Saturday, April 25, 2015

Universal Basic Income: An Idea whose Time has Come

The Universal Declaration of Human Rights, adopted by the United Nations in 1948, is the first global expression of rights to which all human beings are inherently entitled. It includes the most obvious right of all, that we are all born free and equal and have a right to life, liberty and security of person.

But how can we be secure without having the means to meet our basic needs? Or do those basic human rights not apply to the homeless, the working poor or the children who suffer from food insecurity? Rising income inequality and the loss of jobs puts more and more people in that category.

Trading work for income seems to be harder and harder to implement. From self-check in at airports to self-cleaning toilets, automation has replaced human labor, to the point where 'work' has acquired a new meaning. In some areas of the economy, it is no longer connected to activities that traditionally provided 'income, which means that less and less people benefit from economic growth. (The Rise of Robots – and Decline of Jobs – Is Here)

Over the past four decades wages have been flat, because substituting capital for labor through automation is increasingly attractive to companies. Owners of capital are getting richer, while workers are getting poorer. Even in areas that we think require the 'human touch', like teaching or cutting hair, if broken down into small enough steps, automation is gaining ground. Taxi drivers, airline pilots and journalists might soon be a thing of the past.

An added problem with automation is that machines don't pay income tax. they basically work 'illegally', replacing human labor with 'cheap' labor, which does not generate revenue. How then, do we pay for all the services that people need to function as a society? Who will pay for our roads, our schools, if machines don't pay taxes?

Although the free market is very good at creating incentives to innovate, and for allocating scarce resources, it was not designed to share the prosperity it creates. French economist Thomas Piketty warns us that if we don't find a way to expand the circle of prosperity to include more of the have nots, America's hyper-unequal economic model will generate a 'dangerously imbalanced political situation.'

Rather than let it come to a point where we see an explosion of rage, we could be intelligent about this and create a basic income on a national level. * This would be a regular, monthly amount, paid in cash, independent of a job. It is not unaffordable since we already spend vast amounts in subsidies. Not only is the current welfare system like a pipe full of holes, it also stops people from working. (It takes a dollar away from you every time you earn one, so if you are paying 100% tax rate, why should you work?)

The idea of providing everyone with a guaranteed basic income is not new. Thomas Payne, founder the human rights principle, said that 'the basic needs of all humanity must be provided for by those with property, who have originally taken it from the general public. This in some sense is their "payment" to non-property holders for the right to hold private property' just on the basis of being human.'

Abraham Lincoln enacted the National Homestead Act of 1862. It granted 160 acres of public land to any head of a family 21 years of age or older who agreed to reside upon the land and cultivate it for five years.

Franklin Roosevelt, in his annual Message to Congress in 1944 stated that:'We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. “Necessitous men are not free men.” People who are hungry and out of a job are the stuff of which dictatorships are made. In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all — regardless of station, race, or creed.' It was also proposed by Milton Friedman in 1912 and went by the name of 'negative income tax'.

But if we gave everyone an unconditional, basic income, who would do all the hard work that nobody wants to do? Wouldn't the economy collapse and chaos ensue?

In the late 70's, the Mincome Project was run in Canada, to determine whether a guaranteed, unconditional annual income would be preferable to a welfare system and its negative effect on people's willingness to work. The pilot program showed that, contrary to what people feared, guaranteeing a minimum income did not result in people working less. It showed improved health and many other benefits.

Nowadays the interest in an unconditional basic income is fueled by the increase in inequality. Since the mid 70's, productivity growth is up 80.4%, while median hourly compensation has risen a mere 10.7%. This means that less and less people are able to participate in society and take care of their own lives.

Several countries in Europe are considering a guaranteed basic income. Holland is starting a pilot project and Switzerland is already considering implementing it.

An unconditional basic income would be easier to implement in countries where a larger share of the GDP goes to the public sphere. The UBI would replace social benefits to a certain extent and giving people an extra 1000 dollars a month would help the economy. It would be invested, put into buying a truck, put towards purchasing other goods, etc.

Since a rising share of income is going to capital rather than labor, it is only fair that part of the UBI would be paid for via taxes on profits and investment income. More progressive taxation on the wealthiest people, who happen to be in the right place at the right time.

A UBI would have the added advantage of allowing people to do work that is indispensable but that we don't get paid for; taking care of our ageing parents, our children and it would improve our quality of life.

The discussion around a basic income is currently taking place in Austria, Switzerland and Germany. The biggest hurdle against it is not economical, it is psychological. Why would you get money for free? What about our sacrosanct work ethic? But we have to accept the fact that many of us no longer can rely on 'work' to make ends meet.

It's a question of ethics. When growth at any cost begins to erode our 'inalianable rights', rights that have been given to all human beings and for which governments are created to protect, it is time to consider an alternative, especially when that alternative is clearly within our reach.

We should be proactive, rather than wait until half of the population is unemployed, when things get so bad that change will only happen through violence. That would be a lot more disruptive to society than what a Universal Basic Income is proposing. leave comment here

* Transitions for Society: Job Guarantee and Basic Income
Basic Income The Movie (eng subtitles)