Providing a basic income to all that’s not enough to live on makes no sense. The first order should be a guaranteed minimum income for those who need it
John Quiggin, an economist, Professor and Research Council Laureate Fellow at the University of Queensland, has written a recent article for The Guardian on how a functional conception of UBI would look despite the current and successional neoliberal course. Quiggin argues that the political cautiousness of centre-left parties has resulted in their failure to provide radical alternatives to neoliberalism since its inception in the 1970s. The article outlines that the UBI offers a potential alternative to the present economic standing. The question is, how to introduce it in such a way as to render it achievable.
Where many proponents of UBI stress the “universal” aspect of the idea, Quiggin suggests that our emphasis should instead be on the “basic” aspect to begin with. That way we could start by providing a sufficient income to those most in need with the intention of expanding it to the entire population. This would meet the objective of ensuring that everyone has at least a basic income from the outset, and it could be achieved by building on structures that are already in place.
Quiggin claims that it would be more effective to introduce sufficient income support in a model more likened to the “guaranteed minimum income” which would then become universal incrementally, rather than starting with a small universal payment and increasing the level over time, until an adequate level of income is reached. This would significantly reduce the risk that the program would be disbanded or derailed before meeting the target of being adequate enough to live on, which would likely take several decades. Quiggin explains “Of course, an attempt to expand access to income support will be politically difficult, more so than advocacy of a small universal payment. But, in an environment where the economic and political order is breaking down around us, political caution is a road to oblivion. Social democratic parties need to break with their current role as the responsible managers of the status quo, and offer a radical vision for the future. An expanded, and ultimately universal, basic income is such a vision.”
The idea of a universal basic income (UBI) has been around for a long time. However, it has seized the imagination of large sections of the public only very recently, in the wake of the global financial crisis and the subsequent political upheavals.
The failure of the market liberal (or neoliberal) economic order that has been dominant since the 1970s is evident to just about everybody. This has presented a big problem for the parties of the centre-right, supporters of the “hard” version of neoliberalism exemplified by Margaret Thatcher. But it has presented an even greater problem for the parties of the centre-left, which capitulated to neoliberalism in the 1990s, but sought to retain their relevance by offering a “soft” version, sometimes described as a “Third Way”, along with claims to superior, less ideological, management.
None of this works in political terms any more. The right has mostly managed to retain its support by stoking resentment against various ethnic, religious and cultural minorities. But the left needs new and exciting ideas, after decades of defensive managerialism. A UBI seems to fit the bill.
As a vision of the future, there’s plenty of appeal in the idea of a society in which everyone has sufficient resources to meet their basic needs, regardless of their assets, abilities or the way they choose to live their lives. But once we return to the realm of electoral politics, the unavoidable question arises: how do we get there from here? Given the obvious impossibility of implementing a UBI in one or a few terms of governments, what should be the first steps?
For a variety of reasons, the most ardent supporters of a UBI are more excited by the first term “universal” than by the second, “basic”. Logically, this leads to the idea that we should begin with a small universal payment, which would gradually increase in value to the point where it becomes sufficient to meet basic needs.
Alaska’s Permanent Fund Dividend, paid out of the invested proceeds of oil royalties is often cited as an exemplar of this approach. The fund, which began operations in 1982, paid out about $2100 to every Alaskan resident in 2015.
There’s an obvious problem here. $2,100 a year is $50 a week, a handy addition to the budget but not nearly enough for a person to live on. So, in the absence of independent income (say, from private investments), the number of Alaskans who have been freed from the need to work, or meet the demanding conditions for unemployment benefits, is approximately zero.
Nor is there any real prospect that this will change. Even if the dividend were to double or triple, it would not provide a poverty line income as defined by the US government, let alone a decent living standard. And, in the absence of an unlikely oil bonanza, there’s no reason to expect any increase at all.
In practical terms, a strategy of starting with a small universal benefit, and gradually increasing it, can yield no real impact for several decades. Over the course of such a period, it’s virtually certain that some real or imagined budgetary emergency would see the program curtailed and ultimately scrapped.
The alternative is to start with “basic” rather than “universal”. That is, begin by providing sufficient income to support a decent standard of living to those most in need, then expand it to the entire population. This approach is often referred to as a guaranteed minimum income (GMI), and is seen by many UBI supporters as a second-best “residualist” scheme.
In reality, however, provided the objective of ensuring that everyone has at least a basic income is achieved, UBI and GMI schemes are almost identical. To be more precise, in terms of the ultimate distribution of income and effective marginal tax rates (including the effects of means-testing basic payments) any UBI is equivalent to a GMI with the same guaranteed payment and similarly progressive taxes, and vice versa. For wage earners operating under the pay-as-you-earn system, there would be no difference in net pay, just a different way of calculating it on the payslip.
The main difference is that the UBI requires collecting more taxes from people on high incomes and returning some of that revenue to the same people in the form of a universal payment. The appeal of making the payment universal must be weighed against the “churning” costs of collecting and returning it. In an integrated tax-welfare system, such as that we have in Australia, these costs, while real, are not huge. For taxpayers, the UBI could be implemented as a tax rebate, which would cancel out the extra tax relative to a GMI. So, if we actually achieved a genuine GMI, transforming it to a UBI would be largely a matter of definitions.
But the problem of the ultimate design is less important than the choice of a path to get there. Compared to “universal first” the “basic first” approach has the merit that we are already part of the way there, and the next steps involve clear, and feasible, political demands.
The basic old age pension in Australia is around 28% of male total average weekly earnings (MTAWE) for single pensioners and 42% for couples. This income has proved sufficient to eliminate, almost completely, poverty among the old, who were once the most exposed to privation. The same level applies to service pensions, disability support pensions and carer payments.
By contrast, unemployment benefits (now given the Newspeaky name Newstart) were briefly set equal to old pensions at 25% of MTAWE under the Whitlam government. However, a long series of cuts and freezes have reduced access to benefits and cut their relative value to around 18% of MTAWE today. That’s been combined with aggressive attempts to claw back benefits from anyone who might possibly have received income in addition to their benefits, culminating in the recent data matching fiasco.
Any demand to increase access to basic incomes therefore involves a direct assault on the policy directions that have prevailed for at least the past 25 years. It links an ultimate, currently unattainable objective to immediate political struggles. Until they capitulated to neoliberalism in the 1980s, this combination of currently achievable goals and and an ultimate objective of transforming society was the standard approach of social democratic political parties.
Of course, an attempt to expand access to income support will be politically difficult, more so than advocacy of a small universal payment. But, in an environment where the economic and political order is breaking down around us, political caution is a road to oblivion. Social democratic parties need to break with their current role as the responsible managers of the status quo, and offer a radical vision for the future. An expanded, and ultimately universal, basic income is such a vision.