in competition. With each shareholder recognized as a sovereign individual, each would have access to secure loans against a portion of their share at the sovereign rate, for home, farm, or secure interest in their employment. This feature significantly increases the power of each individual.

3. UBI in this form enables dignity. A Share of the economy, along with a residual income regardless the amount, and access to sustainable credit, is dignifying. That said, UBI in this form would have no initial effect on current benefits programs, largely because the income would be very small. Because no basic income scheme could currently provide all everyone may need, social contracts will still be required to provide benefits of some kind, and associated indignities may well persist. 

4. The financial cost of UBI in this form, initially, is minimal. Since the income provided is the interest on sovereign debt, and sovereign debt payments are currently being paid, an income of about $20/month will be provided with no increase in taxation. Increases in the basic income will increase as global sovereign debt increases, which can be affected by each individual, local, state, corporate, and federal sovereigns. The basic income then will be arrived at by market forces.

5. Clearly UBI in this form is not envisioned as a "full" income, though that is within the limits, and with improved social benefits, less income will be required for "fullness". Note that this form does not redistribute anything, it distributes quantum bits of fiat credit, limited rights to lend fiat money into existence, and the income produced is the interest on those loans. This simple mechanism would certainly reduce poverty, and eliminate destitution, along with creating a single focus for each adult on the planet, a common ownership, concern, complaint. The value of this defies quantification, but is great.

6. UBI in this form defines, limits, and distributes fiat credit, that will be invested by those banks holding Shares in trust. This makes a vast amount of sustainably priced credit available on a per capita basis, enabling investment for all levels of government, and all interest paid goes directly to increasing UBI. Initially, money currently backing sovereign debt will be displaced with Commons Shares, and require reinvestment, around two hundred trillion dollars. With the investment welfare of secure sovereign debt unavailable the world will be awash in investment capital.

7. UBI is an individualistic monetary intervention, that provides a common focus for each shareholder worldwide. I suspect this would have a positive effect on social solidarity, particularly with the requirement to provide social contracts. With the bulk of world credit distributed to local institutions all systemic problems may "be addressed by people getting together and building shared control over local economic development, wage bargaining and decisions about national investment in industry and infrastructure." With local investment taking a more leading role.

8. Right wing advocates can believe what they like, but UBI provided by global economic enfranchisement is a reasonable extension of the post-war welfare settlement, and I will place my faith in the enfranchised.

9. This apparently neat and simple silver bullet, will likely not provide the inflated demands framed by those who argue against UBI, but what it will do is well worth the minimal effort.

10. Finally, UBI in this form will require a thorough examination of the social contract, and the creation of actual documents. This allows each location to establish a social contract that reflects the diverse needs and customs of the various peoples.

Thanks so much for your kind indulgence

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