What Are We Talking About When We Talk About Basic Income?

by Charlie Young

18 June 2017

Following an election that confounded the commentariat and the expectations of the establishment, it’s time to think big about the kind of society we want. There’s now a mandate for transformative thinking – economically, socially, and politically. The concept of basic income wouldn’t be a bad place to start. Sixty nine per cent of Brits would vote ‘yes’ in a referendum on implementing a ‘basic income’ – up seven per cent from last year – according to a recent poll. Basic income is the idea that every citizen or resident of a nation should be paid a common regular wage that is enough to support basic needs. A seemingly impossible idea, until recently, it’s now been flung full force into the political zeitgeist.

The idea’s been around for at least five hundred years, since Thomas More published ‘Utopia’, but it is only now, when questions of wealth disparities and cost of living have become especially extreme, that the idea of giving every citizen or resident of a state a base-level income stream is sounding like a more plausible solution. Around the world, basic income’s moving from fantasy to feasibility. There are large pilot programs under way in Finland and Kenya, the Canadian province of Ontario and the Dutch government are in the process of finalising experiments, and the Indian government is considering basic income as a more direct means of poverty alleviation than existing welfare schemes nationwide.

The Labour Party have been looking into the concept of late, and the Scottish Parliament is set to run trials very soon. Glasgow city council green-lit a study in March and other areas including Fife and North Ayrshire are considering basic income. Proponents see the universality that underpins the concept as a more human and more effective way of eliminating poverty, as well as dissolving the distinction between the deserving and undeserving poor. Basic income is talked about as a kind of ‘social floor’ that is philosophically distinct from the ‘social safety net’ so many get caught up in.

As the tectonic plates of our political and economic realities rumble, there’s clearly an appetite for big change. Proponents of basic income believe it could address a range of systemic failures in the economy. They are armed with convincing arguments and evidence which point to dislocations between economists’ expectations and lived experience. 7 in 10 people live on less than $10 a day, while in the UK four million children are living in poverty, 2/3rds of whom are from working families.  In terms of inequality, the global income ratio of the richest 20% to poorest 20% grew from 3:1 in 1820 to a whopping 74:1 in 1997. Today the richest 62 people own the same as the poorest half of the world. In the coming decades up to 47% of US jobs are at risk of automation. From 1979 to 2012 US labour productivity increased 74.5% while median wages, adjusted for inflation, rose a mere 5%. Private debt in the UK is growing faster than at any point since the financial crisis.

Coupled with this is a deficit of resources to cope with changing times. Government welfare programs are struggling to support the most vulnerable, address health and housing crises, and prepare for aging populations. This is all happening within an economic system where work done in the home, unpaid social care, and voluntary work are all ignored as economic contributions. The irregularity of work provided by the gig economy and massive increase in freelancing means security is hard to find. ‘Austerity’ is doubling down on these problems’ causes in the name of reducing national debt.

Many on the left see a basic income, and the stability it offers to the poor – indeed, to everybody – as a transformative move toward a more just and equitable system.

But here’s where it gets weird. There are people arguing just as passionately for a basic income from the opposite direction. A basic income, for them, would mean reductions in bureaucracy and an increase in the individual freedom necessary for the fluid functioning of the free market. Some on the libertarian right see it as an opportunity for them to enter mainstream politics through the back door, with basic income gradually eroding the ideological foundations of other practices of paternalistic government and leading to the dissolution of the welfare state. Still others argue that a basic income should be funded by a tax on land, wealth or shared cultural, technological and natural assets, perhaps as a first step in the restructuring of the modern macro-economic ecosystem with an eye towards eliminating income tax.

Basic income is anything but basic. It is a complex field of often divergent proposals and that fact is hard to notice from what’s on offer in the press. It’s important that we understand what governments mean when they talk about basic income. The fact that Martin Luther King, Freidrich von Hayek, Napoleon, Richard Nixon and John Kenneth Galbraith were all supporters of the idea suggests we should take a closer look. And when we do, it turns out they were suggesting fundamentally different things. Basic income is often presented as a silver bullet, but there is no solution that will magically hit distinctive and conflicting political targets. What the proposals have in common is the fact of payment. What basic income proponents disagree on is how the payment is granted, how much to pay, to what extent it is conditional, how it’s funded and what it might replace.

