The Universal Basic Income: No poverty. Dignity for all.
By Keith Davis
Why are some Capitalists looking at the concept of replacing our Welfare System with a Universal Basic Income?
Well, it is not because they are natural allies of the poor, or altruistic benefactors of those citizens who have to rely on welfare benefits to try and survive. It is because they want to know where their own next dollar is going to come from.
As the divide between rich and poor widens, as more and more people are thrown out of work, and as automation takes over from humans in many workplaces, there is no longer a guaranteed ever-growing pool of happy consumers out there with the capacity to … spend, spend, spend.
In other words, the people who manufacture and sell consumer products are starting to look ahead, and they are worried because the number of people with the spare cash to spend on products and services is starting to decline. Peoples’ pockets are starting to feel the grand pinch and household debt is flying higher than Virgin Galactic.
Capitalists believe in economic growth. For that economic growth to roll around and reach ever higher levels the people who manufacture things or supply services require other people to buy those things. Things like televisions, fridges, cars, houses, mobile phones, computers, online media access, holiday units, and airline tickets.
The Capitalists and Economists want people to not only buy all of those things, they want people to throw out many of those things after only a year or so of use and buy a whole new bigger and better range of those same old things.
But what has all of this got to do with the Universal Basic Income? As it happens it has an awful lot to do with it. There are many figures bandied about internationally and locally for how much the Universal Basic Income should be. I’m proposing an average figure of $30,000 to $40,000 per citizen per year.
Now let’s think about how much the welfare system costs Australia each year.
Remember that this Welfare System covers the whole range of benefits and tax breaks that are out there – Negative Gearing Benefits, Business Subsidies, Rich Peoples’ Tax Dodges, Government Protection for Non-Tax-Paying Corporations, Family Tax Benefits, Unemployment Benefits and other pensions, and we might as well throw in the extent to which Politicians’ Perks are subsidised by the populace. All of those things add up to Welfare.
To that incredible National Welfare System Bill now add the cost of Government funding to all those organisations who are connected to the National Welfare System. As an example the Unemployment Industry of JobActive Providers costs over 5 billion dollars alone.
But think past that and add on all the costs of all the Community Groups beavering away to pick up and support every human and every business that falls through the cracks. We’re getting up to Himalayan heights of expended dosh here and I’d love to see a gifted economist, which I’m not, dive in and come up with a real-world figure for our Welfare system expenditure – and then compare that figure to the annual spend of a Universal Basic Income.
Under the Universal Basic Income scheme I am proposing that each and every Australian citizen 18 years old or higher receives a flat out yearly payment of $30,000 to $40,000. No other Government payment or subsidy is given to anyone, and I mean anyone, for any other reason. You get your Universal Income Grant and that’s it. Period.
The scheme is modified to the extent that the more you earn over that level then you will be subject to a sliding scale that diminishes your amount of dollars received. It might mean that a millionaire, subject to the sliding scale, still gets $50 per week but so what, they are citizens too.
And here is what would then happen …
There would no longer be a welfare system in Australia – though there would need to be a support network in place for youth, and for any citizens in the unfortunate situation of not being able to look after themselves.
Poverty, as a blight on our social landscape, would be eradicated. And as an added bonus – the Government would have to cease demonising the disadvantaged people in our society.
The ludicrous government-funded unemployment Industry of JobActive Providers would disappear.
A Universal Basic Income is an egalitarian scheme. Every Australian would have access to it and there would be no ‘us’ and ‘them’.
But would there be people around who would abuse the scheme?
Yes, of course there would be. We currently have many highly paid corporate CEOs running around doing little else but demolishing their companies and their shareholders’ expectations – and I imagine that these bludgers on the system would continue to do that while pulling in their own share of Universal Basic Income dollars. But … apart from getting ACA to door-stop them, what can you do?
So I can well understand why some capitalists and economists are starting to support the value of a Universal Basic Income, because the implementation of such a scheme would allow even the poor to buy the things that the capitalists want to sell – the fridges, televisions, etc.
The poor, the unemployed, and the disadvantaged would also, and this one is far more important than any silly unending economic growth mantra, would be able to live their lives above the poverty line and with a modicum of dignity. How good would that be?
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Have any one costed this?
A single age pension at the current rate is $21,000
I like your thinking, Keith Davis.
As I questioned before, why can’t we have both a UBI and a Job Guarantee? The UBI ensures the person an income and the JG ensures the person a job, if they are unable to locate or devise one for themself.
Well put together Keith & nice to see this following my comment piece on a universal basic income here yesterday & it would be good to see this gather some momentum from here on in.
