Tuesday, 7 April 2015

Basic Income

A friend asked about basic income on Facebook, so here is my attempt to unpack and explain what it is and why I think it's a good idea.


There are various arguments against Basic Income that inevitably come up on the basis that suddenly giving everyone vast amounts of money would trigger runaway inflation, or cause everyone to instantly quit their job or whatever. Any responsible implementation of BI would be done over the course of several years - perhaps a decade! - in order to gradually introduce it.


A basic income (or universal income) is a small sum paid to every citizen of a nation, regardless of means, in order to guarantee their survival. Some people peg its level as a "living wage" but personally I opt for the lower "survival income" -- for me, a basic income is very literally the basic amount of money needed to survive in society. At the moment in the UK, this would be around £6k/year for 18-55 year olds (you might justify a higher rate for the elderly since they do on average need more money on basics like heating and mobility).

Crucially, a BI would replace almost all in-work and out-of-work benefits paid by the state. In the UK, that would be: council tax benefit, housing benefit, jobseeker's allowance, child benefit, state pension. It would not replace things like Disability Living Allowance, which is a survival income top-up for those whose life costs more to maintain even at a survival level.

Finally, the BI I envisage would be accompanied by a lowering in the minimum wage such that a full-time minimum wage job would earn the same before and after the change - about £4/hour. Also the personal allowance of ~£10k would be abolished, so that taxation would start from the first pound earned.


One of the common reasons proposed for BI, which I believe in, but not as fervently as others, is that pragmatically, there are more people who want to work but can't afford to (because their benefits would be withdrawn) than there are people working on marginal incomes who would stop working to purely live off their BI.

Furthermore, since we currently force benefits claimants to jump through so many administrative hoops, switching to a BI would save money on bureaucracy.

You can look at BI as a small technocratic shift in the way we distribute money to the poor -- right now we use means-testing to ensure that only the needy get the money, but this leads to high "withdrawal rates" of benefits, meaning that there are those caught in a "benefits trap" who want to work but literally can't afford to do so: a combination of childcare costs, travel costs and withdrawal of benefits for taking the job make the job either worth a trivial amount per week or possibly even worth less than the benefits being paid.

You can look at this and say that perhaps our out-of-work benefits are too high, but it's also the transactional costs that are problematic: if you start any job your benefits are immediately stopped and can take 6 weeks to come back of you lose that job. That makes any short-term labour implausible.

A BI ensures that however much a person works, there is always some incentive.


People -- usually right-wing people -- talk about "rights and responsibilities", usually in terms of forcing people to work for their benefits.

Most people would agree that everyone ought to have the right to Maslow's basic needs: food, warmth, shelter, clothing (and wifi?), but many insist that access to those basic rights comes with a responsibility to find work.

I would say that the responsibility at that level is to obey the state's laws -- principally in this case to not take what they need from their environment; at least in theory, a citizen might be able to live off the land, had not the state enclosed and sold it all. In trade, the state owes its citizens at the least access to those basic resources.


Automation is not only improving productivity, it's putting low-skilled people out of jobs. This trend is surely only going to continue as cars and trucks become driverless and more and more of the agriculture and logistics train is automated. Eventually there will be no jobs for idiots to do at all.

This is radically undermining the right-wing notion that everyone ought to seek work, because eventually, there will be no jobs at all. In such an idyllic paradise, the idea that people have some sort of moral responsibility to work will become nonsense.

On that basis, a BI can be seen not as an alternative to work, but a dividend paid to citizens by the process of automation; by denying people cash-paying work, employers have a responsibility to pay a fraction of the proceeds gained by automation back to the communities they have removed the possibility of work from.


Most minimum wage jobs are awful, and the people who would be depending on a minimum wage are those most likely to be affected by a BI scheme.

A BI radically changes the power relationship between minimum wage employees and employers, because employees suddenly have much less of a fear of quitting, if they know that they can leave and still support themselves for a little while while seeking alternative employment.

BI would not necessarily drive incomes up in minimum wage jobs, but what it would do, I think, is deflate thousands of petty tyrants who reward those who suck up to them with extra shifts, and punish those who disobey with less work or less pleasant work, or good old-fashioned physical or verbal abuse, safe in the knowledge that their victims cannot afford to escape.


The most common argument against a BI is that the lazy will simply stop working and live off their "unearned" income, and that this is worse than the current situation where far more people want to do some work but can't afford to.

To that I basically say "humbug" -- a BI system would incentivize work for those on low incomes by ensuring that by not means-testing benefits, work would always pay. Furthermore, the survival income that I propose is pegged to such a low level that life lived on it would by pretty desperately uncomfortable for most. The advantageous properties of a BI is not that it's a lot of money, but that it is a reliable small amount of money.


It's also often said that a BI is a nice idea, but would cost too much. Various organizations have taken steps to cost out a BI. From what I've seen, the rule of thumb is that the BI would cost about twice as much as the benefits it is replacing, but if the tax system is altered to wholly recoup the BI of those earning more than the mean income, then that recoups half the total cost, leaving the BI as a fiscally neutral change.


Should a BI be paid to children? If not, you need child benefit, if so, they're being given a heap of money.

The solution here is to pay a fraction of the BI to the parents and stash the rest in a savings account that would give all adults as they reach their majority a so-called Stakeholder Grant, which should be approximately the cost of a university education, allowing children as they become adults to choose whether to spend that SG on higher education, or on starting their own business, or the down-payment on a house.

This also allows you to disincentivize large families by paying gradually less to the parents for each successive child, stashing the rest in the child's account. (I don't particularly believe that people with large families do it for the benefits, but even if they did, here's the answer)


A BI fulfils a citizen's right to survive through an unconditional, low-valued monthly grant, instead of the various means-tested benefits currently in use. Those out of work can find work knowing that that work will definitely bring in a positive income, and the state saves money by cutting admin costs. Children automatically save for a university degree. What's not to like?

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