by Citizens' Income Trust | Apr 21, 2014 | Opinion
Discussions of the advantages of a universal unconditional and nonwithdrawable benefits will generally list both the lower marginal deduction rates that individuals would experience compared with those imposed by means-tested benefits, and such social benefits as a greater social cohesion generated by everyone receiving the same Citizen’s Income. What is not always recognised is that changes experienced by one individual might cause changes for another.
Take an example from our current social security system. If a mixture of sanctions and incentives leads to someone previously unemployed finding employment, then, if the supply of jobs at the National Minimum Wage is relatively inelastic – that is, if the supply of jobs does not rise to match a rise in demand for jobs – someone else will not find employment who might otherwise have done so. 1 If the supply of jobs at any particular wage rate is instead elastic, then one person finding employment will not damage the chances of someone else doing so.
Let us now suppose that a Citizen’s Income scheme has been implemented. Lower marginal deduction rates will mean that individuals will be more likely to seek and to retain employment. Greater demand for jobs would mean that wages would tend to fall. As Anne Gray points out in her article, this might lead to the Government implementing a robust National Minimum Wage or a Living Wage. If employment at a particular wage rate is inelastic then there will be people seeking employment who cannot find it; but if it is elastic then there will be sufficient employment. The question for further research is therefore this: Would the existence of a Citizen’s Income make the supply of jobs more elastic? The Namibian pilot project 2 found that the answer to this is ‘Yes’. Self-employment increased substantially in the context of a Citizen’s Income. The security of the Citizen’s Income had increased people’s willingness and ability to start small businesses and seek out ways in which they can help themselves get through their initial startup, from raising capital to using ach payment processing for small business to help streamline the operation. The same would be likely to happen in the UK if a Citizen’s Income were to be implemented. This suggests that employment at the National Minimum (or Living) Wage would indeed be elastic, that those who wanted employment would be able to find it, or they would be able to create self-employment, and that the kind of active labour market programmes to which we have become used would no longer be required and would no longer risk depriving of employment those seeking it.
by Citizens' Income Trust | Apr 9, 2014 | Research
[Citizen’s Income Trust]
SUMMARY: On the 19th February The Independent reported that ‘only 3,200 people – a fraction of the original target – had been signed up to receive Universal Credit …. Under the original timetable, one million people were supposed to be receiving the payment by April, rising to 1.7 million a year later. … The DWP admitted that only 3,200 had been enrolled for Universal Credit by the end of November … The vast majority are young, single jobseekers, the least complicated category of claimant. As the Government has spent £612m getting the scheme off the ground, the spending so far equates to £191,250 per head. … Government sources insisted David Cameron and senior ministers remained committed to Universal Credit. … However, Whitehall officials were yesterday reported to fear the whole project could be scrapped after the general election, whichever party is victorious in May 2015. … Anne Begg, the chair of the Commons Work and Pensions Select committee, said the “jury is out” over its future.’ www.independent.co.uk/news/uk/politics/universal-credit-governments-welfare-reform-may-be-scrapped-after-next-election-9139458.html
Nigel Morris, “Universal Credit: Government’s welfare reform ‘may be scrapped after next election,’” The Independent 19 February 2014.
by Citizens' Income Trust | Apr 8, 2014 | News
[Citizens Income Trust]
At a seminar at the University of London on 5 March Guy Standing reported the results of a Citizen’s Income pilot project in which he has been involved in India over the past five years. In recent decades, India has relied on subsidised rice, wheat, sugar and kerosene to reduce poverty, but about three-quarters of the money allocated to the programme never reaches the people for whom it is intended. So an alternative method has now become essential. Cash transfers are the obvious solution, and for the pilot project it was decided that universal, individual, unconditional monthly payments would be the model to be tested. Guy Standing worked with the Self-Employed Women’s Association (SEWA) on the pilots with finance provided by UNICEF.
Guy Standing
There were three pilots. An initial small project in Delhi offered residents of a low-income area a choice between continuing with the subsidised goods or taking a cash transfer of equivalent value. . About half chose the Citizen’s Income. But after a few months of experience, over 20% of those who initially chose the subsidised food and kerosene asked to swap to the Citizen’s Income. All those who had taken the cash wished to remain with it.
The second pilot covered 20 villages in Madhya Pradesh. In eight villages every individual was paid a monthly Citizen’s Income while continuing to receive the subsidised food and kerosene, if they had been receiving them. Initially, each man and each woman received 200 Rupees a month, and each child 100, paid to the mother or surrogate mother. Subsequently, the Citizen’s Income was raised to 300 rupees per month for each adult, and 150 for each child up to the age of 14. These amounts were approximately one third of subsistence income. Twelve similar villages were taken as control villages in what was a modified randomised control trial, enabling the evaluation of the impact to compare individuals over time and with others like them who were not receiving the Citizen’s Income.
A third pilot was conducted in a tribal village, where every adult and every child received 300 or 150 rupees respectively. A second structurally similar tribal village was taken as the control village for comparative analysis.
In each of the 22 villages, a baseline survey (census) was undertaken and then evaluations carried out at six, twelve and eighteen months. In the villages in which a Citizen’s Income was received residents were required to open bank accounts within three months, and over 96% of them did so, the remainder being helped afterwards.