For example, the soon to launch scheme in Ontario is a minimum income guarantee. It is not quite a basic income (despite their repeated use of the term). The difference, while apparently slight, has considerable consequences. A basic income requires little to no administration, as no means-testing is required, and so eliminates much of the social stigma associated with welfare reliance. A minimum income guarantee retains a powerful poverty trap, namely that payments are removed as people approach a certain threshold of earnings. This poverty trap already exists in most means-tested benefit schemes, and is one that basic income eliminates. In the UK, as the earnings of the poor increase, schemes such as working tax credit, housing benefit, council tax benefit, national insurance contributions and child tax benefit are individually removed, applied or augmented. This collectively constitutes a punitively large marginal deduction to earnings so that for each additional £1 earned, sometimes only 20p actually goes to the worker. While the Ontario proposal could be a step toward basic income, many would argue it isn’t actually a basic income yet. One element of the program that is being co-designed with a First Nations community looks like it could be closer.

A government consultation in India shows that sometimes talk of basic income may be used to gloss policies that propose nothing like a liveable stipend. While Business Insider and the Independent heralded the recent announcement with the headlines “Indian Government thinks a Universal Basic Income could eradicate poverty” and “Indian Government to endorse universal basic income”, Amitabh Kant of the state’s National Institution for Transforming India said a prominent option on the table is a basic income in the form of small loans. Loans are obviously quite different from unconditional grants. The Ministry of Finance published a policy paper supporting basic income’s feasibility in February, but how exactly it might be delivered is still up for debate.

Basic income is not inherently progressive or regressive. However, the clue – or ‘tell’ – to the politics of each proposal can usually be discerned from what is said about paying for it. Most fall within the categories of either a) recalibrating existing tax and benefit systems or b) the all out replacement of the welfare state. The distinction is important. Progressive taxation and the reformation of unemployment benefits to pay a flat rate to all citizens, as advocated for by the Royal Society of Arts, the think tank Compass, and Unite the Union, is very different from the host of separate alternative proposals outside of the existing tax system, based in the communalization of commonly shared assets. Yanis Varoufakis suggests funding a basic income by siphoning off the some of the financial gains of automation and putting them into a collective fund. Dr Thomas Pogge has put forward the idea of placing a levy on the extraction of natural resources around the world and redistributing the income globally. Similarly imaginative proposals are popping up all over the place, and some of them are truly visionary, like taxing pollution of the atmosphere or by redirecting funds from regressive fossil fuel subsidies and taxing accumulation of wealth through rent.

Funding a basic income via a Land Value Tax (LVT), for example, has a long intellectual ancestry stretching back to Thomas Paine, the Levellers and Henry George. The primary philosophical justifications for this particular strand of basic income are rooted in redressing injustice, in redistributing unearned rent and dismantling the private ownership of that which is the common property of all – land. The Libertarian left have pushed the idea with gusto, to the consternation of the Libertarian right. When it’s coupled with the concept of an LVT replacing income tax altogether the concept is dismissed outright by the majority of the political centre. The doors opened by basic income are manifold and can lead far beyond the construction of a base wage into the realms of real utopian politik, however controversial.

On the other side of the political aisle there are proposals to fund a basic income by eliminating welfare altogether and encouraging the voucherisation of social services, like conservative US economist Charles Murray’s plan. Murray suggests paying every US citizen $10,000 a year, a more extravagant sum than most proposals, but that level of support is predicated on dismantling social welfare en masse – including Medicare, Social Security and Food Stamps. The Adam Smith Institute has discussed a similar model for the UK, as has the Institute of Public Affairs in Australia.

I’ve outlined just a few of the proposals on the table, and fresh, inventive iterations arrive with each passing day. To treat them all as synonymous would be a grave mistake, and could result in a transformative moment slipping through our fingers. A lot of different plans are marching under the basic income banner. If you want to know what their true colours are, then don’t be fooled by the all-things-to-all-people language used about them. Look at the bottom line. How are they going to pay for it? The devil is in the detail – and that’s where he’ll be, with his nose to the ledger.

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