Friday, 8 April 2016

A guaranteed basic income - surely its time has come

Writing in the Guardian back in February last year on the subject of work-life balance Channel 4 correspondent Paul Mason wrote about the possibility of a guaranteed basic income of £6,000 and how this could benefit many working class people. I only came across this article the other day and so thinking that it had only just been written I wondered why he wasn't mentioning Finland taking up this initiative in recent weeks but that was of course before I realised it was written way back three months before the UK General Election when there was still some hope Labour would be the party in government.

8 million gold coins dropped in a Swiss square to celebrate the successful petitioning for a referendum on BI.

The idea of a guaranteed basic income where you are unconditionally handed a government sum of, say, £6,000 a year for basically doing nothing is of course a wonderful thought just by the mere thought of it. What's not to like about that? But naturally anyone hearing this proposition for the first time would be quick to ask the serious questions about how exactly this would work, how much would it cost, what would be the economic effect of it on the country and so on. I myself went through this idea and its associated questions carefully in my mind before becoming convinced that I was onto something.

Lets just imagine it for one moment a fantastical scenario where you are guaranteed to get a cheque for £6,000. We'll take the example of a tooth fairy visiting you in the night after you lose a tooth and leaving you with a cheque for six grand and a note from the tooth fairy saying she'll be back the following year and each year after that leaving the same sum should you save just one tooth to leave behind. So basically you're guaranteed this large some of money each year. What would you do then? Carry on working forty hours a week on the minimum wage to maximise your income? Or just go part-time so you can earn a little more for the extra perks in life whilst having enough spare time to devote to other activities you enjoy doing or the extra work you could do for your family, friends or community. It's a very appealing prospect and the psychological benefits would be obvious, you're in work so you're away from the stigma of unemployment but you're not having to work for so long and still able to save up money for loads of Christmas presents, your holiday abroad, your tickets for gigs and festivals. It's the life to dream of.

But its the wider communal benefits that provide the measurement of such a scheme's success. If the general working culture is to move from working 40 hours a week to working between 20 and 30 hours a week then that would surely free up spaces for more workers. Take a factory floor of 40 people, just for easy maths, each working full time at 40 hours before the advent BI and now working 30 hours following its introduction. That's a combined weekly time of 1600 hours before BI and now working 1200 hours. It is now possible to employ around 13 extra staff on a 30-hour week or 20 extra staff on 20 hours. That would be doing an enormous amount to reduce unemployment. And if this practice is replicated in other jobs including the more skilled ones many graduates struggling to find the work they've been begging for would have their search fulfilled even if it is just part-time.

Having considered this we are looking at a future in Britain's working class where most people are able to find the middle ground between two unpleasant extremes - unemployment on the one hand and long hours on the other. Both extremes cause many people a great deal of stress. Despite having so much time on your hands to do a lot of enjoyable things you can afford to do, the experience of being unemployed on jobseeker's allowance brings much baggage with it - the stigma, the guilt, the lack of money to spend on more of what you enjoy, the feeling of not contributing enough to society, the waste of your talents, the fear of losing your benefits if you don't do enough to prove you're looking for work, the overall depression. If BI drastically reduces the unemployment level that's a lot of people with improved self-esteem and reduced anxiety. At the other end, working 40 hours a week on the minimum wage can have an equally draining effect. Many people, even graduates find themselves having to work the same hours in menial jobs, week-in, week-out for little financial and recreational reward. So exhausted are you and so short is the weekend and so little money you've earned that you may end up doing very little worthwhile just so you can relax. If you didn't have to work so many hours you could find extra time for your hobbies, your social life, your added community contribution and therefore your mental health.

Of course £6000 is a lot of money. But that's maybe what would be needed to replace both Jobseeker's Allowance and Housing Benefit. But one can imagine a mere £3000 - £4000 to be substantial in meeting many basic costs like food and bills and would not be lost if employment is found. Lets just call it a 'lower basic income.' Because this basic income has met those basic costs short of rent it would take less time to save money for bigger expenses and many people would be spared having to resort to pay-day loan companies and others would be able to pay off their mortgage sooner so they have more money for the other things in life. If you're wanting to move away to another place like from a small town to a big city having the money saved would help you to find somewhere to rent and settle in before looking for work.

There are many questions people would ask of basic income, obvious questions about funding and consequences and so on - lets consider these questions.

It would cost a lot of money, taxes would have to go up, wouldn't it?
Yes it would. It would cost much more than the current expenditure on welfare benefits. So then the question is 'would you be happy to pay more tax'. Personally I would but I don't know about others.
It all depends on how much you raise the basic rate of tax. If it is a further 10p in every pound then with my crude guesswork it might be that every low-paid worker is at least £1,000 better off. But it will be the mathematicians who we should leave to figure out how exactly the taxation would work to ensure this sort of pledge could be phased in so it works effectively. I have heard an argument that actually basic income could be paid for by quantitative easing - yes printing more money. That's a difficult line to advocate when we think of how uncomfortable people would be with a policy that potentially causes inflation. But then inflation happens when quantitative easing is done in the wrong way, when it interacts too much with the money markets but possibly the argument is that with the money being used to improve individuals' purchasing power they could inject more into the economy without causing inflation by being a simple 'helicopter drop'. That possibility is to be explored another time though.

