What I think about a Universal Basic Income

A friend asked me what I thought about a Universal Basic Income. Here are some notes I put together a couple of months ago, when UBIs were the topic of the day here in New Zealand. TL:DR – I’m a supporter in principle, ‘though at this stage, a UBI may not be viable on fiscal grounds.

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A universal basic income may be New Zealand’s next big progressive move. As a country, we’ve often been at the forefront of social change, from votes for women to old age pensions and universal public health. Now we’re considering whether we should have a “UBI”, a Universal Basic Income.

The idea of a UBI is that every citizen would get a small income from the state, just enough to cover the minimum necessities of life. It’s a very, very basic income.

The usual suspects have leapt into print to shout the idea down. Apparently it’s communism, no one would ever work, it would cost too much and it’s completely impractical.

A universal basic income is hardly communism. A number of countries have started working on UBIs. Switzerland is holding a referendum this year, Utrecht in the Netherlands has a pilot programme, and Finland is investigating a comprehensive UBI. New Zealand itself already has a partial UBI: we call it New Zealand superannuation and we pay it to everyone aged 65 or over. None of these countries are communist countries, and some of them don’t even regard themselves as socialist countries. Describing UBIs as “communist” is simply wrong.

Likewise, the suggestion that people won’t work if they get a UBI is wrong too. Our own senior citizens show us this. Many people aged 65 and over are still in paid employment, and others are actively engaged in their communities. They run charities and volunteer schemes, they help with reading and gardening at schools, they do conservation work and look after grandchildren.

People who receive the unemployment benefit usually look for work too. Unemployment in New Zealand soared from 3.7% in 2007, to 6.9% in 2012. That wasn’t because people suddenly realized that they could get the dole. It was simply because work was unavailable. When good jobs were available, people took them. The great majority of people want to work, and they want to have far more to spend than would be provided by a UBI.

Sometimes people point to the difficulty of employing seasonal workers as a reason for not having a UBI. If unemployed people won’t even do six weeks of fruit picking, the argument goes, why would we expect them to work when they can get a basic income, no matter what?

But this ignores one of the big problems with our current rules around the dole. At present, if you become unemployed, you have to go through a stand down period which is usually up to two weeks long, but could be up to thirteen weeks. That’s two weeks with no income which can be very hard for low wage workers to survive. They can be better off not taking on the work in the first place. However, under a UBI, the money earned from seasonal work would be extra, and there would be no stand down time. This would make it much easier for unemployed people to take on seasonal and part time work.

The cost of a UBI is certainly an issue. It could cost anything up to $50 billion, and that money has to come from somewhere. However, at least some of it would come from current welfare spending. Taking a serious look at what it would cost, and how it would be funded, is part of the investigation. Simply dismissing a UBI out of hand without actually investigating it is wrong.

The practical advantages of a UBI are not in doubt. At present, we have a confusing array of benefits and entitlements and abatement rules, all of which is very impractical and costly to administer. A UBI would be much more straightforward to administer.

There are many arguments in favour of a UBI, such as valuing the work done by at-home parents, ensuring that basic needs are met, encouraging unemployed people to take on extra work, enabling people to escape abusive relationships, and so on. Perhaps in the course of the investigation, we will find that even though we would like to have a UBI, we can’t afford it right now. But surely, we can afford to at least take a look.

This entry was posted in Economics, NZ Politics and tagged , , . Bookmark the permalink.

3 Responses to What I think about a Universal Basic Income

  1. I have attached a link to a website, Verso Books, which have recently published an excellent book on UBI.
    Explores the potential benefits, and practical applications of the UBI, highly recommended

  2. Allister says:

    I like the idea of a UBI, but I think the main thing making a hard sell is what it does to the top marginal tax rates as you try to rebalance the tax take to pay for the UBI. As a crude example, lets say you have an UBI set at $25,000 and you feel that someone presently on $100,000 should be no better or worse off. You need to tax their $125,000 ($100,000 salary + $25,000 UBI) at a higher rate than present, which if we use the current tax brackets, means the top tax rate would have to rise from 30% to 70% to get back the extra $25,000. Although this person is no worse off than before, they will not like the look of the 70% top tax rate. Someone on $200,000 will be paying a lot extra tax (and perhaps they should!). You probably have to adjust all tax brackets to higher percentages or perhaps head towards a flat tax rate – all of which could give the impression of being a highly taxed workforce as people ignore the extra UBI income supplement.

    I don’t think you want to abate the UBI for higher earners as that actually complicates the underlying principle that the UBI should be simple to apply and not subject to conditions that could influence how people report income etc.

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