by Karl Widerquist | Sep 5, 2020 | Opinion, The Indepentarian
Originally published by Open Democracy. 14 August 2020, under the title, “Basic income could virtually eliminate poverty in the United Kingdom at a cost of £67 billion per year”
Universal Basic Income (UBI) – a policy that would provide a regular, cash income to every citizen without means test or work requirement – is surprisingly inexpensive. The United Kingdom could introduce a full UBI (one large enough to live on) for just £67 billion per year or 3.4% of Gross Domestic Product (GDP), according to a study Georg Arendt and I recently completed.
Attention to UBI in the United Kingdom has increased substantially as the Scottish Parliament discusses experimenting with it and as policymakers discuss it as a temporary measure to boost the economy during the Covid-19 outbreak. While a pilot project can examine some of the effects of UBI, this kind of study is necessary to determine how much it is likely to cost.
The cost of UBI is often exaggerated because many authors focus on its ‘gross cost’: the size of the UBI times the population. The gross cost of UBI is not a cost in any meaningful sense, because it ignores the great extent to which the new taxes people pay to support UBI are cancelled out by new money they receive in UBI. The real cost of UBI is the ‘net cost’ – the amount people receive or pay after subtracting the amount they pay themselves. The net cost of a full UBI for the UK is only about one-third its gross cost.
Our study is based on data from the 2014/15 UK Family Resource Survey. It uses microsimulation analysis from the European Union’s EUROMOD Tax-Benefit Model to subtract out the amount people pay themselves and determine the cost of a roughly poverty-level UBI of £7,706 per adult and £3,853 per child.
Key findings of the study include:
- The cost of a full UBI for the United Kingdom is £67 billion per year or about 3.4% of GDP.
- This figure is the net cost – the real cost – of a UBI scheme of £7,706 for adults and £3,853 for children. This assumes a 50% income tax rate for net beneficiaries integrated into the UK tax-and-benefit system in a way that ensures the majority of UK citizens benefit from the transition and no one in the bottom 20% of the distribution of income is financially harmed by the loss of programmes replaced by the UBI. Although net beneficiaries’ tax rate increases, they receive more in UBI than they pay in additional taxes.
- This UBI scheme adds only 39% to the cost of the UK’s existing benefits system (not including the spending on the National Health Service), and an 8.7% increase in the UK’s total government spending (£67/£771 billion).
- This UBI scheme is a net financial benefit to most households in the lower 70% of the UK income distribution, making it an effective wage subsidy (or tax cut) for millions of workers and their families.
- The average benefit over the existing system for each net-beneficiary family is £4,056.
- Under this scheme, the percent of UK families with incomes below the current official poverty line would drop from 16% to 4% and poverty among children and the elderly would all but disappear.
- The net cost of this UBI scheme – the gross cost minus the amount people pay to themselves (£155 billion), and ignoring the costs and benefits of integrating the UBI into the existing tax and benefit system – is about one-third (35.4%) of its often-mentioned but not very meaningful gross cost (£438 billion).
- Also subtracting the cost of existing programmes that can be replaced by UBI without financially harming anyone in the bottom 20% of the income distribution makes the net cost only about 15% of the programme’s gross cost.
- This UBI system eliminates absolute poverty (e.g. as it is measured in the United States) from the UK.
- According to a 2015 piece in the Guardian, the UK currently spends over £93 billion per year on corporate subsidies and tax breaks. If so, the UK could entirely fund a UBI by eliminating corporate subsidies and tax loopholes. No increase in individual taxes would be necessary, and the government would still have £26 billion available for corporate subsidies.
- Countries with similar per capita income and similar tax-and-benefit systems should expect the cost of UBI to be a similar percentage of their GDP.
Those remaining in poverty under the scheme would be much closer to the poverty line than they are now and would have enough to get by in combination with other government payments and services. Therefore, we conclude that a UBI of this size would eliminate absolute poverty in the United Kingdom, a powerful result for less money than Parliament currently spends on corporate subsidies and tax breaks.
