UBI from a Women's Perspective    Celia Briar

Strategy Meetings

Successful Wellington Meeting    Lowell Manning

Development of Basic Income as a response to changes in Work, Poverty, and the break-up of the Welfare state    Lowell Manning

Three New Reasons for a Universal Basic Income    Keith Rankin

Ensuring Basic Economic Security--Key to a Sustainable Society
                                                                                                    Sally Lerner

Universal Basic Income and Poverty: Relating
   Anti-Poverty Measures to Basic Income Levels    Michael Goldsmith

Valuing Underpaid Work through Public Superannuation    Keith Rankin

Social and Economic Justice for All: Welfare Reform for the 21st Century
                                                                                    review by Sally Lerner

The Public Health Case for UBI    UK feature

From the OECD conference on
"Economic Flexibility and Societal Cohesion for the 21st Century"    OECD

Costing and Funding Proposals    Keith Rankin

Lowell Manning's Approach    Lowell Manning

The second national conference is being held in Wellington in late March, 1998. Offers of papers and workshops are sought from community workers, researchers and analysts on issues surrounding the implementation of a Basic Income for all citizens in New Zealand which will encourage economic participation and be socially sustainable, in the context of the debates about the future of welfare, the merits of targeting versus universality, rights and responsibilities, higher versus lower taxes, the coincident rise of over-employment and under-employment, the impact of a UBI on different groups in society and strategies for change.

Please send a 250 word outline/summary/abstract to the Conference Organisers, UBINZ, c/- Private Bag 11 042, Palmerston North, fax 06 350 6319, by 15 December 1997.

Sally Lerner, from Toronto in Canada is to be our Conference Keynote speaker. She was a founding member of the Dept. of Environment & Resource Studies in the Faculty of Environmental Studies at the University of Waterloo in Ontario.

She took early retirement July 1, 1996 and is now Adjunct Associate Professor.

Sally convened the Futurework Group to analyse and foster public discussion of the social, economic, political and educational implications of the changing nature of work in October 1993 and initiated the "Futurework" list on the Internet in December 1994. (To subscribe, send a message to majordomo@scribe.uwaterloo.ca saying subscribe futurework)

Sally has written and spoken extensively on the changing nature of work and the changes that need to be made to accommodate them, including the value of a UBI.

Apologies to those who have ordered a copy and have been patiently, or impatiently, waiting for them. Unfortunately they are still in the editing stage but shouldn't be far away. Thank you for your tolerance. Orders can still be placed at $25 a copy.

From the last newsletter you will be aware that Nicola Stanley-Clarke spent some time with us in her final year of the BSW degree examining the concept of UBI from a feminist perspective. It was great having her and she did some excellent work. Her main paper, "The Needs of Women and the Universal Basic Income as a Solution?" is available on request, as is another paper she produced on the history of UBI. It is a brief introduction, for a fuller history refer to the thesis Lowell Manning has reviewed. (See below) Thank you to Nicola and to those who assisted her.

We have a great store of information from around the world and are pleased to make it available for research purposes. There is still plenty of scope. There is a active e-mail network sharing information, if you would like to be part of this contact Ian Ritchie. Copies of the papers abstracted below are also available.

Keith Rankin's UBI proposals in recent years have not included a UBI for children. Here I briefly state why children should be included as priority. UBI has vast potential for:

UBI should be designed first and foremost to reduce and eradicate poverty, permanently.

# At present, 1/3 of children in New Zealand are being brought up in poverty. Their caregivers, mostly women, are also more likely than men and childless couples, to be poor.

# New Zealand provides less assistance to families with children than most other countries (eg no universal child benefit, no paid maternity leave) so the need is particularly great.

# Evidence about the good use made of child benefit (where it exists) by mothers, shows that a UBI for children would be wisely spent and would help to raise families out of poverty very effectively.

# Children are citizens too, and thus should receive a UBI, sufficient for their maintenance.

# Even if caregivers received a UBI, many would still be worse off than non-caregivers because they lose opportunities to do paid work. Under the proposed Rankin scheme, they would also remain dependent on another adult or on means-tested benefits, which would perpetuate the injustice of not treating unpaid work as worthy of reward.

# We cannot expect the UBI to ever produce a socially just system if we use it to perpetuate an unjust one. Ends and means must be compatible.

Some people seem to believe that the key to getting UBI into the statute books is to "sell" it to the Right by producing schemes which do not fundamentally alter the existing system.

There are problems with this:

# UBI would have to be of minuscule proportions and to maintain the status quo in order to appeal to the Right, and many people would be worse off than under the present regime.

# The left would be alienated from UBI. By contrast, by demanding UBI for children, as the first priority could be very politically expedient.

# UBI for children at a level which reflects the real cost of raising children would be very popular. It has already been tried (as the child benefit) and proved effective, so resistance to its adoption would be less.