A universal basic income (UBI) is no substitute for a job guarantee (JG). It is the poor cousin. Having both is a case of two worlds colliding. A good article explains why…
Read them carefully before you go any further.
The economic truth that businesses need customers and fail in their absence is the truth that has long eluded the so-called economic rationalists.
A minimum income for all adults clearly makes sense for all the reasons stated in this article.
The problem with a truly universal basic income is that it is NOT scaled back as other income increases. The available money is spread so thinly that it is not enough to live on.
A guarranteed basic income, however IS scaled back as other income rises once more than say 25% extra is earned.
If such a basic income is provided and indexed, it, plus the allowable extra, should also be the tax free threshold.
A sharply progressive tax regime, coupled with a much less draconian means testing mechanism than we have now, would make sense.
So, say, no tax or basic income reduction for extra income up to 25% of the basic, then for every extra dollar, say, 20 cents is lost. Then taxation kicks in too, but gently until no basic income is received.
That avoids the current situation where pensioners and benefit recipients lose 50 cents for every dollar of extra income above the miserly amount of $164 a fortnight, and pay income tax as well, amounting to an effective tax rate of 65%.
Wiser heads than mine would be needed to desighn the tax scales.
However it is done, expect the economy to boom, if experience in the US in places where minimum wages were increased is any guide.
sounds like a plan – at least it is some kind of plan, as the current mob seem to have no plans at all.
Getting rid of the JobNetwork would be a great start.
John Kelly, I read Dr Steven Hail and I cannot see him suggesting an alternative plan.
He was saying, and is correct, that di Natale was trying to start a conversation and so far Dr Hail just knocked back what was putting forward but he did not come with suggestions.
Is he under the opinion that all is well then or that there are no options?
Freethinker, Dr Steven Hail recommends a Job Guarantee. He says so in the article.
Keith, very interesting thoughts. I was aware that a lot of capitalists as well as lefties are in favor of the Universal Basic Income. It is obvious why lefties are, but I’d always thought capitalists liked it for getting rid of the enormous bureaucracy that services welfare systems. I hadn’t thought of your slant on it. Nice. I’ll have to remember it next time I’m arguing the point with a libertarian or other capitalist. Thank you for the insight and the light-hearted take on what is normally a serious, almost tedious topic.
Sounds good Keith.
I realise that there are arguments for and against a UBI, however I do not understand the claim that a UBI would be inflationary. Taxation plays a major role in keeping inflation from growing to excessive levels, does it not? For this reason there is a good case for taxing all major forms of income, including a UBI. I suspect that a moderate level of taxation applied to UBI would suffice to keep any inflationary tendencies at bay. And even that might not be really necessary, because UBI income would be mainly spent on goods and services, and would therefore circulate around the general economy, attracting further taxation at each stage. A realistic model of financial flows in association with the operation of a UBI is really needed before anyone can give definitive answers on this issue.
economicreform, I’m right there with you. I too, have heard the argument that the Universal Basic Income (UBI) would be inflationary. At first glance that looks like it could be so, after all, it pumps enormous amounts of money into the economy (though as Keith points out, perhaps not as much as is generally considered if all the forms of corporate welfare and wealthy people’s welfare are cut back or eliminated). However, as you say, tax can help to fix that, to some extent. I don’t actually suggest the UBI be taxed. I don’t think we need to complicate the tax laws further. We simply need an effective progressive tax system that works the way it is supposed to, where each person pays taxes according to their ability. No loopholes.
The other way the UBI might not be as inflationary as some think is that it would allow people to start up small businesses and let them buy things they normally could not. Both those things can lead to increases in productivity which would bring inflation down. A UBI would greatly boost small businesses. It would be a universal safety net that takes much of the danger out new ventures. (You know you’ll still be able to eat and pay your bills even if your business doesn’t make any money for the first year — the most difficult time for a new business.) Also, as Keith noted, more people able to buy stuff obviously benefits businesses. It is also anti-inflationary when more stuff can supply that demand. (Extra demand for more stuff is only inflationary if the stuff can’t be supplied because scarcity generally causes suppliers to jack up prices — inflation.)
Of course, some people would use the UBI to let them drop out of the standard workforce, but people hate boredom and I doubt many could stand to remain idle for long, and being social creatures we’re drawn to helping others, resulting in more anti-inflationary, productive work again.
There is another way to increase productivity to keep inflation down, and that’s the Job Guarantee. If the government creates projects, and thus jobs, in sufficient amount to make up for the market’s deficiency, then this also boosts productivity and counters inflation.