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by Roland Duchatelet | Aug 31, 2016 | Opinion
About 80 years ago, academics and policymakers in the US wondered if the country’s wealth was improving every year or not. They decided that the “added value” that was created in a country was the appropriate measure for wealth creation.
These policymakers looked at the quantity and price of goods sold by agriculture, deducted the value of goods acquired, like chemicals, tractors and fuel, to define the added value of agriculture in the economy. They did the same for the manufacturing and building industries and for services provided by bankers, hair dressers, restaurants and shops.
True, the wealth provided by a restaurant is short-lived, but industrial products do not last forever either. What you pay for a product or service is probably the best possible practical measure of its value. It all made sense.
Then they wondered what to do with services consumers didn’t pay for, like police and public administration. Those services were added to the “wealth of the country” at cost, since they were definitely contributing to our welfare by avoiding chaos. In 1930, public employment in the US was only seven percent of the total work force. That has most definitely increased, with more and more people entering public administration through universities similar to Norwich University.
The Gross Domestic Product, GDP, became a faith of the “Labour Church”. That it is faith and not reason was illustrated the last years by the huge impact on financial markets by statistically irrelevant changes of China’s growing GDP, like 0.5 percent, while its measuring inaccuracy is around 2.5 percent (see publications of Harry Wu, economics professor at Hitotsubashi University in Tokyo).
Since 1970 machines, robots and computers have massively reduced the work force in agriculture and industry, considerably reducing the “added value” in those sectors.
I will now give examples of why GDP is not a good measure of wealth anymore.
- During the seventies, many European countries tried to solve rising unemployment following productivity gains in industry by creating new jobs in public service. Whether the newly appointed public servant did useful things or not, it supposedly increased the wealth of the country, since its cost, not its value, was counted in the GDP,
- Imagine that parents living in a village of the US have organised themselves to collectively watch their young kids and organise festivities for the community. That sort of work is not a part of the GDP. In Sweden, it is. Towns there enroll parents to take care of kids and organise parties and other events. This way, voluntary work is converted into paid work and thus GDP.
- If a country, for example Greece, drastically increases the number of its public servants and increases their salaries, they boost their GDP and make the IMF, the EU and creditors happy until the deadline comes to pay the loans used to fund the fantasy-growth of their GDP.
The examples show the same root cause of the problem, being the belief that unpaid labour has no value and paid labour has value even if the work is useless.
The approximation to count public services at cost is a design error in the GDP. It induces some countries to implement wrong policies to get a “better” GDP, at least for a short time, the time to get re-elected.
A nation is wealthy if it takes care of its people. For example, Belgium distributes an average of €550 in cash and another €420 pay-in-kind (free education and health care) per month per citizen. Many countries are now distributing a lot of money to the population (see this Economist graph). All of them do that in an incredibly complex way because the system grew over decades without being re-engineered. It is very likely that most wealthy countries will streamline their social security systems to make them more efficient and fair, like Finland is currently doing. No doubt that version 2.0 of our social security systems will contain a “basic income” core.
Shortly, my friends, within a few decades, the purchasing power distributed by a country to its citizens will replace the GDP as the measure of their wealth.
by Mike Valentine | May 3, 2023 | Arabic
لا يتفق الديموقراطيون والجمهوريين كثيرا، ولكنهم يتفقون بسهولة على تلك النقطة وهي ان سياسات التضامن الاجتماعي الحالية لا تعمل. ويخشى اللبراليون ان السياسات الحالية المتقلصة لاتصل للكثير من يحتاجونها بينما يخشى الجمهوريين ان تخلق اعتماد على الدولة وكلاهما صحيح.
كانت البرنامج الاساسي للمساعدات النقدية المؤقتة للعائلات الأمريكية تشمل في عام 1995 ثمانية وستون بالمئة من العائلات ذوي الدخل المنخفض، بينما حاليا فقط ثلاثة وعشرون بالمائة من الفقراء يحصلون على دعم. السبب الأساسي لهذا التغير هو تحديد فترة المعونة انما لا تزيد عن خمس سنوات، واقل عن ذلك في بعض الولايات، وزيادة تشديد شروط من يحق له الدعم. ادت تلك السياسات لتخفيض عدد المندمجين بالضمان الاجتماعي بزيادة الفقر في الولايات المتحدة، لضغط عائلي وزيادة من الأطفال المطروحة للتبني. حاليا تعيش 1.46 مليون عائلة أمريكية تضمن 2.8 مليون طفل بأقل من 2 دولار في اليوم وبذلك تحت خط الفقر الشديد المحدد من البنك الدولي.