# UBI for children would make it easier for UBI for adults to become politically acceptable, as it would re-establish the principle of universality.

Our children are all our future, and our only future. Let's begin with them!   [back]

Two strategy meetings have been held in Palmerston North this year, in March and October. The purpose of these meetings has been to gather together key people in the various strands of the UBI campaign in New Zealand, both to strengthen and encourage people in the work they are doing and to develop a common understanding of what it is we are promoting and how best to go about it.

Much of the time was spent discussing definitions and language. We agreed on the following definition: "A Universal Basic Income (UBI) is an unconditional cash payment to individuals sufficient to meet basic needs." We also agreed to have the conference next year.

The two meetings have been very useful for the discussion they have engendered and the energy they have strengthened. If you would like to join in, let us know.

One of the. issues being worked on with great results is the costing side. This is being done on two fronts - Keith Rankin with his social wage approach and Lowell Manning who has added the figures up and is examining taxation rates. Next projects are - social effects, impacts on the labour market and the best way to introduce it. Your input will be welcomed.    [back]

A very successful meeting was organised by the Greens in Wellington in August. John Lepper, of Integrated Economic Services, Anne Else and I were the three speakers. About 60 people attended and there was a lively discussion.

I presented a paper:
   "UNIVERSAL BASIC INCOME - ABOLISHING THE WELFARE STATE"

The paper defined UBI as "A universal payment made to each individual AS OF RIGHT for the use of their share of the nation's indivisible common wealth, and to recognised previously unpaid contributions to society."

Following a very brief historical background to UBI [A much more comprehensive one will be presented at the Massey Conference on Work etc at the end of this month], the paper looked at what a UBI would look like in practice.

The "meat" of the paper was the presentation of a specific proposal for UBI designed to enable Social Welfare as we presently know it to be abolished, with residual responsibilities such as those relating to disabilities, invalids sickness and CYPS being transferred to their respective departments (health, education, justice).

The paper provided calculations for two options to service UBI incomes. The first was a flat tax on 47% on earned income; the second, and ground breaking proposal was to do it using a 33% flat tax on earned income, together with the introduction of a Financial Transactions Tax of 0.15% based on current Reserve Bank estimates of $9 Trillion (yes 9 with 12 noughts!) in NZ$ transactions each year.

The proposed UBI (for analytical purposes) is $115 for each person over 18 years of age, $45 for those less than 18, and $140 for every household. The household UBI would be automatically distributed among those over 18 resident in the household and registered on the electoral roll at that address. The estimated total UBI incomes on that basis is about $26.3 billion/year.

The paper concluded by reviewing the advantages and disadvantages of UBI. An appendix listed the main existing benefit structure and gave a graph of tax/income curves for various household types.

Anne Else spoke more in relation to the impact of UBI on women. John Lepper's paper "UBI: Universal Basic Income or Useless Bloody Idea" looked at the theoretical basis of citizen's wage and universal social income, then a section on "funding" where he says income tax would have to be doubled to do it. A universal social income would, on the present basis be too mean to provide an adequate income level. John concluded that general wealth taxes would be needed to provide an adequate income level.

During discussion following the presentations that were very well received, John's major problem was with the SHAPE of my tax curves. We agreed to meet and discuss this and other matters with a view to refining the analysis, and this process is presently underway.    [back]

Abstract for the Work, Families and the State conference: "Problems and Possibilities for the 21st century".

The paper is derived from a Thesis "Every One a King" by Walter van Trier", 476pp, Department of Sociology, Katholieke Universiteit Leuven, Belgium, 1995.

It traces the debate on basic income from its origins after the first world war. Basic income began with the Quaker-influenced State Bonus Scheme and the National Dividend of the Social Credit Movement. Both these groups are still very active in the basic income debate today.

The study shows that the need to respond to the changing nature of work and the importance of alleviating (if not eliminating) poverty were widely debated well before the Keynes-Beveridge Social Contract ushered in the Welfare State. Early basic income proposals were based on universality and unconditionality just like those of today. They also recognised basic income expresses an individual right to share in the public good (common wealth and social heritage) of the nation, and a humanist desire for a more just society.

Basic income lost out to Keynes because his ideas of business cycles and developing econometrics, with the accompanying State intervention in the economic process, were politically more attractive than addressing the fundamental processes of social change and institutional reconstruction resulting from automation in the post-industrial era.

The paper suggests the Keynesian Welfare State has passed its use-by date. The Welfare State couldn't be framed to meet the needs of people and their families in an age when adequate income has been de-linked from traditional paid work and might always have been a kind of economic evolutionary dead-end.    [back]

What is a Universal Basic Income?

