Universal Basic Income:
What other Systems, Policies and Attitude Changes are needed in a UBI Structure?

Paper for UBI conference, Wellington, March 1998.

Prue Hyman, Associate Professor of Economics and Women's Studies,
Victoria University of Wellington

Arguments for UBI include its capacity to give a living income to all, albeit at a low level, and hence reduce poverty, particularly among low income families with young children. Then there is its simplicity, compared with categorical systems of income maintenance, and the removal or reduction of the administrative expense of targeting and the unjustified stigma and policing associated with some benefits. In addition, poverty traps and incentive problems for underemployed people wanting to work more or overemployed to work less would be removed or reduced, freeing up the decisions on what amounts of paid work individuals are free to seek. Other reasons advanced include its role as a social dividend on publicly owned assets, compensation for the increasing concentration of wealth, and a social responsibility of government, matching the current moves for placing such responsibilities on families (Rankin, 1997).

However the primary rationale for a UBI, in my view, in addition to the first above, is the recognition of citizenship, community, and interdependence of all members of society. Buttressing this is the recognition that almost all adults and most children make, and want to make, valuable contributions to society in the form of unpaid household, caring, voluntary and community work, as well as some being in paid employment.

In fact, it is largely arbitrary what work is paid and what unpaid, but overwhelmingly one's prestige, status and claims on resources come from paid work. It needs frequent reiteration that less than half of all work is paid. It can also be argued that earnings differentials within the standard economy are inequitably wide and only tenuously if at all related to productivity issues. These two issues are taken up later. Together, they shake the notion that market rewards and resulting income disparities/ standard of living inequalities are a matter of just deserts, with modification of market incomes through the tax/benefit/public expenditure system a matter of simply providing a safety net for the unlucky and/or undeserving. They make the case for a universal basic income overwhelming.

This paper argues these points further. It then discusses the relevance to UBI of alternatives/supplements to the standard economy, such as LETS and Green Dollar schemes, ethical investment and other local initiatives.

Bringing up the next generation is one of the most important unpaid tasks, undertaken predominantly by women, whether in two or one parent households or other household structures. This requires support from the community. It is vital work, as well as being for many a joy, and should not be just for the rich. We are on the border line of only just reproducing ourselves with declining birth rates, with those on lower incomes barely able to afford children. The individualist position "Why should I support your taste for having children?" is mean-spirited and if adopted collectively, shortsighted for society as a whole. This means that UBI needs to include children, recognising these arguments for collective responsibility for the costs. Further justifications for this come through recognising also the collective returns that will result from investment in the future, as well as the fact that children too are citizens, contributing both when young and later. If UBI does not cover children, many women could be even worse off under such a regime than they are now (Briar, 1997).

Of course, many elements of bringing up children are currently paid for collectively, as well as the parental contributions in money and time. First, the community collectively supports children directly through subsidies to health, early childhood care and education, through compulsory age education and through grants to voluntary sector organisations such as Plunket, although such funding is under increasing pressure. Second, Domestic Purposes Benefit is paid on the basis of dependents, largely children, but again this is under pressure. The argument that bringing up young children is not a real job, and that adults should be in paid work is of course applied selectively, basically to attack sole parents, assert a high moral ground with regard to benefit dependence, and reduce benefit expenditure. Third, targeted Family Support assists low income households. However, there has been a major switch towards parental responsibility both in official rhetoric and in financial terms, with taxpayer support for parents being low by international standards, particularly for large families (Stephens, 1998).

This shift towards individual and family responsibility gives insufficient weight to the inevitability and desirability of the interdependence of all members of society. It is important to challenge the capture of the word 'dependence' by New Right orthodoxy to mean dependence on a welfare benefit. Patterns of dependence, independence, and interdependence are complex and varied over the life cycle and between groups, and are not just a matter of money. The New Right reduces it to that and blames those financially dependent on others, especially the state. But in fact paid work is heavily dependent on all the household, caring, voluntary and community unpaid work that supports paid work and is also unequally distributed in society. Who's dependent on whom, practically and emotionally? Certainly Department of Social Welfare employees are the most dependent on the welfare system, which would require significantly less bureaucracy in a universal basic income environment. Another example is "wealthfare". In the US, it has been estimated that handouts, subsidies and tax loopholes are worth 3.5 times the welfare budget. Redefining dependence and interdependence in this way strengthens the case for a UBI.