‘Capitalists believe in economic growth.’
Then why are they still making their fortunes without growth!
To understand this you have to at Neoliberal ideology and macroeconomic policy. The essential thing underlying this, is to try to reduce the power of government and social forces that might exercise some power within the political economy—workers and others—and put the power primarily in the hands of those dominating in the markets. That’s often the financial system, the banks, but also other elites. The idea of neoliberal economists and policymakers being that you don’t want the government getting too involved in macroeconomic policy. You don’t want them promoting too much employment because that might lead to a raise in wages and, in turn, to a reduction in the profit share of the national income.
The only true means of lifting living standards is full employment, or a job guarantee system.
Neoliberals do not want that!
They want to Keep wages low, or debt pressure high, which means workers will be less likely to complain or make demands. As workers struggle to provide their families with all the temptations that a capitalist society offers, they become far less likely to risk their employment, and less able to improve their situation. At bottom, neoliberals believe in a social hierarchy of “haves” and “have nots”. They have taken this corrosive social vision and dressed it up with a “respectable” sounding ideology which all boils down to the cheap labour they depend on to make their fortunes. The larger the labour supply, the cheaper it is. The more desperately you need a job, the cheaper you’ll work, and the more power those “corporate lords” have over you.
While I appreciate the sentiments of the advocates of the “Job Guarantee”, I do wonder if it might end up as a giant “work for the dole” scheme? OK, the pay may be higher than welfare payments but I suspect many of the jobs created may be phoney. Given that the job guarantee scheme acts as a sump which releases workers from the public to the private sector when the economy improves, it can’t be that the ‘job guarantee’ roles are essential on an ongoing basis for our society. If they were of intrinsic value then we wouldn’t want to lose those workers to the private sector. It seems to me that a UBI with a guaranteed income of say $30k and with full tax on any earnings at all liberates people to do what they want in terms of voluntary work, artistic endeavour, creating small businesses, studying and so on. Most retirees find their niche, is there any reason to suspect younger people won’t too in a UBI world?
Thank you John Kelly for your reply
Chris, the proposed jobs guaranteed by the central government via appropriate agencies (and as envisaged by MMT advocates) do not need to be phony. There is no shortage of work that really needs to be done, in order to address the chronic social and environmental deficiencies that we are all aware of.
Folks and yes freethinker
SORRY i made a comment day before uesterday that had a fundamental error
“June 19, 2017 at 7:43 pm
No sorry but no I don’t think this is a good idea, a UBI would of course be lovely intill the new level of prices and incomes ratio is reached, when prices take up the extra money in circulation All that will happen is a short period of inflation then we would be back to square one.
No the answere is privatisation of utilities essential and monopoly industries, coupled to a government Job garrentee scheme as indicated by the proponants of the Modern Money Theory.
A minimum pension does however have to be at a level to prevent aged and medical pensioners in poverty”
I did not mean “privatise” I meant “nationalise”
Seriously big difference
S G B
Chris Huculak, exactly my fear.
Perhaps the Job Guarantee would concentrate on creating work of social benefit (heaven knows plenty of that is needed) but I’d be scared it would be quickly neutered by pressure groups into becoming worthless made-up jobs.
Imagine the reaction of the many multinational corporations, for instance, if a Job Guarantee project set up a factory to build low-cost, super-efficient refrigerators that have no moving parts and no gasses to leak and potentially last a human lifetime, or longer. “No! You can’t do that! You’ll destroy our built-in obsolescence market and put all our workers out of a job! Go and do something else… something that doesn’t impact anybody.” (Incidentally, those fridges can be made using solid-state electronic peltier devices. In the coming months I intend to build such a fridge. Below is a photo of my hand holding a peltier module.)
I hope this wouldn’t happen, but politicians are notoriously easy to con, especially by those with deep pockets. If the Job Guarantee did degenerate into a terrible waste then we would need the Universal Basic Income (UBI) as a fall-back. It would also, as I’ve said before, keep the Job Guarantee honest. The UBI would prevent it becoming coercive because people could just walk away from it; it would then need to attract people back. And it is very easy to see how how it could become coercive, given the remarks by proponents of the Job Guarantee implying that people who don’t work normal jobs are worthless.
Damn. I don’t seem to be able to insert images here. There must be a way, but in the meantime here is a link to the picture I mentioned above:
A UBI of $30 to $40 thousand per year is unfortunately not possible. Even if all the wasteful tax concessions were to be removed, all tax evasion stopped, taxes on the wealthy increased and all the social welfare system public servants sacked, the funds would not suffice.