A universal basic income (UBI) is a monetary payment to every "citizen" (ie 'tax resident'), funded from public revenue. A UBI is a central component of a "basic income system", the other parameter being a moderate­high rate of income tax. The standard formula for each citizen under a basic income system is:

Under a full UBI system, there are no other benefits other than UBI, and no income tax concessions or surcharges. Under a partial UBI system, the formula allows for additional benefits:

where the value of the "benefit" is typically but not always zero. (The term "benefit" should be understood as an accounting item, bereft of any value­judgement re its status.)

In New Zealand at present, every person with annual earnings over $34,200 conforms with the following partial UBI formula:

where the value of the benefit is almost always zero. The most common benefits paid to people in this income range is the "Independent Family Tax Credit" payable to many working caregivers, and New Zealand Superannuation.

From July 1998, every person with annual earnings over $38,000 will conform with a new partial UBI formula; a new formula that is the equivalent of an increase in the UBI:

where the value of the benefit is almost always zero.

For people earning less than $34,200, the present formula can be presented as:

where Net Benefit may be positive but is in fact negative for most wage­earners and caregivers.

In order to convert New Zealand's present tax­benefit system into a partial UBI system, all that needs to be done is to pay a top-up benefit to everyone whose "Net Benefit" is currently negative. Given the present range of means­tested benefits payable to low­income working families, the financial cost of providing such top­ups is less than the financial cost of the 1998 tax cuts.

1. Administrative efficiency, simplicity

2. Recognition of social value of unpaid work

3. Dignity of beneficiaries by eliminating punitive conditions associated with benefit "targeting"

4. Elimination or reduction of poverty traps arising from benefit abatement

5. Elimination of benefit fraud which occurs when beneficiaries remain on a benefit after they become employed

6. Encourages unemployed people to accept part­time employment when full­time jobs are not available

7. Incentives for the underemployed to work more and for the over-employed (especially parents) to work less

8. Income reallocation favouring caregivers of children

Much of the fixed capital stock which contributes to production and productivity is not privately owned; indeed cannot be privately owned. In order to treat such publicly­owned assets on the same footing as freehold assets - as the logic of economics demands - then such capital must be attributed to the sovereign - ie to the "crown" - as a kind of supreme freeholder.

Such capital stock includes our environments (natural and artificial), our stock of knowledge, our technologies, our infrastructure, our cultures, our institutions and our legislation. It is in the public domain; indeed, in a democracy in which the people are sovereign, most of it is the collective inheritance of humankind. As a corporate (ie collective) inheritance, it should be regarded by economic theory in much the same way as privately inherited capital stock.

The economy is inefficient if the owners of certain kinds of productive assets are not rewarded while the owners of other productive assets, although no more important as productive assets, are rewarded generously. The sovereign should have the same rights to receive property income as do private corporations and private individuals.

From this perspective, a UBI - partial or full - is simply a social dividend; an equal division of a part of the "social profit" or "social wage"; an equal division of the sovereign's income. Taxes become just like wages and royalties; a cost to the users of a resource, and an income to the owners of the resource. Increases to the UBI can be regarded, in the jargon, as "total factor productivity dividends".

It is an axiom of economics that more is better than less. Thus if more can be produced at the same cost as less, then more should be produced. The problems come in the distribution of the more.

Societies have always been concerned at unemployment caused by labour-saving technology. They have been suspicious of knowledge that, while enabling more to be produced without incurring more material and labour cost, has caused particular jobs - indeed whole occupations - to be lost.

Generally, as basic labour ("commodity labour") becomes both less scarce and less important as a contributor to final production, then incomes - the entitlements to consume final production - become increasingly concentrated in the hands of the owners of capital assets. If there is no explicit social profit, then, by default, the income in such a growing economy must be concentrating in the hands of private freeholders.

Economics 101 justifies a process of economic growth accompanied by increased inequality through the "compensation principle". This means that, in theory, the winners (the capitalist freeholders) can compensate the losers (the workers who lose their jobs or who must accept lower wages in the face of increased competition in the labour market) and still come out ahead. A universal basic income is just a practical realisation of this theoretical principle. Compensation is paid as higher taxes.

While the people are collectively sovereign, they are also individually subject to the laws and to the executive will of their constitutionally elected sovereign governments.

Government, as the executive, legislative and judicial arm of the sovereign, is responsible for the well-being of its subjects much as "breadwinners" and "caregivers" are responsible for their families. Hence the welfare state. Subjects agree to be bound by the rule of law and the demands placed on them by the executive, in return for "protection"; security and a minimum standard of living that reflects the wealth of the society as a whole. Thus the poorest subjects of a rich society should have a higher guaranteed standard of living than the poorest subjects of a poor society. Put another way, as a society becomes richer, then the least rich subjects of that society should get richer in proportion.