Feminist analysis of the dependence of the market economy on women's productive and reproductive work has made some impact. However, all standard measures of national income, such as Gross Domestic Product, continue to exclude these 'goods', while including 'bads' such as pollution and defence industries (Waring, 1988). Despite greater recognition of environmentalist and feminist critiques of GDP as being totally inadequate as a measure of worthwhile economic activity, let alone welfare, it is frequently used as such and its growth rate receives huge official and media attention as a measure of the nation's health. While some imputations are made for unpaid labour, particularly in subsistence agriculture, basically it is paid work figures alone which figures in these statistics. Increasingly even economists question the omission of unpaid work from national income statistics, based on the size and counter-cyclical nature of such work which means that the impact of boom and recession, in aggregate and on individual households, is overstated. Time use surveys make possible calculation of household input-output tables throwing light on inputs of time and goods/services into household production including the raising of children. From these tables and a reassignment of the capital component of household activity, it has recently been calculated that the household sector comprises fully half of the total economy, a much higher figure than previous estimates (Ironmonger, 1996)

Yet still overwhelmingly one's prestige, status and claims on resources come from paid work and governments stigmatise those without paid work or independent wealth. In fact, it is largely arbitrary what work is paid and what unpaid, and the boundaries of what work is done on a paid basis shift with time, space, class, technology, and convenience to employers. For example, deinstitutionalisation in the mental health field and shortening hospital stays after operations and childbirth puts more unpaid work onto family relatives. Technological and social advances may be part of the rationale for such changes, in addition to cost cutting, but a transfer to unpaid work is a major result. Similarly, self service rather than home delivery of groceries, Pak'n Save, and use of mail order and Internet shopping have been transfers over time to voluntary unpaid labour, even if they may cut prices, increase convenience, and be welcomed by consumers.

More importantly for the UBI implications, almost all jobs are at the SAME time undertaken by both paid and unpaid workers. This is true of almost all industries and occupations, from the obvious caring and home maintenance work examples to management and agriculture. Similarly, voluntary workers operate alongside paid workers in the community sector in organisations from CABs to refuges, meals on wheels to Kohanga Reo, schools to hospitals. VALUING all such work properly does not mean paying for it all by the hour. Social cohesion depends on voluntary, gift work, many people WANT to do it, nor could the economy bear the costs of paying for it in that manner. But the desire and ability to do such work may be breaking down with the increasing requirements and financial necessity for almost all adults to be in paid work. Recent suggestions that foster parents should receive more support, and some resistance to giving blood in a health service climate of retrenchment are examples.

And only those with access to sufficient resources (the retired, those with others in the household earning) can afford for this voluntary work to be their main activity. Under current orthodoxy, this is OK, because they do not require community support for their basic living costs to do this work. But it is not OK for those needing unemployment benefit to spend time this way because they should be looking for 'proper' work. Similarly only those with spouses with adequate incomes are to be allowed to bring up children full time: sole parents should become partnered and/or be in 'proper' work.

Then we have the concerns over workfare - a probable displacement of 'proper' jobs (with a minimum wage and conditions) by created jobs, and a compulsion to work for the dole which is resented. As it was well put at last year's Beyond Poverty conference, "I'll mow the old lady's lawn, but not because you .... tell me I have to!" A Universal Basic Income may be the better way to deal with all that and get the lawn mown without policing or resentment. Recognition of the total arbitrary nature of the paid/unpaid work distinction with a UBI would alleviate many of these problems.

For all the attention they receive, tax/benefit systems (including any UBI) only tinker with the wide income disparities arising from market rewards. Hence it is important to be brave enough to question whether earnings differentials in the labour market are reasonable. I argue that they are inequitably wide and only tenuously related to productivity differences or just deserts. Much highly paid work, such as manipulating futures markets, might be judged by many as totally unproductive in terms of real social value, as against lowly paid socially valuable child care, for example. Further, interest (beyond the rate of inflation), rents and capital gains, and access to and returns from inherited wealth, have nothing to do with current productivity. Resistance to very high salaries for CEOs, consultants, and public relations experts employed to 'sell' health sector policies of dubious merit is often labelled by politicians and adherents to current orthodoxy as misguided or simple envy. Current reactions, sadly even that of the Privacy Commissioner, include arguing that such salaries should be kept secret, an increasing trend under labour market deregulation. Hopefully, we will continue to argue that accountability in the public sector and to both shareholders and customers in the private sector requires disclosure - and preferably better justification than at present.

What of the argument that labour market rewards simply reflect perfectly competitive supply and demand pressures, with the latter entirely a matter of productivity? CEOs are worth that much due to their overwhelming responsibilities, and ability to go elsewhere if not paid a competitive salary, and top sportspeople (I even-handedly question their salaries too!) because the public will pay that much to see them win. More often they lose with NZ cricket, yet people still turn up and turn on - should there be more emphasis on performance pay? Can there then be any question of top earnings being too high and bottom ones too low, even though they have widened considerably? If CEOs are paid what the market or the board of the company believe they are worth, is this really marginal productivity or is it simply market decision makers able to set their own price?

