Cross-Examination: The Universal Basic Income – A Step on the Road to Serfdom?

BY JASPER LAU

In the past couple of years in New Zealand, there has been growing calls for the introduction of a form of universal basic income to be implemented in New Zealand. With a study conducted by Chartered Accountants Australia and New Zealand finding that up to 46% of current New Zealand jobs (885,000) are at a risk of automation over the next two decades, there is a realisation amongst academics and politicians that calls for new solutions are warranted.[1] Similarly in 2016, the Labour Party presented their Future of Work Commission report to the public in determining the way in which uptake of new technology will affect the workplace in New Zealand. The report found that artificial intelligence and automation posed greater risks to unemployment, inequality and insecurity for workers. Although the idea of a universal basic income has existed in different forms in academia, it is through the recent ‘endorsements’ by the likes of Mark Zuckerberg and Bill Gates that has garnered the idea serious attention in public discourse.[2] The purpose of this cross-examination is therefore to explore this idea of a universal basic income and discuss its potential benefits and criticisms.

What is a universal basic income?

A universal basic income (or known as UBI) is a fixed and unconditional regular income, paid to everyone by the government in a given economy.[3] A UBI is not dependent on income, age, health or any other status, but simply, a sufficient amount of money that is given which can help meet the basic needs for individuals.[4] Proponents for a UBI argue that a multitude of converging reasons including rising inequality, stagnant wages across western societies, displacement of traditional career jobs and of course, exponentially advancement of technology and automation  point to the need to guarantee for individuals at least some income. As American writer Scott Santens puts it, a “basic income” would be a promise of equal opportunity but not equal outcomes for everyone. A UBI would serve as a permanent earnings floor that individuals would not fall under by virtue of their social class.[5]

The UBI system would effectively remove various current forms of social security, though there are still question marks surrounding which programs basic income should replace. If a full basic income were to be implemented, the cash handed out to citizens would need to be high enough to ensure that it would cover the systems that had been replaced, while also not being so high that it would remove the urge for many to seek other income and give back to the system.

One of the most surprising aspects about the discussion of the UBI, is that it has wide support and detraction from all views of the political spectrum. Even famous libertarian economist Milton Friedman, supported the UBI idea through his concept of a negative income tax.[6] Friedman recognised the fact that the free market did generate some inequalities in which society should try to correct, so that the constituents at least have means to their basic needs. Although he viewed most social programs as costly and unsuitable, he thought a UBI program would in theory be easier to administer. Through his discussion most commentators recognise the implementation of the UBI would likely mean a significant overhaul to our tax and welfare system.[7]

What are the potential benefits of a UBI scheme?

Proponents for the implementation of a UBI system generally highlight 5 key potential benefits of having such a system.

1) Alleviation of poverty. Like social security programmes, UBI is claimed to be an effective tool in reducing poverty within a society. The argument here is that by giving everyone a regular payment from the state, it would remove the poverty trap which afflicts people on welfare and those earning less.[8] A regular payment to those who cannot work or do not earn enough would allow them to spend it on food, clothes and shelter, hence reducing rates of material deprivation.  Harris and Bierema articulate this as an increased security for individuals because a UBI would be one way to ensure people’s livelihoods in an increasing insecure job market which could push individuals into increasing risk of poverty.[9] A commonly cited example of the UBI being successful is found in the small town of Dauphin, in Canada, between 1974-1978.[10] The scheme allowed all adults earning below $20,000 (NZD at that time) an extra grant of $7000. After the scheme had ended and Dauphin was then compared with other similar towns, researchers found people in Dauphin became richer, had an 8.5% decreased rate of hospitalisation and were less likely to quit their jobs.[11] On a basic level, it seems giving people a basic income would reduce poverty.

2) Increased entrepreneurship. One of the strongest economic argument in favour of a UBI is that a UBI would provide guaranteed support for entrepreneurs seeking their own start-ups. Introducing a basic income would help people take more risks with the extra money knowing their livelihood is secured with starting up a business.[12] This could potentially lead to a greater diversity of businesses, along with many being able to pursue further education, training and projects that they previously would not have been able to afford. A recent study from the Mowat Centre (independent Canadian public policy think-tank) found that a basic income could “de-risk” social entrepreneurship for people and encourage more people from marginalised communities to attempt a start-up.[13]

3) More transparent and efficient bureaucracy. Economic liberals in favour of a UBI scheme articulate that the UBI system would effectively remove various current forms of social security, though there are still question marks surrounding which programs basic income should replace. Currently in New Zealand, there are up to 53 different benefit packages available to people which critics cite as being complex and inefficient.[14] Not only would a UBI scheme reduce the administrative costs and paperwork associated with the current system, it would also likely reduce benefit fraud and be easier for users to access. It is also argued that a UBI would reduce the stigma for individuals that are currently receiving benefits from the state[15].

