Universal basic income — we’re not there yet, not even close
Auniversal basic income, or UBI: everyone gets a set amount of money, paid by the government from taxation. Not enough to prosper, but enough to live on. Just like superannuation, only it’s for everyone.
Is that a good idea? Finance Minister Grant Robertson said in March that it was “on the table”, and support for the idea has come from both the left and the right.
There are some genuine advantages to a UBI. The first one is that it puts the issue of welfare squarely on the table. Debating a UBI is a useful way of debating what welfare nets we want.
Beyond that, most of the specific benefits of a UBI relate to its simplicity. Everyone gets it, end of story.
That becomes especially valuable in a period of volatile employment, because we would all have some certainty about our minimum income. If you lose your job, have to rethink your options, maybe retrain, and maybe it will take time to find another, it’s helpful to know you won’t be without an income during that time.
That’s especially true because the existing benefit system is not nimble or flexible and it’s easy not to know where you are in it. There are standdown periods, abatements if you still have some income, qualification hoops that can be hard to jump through.
And although the employment situation is extremely volatile right now, that may not change for a long time. The volatility may not ever change. We may claw our way out of a Covid-19 recession only to confront the workplace realities of future pandemics, any number of other threats to biosecurity, climate disruption. And AI.
Employment as we know it may not, for many of us, be with us very much longer. One day, a UBI may become simply the only realistic way to keep people functional in society.
A UBI makes it easier to work in a field where there is no reliable income, or perhaps none at all. Creating open-source software to benefit the world or simply to entertain us, for example. Working in the theatre, as a musician, as any kind of artist. You might want to dedicate your life to environmentalism: trapping rats and keeping your local beach clean and clear of invasive species. You might want to volunteer to help the elderly, the disabled, kids struggling to learn to read.
A UBI makes such choices more possible and, as old-fashioned employed work starts to disappear, far more legitimate too. You might want to run the household, and you’d get paid for it.
But we’re not there yet. We’re not even close.
The greatest immediate disadvantage of a UBI is political. Think of it this way: a lot of people, impressed with the Government’s handling of the Covid crisis, will vote Labour this year — unless Labour gives them a good reason not to.
The PM, always a cautious politician, and her colleagues will be thinking: a major restructure of the welfare system, just now? That sounds risky.
And there’s this: a UBI would give not enough money to people who need it and too much to those who don’t. Who in their right mind would vote for that?
UBI, as that line of thinking suggests, falls to pieces on the rock of how much. If everyone was paid a UBI equivalent to a single person’s superannuation ($652.04 per fortnight after tax), it would cost the country over $80 billion a year.
If we all got $200 in the hand each week, as Gareth Morgan has suggested, it would still cost over $50b a year. But for many people, $200 wouldn’t even pay the rent.
Robertson may have floated the UBI idea only as a temporary measure, which would make it less expensive. And the whole argument about money becomes much more sophisticated once you introduce savings in the existing welfare system. But the simple criticism remains: it doesn’t distribute the money where it’s needed most. That makes it unfair.
So what’s the answer? You could add various supplements to the UBI, but the more you did that, the less it would be a universal benefit. And you’d quickly start to ask, if it’s not going to be simple and universal, why on earth would we pay anything to well-employed people who don’t need it?
If there’s a problem with welfare assistance being too unreliable and/ or hard to access in times of income stress, it doesn’t need to be fixed with a UBI. The current system can be made simpler and fairer, and that should happen anyway.
In fact, in some ways, it just has happened. The Ministry of Social Development has set up Rapid Response Teams in parts of the country most acutely impacted by Covid-related job losses, and has introduced a growing suite of measures to help people transition as quickly as possible to cope with the sudden loss of income, get back to work or move into retraining.
If they can do it in a crisis, they can do it all the time.
It remains almost certain that for the foreseeable future the economy will change fast and face many more crises. If you accept we should not confront this with policies that strand large parts of society in everdeepening poverty, it’s clear we will need welfare reform. Does it need to be structural? Perhaps. But the simpler response would be to raise benefit levels and, as outlined above, make access to it easier.
The bigger need for structural change is in tax.
How about a wealth tax? You know, where we all — individuals, companies and other entities — pay tax on our net worth. Google and Facebook would pay it. Property speculators would pay it. Everyone would pay it.
It would be fair. It would be agnostic about where wealth comes from, conveying no unwelcome advantage on any investment sector — as we have with property now.
You could replace income tax and GST, or reduce them and introduce the wealth tax only for the most wealthy, as Elizabeth Warren and Bernie Sanders have both proposed in the US.
Whatever directions the economy moved in, it would continue to function. And it would clearly be redistributive, underlining the point that tax is a social good. In a thousand different ways, it can never be said too often, tax brings benefits to everyone. The thing is, while the budget on May 14 could well define Robertson’s career, his PM seems to have hinted there won’t be any new taxes.
The current system can be made simpler and fairer, and that should happen anyway.