Should Australia introduce a universal basic income?
YES KEITH RANKIN Economist, Auckland’s Unitec Institute of Technology
Auniversal basic income (UBI) is an unconditional dividend paid from public funds to all adult tax residents or citizens, coupled with a flat rate of income tax. It is not the only cash benefit available, just as income tax is not the only form of tax levied. Both the basic income and the flat tax fully conform with the principle of horizontal equity – treating equals equally.
There are two principal objections to a UBI: affordability and fear that it might encourage people to choose lazy lifestyles.
The reality is that a UBI – with the benefit set at a practical level (for example, $230 a week) – is work-enabling: it frees people to accept short-term and parttime employment. Presently, the selective welfare system, incentivises people on the margins of the labour force to arrange their lives so they qualify for benefits instead of working.
The introduction of a UBI taxbenefit regime is an affordable two-stage process.
The first stage is one of fiscal accounting innovation. All Australians with annual incomes between $80,000 and $180,000 receive, net, 63% of gross earn- ings plus $12,053. We can view this as an income tax of 37% and a "public equity" benefit (PEB) of $12,053. Other Australian taxpayers get a lesser PEB. In UBI stage one, we also re-label the first $12,053 of the income of beneficiaries and pensioners as a PEB.
The second stage is to convert the PEB into a dividend by ensuring that all (rather than most) Australians receive at least $12,053 of publicly sourced income .
A UBI represents both economic democracy and a productivity dividend. It enables the overworked to work less and the underemployed to work more. So long as the unconditional benefit and the flat tax increase over time, we can happily let capital – for example robots – do more of the necessary work that labour does at present, without creating dystopic inequality.
LNO GIGI FOSTER Associate professor, school of economics, UNSW Business School
ike its peer nations, Australia looks after its struggling citizens using a targeted, means-tested social security and welfare system. This means we customise assistance based on a person’s needs. So an unemployed single mother receives a different amount and type of assistance to a disabled 60-year-old unemployed veteran. Because in principle everyone qualifies for assistance if they find themselves in strife, this system approximates a basic income with exceptions for people who don’t need it, plus customisation of monetary and in-kind benefits to suit the varied needs of the struggling.
This system isn’t flawless. For one thing, help comes only on request, which creates an administrative burden, a waiting period, a social stigma and the twin possibilities of misreporting or mismeasuring the need. For another, as one’s circumstances improve, benefits are clawed back. Some suspect this creates a disincentive to improve one’s circumstances
– for example to get a job.
Should we replace this system with a basic income? “Basic income” can mean many things. The minimum interpretation I’ve seen involves giving each unemployed person a fixed amount. This might reduce the administrative burden of taking care of people but benefits would be less targeted to needs, and clawback, waiting periods and stigmatisation would still occur. Also, without support like skills training and job placement assistance, people disconnected from markets may have trouble re-integrating.
A more radical shift to a UBI, where every adult gets a government hand-out, might further reduce administrative costs and lower the stigma. But UBI in an amount worth the name is massively expensive (over twice our current welfare bill, using often-cited figures) and inefficient. We need smarter and more pragmatic policies to combat modern inequality.