Recent discussions relating to the establishment of a code of social responsibility have focused on the responsibilities of parents to their subject children. Implicit in the social responsibility proposals are "stick and carrot" incentives which can fairly be labelled "social engineering". They reflect a mood signposted by the 1991 Child Support Act, which clearly expressed the principle that children are entitled to a standard of living proportionate to the standard of living of their natural parents.

This is clearly a principle that has widespread support, and not only in conservative political circles. It is therefore natural - at least for those who support the principle - that it should be extended to the government itself. Governments must not only be socially responsible; they must also be seen to be socially responsible. Being socially responsible means being committed unconditionally to the support of and the care for all the "subjects" to whom one (a constitutional government or a legal guardian) is constitutionally, legally and morally responsible.

The provision of a Universal Basic Income is a moral act of social responsibility.    [back]

To be sustainable over the long term, a society must assure that all of its members have the basic resources required for them to participate fully in that society. After the end of World War II, Canada set off boldly to reach that goal and, to a notable extent, succeeded. Now, in the mid-1990s, Canadians are caught in a backward-running tide, our health care and other structures of social support ripped from under those who need them most, including the growing ranks of the un- and under-employed. Hardest to swallow is the blame laid on the victims. Most to be feared and fought is the assertion by those in power that there are no alternatives. There are other choices, and to be sustainable as a society, Canada must make them.

Economic globalisation and technological change are irrevocably reshaping the nature of work: we are in the throes of a post-industrial revolution. Industrialised societies such as Canada must no longer perpetuate the myth that secure adequately-waged employment is available to all who want it. The effect of this myth is to manufacture consent for deserting and stigmatising those most in need, and dangerously postpone the effective societal action needed to steer global change in positive directions for Canada.

In the present context of jobless growth due to technological innovation and economic globalisation, it is the growing polarisation of industrialised societies -- into an impoverished, "redundant", deskilled large minority and a small, affluent technical-professional elite -- that must be faced and squarely dealt with by decision makers. Who's in the middle? The increasingly "anxious class" flagged by U.S Labour Secretary Robert Reich in 1992 (The Work of Nations)

Without decisive and innovative action, this downward spiral, together with long-term unemployment for increasing numbers of individuals and families, will exact an even heavier toll than at present. It will be felt in reduced purchasing power and material standard of living as well as, more cruelly, in eroded self-esteem, family breakdown, rising crime rates and all of the other well-documented consequences of unemployment and downward mobility. On this path lies the resort to some type of repression, or terrorism--or both. Surely we don't want prison construction and operation to be a major growth area in Canada.

How can we respond to these new realities? Justice dictates that we should not continue to penalise people who cannot find secure, living-wage work. We must examine other mechanisms for allocating work and distributing income. These might include a shorter work week, job sharing, earlier retirement and innovative mixes of these ideas in conjunction with sabbatical leaves based on some form of "time-bank" that would allow individuals to accumulate waged time.

But work-time reduction can be viewed as only one component in a strategy to adapt to growing structural unemployment. And no strategy is likely to be successful in equitably addressing the new problems of income distribution without the introduction of some form of adequate and secure basic income. Certainly there have been telling arguments in favour of progressive versions of the idea. The need to adequately compensate work vital to the well-being of communities, such as child and elder care, is one. Another is that current productivity and prosperity in the private sector owes much to social investment (taxpayers' money) over time in health, education, law and order, R &D, and infrastructure. In this view, a secure basic income is a just means to underpin the peaceful transition to a new era of less traditional, less secure 'employment'.

There have also been vehement denunciations of any program to guarantee income on the grounds that such income would inevitably be meagre, perhaps less than welfare, and that any type of 'workfare' would simply subsidise bad wages or institutionalise unemployment.

What we need now is a well-designed research effort, building on existing British and other European models, that identifies economically and socially feasible basic-income alternatives. Resources distributed more equally are investments in a socially sustainable--and desirable--Canadian future.

As Rifkin suggests in The End of Work (1995), social income paid out through non-profits for societally-needed work, and at least partially government-provided, could be financed by closing down many welfare bureaucracies, discontinuing billions in subsidies to corporations, and levying an earmarked value-added tax (VAT) on nonessential goods and services, or at least on "the goods and services of the high technology revolution"; a Tobin-type tax on unproductive financial speculation is a feasible option of the latter type. Like others who envision the future similarly, Rifkin sees almost no paths to positive alternatives other than institution of a social income. It is clear to an increasing number of thoughtful analysts that there may be some extremely negative outcomes globally if those with power and wealth refuse to act in their own best interests by distributing resources so that individual dignity, community stability and a sound consumer base are renewed and preserved.