في نفس الوقت أدت الشروط الزائدة لتحديد من يستحق الدعم الهادفة لتقليل الاعتماد على الدولة لنتيجة عكسية. في سبيل المثال ترينا المقارنة بين ولايات ذو شروط صارمة للعمل من ولايات مع شروط أكثر مرونة وجد ان في هذه الولايات الحاصلون على الدعم يجدوا وظائف أفضل: المتلقين ينتقلون إلى أجر أعلى، وعمل ذو مزايا أعلى. والسبب في ذلك على الأرجح هو لأن لديهم متسعًا للبحث عن وظيفة جيدة ومناسبة. بدلا من ان يكونوا مجبرونا لا ان يأخذوا اول فرصة عمل تقدم لهم. ونلاحظ نتائج مشابهة في الولايات التي ربطت تلقي الدعم بممتلكات الحاصلين عليه، وفي تلك الحالات، فلا يحصل مثلا من يمتلك سيارة على دعم، فكما هكذا شرط يتبق على الاسر الفقيرة فليس بإمكانهم الاستمرار بوظيفة في مناطق تنقص فيها وسائل المواصلات العامة.
والأسوأ من ذلك، بعض الباحثين يكتشفون “تأثير الهاوية” حيث يفقد متلقو الرعاية الاجتماعية على الفور جميع المساعدات (بما في ذلك مساعدة رعاية الأطفال) بعد زيادة طفيفة في الدخل. نتيجة لذلك، يرفض العديد من الأهالي فرص ترقية لأنهم سيكونون في نهاية المطاف أسوأ حالًا من الناحية المالية. سيتخذ أي رب أسرى نفس القرار إذا كان يعني القدرة على إطعام أطفالهم وتحمل تكاليف رعاية الأطفال الجيدة.
يجب أن نعيد تصميم هذا النظام بأكمله. في أكثر الدولة ازدهارًا في العالم ، من المضحك أن ينشأ الأطفال في نوع من الحرمان الذي نربطه عادةً مع البلدان النامية. في الوقت نفسه، يجب أن لا نعيق أي شخص من زيادة دخله أو أصوله. أحد الحلول المتاحة هو الدخل الأساسي الشامل ، والذي من شأنه أن يوفر فائدة سنوية لكل مواطن. ومع ذلك، فإن هذه الفكرة تأتي بسعر باهظ وستزيد إما من عجزنا القومي أو تزايدة من معدل الضريبة الهامشي، وكلاهما قد يكون سياسيًا غير مجدي. الحل الأبسط هو ضريبة الدخل السلبية (NIT) .والتي من المحتمل أن تكون أرخص من جهودنا الحالية للتخفيف من حدة الفقر NIT ائتمان ضريبة قابلة للاسترداد ترفع كل أسرة على مستوى الفقر الفيدرالي. الطريقة الأكثر فاعلية للقيام بذلك هي تقليل الائتمان ببطء (على سبيل المثال، تخفيض 0.50 دولار لكل زيادة قدرها دولار واحد في الدخل المكتسب) بحيث لا تكون هناك عقوبة على العمل الشاق.
قام الباحثون في جامعة ميشيغان بحساب كيف تبدو هكذا خطة في الممارسة العملية. على سبيل المثال، إذا لم يكن لدى الأسرة دخل، فسيكون ائتمانها الضريبي 100 ٪ من خط الفقر (20.780 دولارًا لأسرة مكونة من ثلاثة أفراد ). إذا زاد الدخل المكتسب للأسرة إلى نصف خط الفقر (10.390 دولارًا)، سينخفض الائتمان الضريبي إلى 15.585 دولارًا. سيتم إنهاء الائتمان الضريبي تمامًا بمجرد وصول دخل الأسرة إلى ضعف مستوى الفقر (41،560 دولارًا أمريكيًا). تكلف هكذا خطة ما يقرب من 219 مليار دولار سنويًا ويمكن دفع ثمنها بالكامل تقريبًا عن طريق استبدال معظم أو كل برامج الفقر الحالية لدينا .