Wouldn't it create a disincentive to work?
Maybe for some. If you're still living with your mum and/or dad then even a lower basic income is going to be enough to live off as long as your parents are generous enough to just charge you £40 or £50 house-keeping a week. Maybe they'll be more lenient than that. Maybe they'll be more pushy. It all depends on the nature of your parents. For a lot of people however, basic income would hardly be enough to pay for their food, rent, bills and other living costs. But it could be a much needed supplement to the income they already receive from working. Few people in the position of somebody renting their own place to live are going to look at a basic income and see it as a reason to leave their job. Most people want to earn more money and therefore they will want to carry on working if they are already in a job in which they feel comfortable or at least okay. They will want that job security. But if it's an option to reduce their hours and they feel like doing so then potentially many part-time openings appear - perfect for those who can't be bothered to do much work. Lets consider for one moment undergraduate students. Many of them get loans and grants that allow them to spend without working. Yet many still take up weekend jobs. Why? Because they want the extra money. If working for money is a common occurrence among students who already have the money they need then one can imagine this would apply to the rest of society as well.

Is it right to pay this money to people who don't need it?
Lets put this one to bed once and for all. The whole idea of a basic income is that everybody receives it, thus eliminating the need for means-testing. It wouldn't be a basic income otherwise. Of course for the higher earners, it would be more symbolic, more of a formality than a necessity. The whole principle is that we are saying to everybody, whatever happens to your circumstances in the coming days, months and years you can be sure of this one guarantee, this safety net of a basic income. Additionally, higher earners will of course be paying a lot more in taxes and that will include the extra levied to pay for basic income. And that extra could be a lot more than any likely amount of basic income. And if anyone should complain about higher earners getting a basic income it should be people on a lower income. But for those of us who are on a lower income, while we may feel a little awkward about Government ministers, bank CEOs and showbiz actors picking up public money they don't need, we will still prefer that to having no guaranteed basic income for ourselves. Ultimately it's a small issue rectified by higher taxation for higher earners.

What would be the knock-on effect for the economy?
Critics will point to what they think will be a low work-incentive economy driving down production. Obviously that would likely happen if we handed out £12,000 to everyone as a basic income because many people would see no point in working. But we would only be handing out enough for people to enjoy a basic level of security. As explained earlier, people want more money so they will work for it. And if there is a shortage of housing with loads of people on waiting list for somewhere of their own to live then that says it all. We can be pretty sure these people on the waiting list are people who will not simply want to live with their parents or if they want to they can't. Generally they want their own place to live and know they cannot rely on a basic income so they know they have to look for work. And that will become a lot easier with more people reducing their hours of work so freeing up spaces for jobseekers to take up even if only on a part-time basis.

What about economic migrants? Would too many rush to our country if they could get BI as well?
This is a difficult one for me. Of course I do not wish to jeopardise my own pro-immigration stance in all this. But it would be a fair point. I am not personally interested in capping immigration, at least not while there's no real issue with it. Different parts of the country benefit from having immigrants especially when they fill vacant spaces for employers. The common complaint is that immigrants 'take jobs from locals' but very often it's the case that where there's work for migrants then equally there's work for local people. In places where there is a genuine problem with unemployment it's because the jobs have been cut and what few vacancies there are left the rush to fill them will be greater but most of the people in that rush and the people filling them will be local people anyway. It makes very little difference whether or not there are immigrants applying to the same vacancy as you are, the chances of getting the job remain the same regardless. People who complain about immigrants because 'they steal jobs' should instead be focusing their energy on protesting against cuts and inaction on job creation as well as the overall gap between the rich and the poor. I doubt if we are offering the lower basic income of £3000 it's going provide any greater incentive to come here than the present day Jobseeker's Allowance. Most people coming here from Poland and other countries in the EU, indeed any other country around the are doing so to find work. Whether or not they get a basic income they will still look for a job because they can ill afford not to with housing and food costs and bills to pay.

Utrecht, Netherland where Basic income is being trialled

Basic Income isn't a new idea. Thomas Paine in the late 18th Century advocated it. But only recently does it seem to have received a great deal of attention. Now Labour, the SNP and the various Green Parties are considering it on future manifestos. Even some right-wing thinkers believe that it will be of benefit if only because it simplifies the bureaucracy of the welfare system thus saving the department money.  It is being tried out in the Dutch city of Utrecht, Finland will have it soon and a referendum has been held in Switzerland on basic income. A whole lot of people at lower end of income scale is facing a difficult future and much talent could be lost if it isn't nurtured. And talent is potential creativity which is a potential benefit to local and wider economies. Lets not let it go to waste, lets get Basic Income into our manifestos.

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