John Robinson, 9 April 1998.
John Wilson's response John Robinson's rejoinder
annotated comments: by (i) Keith Rankin
Two weeks ago I attended a conference on a universal income (UBI).
The idea is to provide an income to every adult (with a smaller sum to every child) as of right. [kr1] These incomes, which would be financed from higher taxation, would simplify the welfare structure and reflect a more compassionate and non-judgmental attitude towards one another.
I was intrigued to learn that the present government has in effect introduced a UBI for all high income earners through its recent tax cuts. [kr2]
For those people, the reduction in tax is extra money in the pocket, just like a universal payment. And they are not required to demonstrate any level of social responsibility.
So the well-off already have a UBI. Many (but not all) non-earners or low earners are receiving a benefit of some sort.
So they too are taken care of under the present system. As Keith Rankin pointed out, all that is required for a full UBI is to simplify the existing set of schemes by extending them to take in the middle group who are left out - those who do not fit the current categories of beneficiaries or who are low income earners.
Additional payments would still be made (as now) to those with special needs.
This would not cost too much and would cut red tape, reducing the ability of government departments to sit in judgement on people in need.
It simply requires that government extend the compassion [kr3] which it has for the wealthy to include those less well off, and for a realisation that money in the pockets of the poor will stimulate the economy even more effectively than extra cash for the wealthy.
UBI is a modest [kr4] change to bring about a small but worthwhile result. Unfortunately the enthusiastic proponents of UBI at the conference tended to overstate their case, which made it difficult for a doubtful outsider to grasp.
I tend to back off any new idea when I realise that some claim is unjustified or exaggerated.
An example here is the belief that UBI is required to reduce the poverty trap, whereby many people on welfare keep very little of any earnings. The clawback can run to 98% [kr5], so that there is only 2c more in the pocket for each additional dollar earned.
This problem is, however, a feature of any welfare system, including UBI. If welfare is provided to a non-earner, and not to a person on the minimum income, then by taking on a job a person would increase take-home income by an amount equal to the minimum income minus the welfare benefit. [kr6]
If the welfare payment is small relative to the wage, the clawback is small; if the welfare payment is large, so is the clawback.
Under any scheme, a choice must be made between providing a level of benefits which moves people out of poverty (high benefits, high clawback) or providing low benefits and requiring a low clawback.
The lower clawback in the UBI schemes which I have seen are a consequence of additional payments [kr7] which increase the take-home pay of those on the minimum wage - there is an increase in the gap between a basic income and the minimum wage.
A danger in extending payments to low income earners (as well as beneficiaries and the wealthy) is that this may become nothing more than a subsidy to employers of cheap labour. [kr8]
If people can be employed at the same take-home pay as now, and if the government is providing a part of that pay, then the employer's wage bill is reduced. I have been distressed to find that some UBI supporters are delighted that there may be an extension of non-paid or poorly paid work. That is hardly in keeping with the intent or philosophy of UBI. [kr9]
This problem was recognised at the conference by Lowell Manning, who argued that minimum wage levels should be reinforced. [kr10]
He did, however, note that even then there is a possibility of a drop in pay in some jobs towards the minimum wage. In order to provide a proper balance and to prevent significant decreases, a strengthening of the powers and responsibilities of unions is thus required. [kr11]
If those steps are included, the concept of a universal basic income is worthy of a serious consideration by all political parties of the centre-left.
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Basic Income
16 April 1998.
John Robinson (April) talks of the introduction of a Universal Basic Income (UBI) payable to all as a "modest change".
But the payment of a basic "living" wage to everyone at a level presumably similar to existing national superannuation or unemployment payments would be a major change, and some idea of the total cost and the level of tax required would be appropriate.
With the practicality of paying national superannuation to all at 65 in question, there must be a bigger question mark over a UBI paid to everyone, even though there would be some saving in the administrative costs of "targeted" benefits.
While the "surtax" required little administration, unemployment and sickness benefits require a bureaucracy to determine both eligibility and the payment of additional allowances.
And the clawback or abatement because benefits may be cut, leaving little net increase from obtaining a job, is a serious disincentive.
Then, although I thought that the UBI would be universal and thus not stopped if the recipient got a job, Mr Robinson goes on to talk about the "clawback" if someone on the UBI took a job. [kr12]
Similarly, why make additional payments to those on the minimum wage? Presumably the UBI will be enough by itself for someone to live on if it is to replace national superannuation, unemployment and sickness benefits; so the UBI plus a wage should be adequate.
While there will always be a few people with special needs requiring extra payments, the UBI should not lose its simplicity if adopted! [kr13]
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John Wilson (16 April) has raised a couple of questions concerning the Universal Basic Income (UBI). On a technical point, there is no abatement as such since the UBI is paid in full to everyone. But the calculations by Keith Rankin which I mentioned include a tax of one-third on all income, and this is the "clawback" to which I referred (9 April). My point is that while a UBI reduces the effective clawback (whether or not it is called by some other name), it does so at a cost, since the difference in take-home income between beneficiaries and low income earners is increased significantly.
I do not see the UBI as a cure for all ills and indeed I have been a lively critic until recently. Which brings us to the key point which I hoped to make. The cost of a UBI depends very much on just what tax structure is already in place and what changes are intended.
A few years ago, the cost of UBI would have been too great. [kr14] But not now, since the government has given the UBI, in the form of tax cuts, to all middle and high income earners. [kr15] The cost is now modest, and my earlier reservations have lost their sting.
Government has had the audacity to give a UBI to the wealthy with no call for any degree of responsibility [kr15], while running their scarcely hidden agenda attacking beneficiaries, many of whom are struggling to cope on low incomes with no jobs in sight. The philosophy driving these actions is the very opposite to that of caring and respect which motivates the supporters of UBI.
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