من خلال هذه السياسة البسيطة، يمكننا تحقيق العديد من الأهداف لكل من اليسار واليمين. سيتم القضاء على الفقر بين عشية وضحاها. سيتم إزالة مثبطات العمل. سيتم تقليص البيروقراطية الأمريكية بشكل كبير. ستكون العائلات حرة في اتخاذ القرارات المالية دون تدخل الحكومة. وعلى المدى الطويل، سنوفر المال. يكلف فقر الطفل وحده 1.03 تريليون دولار أمريكي (نعم، تريليون) سنويًا. في القرن الحادي والعشرين، القضاء على الفقر ليس معقدًا، ولكننا نعمل بهذا الاتجاه بأسوأ طريقة ممكنة
من ليا هاميلتون / مترجم من احمد الباز
عن المؤلف:
ليا هاملتن أستاذة مساعدة في الخدمة الاجتماعية في جامعة ولاية أبالاتشي . حصلت على شهادة البكالوريوس في العلوم من جامعة ولاية ميتروبوليتان في دنفر ودرجة الماجستير من جامعة دنفر ودكتوراه في السياسة العامة من جامعة أركنساس. عملت كعاملة في مجال رعاية الحضانة ومدربة لمدة خمس سنوات في دنفر، كولورادو. تشمل الاهتمامات البحثية للدكتور هاملتون الفقر والعدالة الاقتصادية والسياسة الاجتماعية.
Title: Why Welfare Doesn’t Work: And What We Should Do Instead
Original article
by Peter Knight | Feb 10, 2023 | News
Martin Wolf of the Financial Times has a new book, The Crisis of Democratic Capitalism, in which he dismisses UBI very superficially.
Geoff Crocker has posted a review in which he argues that Wolf’s “summary dismissal of proposals such as basic income, which he calls a ‘delusion’ (p278)” lacks depth. Crocker writes: “Stating that a UK basic income of £11,200 per adult would cost £580 billion or about 25% of GDP, and is therefore unaffordable and that ‘that is all there is to say about this idea’ (p283) is superficial and trivial. He equally dismisses his colleague Martin Sandbu’s more refined proposal. In static analysis, writers like Malcolm Torry and Stewart Lansley have shown that basic income schemes can be revenue neutral and achieve progressive redistribution. The further dynamic case that automation reduces labour income per unit of output, requiring increased non-labour income is equally ignored. Recent macroeconomic modelling by Cambridge Econometrics has demonstrated the stability of a basic income proposal funded by debt-free sovereign money.”
Read the full review here.
by Tyler Prochazka | Jan 17, 2023 | Featured
Taiwan is making history by sending out a one-time universal cash payment of $6,000 New Taiwan dollars (NTD) to every citizen “young and old.” This is the first time the country has implemented such a policy, and it comes as a result of excess tax revenue of $450 billion NTD, much of which is coming from corporate taxes that have seen record-high profits. $140 billion NTD will be dedicated to the cash payments, with the remainder going towards improving labor and health insurance systems and providing funding for local governments.
UBI Taiwan hailed the move as a victory for Taiwanese citizens, as the payment is unconditional and universal, meaning that everyone in the country will receive it, regardless of income or other circumstances. They said it reflects the growing demand that a greater proportion of Taiwan’s growth is shared with average families.
“This is a huge victory for the basic income movement,” UBI Taiwan founder Tyler Prochazka said.
UBI Taiwan promotes unconditional basic income (UBI) in Taiwan. UBI is a policy that periodically sends out unconditional cash payments to every citizen in a country regardless of an individual’s income or job status.