Is there such a thing as a perfectly competitive labour market or are imperfections inevitable? An example is the continuing undervaluation of female dominated work - relative to productivity, and/or through occupational crowding, discrimination, for historical and/or social reasons, and through definitions of skill which are biased. It is assumed in orthodox analysis of occupational differentials that skill is an objectively measured variable, whereas there is a growing literature arguing that its evaluation is socially determined (Hyman, 1994). There are a mixture of concepts here: the market may be thought adequate, but out of equilibrium, the market is working but not perfectly competitive so there is resource misallocation, the market is not working because resources are 'lumpy' and/or there is not real demand (or supply) curve, or most fundamental, the market is working but its underlying values are unacceptable.

One can also challenge the whole structure, suggesting circularity and lack of reality. Whether, except in economists' graphs, the marginal productivity of labour can be measured is doubtful (Thurow, 1975). Teamwork, the dependence of every type of worker on the work of others, the other inputs that are held constant in the analysis, and the quality of management are among factors which blur the picture. Marginal productivity can be seen as another of the economists' circular tricks. Analytically, the wage rate must reflect the value to the employer of the extra amount produced (in perfect competition at least). However, only the wage is observed, so it is simply presumed to reflect marginal product. This can persuade people that there is an objectivity to the wage determination process. In service industries there is even less chance of determining the value of output. Much attention is now paid to the principal agent problem, which essentially recognises this issue. In the labour market employers need to find ways of ensuring they receive the work input for which they are paying. Hence attempts to assess individual or team performance are growing, but they are often crude and subjective.

Differentials generally and between CEOs' pay rates and others are certainly widening. On my cautious days, I suggest that the ratio between top and bottom hourly rates should be no more than, say, five to one, rather than the 70 to 1 which approximately reflects hourly rates arising from million dollar annual salaries compared with the minimum wage. Of course the extremes are greater than that, with some much higher salaries and people being paid below the legal minimum rate. On my brave days, I want to write a paper saying all hourly rates should be the same, as in most of the Time Dollar schemes discussed below.

Other initiatives which could improve social justice are extension of worker cooperatives, and use of organised consumer buying power to pressure existing firms on environmental and labour policies, and create enterprises with less capitalist, more community values (Matthaie and Amott, 1997). These ideas blend well into another major area of challenge to the standard economy, local trading schemes.

Growing fast in New Zealand and overseas are a range of local economic and social initiatives which act as an alternative to or supplement to the local economy. These include such local trading schemes, often with their own currencies, and alternative sources of investment, usually for smallish sums at low or no interest and in some cases committed to ecological and other ethical investment principles. In New Zealand the main term used for the first type is Green Dollar schemes, with Local Economic Trading Schemes (LETS) the common British term, and Time Dollars common in the United States. In July 1997, New Zealand had 46 Green Dollar exchanges in operation from Alexandria to Whakatane, and including ZACS, the splendidly named Zany-ladies Alternative Credit System established by two women active in the Thames exchange. "ZACS is unique! ZACS has NO current members. We are a short term mobile exchange that was set up specifically to run at NZ G$ National Conferences" (http://www.pipcom.com/~sparky/nz.htm). Run over one weekend, all participants start and end with zero balances through trading goods and services in 'zacs' (l zac equivalent to $1).

There are some differences in operation and principles between various types of scheme. For example most Time Dollars schemes use the principle of strict equality for the value of time. "1 hour, l credit, whether the task is doing laundry or helping someone with his taxes. Every resident's time is considered just as valuable as anyone else's" (Cahn and Rowe, 1992, p 6). Some other schemes allow people to put varying values on their time or use a synthetic unit or alternative dollar as the unit of account. Nevertheless, the differentials between different types of work are invariably smaller in these schemes than in the market economy, with the values of participants, including those of professionals who may be able to command high hourly rates elsewhere, supporting this - and differentials narrow without the world falling apart!

Such trading schemes may seem at first sight not very radical and possibly even undermining of gifting and volunteering free labour. However, this is often an illusion. Many participants contribute twice, donating the time dollars they have earned to others less able to work. Also, "It's important to remember that the work 'volunteer' actually refers to something done from the heart, rather than strictly without reward. The most important thing Time Dollars do is establish a structure of reciprocity by re-building a sense of neighborhood and community and turning worthy sentiments into real social and economic forces" (Time Dollar Institute web site). Hence Ralph Nader says, in a forward to the book by Edward Cahn, founder of the Institute, and Jonathon Rowe, "Time Dollars provide the kind of new economics that can support sustained citizen action... Time Dollars are far more than a tax-exempt, barter currency. When strangers start acting like neighbors, and neighbors start acting like extended family, communities are invigorated... " (Cahn and Rowe, 1992, p x).