4) Freedom as an individual. A more theoretical explanation for the need of a UBI is that it is a tool that promotes individual freedom within a state. Belgian libertarian philosopher Philippe Van Parijs argues that a UBI is the only means to guarantee individuals a ‘real freedom’ to make choices.[16] He states that a majority of people do not have enough material resources to make free choices and cannot pursue to their own conceptions of a good life. Parijs therefore argues that a basic income allows individuals to “live as one might like to live.” A similar argument about freedom is made by those who say a UBI is needed to protect the power to say no to those who control the most resources in a capitalist society. What this means is that a UBI gives individuals the sufficient freedom to purchase the resources or goods necessary to sustain their basic needs, whilst not being coerced to spend all their time working.[17]

5) Rethinking the concept of work. A UBI would recognise domestic housework and voluntary work as valid work. Harris and Bierema state that individuals doing domestic work or volunteering for non-profit organisations do not get ‘paid’ for the work they actually do.[18] A feminist perspective, as articulated by Patricia Schulz, argues that a UBI scheme would tackle structural inequalities faced by women in both the public and private sphere.[19] She argues that despite women providing the largest part of care work in the home, the system exposes women to higher risk of poverty and dependence to welfare. A UBI as a human right would therefore challenge the existing structures.

What are the criticisms and potential risks of having a UBI scheme?

Although there are many potential benefits in adopting a UBI system, there are also a number of valid criticism against having a UBI scheme.

1) Expensive. One of the strongest criticism against the UBI is the fact that a nation-wide implementation has never been tried and it appears to be more expensive than first thought. Over in Australia, Gigi Foster (associate professor at the school of economics for the University of New South Wales) questions where the money would come from to pay for a UBI. She calculates that the present Australian welfare system costs around $170 billion per annum, so assuming a basic UBI would mean giving $20,000 AUD to 19 million Australians, it would cost approximately $380 billion dollars which is more than double the current existing welfare support.[20] A similar sentiment is shared by Robert Greenstein (founder and president of the think tank Center for Budget and Policy Priorities) who state a UBI in the United States would consume all the tax revenue and come at the expense of the social programmes that already exist.[21] He argues that a basic income would leave low-income families worse off because money that are currently targeted toward the poor would be transferred to a universal program shared by the middle and upper class too – making it less effective. The concern for costs regarding a UBI was demonstrated in a recent referendum conducted in Switzerland whereupon 77% of Swiss voters rejected a proposal to introduce a UBI in their country, citing costs.[22] A UBI system does not automatically ensure the prosperity of a country, and if not correctly implemented could well wind up leading to more financial issues in the future, says the critics.

2) Does not alleviate property. A recent OECD report found that a UBI scheme would not reduce poverty.[23] The report found that implementing a UBI in countries such UK, France, Finland and Italy would actually see losses among both the poor and the rich, with those in the middle more likely to gain. The report stated that if the UBI were fixed on existing minimum income benefits found in those countries, many of those will initially see a lift but unfortunately, would fall back into poverty again. As a consequence, many critics feel there is not enough evidence that UBI could fix poverty.

3) Disincentive for the motivation to work. There is the obvious problem of people taking the money and decide not to work. Gigi Foster also points out that in principle if the UBI were to come from increases in income tax rates, then people would be more strongly penalised for working additional hours and might hence work less.[24] She questions whether increase in entrepreneurship would in fact materialise.

4) Rising taxes to pay for it. In the most likely scenario for the implementation of a UBI scheme, it would seem a likely substantial raise in tax thresholds. Dr Eric Crampton (from the liberal think-tank The New Zealand Initiative) argue that current benefit programs are income contingent which helps target those most in need.[25] However with a UBI, it would remove these targeted programmes, increase taxes substantially and could in fact cost us more in the long run. He also raises concern whether with increasing migration in New Zealand that a UBI for all citizens is in fact financially feasible.

Is there any public or judicial support for a UBI?

Although there does not exist a direct poll to show the current support for a UBI in New Zealand, it is worth considering to note that political parties such as The Opportunities Party and Labour Party have tabled the idea within their thinking or policies. The Opportunities Party has advocated for a form of UBI to be introduced.[26]

Surprisingly in a case called Re Fehling the concept of a UBI was mentioned in passing by McGechan J.[27] The judge noted that a universal basic income was an aspiration towards an ideal rather than legislative reality.[28] This seems to suggest that any implementation of the UBI in the present moment would have to likely fall within Parliament, rather than an idea the judiciary would enforce.

