Universal Basic Income
This is the idea of doing away with unemployment benefit, sickness benefit, and personal tax allowances, and replacing them with a non-means-tested income for all citizens. It would simplify bureaucracy enormously, and be an all-round Good Thing – it would eliminate absolute poverty, and ensure that people would always be better off if they took paid employment.
Concerned that we’d be giving extra money to people who are already very well off? It could easily be exactly balanced by an increase in their tax bill, with no extra administrative burden whatsoever.* (Obviously we wouldn’t be increasing the tax on those on low incomes.)
It would also eliminate the need for a minimum wage. This is because:
- you’d no longer need it to prevent people falling into absolute poverty;
- there’d be no “poverty trap” where a small income would mean loss of benefits (even when the benefits are only cut by the amount of the income, or a little less than that, the costs of travel and other costs associated with working often leave people worse off in work than out);
- employers would still have to pay enough to make it worth someone’s while working – not just enough to cover their costs, but enough to give them an actual incentive, since there’d be no threat of absolute poverty hanging over anyone. It would level the playing field, giving employees an actual bargaining position (at present, the poor are basically slaves).
Employers should be happy – it’s effectively a state subsidy for them, like workfare in this respect, but without the total unfairness to the employees.
How would it be funded? It’s very nearly cost-neutral. The costs are almost exactly balanced by the savings in the benefits and tax allowances that it replaces. There’s also a substantial saving in administration. The only additional cost is the elimination of the poverty trap – which may be less than the saving in administration, and even if it isn’t, that poverty trap is a pernicious anomaly whose elimination would be well worth the relatively small cost.
Then there’s that little question of how to give a boost to the economy. Should you give money to the banks – by allowing them to create money by making larger loans in proportion to their assets, or by quantitative easing – in other words, by giving money to the rich? Or should you give it to everybody, by way of an increase in Universal Basic Income? See Trickle Down Economics.
Commonsense says no? See my short piece Commonsense v. Careful Analysis. Careful analysis says yes.
I’ll tell you who really says no: the right-wing press and the right-wing establishment – who like the general population to be slaves, threatened with actual starvation if they don’t do as they’re told.
Update 2017: Scientific American!
See Brain Trust by Kimberly G. Noble in Scientific American, March 2017, p.36-41. “Poverty may affect the size, shape and functioning of a young child’s brain. Would a cash stipend to parents help prevent harm?” – “The idea of a universal basic income is gaining traction and is being piloted by several charitable organizations and governments around the world.”
Update 2023: Scientific American again!
See Universal Basic Income Evidence by Michael W. Howard in Scientific American, April 2023, p.9.
“A monthly payment could lift people out of poverty without increasing unemployment.”
“To the extent that the mere fact of ‘churning’— money going out to everyone only to be taken back in taxes from some—is an obstacle to political support, a means-tested guaranteed income may be the more politically feasible policy, but it lacks some of the advantages of universal programs. In the meantime, if a truly universal child allowance is eventually adopted, it could build support for UBI down the road.”
* This is a general point. For example, there’s no sense denying bus passes to the well-off. Give them to every pensioner, and recover the additional cost of providing them for the wealthy in increased taxes on the wealthy. The reduction in administrative costs would probably be greater than additional cost of providing more bus services. If not, because the wealthy actually used the buses a lot, there’d be a worthwhile reduction in traffic. In fact, you could give bus passes to everyone – you then wouldn’t need tickets or passes at all, saving on admin and materials, and perhaps most importantly, saving time and hassle for bus drivers and passengers. (See Free Public Transport.)