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Basic income

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On 4 October 2013, Swiss activists from Generation Grundeinkommen organized a performance in Bern in which roughly 8 million coins, one coin representing one person out of Switzerland's population, were dumped on a public square. This was done in celebration of the successful collection of more than 125,000 signatures, forcing the government to hold a referendum on whether or not to incorporate the concept of basic income in the Federal constitution, the measure did not pass, with 76.9% voting against basic income.[1]

A basic income (also called basic income guarantee, Citizen's Income, unconditional basic income, universal basic income (UBI), or universal demogrant) is a form of social security in which all citizens or residents of a country receive a regular, unconditional sum of money, either from a government or some other public institution, independent of any other income.[2][3][4] An unconditional income transfer that is considered insufficient to meet a person's basic needs (or below the poverty line), is sometimes called a partial basic income, while one at or greater than that level is sometimes called a full basic income.

Basic income systems that are financed by the profits of publicly owned enterprises (often called social dividend, also known as citizen's dividend) are major components in many proposed models of market socialism.[5] Basic income schemes have also been promoted within the context of capitalist systems, where they would be financed through various forms of taxation.[6]

Similar proposals for "capital grants provided at the age of majority" date to Thomas Paine's Agrarian Justice of 1795, there paired with asset-based egalitarianism. The phrase "social dividend" was commonly used as a synonym for basic income in the English-speaking world before 1986, after which the phrase "basic income" gained widespread currency.[7]

Prominent advocates of the concept include André Gorz, Ailsa McKay,[8] Guy Standing, Karl Widerquist, Hillel Steiner, Peter Vallentyne and Philippe Van Parijs.[9][10]

Policy aspects

Transparency

Basic income is potentially a much simpler and more transparent welfare system than the one existing in the welfare states around the world today.[11] Instead of having numerous welfare programs, it would simply be one universal unconditional income, this strategy for introducing basic income is controversial because some basic income supporters argue that it should be added to the existing welfare system rather than a replacement for it.

Administrative efficiency

The lack of means test or similar administration would allow for some saving on social welfare, which could be put towards the grant, the Basic Income Earth Network (BIEN) describes one of the benefits of a basic income as having a lower overall cost than that of the current means-tested social welfare benefits, and they have put forth proposals for implementation that they claim to be financially viable.[12][13]

Poverty reduction

Basic income is often argued for by its advocates because of its potential to reduce poverty, or even eradicate poverty,[14] the ability of basic income to eliminate poverty is based on the assumption that an unconditional income set above the poverty line will not change the poverty line by inflation or other effects. It is controversial whether that level of basic income is sustainable and even more controversial whether that level of basic income is all-things-considered a wise policy.

Basic income and growth

Basic income and growth (or BIG) allows for potential economic growth: people may decide to invest in themselves to earn higher degrees and get interesting and well-paid jobs that, in turn, could trigger growth,[15][16] as Jason Burke Murphy argues, a substantial discussion has grown over recent years about whether basic income could be a part of a larger degrowth movement.[17]

Freedom

Philippe Van Parijs

Supporters commonly make three very different arguments that basic income promotes freedom. First, although most basic income supporters tend to be politically left, right-leaning supporters, at least since the 1970s, have argued that policies like basic income free welfare recipients from the paternalistic oversight of conditional welfare-state policies.

Second, Philippe Van Parijs has argued that basic income at the highest sustainable level is needed to support real freedom, or the freedom to do whatever one "might want to do."[18] By this, Van Parijs means that all people should be free to use the resources of the Earth and the "external assets" people make out of them to do whatever they might want to do.

Money is like an access ticket to use those resources, and so to make people equally free to do what they might want to do with the external assets of the world, the government should give each individual as many such access tickets as possible—that is, the highest sustainable basic income.

Third, at least since Thomas Paine, some supporters have argued that basic income is needed to protect the power to say no, which these supporters argue is essential to an individual's status as a free person. If some other group of people controls resources necessary to an individual's survival, that individual has no reasonable choice other than to do whatever the resource-controlling group demands, before the establishment of governments and landlords, individuals had direct access to the resources they needed to survive. But today, resources necessary to the production of food, shelter, and clothing have been privatized in such a way that some have gotten a share and others have not. Therefore, this argument goes, the owners of those resources owe compensation back to non-owners, sufficient at least for them to purchase the resources or goods necessary to sustain their basic needs, this redistribution must be unconditional because people can consider themselves free only if they are not forced to spend all their time doing the bidding of others simply to provide basic necessities to themselves and their families.[16] Under this argument, personal, political, and religious freedom are worth little without the power to say no; in this view, basic income provides an economic freedom, which—combined with political freedom, freedom of belief, and personal freedom—establish each individual's status as a free person.