The federal government deficit could however be increased to cover the UBI financing shortfall and paid for with ‘newly created’ money but as the productive capacity of the economy would not be increased significantly, too much money would then chase the goods and services available which would be inflationary which would erode everyone’s real spending power so in the end the UBI would be meagre and taxpayers would deeply resent the increased taxation, inflation and reduced spending capacity. This will set up an increasingly divisive haves (lifters) and have nots (leaners) political divide that will be difficult to repair. We have too much of this now.
The Job Guarantee as proposed would include paid work in many of the areas that would be freely undertaken by those on a UBI such as aged care, community service, environmental care and starting a business. However because most of the JG jobs increase the productive capacity of the economy, the funds available before inflation becomes excessive is much larger than for the UBI. I assume an unemployment benefit a little larger than currently without all the onorous ‘mutual obligation’ harassment would still be available for those who do not want to work. A more generous social welfare support system would be available to those unable to work and to help those requiring assistance to enter the workforce.
My understanding is that most new jobs will however arise directly from increased government spending on infrastructure such as public transport, social housing and clean energy for example as well as the adequate funding of existing government services such as healthcare, education, agedcare and pensions for example. This extra employment also increases consumption demand which indirectly provides even more jobs in the wider economy. This is classical Keynesian stimulus in action similar to FDR’s New Deal which partially bought the U.S. out of the Great Depression.
This additional funding is met from larger deficits as well as reducing tax evasion and taxation concessions. The JG would then provide employment for the residual unemployed that seek employment.
Andreas, the Universal Basic Income (UBI) would be given to all, but taxed away for people who earned much money. Thus when calculating the cost it should really be seen more as a replacement for the dole and pension, as well as a lift to the working poor. It wouldn’t really affect anybody else. This is pretty-much the same as what you’re advocating anyway, except that the dole and pension can easily be used to discriminate against people, whereas it’s much more difficult to do with a universal payment to all citizens (though I’m sure it’s not impossible — nastiness can always find a way).
The Job Guarantee is a good idea, in my opinion, but it needs the UBI to keep it honest. If the Job Guarantee became coercive and hassled people, then the UBI gives them something to fall back on so they could just walk away. Without the UBI workers are trapped at the whim of bureaucrats who can be as cruel as their little hearts desire. With the UBI the Job Guarantee, work would need to be a positive step for people.
Likewise, the Job Guarantee would keep employers honest by stopping them treating workers badly, because workers can just walk away and get work with the Job Guarantee. The Job Guarantee could also push employers to pay proper wages because the workers could just leave if they didn’t. (Boy! Some employers are just gonna hate the Job Guarantee!)
I keep hearing people say that the UBI would be inflationary, and that the Job Guarantee wouldn’t… but then they go on to describe a form of Job Guarantee that sounds exactly like the UBI. What is the difference between Alice being paid by the Job Guarantee to look after her elderly neighbors and Bob looking after his elderly neighbors while living on the UBI? Well, the Job Guarantee probably costs the government a lot more. So how is the UBI more inflationary? Also, in one case the person has a boss looking over their shoulder, but in the other they do it because they want to help.
I’m amazed by the pervasiveness of this pessimistic view of humanity, that those on the UBI would do nothing. But that patently is not true. People volunteer for enormous numbers of things and work their butts off doing them. I know large numbers of people who volunteer for all kinds of things. People hate to be bored. They love to help other people — even an old hermit like me!
Something has been bothering me for a while now in all these conversations which seem to pivot around the UBI and Job Guarantee and inflation: we loosely bandy around the term “productivity” (I’m guilty of this too). But just what is it? How do we measure it?
Is a mother who stays home and foregoes an income in order to raise well-balanced intelligent children being productive? She isn’t producing any goods for the economy, and the child-minding services are missing out on her dollars because she’s doing it for free.
What about a weapons manufacturer? Are they being productive? Their goods either sit idle or are used to destroy things. Is that productive?
What about a fashion designer? They convince people to buy stuff at artificially boosted prices and to discard old, “unfashionable”, but perfectly serviceable stuff that often ends up in landfill. Is that productive? What about when the old gear goes to secondhand shops?
Are vehicle manufacturers adding to the productivity of the nation? My instinct is to say “yes”. But what about when we offset all the years of lost service of vehicles built to fail after about 7 years? Is that a positive or a negative?
Whitegoods manufacturers are even more obvious in their built to fail designs. Are they being productive?
If another manufacturer came to market with designs that lasted for centuries, with efficient machines that you could hand down to your kids and grand kids, would they be more productive than the shonky manufacturers? Or less?