The other major challenge in adapting to the new realities, of course, is to rethink the purposes and structure of formal education so as to enable people to play a richer variety of roles in a society that has less need for 'employees' and more for parents, artists, environmental stewards, community caretakers, and many other self-motivated makers and doers. The sooner instituting basic economic security for all allows us to turn our attention to this challenge, the sooner we will be back on course creating the kind of society we in Canada want to sustain.

This was first published in Canada Watch (Sept.-Oct 1996), a York University publication.    [back]

Universal Basic Income and Poverty:
   Relating Anti-poverty measures to Basic Income Levels            by Michael Goldsmith

Paper prepared for the 'Beyond Poverty' Conference, Massey University, Albany, 14-16 March 1997

and published in the Proceedings (Mike O'Brien and Celia Briar, eds) by Michael Goldsmith, University of Waikato

The original abstract was: "The debate over whether there is 'real' poverty in New Zealand and, if so, how much, intersects with the debate within Universal Basic Income circles over the appropriate monetary level at which to set any future basic income scheme (e.g., whether 'full' or 'partial'). This paper will (1) present an analytical summary of these two debates and (2) then, if possible, attempt to establish from the relationship between them some conceptual and empirical criteria for the setting of UBI levels. Even though it seems impossible to establish universal needs-based criteria for basic income levels, and there are consequently real problems in determining what might constitute a 'full' UBI, those who favour basic income proposals have a responsibility to recognise issues of adequacy."

In the event, I did not have time to carry out the detailed empirical research that the second half of the topic deserves (though it is still on my 'list' of things to do). I wound up giving a paper that argued along the following lines:

(1) Universal Basic Income represents a necessary, if not sufficient, response to poverty in New Zealand/Aotearoa. It offers real advantages over excessively targeted systems of social welfare.

(2) One of the strongest arguments for the recent upsurge of interest UBI stems from growing evidence that poverty is a serious problem in this country. However, poverty researchers may have concentrated unduly on establishing a 'poverty line'---a concept that makes most sense in highly targeted welfare regimes.

(3) What should the 'basic' in Universal Basic Income mean? One way of answering this question is to establish at what level a UBI should be set to address existing poverty levels. While this question of 'adequacy' is important, I highlighted an equally important sense of 'basic' (drawn from Philippe Van Parijs) as referring to a 'base' income to which other forms of income can be added without jeopardising the basic entitlement.

(4) Finally, I addressed the advantages of UBI over the neo-liberal penchant for 'targetting', by showing that the latter is tantamount to the rationing of abundant resources (unlike wartime rationing regimes which stress universal sacrifice in the allocation of scarce resources).

Other recent activities and publications:

* My paper on 'Universal Basic Income and Citizenship' (based on a talk to the July 1996 UBINZ Conference in Wellington) is due to appear shortly in the Social Policy Journal, alongside Keith Rankin's latest version of his UBI/Tax Credit proposal.

* I will be giving a talk on the moral justification for UBI at the 'Sea of Faith' gathering organised at Bryant Hall, University of Waikato on 6 November.    [back]

Abstract for the Work, Families and the State conference: "Problems and Possibilities for the 21st century".

Keith Rankin, 30 September 1997.

Both our national economies and the international economy are characterised by interdependence. That means that what we produce - whether marketed or not - is a result of co-ordination; of teamwork between the owners of capital and the owners of labour, and between many different workers, paid, unpaid, and underpaid.

Unpaid work is work that does not feature in the national accounts because it is not marketed, or it is work that does contribute to gross domestic product, but is not acknowledged as so doing. The latter is any kind of unpaid supportive work that helps others to gain an income; such as School Boards of Trustees, who help the government to provide education services.

Unpaid work is an extreme form of the more general case of underpaid work. Since the 1991 Employment Contracts Act, underpaid workers have increasingly contributed by accepting less for doing more. They contribute through their product, and not through their taxes. It is only when they become eligible for a public pension that they get some monetary recognition for what they give up as workers. That is reason enough to pay an adequate if not generous public pension that can facilitate retirement while the person is young enough to enjoy it.

By an extension of that reasoning, it is appropriate to raise taxes and to pay a universal basic income - a universal public income, a social dividend - as a recognition that a part of the product of the underpaid and unpaid is currently accounted for as a part of the private incomes of others, and should be returned through the public accounts to all citizens.

In an interdependent world, it is virtually impossible to assess every person's individual contribution to the economic well-being of the nation and of the planet. So a universal means of attributing value to contributions is appropriate; a means that errs in favour of the proposition that everyone makes a contribution, or at least seeks to.    [back]

by Michael L Murray (Armonk, NY: M.E. Sharpe Publisher, 1997)
Paperback ISBN 1-56324-989-8 US$22.95

Review by Sally Lerner

Michael Murray's book is a plain-speaking, no-nonsense introduction to the idea of a "guaranteed adequate income" (GAI) that uncouples basic income from employment. The idea is not unknown in Canada, but its most recent outing here-a regressive version aired by the MacDonald Commission in the mid-1980s-gave it a bad name.