Work incentives

There is also a belief among critics that if people have free and unconditional money, they will not work (as much) and get lazy.[19][20][21] Less work means less tax revenue and hence less money for the state and cities to fund public projects. There are also concerns that some people will spend their basic income on alcohol and drugs.[16][22]

If there is a disincentive to employment because of basic income, it is however expected that the magnitude of such a disincentive would depend on how generous the basic income were to be, some campaigners in Switzerland have suggested a level that would only just be liveable, arguing that people would want to supplement it.[23]

Tim Worstall, a writer and blogger, has argued that traditional welfare schemes create a disincentive to work, because such schemes typically cause people to lose benefits at around the same rate that their income rises (a form of welfare trap where the marginal tax rate is 100 percent). He has asserted that this particular disincentive is not a property shared by basic income, as the rate of increase is positive at all incomes.[24]

In one study, even when the benefits are not permanent, the hours worked by the recipients of the benefit are observed to decline by 5 percent, a decrease of two hours in a typical 40-hour work week:

"While experiments have been conducted in the United States and Canada, those participating knew that their benefits were not permanent and, consequently, they were not likely to change their behaviour as much or in the same manner had the GAI been ongoing. As a result, total hours worked fell by about five percent on average, the work reduction was largest for second earners in two-earner households and weakest for the main earner. Further, the negative work effect was higher the more generous the benefit level."[20]

However, in studies of the Mincome experiment in rural Dauphin, Manitoba, in the 1970s, the only two groups who worked significantly less were new mothers and teenagers working to support their families. New mothers spent this time with their infant children, and working teenagers put significant additional time into their schooling.[25] Under Mincome, "the reduction of work effort was modest: about one per cent for men, three per cent for wives, and five per cent for unmarried women."[26]

Another study that contradicted such decline in work incentive was a pilot project implemented in 2008 and 2009 in the Namibian village of Omitara; the assessment of the project after its conclusion found that economic activity actually increased, particularly through the launch of small businesses, and reinforcement of the local market by increasing households' buying power.[27] However, the residents of Omitara were described as suffering "dehumanising levels of poverty" before the introduction of the pilot, and as such the project's relevance to potential implementations in developed economies is unknown.[28]

Affordability

The affordability of a basic income proposal relies on many factors such as the costs of any public services it replaces, tax increases required, and less tangible auxiliary effects on government revenue and/or spending (for example a successful basic income scheme may reduce crime, thereby reducing required expenditure on policing and justice.)[citation needed]

Key principles

The case for basic income affordability can be summarized[citation needed] this way:

  • Welfare substitution: Basic income would substitute to a wide range of existing social welfare programmes, tax rebates, state subsidies and work activation spendings. All those budgets (including administrative costs) would be reallocated to finance basic income.[citation needed]
  • Auto-financing of basic income: although basic income is paid to everyone universally, people whose earnings are above the mean income are in fact net contributors to the basic income scheme, mainly through an income tax. In practice this means that the net cost of basic income is much lower than the raw cost calculated as a sum of monthly payments to the whole population.[citation needed]
  • More fiscal redistribution: in addition to reforming and optimizing the existing tax systems, additional taxations can be implemented to fully finance a basic income scheme. Some proposals frequently mention to this effect the need for a tax on capital, carbon tax, financial transaction tax etc. which do not currently exist in most jurisdictions.[citation needed]
  • Money creation: In addition to tax reforms, the power of central banks to create money could be used as one funding channel for basic income; conjugation of basic income and monetary taxation is called Social credit, an alternative system to the quantitative easing, is proposed by the distributive movement.[citation needed]

Case studies

A 2012 affordability study done in the Republic of Ireland by Social Justice Ireland found that basic income would be affordable with a 45 percent income tax rate, this would lead to an improvement in income for the majority of the population.[29]

Charles M.A. Clark estimates that the United States could support a Basic Income large enough to eliminate poverty and continue to fund all current government spending (except that which would be made redundant by the Basic Income) with a flat income tax of just under 39 percent.[30]

Paul Mason stated that universal basic income would increase social security costs, but that it would also reduce the high medical costs associated with diseases of poverty, by reducing stress, diseases like high blood pressure, type II diabetes etc. would become less common.[31]