The organization has noted the problem of stagnant wages for the last two decades in the country and the rising cost of housing. Through basic income payments, they argue that many Taiwanese could pursue better opportunities and improve their education.
“Unconditional cash transfers are an efficient way to provide an ‘economic vaccination’ to make sure that everyone can face the future in a healthy and happy manner,” said Jiakuan Su, the new chairman of UBI Taiwan.
Over the last few years, Taiwan’s economy has experienced record-breaking 6.45% GDP growth in 2021 and over 8.73% growth in exports in 2022. However, most people have not enjoyed the fruits of this economic growth, as a 104 Job Bank survey found that real wage growth was nearly zero in 2022 due to inflation. The universal cash payment is a way for everyone to have a small share in Taiwan’s economic success.
“With the rise of the pandemic over the last few years, Taiwan has experienced rapid changes in its economy and society,” Su said. “We have experienced directly why Taiwan needs a resilient social welfare system to protect each person’s economic security.”
Since the payment is equal to all taxpayers, it will have a progressive effect with a greater proportion of the refund going to low-income earners. There is some expectation that the cash payment could help stimulate the economy because low-income households are more likely to use the money to satisfy their essentials, such as food and housing, freeing up some additional discretionary money for recreational uses as well. A greater willingness to spend by average families could help smaller businesses that may have struggled since the pandemic.
Both political parties have agreed on the general outline of the proposal and the cash could be sent out as soon as February. A surprise has been that the plan appears to be a universal rebate of the revenue instead of a targeted one, which will make it easier for everyone to apply and reduce administrative costs and time. One area still under consideration is whether foreign taxpayers will receive any of the money.
Previous cash assistance schemes during the pandemic were targeted and a stimulus voucher was sent universally. The pandemic vouchers were limited in how they could be spent and had an expiration date, similar to the vouchers under former President Ma Ying-Jeou.
Members of the Kuomintang (KMT) and Taiwan People’s Party (TPP) argued during the pandemic that cash should have been sent out instead of vouchers. At the time, the TPP held a news conference with UBI Taiwan to discuss the benefits of cash over vouchers. Many also complained that the targeted cash programs were difficult to receive because of the strict conditions.
Research by the World Bank later demonstrated that the simplicity of universal and unconditional cash payments during the pandemic increased access to the assistance and likely provided economic stimulus. Previous research showed a multiplier effect up to $2.6 for every dollar sent. Fears of saving the cash were largely overblown. For example, in over a dozen economies primarily in East Asia, 40 percent of the universal cash transfers during the pandemic were directly used for consumption.
Besides improved standard of living, research on basic income consistently shows improved mental health and trust in society. A meta-analysis of basic income policies looked at eight governmental reports as well as seven peer reviewed studies. They found there was justification that the alleviation of stress from financial instability could be a reason for improved mental health from basic income.
There have been criticisms of the current cash payment plan, including concerns about inflation. However, it is important to remember that this is surplus tax revenue that has already been collected and is not new money created by the central bank. An effect on inflation is just as likely if the government directly spends the money or if it is sent back to taxpayers.
Additionally, while it is true that Taiwan’s insurance systems require further reforms for sustainability, the vast majority of the surplus revenue is being used to shore up these systems and provide an emergency fund. A one time injection of funds is helpful but will not save these systems in the long run.
Previously, basic income advocates from UBI Taiwan have suggested that Taiwan could establish a sovereign wealth fund (SWF). Such a fund would act as a guarantee that Taiwanese could enjoy more equity in the growth of Taiwan’s economy even if wages remain stagnant. Excess revenue could be placed in the SWF and invested in the economy, with dividends from the SWF distributed back to the people each year, similar to the system in the US state of Alaska. The Alaska Permanent Fund sends out a yearly payment from the oil revenue generated in the state. In 2022, the universal payout reached a record high of $3,284 USD.
“I applaud the government’s decision to send the universal cash transfer and hope this establishes the precedent for Taiwan to consider making this a permanent policy,” Su said.
Prochazka furthered that by making this payment equal to all citizens, the government is taking the “first small step” towards ensuring that the benefits of economic growth are shared by all.