In the villages in which residents received the Citizen’s Income:
· Latrines were built or improved;
· Housing quality improved;
· Mosquito nets and repellents proliferated;
· Child weight-for-age moved closer to the normal distribution, and girls in particular benefited;
· Diets improved, with more fresh fruit and pulses being consumed;
· There was a lower incidence of illness;
· Spending on medical care and on schooling increased;
· 48 disabled people went to hospital when they were ill (and only two in the control villages);
· Secondary school enrolment outstripped enrolment in the control villages, particularly for girls;
· School performance rose;
· Indebtedness fell, and some men managed to escape from debt bondage. In the local naukar system, someone in debt has to work for the person to whom they owe money.
Particularly important results in relation to the critic-isms sometimes levelled at a Citizen’s Income were:
· Alcohol and tobacco use did not rise;
· There was a general increase in economic activity, particularly amongst women;
· The purchase of productive assets increased: goats, chickens, bullocks, buffaloes and sewing machines;
· More people in the Citizen’s Income villages increased their earned incomes than did those in the control villages. (An increase in work days was mainly generated by increases in second main economic activities and by a shift to own-account labour).
· Child labour shifted from external wage labour to work with adult relatives in own-account farming: a form of labour that is less disruptive to schooling.
What is particularly significant about these results is that they were obtained with a Citizen’s Income that was only about one third of subsistence income.
Questions and discussion followed the presentation.
Seminar led by Guy Standing, at the School of Oriental and African Studies (SOAS), University of London, on the 5th March 2014.
by Citizens' Income Trust | Apr 5, 2014 | News
A conference, entitled, “Citizen’s Income: A solid foundation for tomorrow’s benefits system,” will take place on Friday 6th June at the British Library (Euston Road, London) from 10 a.m. to 5 p.m. Speakers already confirmed include Natalie Bennett (Leader of the Green Party), Dr. Tony Fitzpatrick (Nottingham University), John McDonnell MP, Professor Guy Standing (SOAS).
The event will be genuinely a conference, in the sense that participants shall be conferring with each other over particular issues that face the debate on Citizen’s Income and that would face the policy’s implementation. Political feasibility, the design and modelling of alternative schemes, and funding options, have already been suggested as topics that require in-depth discussion.
Organizers ask people to register their interest in attending by sending name and contact details to info@citizensincome.org.
by Citizens' Income Trust | Mar 28, 2014 | Opinion
Malcolm Torry, Money for Everyone: Why we need a Citizen’s Income, Policy Press, 2013, xiv + 300 pp, 1 44731 125 6, pbk, £24.99, 1 44731 124 9, hbk, £70
Malcolm Torry delivers a blockbuster argument in favour of a Citizen’s Income to wholly or partially replace current benefits. His book is well-researched, well-informed, well-written, and is articulate and readable. His main argument is that, given widespread acceptance of a benefits scheme of some sort, then a Citizen’s Income is by far the best option. Specifically it avoids the disincentives of very high marginal deduction rates of current benefits which create the familiar unemployment and poverty traps. According to Torry, a Citizen’s Income would incentivise employment, training, new business formation, women’s participation rates, and can even reduce teenage pregnancy in Namibia. It is socially cohesive. It is less expensive administratively, less intrusive into the private detail of people’s lives, and less distorting of the markets for labour, goods and services. The Iain Duncan Smith / Steve Webb universal credit comes close, but is based on households rather than individuals as a Citizen’s Income would be, and is therefore deficient.
Torry’s very thorough presentation is worthy of the LSE tradition to which it belongs, established by major figures such as Richard Titmuss whom he frequently quotes. It offers a substantial social commentary. The excellent essay on poverty in chapter 11 is a classic case. Torry works as a vicar in London, and so has widespread awareness and understanding of the life situation of people with lower income struggling with a range of adversity, and this gives him great insight into the effect of benefits systems in the population. His deep study of the benefit system itself enables him to offer a uniquely powerful synthesis. The strength and extent of his argument for a Citizen’s Income appears to render it uncontentious. It is only cynical civil servants whose jobs may be at risk who stand in the way, together with inertia in the political system.
Due to its thorough coverage, the book is long, and sometimes repetitive. The argument on marginal deduction rates is repeated too often. But the main weak point is the lack of attention to economics, since herein lies one of the most powerful objective arguments for a Citizen’s Income. Torry’s uncertainty in economics appears immediately on page 1 where he writes ‘Citizens might spend it (a Citizen’s Income) on goods and services, thus creating employment; or they might save it, making lending and investment possible’. The first part of this sentence is thoroughly Keynesian and correct, whilst the second part is thoroughly neo-classical and incorrect. Saving in the Keynesian paradigm does not enable investment, but by reducing demand, reduces investment which businesses plan to meet demand.
Only on page 122 does Torry mention the economics argument for a Citizen’s Income, where he presents Stewart Lansley’s argument that ‘income inequality reduces productivity’, so that wages and therefore consumption reduce, leading to the current crisis that only greater equality can resolve. Even this ignores an alternative powerful economics argument that the crisis has been driven by technology increasing productivity, reducing the wage and consumption element of output, raising output GDP above disposable consumer income, which has been corrected with unsustainable credit. According to this argument, the technology-led wage reduction is inevitable and inexorable, and contrary to Lansley’s proposal, only a Citizen’s Income can replace consumer credit in order to raise consumption to match output GDP. In this model the Citizen’s Income would need to be spent rather than saved, perhaps by being distributed on stored value cards with the value expiring over time. It needs however an alternative theory of money, i.e. that money is virtual and its distribution only has to respect output GDP and not be supported by gold reserves or government debt. This removes the need for Torry’s argument on the affordability of Citizen’s Income – it is output GDP which makes it affordable. These arguments would add considerably to Torry’s case. They also dismiss current deficit reduction and austerity policies as the nonsense they are.