With access to this and other balanced discussions of GAI-type programs, perhaps there will eventually be less opposition to the idea here than in the US, since Canadians have not succumbed completely to the extreme neo-conservative individualism that currently prevails south of the border. The potential of such programs to maintain societal cohesion in times of extreme change in the nature and availability of paid employment has recently been recognised, or at least debated, by even the staid OECD.

The basics of a GAI, as Murray conceives it, are these:

* Who receives it? Every man, woman and child is entitled to do so.

* Who pays for it? You and I, the taxpayers.

* What is provided? Cash, through a periodic check or electronic funds transfer.

* How is it paid? Through the government--either the Internal Revenue Service or the Social Security Administration.

*When is it paid? With the use of electronic fund transfer, weekly payments would be reasonable.

*How much is provided?
An adequate amount, fluctuating with the state of the economy. OK, you want a number?
About $6,000 for an adult and $2,000 for a child annually. ..... We'll let our elected representatives determine the final amount. The concept is what is important now.

*How is it funded? ...a change in the federal income tax to a 35 per cent flat tax combined with savings from eliminating all current welfare programs...[plus] a value-added tax (VAT) ...[to] allow a reduction in the income tax rate. Details on funding this program are in a later chapter.

Murray, a professor of insurance in the College of Business and Public Administration at Drake University in Iowa (USA) describes himself as someone "who believes that government is best which governs least, but does not trust the invisible hand of market forces to bring about economic justice." He walks his own line between conventional left and right political views and presents a balanced consideration of such questions as:

* what constitutes economic justice?

* what's wrong with contemporary US-style welfare systems?

* what can--and can't--market forces do?

* how would a GAI benefit existing market economies?

To the latter question, he answers that it would eliminate the need for minimum wage laws and for expensive programs to move people into employment, which will be harder to do, he argues, as there are increasingly fewer traditional paid jobs due to technological change and globalisation. The GAI would allow, though not require, use of a flat income tax, which is discussed extensively in the latter part of the book. It would stimulate consumer demand and encourage labour mobility. In fact, Murray argues, it would rescue contemporary capitalism from some of its inherent problems. The reader must decide if this is a plus or minus.

As Murray suggests, the funding details of a GAI would be worked out with public input through elected representatives. A number of models of how a GAI could be financed, including 'top-up' GAIs for the disabled and elderly where necessary, exist or are in preparation. For example, a plan for Ireland is receiving a great deal of attention because it grapples realistically with all of the hard questions.

The idea of a GAI is not new, and this book provides a brief history of some of its incarnations, from the 18th century English Speenhamland system (much studied for its negative lessons) on through various US and UK proposals. A major problem with past GAI ideas, in Murray's opinion, is that they incorporated a work requirement (his version does not, though some contemporary models do), which required an expensive bureaucracy to administer and which perpetuated the notion that income must be tied to work, rather than seen as a legitimate share of society's wealth.

"Those who have control of the wealth of the country commit themselves to share it." Put this way, GAI may sound like a radical left-wing idea, but Murray sees it as consistent with many strongly-held conservative positions: it reduces the level of government bureaucracy and associated costs; it minimises government interference in people's lives; it has minimal impact on the workings of the market system; and it emphasises private property.

Probably no one will agree with everything proposed in this book, but it could serve as a useful and needed stimulus for Canadians to examine and debate proposals for GAI, Basic Income, Citizens Income and similar programs under yet different names currently gaining adherents in the UK, Europe and other countries faced with sea changes in the nature of work.

Further reading: [On the plan for Ireland] Charles M.A. Clark & John Healy, Pathways to a Basic Income , April 1997 (The Justice Commission, Conference of Religious of Ireland, Milltown Park, Dublin 6, Ireland)    [back]

The United Kingdom Medical Practitioners Union presented a comprehensive submission to the UK Labour Party Commission on Social Justice two years ago. They submitted that the introduction of a UBI was a key public health measure. The following is the summary from the paper.

"This paper opens by setting out the public health case for the relief of poverty. More than 85,00 premature deaths are caused by poverty. The abolition of poverty would be a goal so full of vision and hope that to propose it in our current cynical and alienated society would be to invite instant derision.

We have however in this paper examined the cost and economic impact of a measure that would do exactly that.

The measure in question is to introduce a citizen's income, set at 2/3 of national average income, adjusted for household size in the manner used by your commission and recovered from those not in real need of it by claw back, but with claw back of small incomes limited to a maximum of 80% of income to avoid creating a poverty trap.