C. H. Douglas called for financing a basic income with created money ("Social credit"). In a 1935 speech, Douglas said:

"We believe that the most pressing needs of the moment could be met by means of what we call a National Dividend. This would be provided by the creation of new money – by exactly the same methods as are now used by the banking system to create new money – and its distribution as purchasing power to the whole population. Let me emphasise the fact that this is not collection-by-taxation, because in my opinion the reduction of taxation, the very rapid and drastic reduction of taxation, is vitally important."[32]

Financial Source

Amount to paying the basic income may come from:

Taxation or fee

Increase Money Supply

common ownership

Integration of social welfare

These manners saves the cost and diverted as a form of source for paying basic income

  • Integration of current social welfare or Social insurance, include income support, unemployment support, subsidies, pensions and etc.
  • reduced bureaucracy, reduce cost of personnel and raise effective, it is cost and waste by means test and eligibility checking for a welfare, including documents, staffs , offices, places cost and other consumption.
  • Reduce and eliminate concession and subsides for a few of peoples and legal entity only.
  • Elimination of current income support programs and tax deductions.
  • Repayment of the grant at death or retirement.
  • Replaces Minimum Wage to avoid the disadvantages[38]

Pilot programs

As of 2017, the only well established and ongoing cash transfer programs akin to a basic income are the Permanent Fund of Alaska in the United States and Bolsa Família in Brazil. Additionally, several other countries have tested, implemented, or begun planning the following basic income experiments:

  • Experiments with negative income tax in United States and Canada in the 1960s and 1970s.
  • A town in Manitoba, Canada experimented with a basic guaranteed income in the 1970s[39]
  • The Basic Income Grant (BIG) in Namibia, launched in 2008[40]
  • An independent pilot implemented in Sao Paulo, Brazil[41]
  • Several villages in India participated in basic income trial,[42] while the government has proposed a guaranteed basic income for all citizens.[43]
  • The GiveDirectly experiment in Nairobi, Kenya, which is the biggest and longest basic income pilot as of 2017.[44]
  • A study undertaken in rural North Carolina in the U.S.[45]
  • The city of Utrecht in the Netherlands launched an experiment in early 2017 that is testing different rates of aid.[43]
  • Ontario, Canada will implement a basic income trial in summer 2017.[46]
  • The Finnish government implemented a two-year pilot in January 2017 involving 2,000 subjects.[47]
  • Eight, a nonprofit organisation, launched a project in a village in Fort Portal, Uganda in January 2017, providing income for 56 adults and 88 children through mobile money.[48]

Basic income and ideology

Economic perspectives

Erik Olin Wright, 2013.

Economists and sociologists have advocated a form of basic income as a means for distributing the economic profits of publicly owned enterprises to benefit the entire population (also referred to as a social dividend), where the basic income payment represents the return to each citizen on the capital owned by society, these systems would be directly financed out of returns on publicly owned assets and are featured as major components of many models of market socialism.[5]

Erik Olin Wright characterizes basic income as a project for reforming capitalism into an economic system by empowering labor in relation to capital, granting labor greater bargaining power with employers in labor markets, which can gradually de-commodify labor by decoupling work from income. This would allow for an expansion in scope of the "social economy", by granting citizens greater means to pursue activities (such as the pursuit of the arts) that do not yield strong financial returns.[49]

Other theorists leaning towards different kinds of basic income economic perspectives who have advocated basic income include James Meade, Bertrand Russell, Frances Fox Piven and Harry Shutt. Meade states that a return to full employment can only be achieved if, among other things, workers offer their services at a low enough price that the required wage for unskilled labor would be too low to generate a socially desirable distribution of income, he therefore concludes that a "citizen's income" is necessary to achieve full employment without suffering stagnant or negative growth in wages.[50] James Meade advocated for a social dividend scheme to be funded by publicly owned productive assets.[51] Russell argued for a basic income alongside public ownership as a means to decrease the average length of the working day and to achieve full employment.[52]

Fox Piven holds the view that an income guarantee would benefit all workers by liberating them from the anxiety that results from the "tyranny of wage slavery" and provide opportunities for people to pursue different occupations and develop untapped potentials for creativity.[53] Gorz saw basic income as a necessary adaptation to the increasing automation of work, but also a way to overcome the alienation in work and life and to increase the amount of leisure time available to each individual.[54]

Harry Shutt proposed basic income along with reforms to make all or most of the enterprises collective in nature, rather than private. Together, he argued, these measures would constitute the make-up of a post-capitalist economic system.[55]

Georgist views

Geolibertarians seek to synthesize propertarian libertarianism and a geoist (or Georgist) philosophy of land as unowned commons or equally owned by all people, citing the classical economic distinction between unimproved land and private property. The rental value of land is produced by the labors of the community and, as such, rightly belongs to the community at large and not solely to the landholder.