In my view, barter, gifting, (the exchange of biros is often part of the gift economy!), green dollars, and Time dollars are creating more important value than that on the market. Part of the impetus for such schemes has of course been the failure of the conventional economy to deliver a decent standard of life for many. Australian surveys indicate that LETS, especially newer ones established with a social equity agenda, have membership well above population proportions among women, those not in employment (retired and unemployed), 'green' supporters, and those with low incomes. Most scheme coordinators believe they are "effective in helping the poor get-by" (Williams, 1997). This is of great importance, but also the values behind such schemes, as indicated above, go beyond this to support the move back from individualism towards community and social responsibility which all at this conference would presumably support. These aims, I argue are also highly congruent with the UBI objectives I have discussed, so I see UBI as supporting, not an alternative to these initiatives.

Universal Basic Income can be made to appeal to various positions on the political spectrum. However, I do not believe it is worth selling it from a right wing libertarian angle. Only if its philosophy is combined with the other elements outlined above, can it hope to help deliver a future of social justice and hope for all. But on my more utopian days, I think that none of this is radical enough. Suggesting that all work should be paid the same hourly rate, that the paid/unpaid work boundary is arbitrary and blurred, and that exchanges other than through the standard markets and money encourage community values, goes only a small way. Perhaps the whole concept of (onerous?) 'work' and compensation for it should disappear, in favour simply of (non-destructive) activities undertaken by people in accordance with their preferences and the needs of themselves and others.

Similarly, more revolutionary thinkers suggest that the whole exchange paradigm is unhealthy, and that gift giving is far more basic to humanity. "The gift paradigm emphasizes the importance of giving to satisfy needs... giving to needs created bonds between givers and receivers... Opposed to gift-giving is exchange, which is giving in order to receive... Even many of those who wish to challenge capitalism envision only an economy without money - a barter economy - which is of course still based on exchange... In exchange, the satisfaction of the need of the other is only a means to the satisfaction of one's own need. When everyone is doing this, the communication that occurs is altered and only succeeds in creating a group of isolated, unbonded, independent egos, not a community... As we shift our focus towards validating the gift paradigm and seeing the defects of the exchange paradigm, many things acquire a different appearance. Patriarchal capitalism, which seemed to be the source of our good, is revealed as a parasitic system, where those above are nurtured by the free gifts of their 'hosts' below... Scarcity is necessary for the functioning of the system of exchange and is not just an unfortunate result of human inadequacy and natural calamity" (Vaughan,. 1997, pp. 24/28). Perhaps only this degree of radicalism will lead to REAL change.

Briar, Celia, 1998, 'Towards UBI: The Case for a Universal Child Benefit' in Work Families and the State: Problems and Possibilities for the 21st Century - Conference Proceedings, Celia Briar and Gurjeet Gill (eds.), Palmerston North: Massey University, pp. 33-35.

Cahn, Edgar and Rowe, Jonathan, 1992, Time Dollars, Emmaus, Pennsylvania: Rodale Press.

Hyman, Prue, 1994, Women and Economics: A New Zealand Feminist Perspective, Wellington: Bridget Williams Books.

Ironmonger, Duncan, 1996, 'Counting Outputs, Capital Inputs and Caring Labor: Estimating Gross Household Product', Feminist Economics, 2(3), Fall, 37-64.

Matthaie, Julie and Amott, Teresa, 1997, 'Global Capitalism, Difference, and Women's Liberation: Towards a Liberated Economy', Wellesley College Working Paper 97-03, Wellesley, Massachusetts: Department of Economics, Wellesley College.

Rankin, Keith 1997, 'Three New Reasons for a Universal Basic Income' in Universal Basic Income Newsletter, Ian Ritchie (ed.), Palmerston North: UBINZ, pp. 4-6.

Stephens, Robert J., 1998, 'The Generosity of Social Assistance in New Zealand' in Work Families and the State: Problems and Possibilities for the 21st Century - Conference Proceedings, Celia Briar and Gurjeet Gill (eds.), Palmerston North: Massey University, pp. 145-152.

Thurow, Lester, 1975, Generating Inequality: Mechanisms of Distribution in the U.S. Economy, New York: Basic Books.

Vaughan, Genevieve, 1997, For-Giving: A Feminist Criticism of Exchange, Austin, Texas: Plain View Press.

Waring, Marilyn, 1988, Counting for Nothing: What Men Value and What Women are Worth, Wellington: Allen and Unwin/Port Nicholson Press.

Williams, Colin C., 1997, 'Local Exchange and Trading Schemes (LETS) in Australia: A New Tool for Community Development?' in International Journal of Community Currency Research Vol. 1
(available at http://www.bendigo.latrobe.edu.au/arts/ijccr/1CCW.htm).

© 1998 Prue Hyman

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