We estimate that the cost of the scheme to the extent that it would be necessary to recover this by an increase in the tax burden on the standard of living of the general population, or on industry, would be $15 billion. Although substantial it is slightly less than the full year effect of the tax increases in the March and November 1993 budgets. We believe that it is a sum people would be willing to pay for considerably greater security and a considerably greater sense of social justice.

This $15 billion is, of course, not the gross cost of the scheme but the net cost of a substantial package of adjustments. A further $8 billion is derived from an estimate of cautious Keynesian multiplier effects (half of this comes from the VAT raised when the poor spend their extra income). A further $5 billion necessary to avoid a poverty trap is derived from public expenditure reductions, mainly directed at anti-poverty programmes that the abolition of poverty would render unnecessary. A further $13 billion necessary to afford the payment of citizen's income to low income members of high income households is raised by the abolition of tax relief which currently benefits the same social groups as this windfall. And hundreds of billions of pounds would be involved in the transfer to citizen's income of spending on welfare needs that would be abolished or in claw back transactions of a circular nature.

The mechanisms of claw back are discussed - one based on income tax, one based on national insurance contributions and one based on once and for all reduction of wages matched by increased industrial taxation. The advantages and disadvantages of each are discussed.

In section 4 of the paper we discuss the economic effects of this package of adjustments and conclude they are overwhelmingly positive.

We conclude that the abolition of poverty is feasible for a government which is prepared to make this their major contribution to history. We believe that it is the highest priority for the improvement of the health, well-being and security of the people."

Tony Watts, Director of the UK National Institute for Careers Education and Counselling, in his keynote address to the international conference on "Career Planning: Signposting the Future" in Wellington in January had this to say:

"The first and most fundamental is to reform the welfare state to provide a base of support to more flexible and individually driven careers, linked to a wider concept of work. The welfare state that emerged in the UK as in New Zealand following the Second World War was based on a series of assumptions about the family, work and the life-cycle. The family was assumed to combine a full-time stably-employed male wage-earner, with a wife primarily devoted to her work within the home. It was further assumed that their life-cycles were orderly, standardised and predictable, that male employment was assured, and that the welfare state could therefore concentrate on childhood and old age, being largely passive during the active middle part of the life-cycle.

All of these assumptions are now in question. The strongest proposal, in my view, for supporting a more flexible concept of career is to collapse the present tax and social benefits system into a basic citizen's income, received as of right by every individual man, woman and child. This would enable people to make flexible choices about the extent of paid employment in which they engage. The concept of unemployment - an industrial era notion whose time has passed - would disappear from the dictionary. With it would go the poverty traps and the pressures to squeeze economic activities into the black economy. More flexible patterns of work would be positively encouraged rather than - as at present - discouraged. The concept has appeal both to the political left, because it provides an egalitarian base, and to the right, because it liberates the market."    [back]

At the conclusion of a December 1996 OECD conference on "Economic Flexibility and Societal Cohesion for the 21st Century", the participants recommended four "innovative approaches to finding the balance between economic flexibility and societal cohesion" (NB: if you don't quite know what "economic flexibility" means, think temporary work, contract work, movable workers, wage concessions, etc.) The first three are somewhat opaque. But the fourth, as reported in a summary of the conference report, was an encouraging nod toward at least debating the idea of a guaranteed income as a prerequisite for maintaining societal cohesion in the face of fundamental changes in the nature of work:

"Lastly, and controversially, there were those who argued for a major transformation of the economic and social importance attached to paid employment. This fourth approach to the challenge of achieving societal cohesion in a flexible economy would involve the introduction of a universal citizen's income intended to put greater value on the broad range of human activities that extends well beyond paid work. On the one hand, worries were expressed about both the affordability and perverse incentive effects that might arise if paid employment and income were delinked. On the other hand, it was acknowledged that for many people employment of any kind, much less at above poverty level wages, might not be attainable - particularly if economic growth does turn out to be quite modest. More general support was offered for policies that validate a broad range of human activities without inhibiting the decline in the share of traditional full-time life-time jobs. Finally, since work of all kinds, paid and unpaid, will continue to be central to achieving social integration, policies should be crafted so as to encourage activities like environmental conservation, community care giving and learning."

The full report: Societal Cohesion and the Globalising Economy - What does the future hold? Proceedings of the OECD Forum for the Future conference "Economic Flexibility and Societal Cohesion in the 21st Century", December

1996 (OECD: 2, rue Andre Pascal 75775 PARIS CEDEX 16, US$19.00)    [back]

New Zealand 1997 - Some Stylised Facts

National Income / GDP                                    $90,000m

Population                                             3,600,000
Adults                                                 2,700,000

Income Tax @ 33% of GDP                                  $29,700m
Other public Revenue                                     $13,500m
Social Wage Fund                                         $43,200m

GDP per person                                           $25,000
Social Wage per person                                   $12,000
Adult UBI (including tax concessions)                     $4,000
    Retained Social Wage                                  $8,000
Child UBI                                                     $0
    Retained Social Wage                                 $12,000

