One of the recurring ideas that crops up in alternative economics circles is the Basic Universal Income, or citizen’s income. In a nutshell, it’s a universal and unconditional payment made to every adult in the country, every month. This provides everyone with a guaranteed minimum income.
We have it in a very loose form in the UK already, through child benefit payments. A full scale citizens income would include adults too, with different rates for different stages of life. Everyone would receive it, and it would replace child benefit, state pensions, unemployment benefits and a host of other tax credits.
Reactions to this idea generally divide in two. The first group is ‘brilliant – free money from the government’! The second comes from those who think about it a moment longer and realise that it would be funded through taxes. Then they ask why you’d want to give benefits to rich people as well as poor people.
A fair question, but there is some sensible thinking behind the idea of the citizens income that makes it more than the national pocket-money scheme it appears at first glance. It’s also one of those ideas that has been advocated by politicians and economists from right across the spectrum. It’s been a recurring policy in the Green Party, but free-marketer Milton Friedman was a fan too. Martin Luther King called for it. So did Napoleon. It was discussed by the Labour Party in Britain in the 50s, and by the Republican Party in the US in the 60s.
There aren’t many ideas that can cross these sorts of ideological boundaries so freely, and when you find one it’s well worth investigating it a little further. Especially since it is getting a renewed round of interest in response to the Coronavirus.
A fair benefits system
The first reason to take a Basic Income seriously is that in a society that runs social security programmes of any kind, you will have net contributors and net takers. Some people work hard all their lives, save for their retirement and maybe even have private healthcare insurance. Where social programmes are fairly generous, there’s a risk that such people end up as net losers in financial terms, paying for the sections of society that can’t or won’t work.
The usual political response is to this problem is to cut benefits to ‘make work pay’, so that ‘spongers’ can’t live off the hard work of others. That’s legitimate, and a system that pays people not to work is obviously self-defeating, but it only deals with half the problem. If you cut benefits right down, you punish those who are legitimately out of work, and still end up with a large section of society that are net contributors. You can never create a fair system. All you can do is shift the burden back and forth between sectors of society, usually on the basis of who is most likely to vote for you.
The citizens’ income fixes that by securing a share for everyone. There would be less need for unemployment benefits, because everyone would get an equal cut of our shared wealth. The sum wouldn’t be enough to live on in any great comfort, so it wouldn’t encourage idleness, but it would be enough to provide a safety net for hard times. Everyone would get it regardless, so there would be no winners and losers in the benefits system. The endless arguing over benefits scroungers and the ‘hard-working’ middle would be solved at a stroke – everyone gets treated equally.
Rewarding unpaid work
Another good reason for paying a Basic Income is the vast amount of unpaid work that goes on in the economy. As things currently stand, you only get paid if you have a formal job. But just because you aren’t in a job doesn’t mean you aren’t working. Some of the most important work in the country is currently going unpaid.
Consider someone who chooses to drop out of work to care for an elderly parent. There is a cost to that care, and if the son or daughter wasn’t doing that care for free, it would have to be picked up by the state. Instead, that person has opted to take those costs in the form of lost wages.
The same is true of parenting. If you put your children into childcare and go to work, this creates two jobs – one of you and one for the carer. This is good for GDP, which counts all economic activity as positive, but it’s not good for the child or for the parent. This is rather perverse. Raising children is valued if it is done by a stranger, but is technically ‘worthless’ if parents do it themselves. All of society benefits when children are brought up well, and society suffers when children are brought up badly, so it is in our interests to value parenting.
Carers, parents and volunteers provide services to society that would be worth billions, but that work goes unrewarded. A citizen’s income would not be ‘paying’ people to do these things, since everybody else would get it too, but it would mean that those who choose to do important but unpaid work aren’t penalised financially for making that decision. Since a disproportionate amount of unpaid work is done by women, this would also be good for social equality.
A dividend in the national wealth
The forms of wealth that are most familiar to us are personal, accumulated through personal effort for the benefit of individuals. There are other kinds of wealth too though, things that are shared in common. That includes the atmosphere, the oceans, airwaves and airspace, and plenty of other things that belong to nobody and therefore to everybody.
As things currently stand, businesses get to use most of these shared resources without paying for them. Society picks up the cost collectively, so a public resource gets run down for private gain.
Consider a factory that pollutes the air. There are costs (externalities) that the factory owner doesn’t pay, from environmental degradation, to asthma and other health problems, and perhaps even a changing climate. Society pays those costs instead, even though the resource that the factory has used – the atmosphere its chimneys discharge into – belongs to all of us.
Environmental taxes already catch some of these costs, but the revenue usually just goes into the central pot of government spending, so we’re not really compensated as individuals. The same goes for our natural resource wealth. Revenue from Britain’s North Sea oil just goes into government spending, but other oil-rich parts of the world see it as a natural wealth that should be shared more equally – see Alaska or Norway.
A Basic Income recognises that we’re all shareholders in our natural capital. We all suffer when it is abused, so why shouldn’t we all benefit when it is used well? One of the key ways to fund the Basic Income is to levy a price on the commons. Businesses that use shared resources pay for the privilege, and those of us that are stakeholders in those resources are compensated. In that sense, the payments are not so much a universal benefit as a dividend in our shared national wealth.
Smaller government and personal freedom
One of the interesting things about the UBI is that it has been championed by both sides of the political divide. It is good for society and for the poor, but it’s also good for personal freedom and reduces the size of government.
Because it would be unconditional and automatic, you could sweep away whole swathes of bureaucracy that currently assesses, administers and polices the benefits system. You’d still need a few means-tested benefits for certain cases, such as disability, but many more general benefits and tax credits would be rolled up together. Many government services focused on poverty would be rendered obsolete, along with state pensions. Benefits fraud would be dramatically reduced. There are lots of potential efficiency gains from a Basic Income, and hence a smaller state apparatus.
The UBI is also good for personal freedom because it would give everybody an equal platform to build from. It would give people a safety net for those who wanted to retrain or start their own businesses. And of course you are receiving a dividend from the government in cash, for you to spend however you want. It would be entirely up to you whether you saved it, spent it or gave it away.
Funding a Basic Income
So the UBI sounds great in theory, but can we afford it, especially in times of crisis? I’ve already mentioned the savings from simplifying the benefits system, and state pensions, child benefits and unemployment benefits all offset the cost. I’ve also mentioned environmental and resource levies. The other big funding option goes right back to the earliest proponents of the idea.
The roots of the UBI go back to Thomas More’s Utopia, surface again in the French Revolution, and are perhaps best articulated by the revolutionary Thomas Paine. “The earth in its natural uncultivated state,” he wrote, is “the common property of the human race.” Private ownership and use of land deprives others of their “natural inheritance”, and so they should be compensated. In other words, the citizens income is best paired with a Land Value Tax.
Several countries have come quite close to implementing a UBI in the past. The Nixon administration got so far as to pass a guaranteed minimum income through Congress under the name Family Assistance Programme, but it was rejected by the Senate in 1972. There are several smaller-scale measures in place, including Child Benefit and some of the other universal benefits brought in by Britain’s Labour government.
The movement has had a significant boost from both ‘direct cash transfers’ used in developing countries, and the interest of dot-com billionaires in the idea. One of the founders of Facebook, Chris Hughes, has gone on to be a campaigner for the Basic Income. The Coronavirus has revived debates and injected some urgency, with Spain advancing the idea the furthest.
Could the Basic Income still have its moment?