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Why is there much scepticism about the viability
of a universal basic income in the foreseeable future? The first
answer is that most radical ideas in science and social science
are treated with scepticism. In a society like New Zealand with
an adversarial culture, an unwillingness to seriously contemplate
new solutions to social problems leads mainstream socioeconomic
debate into a 'dialogue of the deaf' between the "dinosaurs"
who want to draw inspiration from one era, and "trilobites"
who seek to recreate an even earlier time (Rankin, 1996b).
The first reaction is simply to dismiss UBI as "utopian" or simply "too expensive". At times this reaction is justified. More often it is not. It is up to advocates of a universal basic income to be cautious in the claims they make for their product, while being seen to oppose 'straw man' criticism; criticism based on claims that are confined to the minds of the critics. The social wage accounting approach negates this line of criticism by showing that a social dividend can be afforded from any tax rate.
A second line of criticism, usually coming from the political right, applies in general to the welfare state: why should the "strivers" be forced to give their money to someone else, especially someone who might choose to not work? The simple answer here is that social wage accounting shows that income taxes are not personal earnings at all; rather they are factor payments from firms to the Inland Revenue acting on behalf of the public. Some of the highly paid may feel that producers are paying too much tax; all that means is that the price to be attributed to public resources should be politically contestable.
A related argument is that higher marginal tax rates will encourage tax avoidance and the growth of the 'black economy'. Such developments are in fact linked to the effective marginal tax rate (EMTR), not the nominal marginal tax rate. The provision of a UBI is actually a way of reducing the EMTR, hence reducing the relative growth of the informal economy. With respect to highincome people little affected by abatements and surtaxes, there is enough circumstantial evidence to suggest that some will seek to avoid taxes, whatever the tax rate. Social wage accounting will at least help to reveal the extent of their tax avoidance.
Another related line of criticism relates to a cultural unease about granting incomes to people without them or their families incurring a cost, whether that cost is employment, training or some degree of humiliation. The reality is that the entire social wage is propertyderived income. Concerns about people getting something for nothing apply equally to income arising from inherited private property. Pure rent, income without an associated cost, is by no means confined to the social wage. The owners of most kinds of property do incur costs in maintaining their property, however. The social wage is not an income without an associated cost.
A variation of this 'no free lunch' argument is the labour supply 'work avoidance' argument, presented by both professional and armchair economists, that hardly anyone would choose to work if an unconditional basic income was available. People who use this argument are extremely cynical about human nature. While many such economist critics may believe that real people conform to the onedimensional calculating "Hobbesian brutes" that pass for people in many formal models, they ignore simple textbook models which show that cutting taxes to the "strivers" may also encourage them to work less. Furthermore, they ignore the reality of the huge gift economy that exists today and has always existed. More than the voluntary sector, the gift economy includes intellectual, cultural and charitable contributions to the public domain. The gift economy is where people voluntarily produce goods, services and intangible assets of economic value, expecting either nothing in return, or considerably less than the true economic value of those assets.
A third line of criticism comes from groups which benefit or seek to benefit from some degree of positive discrimination. Some feminists, for example, may suspect that the removal of negative discrimination implicit in basic income systems would create a 'level playing field', to the detriment of some gains that some women have made since the 1970s. The answer here is that, the granting of a social dividend as a minimum direct entitlement from the social wage in no way requires that that minimum should be also a maximum entitlement. Social wage accounting does not preclude social wage redistributive spending, such as Domestic Purposes Benefits, that benefit mainly women. Nor does it preclude Treaty of Waitangi settlements to Iwi.
A fourth line of criticism, usually from the political left, is that employment is, per se, a benefit, not a cost. It has become part of an ingrained 'workethic' culture that we should think this way, forgetting that it is the salary that is the benefit, and that employment is the cost we incur to secure our salaries. Leftwing critics of basic income systems tend to argue that social wage funding would be better allocated to job creation programmes than to a social dividend.
There are of course peripheral benefits associated with certain jobs, such as enjoyment of the work and socialisation. But these benefits do not revoke the basic principle that employment is the cost employees incur in order to get paid. Furthermore, such benefits can arise from many activities in addition to paid work. Critics of this persuasion see the UBI as the means by which a social commitment to full employment might be dropped. My answer is that (i) such a social commitment died some time ago, (ii) that a commitment to providing everyone of working age with a job that pays a high enough wage for no other income source to be required is not appropriate to a sustainable postindustrial or a preindustrial economy, (iii) that one of the strengths of a universal basic income is that it frees people who would otherwise be dependent into becoming employed, and (iv) that full employment can coexist with high productivity and low levels of labour force participation. In essence, the level of employment is determined much more by the demand for labour than by the size and allocation of the social wage. A universal basic income encourages the underemployed to work more, and the overemployed to work less. It can coexist with a political commitment to full employment, and encourages the employment of "jobless" discouraged workers.
A variant is the belief that a UBI will subsidise employers. The alleged problem here is that if a person's salary falls, a significant part of the tab will be taken up by the UBI. Therefore, it is argued, employers and employees will do a deal to underprice labour. The argument is misplaced in that this applies equally to traditional graduated tax scales, and applies to a much greater extent when targeted welfare and explicit surtaxes create very high effective marginal tax rates. The most blatant kind of wage subsidy scheme is the GMFI (guaranteed minimum family income) which was the centrepiece of Sir Roger Douglas's 1987 taxwelfare proposals, and does exist at present in an attenuated form. A basic income is in fact a means of overcoming this existing problem of underpriced labour, by giving workers more bargaining strength.
A final aspect of the centreleft critique is
that basic income systems will casualise the workforce. The cynical
reply is that a solid dose of 'Rogernomics' in the 1980s, followed
by the 1991 Employment Contracts Act, has got there first. More
realistically, changes in the labour markets of rich western economies
are a result of their past success; a result of the growth process
itself which gives people aspirations to fill their lives with
a greater variety of experiences, and to pursue life goals which
may clash with the 1950s' ethic that favoured devotion to a single
career and a lifetime employer. Thus casualisation is not necessarily
bad, and is a feature of economic success. The challenge of the
21st century is to manage economic activity in such
a way as to achieve economic justice and sustainability in a complex
world in which people expect to gain income from a wide variety
of sources throughout their lives. Social wage accounting illuminates
ways by which economically advanced societies can reconcile themselves
to the consequences of their success, while taking full responsibility
for the intangible assets upon which that success rests.
© 1996 Keith Rankin
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