Cost of UBI                                              $10,800m
Child Investment Fund                                    $10,800m
Other spending and surplus (incl supplementary benefits  $21,600m

While the above is an example in which the partial UBI for adults is $4,000 and for children is $0, by accounting for children in this way then any proportion of children's social wages could be paid as a UBI. And, regardless of what level of UBI is paid to children, then children "earn" the same social wage that adults do (ie as a legitimate property income). The "child investment fund" is simply another name for the "children's social wage fund".   [back]

Individual    2,675,000 adults x $115 x 52        $ 16.0 B
Child           975,000 children x $45 x 52        $ 2.3 B
Household     1,100,000 households x $140x 52      $ 8.0 B
Total                                             $ 26.3 B

Total economy                                     $ 98.9 B
Taxable incomes (taken as GDP- indirect tax)      $ 87.0 B approx. 
47% tax on $87B                                   $ 41.3 B
plus indirect taxation                            $ 11.9 B
Total taxation                                    $ 53.2 B
 
The 1998 budget expenditure                       $ 35.7 B
    less transfers (benefits and super)            (11.7 B)
    add back transfers to other departments
                     (sick/invalid/CYPS etc)       $ 1.8 B
Projected expenditure                             $ 25.8 B

----------

Available for UBI                                 $ 27.4 B
Needed for UBI                                    $ 26.4 B 
Surplus for other programmes, capital flows        $ 1.0 B
Add departmental savings                           $ 0.4 B
Surplus for other use                              $ 1.4 B

Financial transactions tax 0.15% on $9 Trillion          $ 13.5 B
The tax rate needed to support UBI is reduced from 47%
     (producing $41.3 B in tax) to
                    47% x (41.3-13.5)/47                   31.6%

Which is LESS than present tax rates of 33% on incomes above $38000/year. So there need not be an increase in income tax. In fact, in theory a tax CUT could be possible for many people.

The proposal presently being considered for economic analysis as at mid October, is as follows:

The UBI must not compromise other social wage areas to which the Alliance (and the Democrats) are committed such as free health and free education. It must be a full, universal UBI, including child payments, that enables Social Welfare as we presently know it to be abolished, (though additional special needs payments to the disabled, invalided and sick would be transferred to and administered by the respective departments like health and education)

I have agreed to using a stepped tax structure and treating the UBI as a gross income (like present superannuation) rather than a net payment coupled with a flat rate tax. This increases flexibility relating to progressivity, especially for households on lower incomes. Present work indicates about $115/week for each adult, $45/week for each child and $140/week for each household automatically distributed among adults resident in the household for the time being and registered on the electoral roll at that address.

Agreed on: a total UBI income base of $28 billion - so existing beneficiaries are better off, all things included, even if only marginally so (though there could be exceptions). The $28 billion to be funded (for economic analysis purposes) as follows:

a)   Net $11 b from existing transfers
             ($11.7b less special needs of $0.7b over and above the basic sum)

b)   Estimated $ 1 b from savings in government

c)   Net $ 8 b from 0.15% Financial Transactions Tax less reduction in GST to 7.5%
            [$3.2 b] (made up of: Ftt 0.15% on $9t = $13.5 b Less slippage of $2.3 b).

d)    Reduction in GST from 12.5% to 7.5% included in c) above,
            specifically designed to offset the bulk of the CPI effects of introducing Ftt,
            as well as satisfying present Alliance policy.

e)    Net $5 b from direct Reserve Bank Credit creation accompanied by equivalent
            restrictions on private credit creation (a return to a reserve ratio) and an
            attractive (voluntary) savings scheme to draw off excess purchasing power.

f)    Net $3 b from other sources eg increase in income tax rate of up to 4%;
      eg land tax of perhaps 1.5%, wealth tax of less than 0.5%, or resource taxes (various).

[Generally, I believe resource taxes are better used to offset existing indirect taxes and charges, and provide for environmental projects. Land/wealth taxes tend to be progressive, but they do complicate tax returns, and there is some risk of shifting wealth offshore. Land taxes were very common in NZ in the past. It might be better to re-introduce a land tax rather than increase income tax rates or we could look at increasing the FTT to 0.2% or both]

The analysis will show what the positive economic effects are likely to be, and what problems there will be, if any, on wage rates, production, interest rates and inflation. We are concerned to manage the possible initial inflationary impact of the package (which is why I wanted a substantial voluntary savings target constructed to restrain consumer spending and deposit growth), but we will not know what the effects will be until the package has been through the number crunchers.

There will, of course, be a burst of GDP growth, increasing compensation, and an increasing revenue stream we can take into account. The trick will be to limit the expansion of consumption to the real increase in goods and services.    [back]