A land value tax (LVT) is levied as an annual fee for exclusive access to a section of earth, which is collected and redistributed to the community either through public goods, such as public security or a court system, or in the form of a basic guaranteed income called a citizen's dividend. Geolibertarians view the LVT as a single tax to replace all other methods of taxation, which are deemed unjust violations of the non-aggression principle.

Right-wing views

Support for basic income has been expressed by several people associated with right-wing political views. While adherents of such views generally favor minimization or abolition of the public provision of welfare services, some have cited basic income as a viable strategy to reduce the amount of bureaucratic administration that is prevalent in many contemporary welfare systems. Others have contended that it could also act as a form of compensation for fiat currency inflation.[56][57][58]

Feminist views

Feminists' views on the basic income can be loosely divided into two opposing views: one view which supports basic income, seeing it as a way of guaranteeing a minimum financial independence for women, and recognizing women's unpaid work in the home; and another view which opposes basic income, seeing it as having the potential to discourage women from participating in the workforce, and to reinforce traditional gender roles of women belonging in the private area and men in the public area.[59][60]

Automation and basic income

Concerns about automation have caused many in the high-tech industry to turn to basic income proposals as a necessary implication of their business models. Many in the tech industry believe automation (along with other things) is creating technological unemployment.

Journalist Nathan Schneider first highlighted the turn of the "tech elite" to these ideas with an article in Vice magazine, which cited figures such as Marc Andreessen, Sam Altman, Peter Diamandis, and others.[61] The White House, in a report to Congress, has put the probability at 83% that a worker making less than $20 an hour in 2010 will eventually lose their job to a machine. Even workers making as much as $40 an hour face odds of 31 percent.[62]

The need for a universal basic income is becoming more apparent as the world makes strides in technological advancement, the impending damage that will be dealt with the economy will be far reaching and affect many people. With a rising unemployment rate, poverty stricken communities will become more impoverished and cause a decline in livelihood worldwide. By implementing a universal basic income, we could do away with many current world problems like high work stress, and give life to more opportunity and efficient and effective work, it has been shown in studies that basic income has many positive impacts on communities it has been tested on. In a study on basic income in the city of Dauphin, Manitoba, only 13% of labor decreased from a much higher expected number;[63] in another study in several Indian villages, basic income in the region raised the education rate of young people by 25%.[64] Basic income is important today more than ever and it has been tested many times, only to find positive results.

Although the fear of technological unemployment has been a major cause of the recent increase in support for basic income, some tech-industry experts are worried more that automation will destabilize the labor market or that it will increase economic inequality than that it will cause increasing levels of unemployment, for example, Chris Hughes, co-founder of both Facebook and Economic Security Project, does not stress technological unemployment in his arguments for basic income.

Automation has been happening for hundreds of years, it has not yet caused declining levels of employment but it has displaced workers who spend their lives building up skills just to see them outmoded and find themselves forced into the unskilled labor market. Technological unemployment is a future fear, but automation-based employment instability has been around since before the Luddite movement gave it a name in the early 1800s.

Paul Vallée, a Canadian tech-entrepreneur and CEO of Pythian argues that automation is at least as likely to increase poverty and reduce social mobility than it is to create ever-increasing levels of unemployment. At the 2016 North American Basic Income Guarantee Congress in Winnipeg], Vallée examined slavery as a historical example of a period in which capital (African slaves) could do the same things that human labor (poor whites) could do, he found that slavery did not cause massive unemployment among poor whites, but instead increased economic inequality and lowered social mobility.[65]

Non-basic income responses to automation-related employment instability

To better address both the funding concerns and concerns about government control, one alternative model is that the cost and control would be distributed across the private sector instead of the public sector. Companies across the economy would be required to employ humans, but the job descriptions would be left to private innovation, and individuals would have to compete to be hired and retained.

This would be a for-profit sector analog of basic income, that is, a market-based form of basic income, it differs from a job guarantee in that the government is not the employer (rather, companies are) and there is no aspect of having employees who "cannot be fired", a problem that interferes with economic dynamism. The economic salvation in this model is not that every individual is guaranteed a job, but rather just that enough jobs exist that massive unemployment is avoided and employment is no longer solely the privilege of only the very smartest or highly trained 20% of the population.

