From 2017 Finland & the Netherlands will introduce the policy of Universal Basic Income i.e. to simply hand each citizen enough cash to live on… that gives every citizen a basic obligation-free living wage to meet their living costs. The idea, which has been advocated in the past by no less than former US president Richard Nixon, economist Milton Friedman and civil rights leader Martin Luther King, has been gaining momentum recently. Under this it is proposed to pay a fixed amount of monthly income for all adults.
The new impetus is fresh concern about the impact of new technology in destroying jobs. Driverless cars, artificial intelligence and the automation of many previously labor-intense jobs threaten to create a new army of unemployed, the argument goes.
Few like it because it eliminates poverty on the spot, while removing some of the more punitive aspects of the welfare state, such as imposing strict conditions on who is entitled to help (like those prepared to jump through the hoops to prove they are looking for paid work).
Others like it because of the simplicity. Pay everyone enough to live on and then you can abolish the vast labyrinthine bureaucracy of the welfare state and the cost to taxpayers of administering it. In Australia, for example, the cost of administering Centrelink is around $3 billion, so simplification can offer huge potential savings, as pointed out in last year’s Review of Australia’s Welfare System report.
One of the reasons for this is that a key objective is to reduce disincentives to work. Under the traditional welfare system, benefits are withdrawn as incomes rise, thus creating disincentives to work for many. Replacing these with universal benefits can, in fact remove this disincentive for these people.
Moreover, basic income money can boost overall (mental, physical and social) wellbeing and sense of security of the poor, by enabling them to secure long term employment, access to medicare, education and connectivity.
Another argument in favour of the universal basic income lies in the failure traditional monetary policies in fighting deflation. By giving every citizen basic income could help generate demand for consumption of the necessities.
However, the devil lies in detail… few argue the payment should be universal, including the well off.
Firstly it gives away with the need to distinguish between those who are deserving and those undeserving, thereby resulting in huge cost saving to the exchequer in terms of administrative cost. The argument of paying the “haves” is to compensate them for increased burden (by way of taxes or debt funding) and abolition of welfare schemes (to some extent). But if you don’t want to give cash to the rich, and want to target assistance to those at most disadvantage, you need to keep the machinery of the welfare state, and you add to the cost.
As per another line of thought, if one is paid a set amount periodically, why would that individual work… the motivation to work is gone. Further, people do not just work for money, they have other reasons as well – status, a sense of purpose and belonging.
The Swiss have just refused to “go Dutch” on this matter (link – http://www.financialexpress.com/article/fe-columnist/universal-basic-income-swiss-refuse-to-go-dutch/275484/), citing this concept as expensive and unhealthy. The Swiss citizens should be thanked for their work ethic and common sense. They just voted against a proposal for a 2500 Swiss franc ($3400) monthly income for all adults. Advocates have emphasised the importance of “humane existence” for all and a system which valued caring work and time for activism. But Swiss people voted “no” on practical grounds, a matter of cost and fear of an influx of migrants if introduced. They clearly seems to have learnt from the European neighbours and UK in particular, where the tax payers have raised concern on such payouts and incentives (council homes, free education, medicare, etc.) to the “undeserving”.
With the migrant population increasing in the West, if is also feared that these funds could end up as source of funding of extremism.
However, all’s not black… these studies found positive impacts of basic payout as well. Real-world experiments in Canada and the US in the late 1960s, along with studies in India and Brazil, have found little evidence of widespread work discouragement from a minimum income.
Participants in the Canadian study went to hospital less frequently and were more likely to finish high school.
Women in the US study were more likely to leave abusive relationships.
A minimum income paid to citizens in India (under the Minimum Wages Act, 1948 and National Rural Employment Guarantee Act) actually helped them to secure work, by providing stability and access to childcare and transport.
To quell the opposition, universal basic income does not necessarily mean more free money for everyone. In India, it saves the “deserving” lower skilled people from being exploited and underpaid, thereby their living standards are raised to reasonable/ minimum levels of sustainability.
An argument is that the wealthy would be paying more as taxes, but, in fact, the poor will be getting more for every cent rich forgoes… charity begins at home. We pay millions as charities in third world countries, but the same money could be used for upliftment of fellow (countrymen) poor.
Concluding the article the time and stage is not set for fiscal plan for this policy, nor there any compelling reason for it to be pursued immediately. But it is for the future… where we could foresee a system whereby the “strivers” get enough to live on – and also get to keep whatever else they earn – while the “skivers” do not starve but are tangibly worse off.