If a homebuilder created homes that used safe, low-voltage DC systems on solar power, and plumbing and wiring that was easy to access and fix yourself so that plumbers and electricians were never needed, and the homes used a low-energy, self-regulating system to keep the temperature and humidity constant indoors regardless of what it was outside (like termites do), and if that home was so well built that it would easily last for centuries, would that be productive? Think of all the energy it wouldn’t require, all the work it would never need, all the money that wouldn’t be spent on upkeep. Is that productive?
If a terrorist blows up a building, destroying it and killing dozens of people and injuring many more, is that productive? Now more homes must be made, police, emergency workers, doctors, and funeral directors get paid. Think of all the equipment that needs to be replaced and the boost to manufacturing.
Is the boss who pays himself a lucrative wage more productive than his lowly paid workers who actually create the stuff?
Please understand, I’m not being sarcastic here, I’m genuinely and honestly interested in this. I really don’t know how to calculate productivity and I’m beginning to believe that nobody else does either.
I’ve heard some say that it should be calculated on hours, but that doesn’t make sense: a heroin dealer can put in long hours and it’s absurd to talk of a factory robot putting in hours. The most brilliant artist can spend weeks or months on a painting, or a talented writer months or years on writing a novel, but die in obscurity. Or a clown pretending to paint can put in exactly the same number of hours (e.g. Picasso), or a writer can spend months turning out a worthless book (“Art of the Deal”).
You can’t calculate it on money either. Is a millionaire junk-bonds trader more productive than a farmer who produces acres and acres of food? What about when the share trader makes a lot of money and bankrupts the farmer so that he loses his farm, which then goes fallow?
And you can’t calculate it on physical objects created because that leaves out the whole service sector, not to mention the entire information economy. Oh, and don’t get me started on the information economy, where I create ebooks when I download them, and if I do so from Project Gutenberg (as I often do) then they cost me nothing, yet I have an entire book now that I didn’t before. Is that productive?
This whole topic seems sometimes like those honey traps that sundew plants use to trap small creatures. It appears to be important and of great benefit to society, but it is sticky and the more we struggle the less we seem to be able to get anywhere. [sigh]
the UBI is a necessary equal component to anything stated about the JG. Your explanation of two balancing each other is intellectually and pragmatically paramount.
As far as productivity being the wrongful central focus of discussion, I agree.
The common good of the Australian People must always be the utmost priority of any political or philosophical discussion.
Why the necessity of a regular job? Why not choose a life of creativity or rationality?
Why not contribute to a life of the mind?
Isn’t education the key to resolving earth’s problems? Shouldn’t we prioritise the role of educators in society?
What is the real value of money? Why should we live life at the behest of economics?
If we are going to be challenged by robots and artificial intelligence shouldn’t we be fulfilled by contributing to expertise in society?
Health and exercise physiology will also be included.
Agriculture,engineering and creative arts- the list is endless.
The basic idea is to live other than via brute competition.
Socialism hasn’t been a failure,it just hasn’t been comprehensively enjoyed.
I desire to see a universal payment to all citizens before I die.
You’ve read my mind, Annabel. Great comment.
Jennifer Meyer-Smith, I’m sorry I didn’t notice your earlier answer. I had been puzzling over how we should define productivity. I think you’ve hit upon the answer: the common good. We now have a science of happiness which lets us objectively measure and study happiness. Sam Harris wrote a book, “The Moral Landscape”, in which he stated the case for being able to use science to navigate the vista of potential good and bad solutions. Perhaps it isn’t the elusive (and I think ultimately undefineable) “productivity” that we should be chasing, but the common good.
Annabel Jenkins, I think what you’re asking takes us close to the answer. The next wave of automation, which will include artificial intelligence (AI), will change everything. A large fraction of the jobs market will disappear. It looks like there will be very little creation of new jobs to compensate for the loss, so large fractions of society will be permanently out of work. There are varying guesses as to what that fraction will be, but it is likely to be something like half the employable population (perhaps more, perhaps less). At that point we can either consider all those people an underclass of failures who are denied a “right to work” and are destined to live a life of deprivation and misery and desperation…
OR we can wake up to the fact that there is no inherent reason why we should need to work at all. As you say, why not choose a life of creativity or rationality? — a life of the mind? Society will be amply wealthy enough to pay everybody a basic income and people could explore their own capabilities without the limitations of a 9 to 5 job, without a boss, without the need to trade the hours of their life away for tokens.
This was in abc news today.
Rise of the machines: Is a universal basic income the answer for mass unemployment?
your last paragraph is spot on.