Another option for a market-based form of basic income has been proposed by the Center for Economic and Social Justice (CESJ) as part of "a Just Third Way" (a Third Way with greater justice) through widely distributed power and liberty. Called the Capital Homestead Act, it is reminiscent of James S. Albus's Peoples' Capitalism in that money creation and securities ownership are widely and directly distributed to individuals rather than flowing through, or being concentrated in, centralized or elite mechanisms.[66][67][68]

Criticism

Discussion of a basic income can be found both in the economics literature and in public policy debates in the political arena.

Economics research

Major Western economies today are managed to maintain a large army of unemployed to discipline the demands of labor, which they believe would increase inflation. A primary tool in this regard is the NAIRU (non-accelerating inflation rate of unemployment): The theory is that unemployment below that level will presumably drive up inflation.[citation needed]

Proponents of modern monetary theory recommend a job guarantee as an alternative.[citation needed]

Daron Acemoğlu, has expressed doubts on basic income with the following statement: "Current US status quo is horrible. A more efficient and generous social safety net is needed, but UBI is expensive and not generous enough."[69] Eric Maskin has stated that "a minimum income makes sense, but not at the cost of eliminating Social Security and Medicare".[70] 

The Economist notes that raising the income floor would have no impact on the wealth gap. While cash transfers would make the most difference to those on the bottom of the pile, they posit it would be instead of existing welfare benefits.[71]

Political debate

A commission of the German parliament discussed basic income in 2013 and concluded that it is "unrealizable" because:

  • it would cause a significant decrease in the motivation to work among citizens, with unpredictable consequences for the national economy
  • it would require a complete restructuring of the taxation, social insurance and pension systems, which will cost a significant amount of money
  • the current system of social help in Germany is regarded more effective because it's more personalized: the amount of help provided is not fixed and depends on the financial situation of the person; for some socially vulnerable groups the basic income could be insufficient
  • it would cause a vast increase in immigration
  • it would cause a rise in the shadow economy
  • the corresponding rise of taxes would cause more inequality: higher taxes would translate into higher prices of everyday products, harming the finances of poor people
  • no viable way to finance basic income in Germany was found[72][73]

Worldwide

Discussion of what eventually came to be called basic income began with scattered writers in Britain and the United States in the first half of the twentieth century, the idea gained strength in United States and Canada in the 1960s and 1970s, not least among economists, but disappeared from the political scene in the 1980s (when the politicians chose to implement the Earned Income Tax Credit instead). In the 1980s, however, the discussion had also begun in Europe, it was a somewhat fringe debate in the beginning, but it continued and grew gradually in the 1980s, 1990s, and 2000s. Following the 2009 financial crisis, basic income has seen a significant rise in prominence around the world, the debate has now broadened to most of the developed world, to Latin America, Middle East, and to at least some countries in Africa and Asia. Several countries are also preparing or are already running basic income pilots.[citation needed]

Advocates

Europe

The United States and Canada

Asia, Africa, Latin America, Oceania

Historical advocates

Petitions, polls and referendums

  • 2008: an official petition for basic income was started in Germany by Susanne Wiest.[120] The petition was accepted and Susanne Wiest was invited for a hearing at the German parliament's Commission of Petitions, after the hearing, the petition was closed as "unrealizable".[72]
  • 2015: a citizen's initiative in Spain received 185,000 signatures, short of the required amount for the proposal to be discussed in parliament.[121]
  • 2016: The world's first universal basic income referendum in Switzerland on 5 June 2016 was rejected with a 76.9 percent majority.[1][122] Also in 2016 a poll showed that 58 percent of the European people are aware of basic income and 65 percent would vote in favor of the idea.[123]

The future of basic income

Some researchers have hastened to add that basic income should be viewed as capital –– not just as money; in the future basic income could thus be distributed as access to things like energy, AI, 3D printing or robots.[124]

See also

References

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  2. ^ "Improving Social Security in Canada Guaranteed Annual Income: A Supplementary Paper". Government of Canada. 1994. Retrieved 30 November 2013. 
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  4. ^ Universal Basic Income: A Review Social Science Research Network (SSRN). Accessed August 6, 2017.
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  6. ^ Arneson, Richard J. (April 1992). Is Socialism Dead? A Comment on Market Socialism and Basic Income Capitalism. 102. Ethics. pp. 485–511. JSTOR 2381836. 
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  8. ^ McKay, Ailsa (2001). "Rethinking Work and Income Maintenance Policy: Promoting Gender Equality Through a Citizens' Basic Income". Feminist Economics. 7 (1): 97–118. doi:10.1080/13545700010022721. 
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Further reading

External links