In a world where technology is expanding rapidly and there is an apparent increase in inequality within many Western democratic societies, it seems logical that new ideas are needed to ensure the growth of the economy and also the welfare of all its citizens. Although there are many valid criticisms against the use of a UBI, there is also a plethora of potential benefits worth investigating. As New Zealand continues to grow and prosper, a UBI would seem likely to be the next logical step in delivering a better country for all of us.

The views expressed in the posts and comments of this blog do not necessarily reflect those of the Equal Justice Project. They should be understood as the personal opinions of the author. No information on this blog will be understood as official. The Equal Justice Project makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The Equal Justice Project will not be liable for any errors or omissions in this information nor for the availability of this information.

[1] Chartered Accountants Australia and New Zealand “Disruptive technologies risks, opportunities – can New Zealand make the most of them?” (13 October 2015) NZIER <https://nzier.org.nz/static/media/filer_public/6d/6e/6d6ecf8b-032c-4551-b0a7-8cd0f39e2004/disruptive_technologies_for_caanz.pdf>.

[2] Karla Lant “Mark Zuckerberg just voiced his support for universal basic income” Futurism (online ed, 26 May 2017).

[3] Robert S. Rycroft “Universal basic income” in Robert S. Rycroft (ed) The American Middle Class: An Economic Encyclopedia of Progress and Poverty (ABC-CLIO, California, 2017) at 314.

[4] Scott Santens “Why we should all have a basic income” (15 January 2017) World Economic Forum <https://www.weforum.org/agenda/2017/01/why-we-should-all-have-a-basic-income/>.

[5] Scott Santens, above n 4.

[6] Robert S. Rycroft, above n 3, at 314.

[7] Keith Rankin “Universal Basic Income: a System of Tax Reform” (paper presented to the 2nd NZ Universal Basic Income Conference, Wellington, March 1998). Gareth Morgan “Scrap complex welfare systems and just pay everyone” The National Business Review (New Zealand, 11 December 2015).

[8] Jonathan Bartley “Universal basic income would eliminate the poverty trap faced by millions” (27 May 2017) iNews <https://inews.co.uk/opinion/universal-basic-income-eliminate-poverty-trap-faced-millions/>.

[9] Max Harris and Sebastiaan Bierema (19 March 2016) Future of Work <https://d3n8a8pro7vhmx.cloudfront.net/nzlabour/pages/4208/attachments/original/1461211267/Background_Paper_-_A_Universal_Basic_Income_for_New_Zealand.pdf?1461211267> at 1.

[10] Anthony Painter “A universal basic income: the answer to poverty, insecurity, and health inequality?” (2016) 355 BMJ 1.

[11] Rutger Bregman “Utopian thinking: the easy way to eradicate poverty” The Guardian (online ed, London, 6 March 2017).

[12] Max Harris and Sebastiaan Bierema, above n 10, at 2.

[13] CBC News “Basic income could mean more diversity among social entrepreneurs: report” CBC News (online ed, Canada, 26 May 2017).

[14] Max Harris and Sebastiaan Bierema, above n 10, at 3.

[15] At 3.

[16] Philippe Van Parijs Real Freedom For All. What (If Anything) Can Justify Capitalism? (Oxford University Press, Oxford, 1995).  

[17] Allan Sheahan Basic Income Guarantee: Your Right To Economic Security (Palgrave Macmillan, New York, 2012).

[18] Harris and Bierema, above n 10, at 4.

[19] Patricia Schulz “Universal basic income in a feminist perspective and gender analysis” (2017) 17 Global Social Policy 89.

 

[20] Gigi Foster “Universal basic income: the dangerous idea of 2016” The Conversation (Australia, 27 December 2016).

[21] Joel Dodge “The progressive case against a universal basic income” Quartz (online ed, United States, 23 September 2016).

[22] “Switzerland’s voters reject basic income plan” (5 June 2016) BBC < http://www.bbc.com/news/world-europe-36454060>.

[23] Mark Sumilan “Universal basic income would not reduce poverty” Public Finance International (online ed, 30 May 2017).

[24] Gigi Foster, above n 21.

[25] Eric Crampton “I love the idea of a Universal Basic Income. But here’s the problem” The Spinoff (online ed, New Zealand, 31 March 2016).

[26] The Opportunities Party “The Opportunities Party – UBI and thriving families” (2017) TOP <http://www.top.org.nz/top7>.

[27] Re Fehling [1997] NZFLR 857 (HC).

[28] At 864.