by Citizens' Income Trust | Apr 9, 2016 | Opinion
By Mark Wadsworth
The Citizen’s Income Trust has suggested replacing Child Tax Credits and Child Benefit with a higher flat rate Child Benefit and merging the income tax-free personal allowance, the National Insurance-free Lower Earnings Limit and Working Tax Credits into a Citizen’s Income.
These proposals have been criticised on the basis that Working Tax Credits include a Childcare Element to subsidise childcare costs (registered nursery or child minder), which are supposed to be targeted at lower earners. The Child Tax Credit is a vitally important tool that helps many parents survive. Whilst the source here suggests television may be undermining the safety of children, it is clear that further cuts to Child Tax Credits would compromise their safety and security in an even more detrimental way.
This article addresses those concerns (the Childcare Element of working tax credits is only four per cent of total Tax Credit payments[1], and only one-quarter of total government subsidies for childcare costs) and looks at how these overlapping subsidies could be merged into a single simplified and harmonised system. This would free parents up, allowing them to look more openly on Daycare Spots and the like for what they want out of a daycare or childcare company rather than relying on what is in place.
First let us look at the bigger picture.
How many children are affected?
According to the population pyramid, there are nearly 800,000 children in each year cohort 0 up to 5[2].
Table 1: The number of children receiving childcare [3],[4]
|
|
| Age 3 and 4, registered nursery or child minder |
859,000 |
| Age 2, registered nursery or child minder |
592,000 |
| Sub-total ‘paid for’ childcare |
1,451,000 |
| Age 4, in a reception class at a state primary school |
549,000 |
| Total |
2,000,000 |
The cost of children in a reception class forms part of the education budget and is largely outside the scope of this article, which focuses on the 1,451,000 receiving ‘paid for’ childcare.
Table 2: Average childcare costs before subsidies
|
Nursery or primary school |
Child minder |
| Child aged 0 or 1 |
£/week |
£/week |
| 25 hours |
115 |
104 |
| 50 hours |
212 |
197 |
| Child aged 2, 3 or 4 |
|
|
| 25 hours |
110 |
103 |
| 50 hours |
n/a |
n/a |
| After school club 15 hours |
48 |
|
| After school pick up |
|
64 |
The costs in London are 50% higher[5]
Table 3: Total government spending on the various schemes [6]
|
2014-15 |
Planned |
|
£m/per year |
£m/per year |
| Free Early Education aged 3 and 4 |
2,400 |
2,400 |
| Free Early Education aged 2 |
800 |
800 |
| Working Tax Credits/Childcare Element |
1,200 |
1,800 |
| Employer Supported Childcare |
800 |
400 |
| Tax free Childcare |
0 |
1,000 |
| Total |
5,200 |
6,400 |
Table 4: The number of children eligible to claim in each category
|
2014-15 |
Planned |
| Free Early Education aged 3 and 4 |
859,000 |
859,000 |
| Free Early Education aged 2 |
250,000 |
250,000 |
| Working Tax Credits/Childcare Element |
745,000 |
745,000 |
| Employer Supported Childcare vouchers |
860,000 |
430,000 |
| Tax free Childcare |
0 |
500.000 |
| Total |
2,714,000 |
2,784,000 |
This compares with 2,000,000 children from Table 1. The bulk of the overlapping claims relate to Free Early Education.
The simple average planned cost/value per child is the total annual cost of £6.4 billion from Table 3 divided by 1,451,000 children in ‘paid for’ childcare from Table 1, which is £85 per child per week. The changes will help bring education to more children which will improve their cognitive development far more in their early years. Non-profits like Defending the Early Years are campaigning to get just, equitable, and quality early childhood education for every child so these childcare benefits would be extremely beneficial.
Eligibility flowchart
As mentioned, there are many children for whom parents claim Free Early Education as well as one of the other subsidies. The three main other subsidies are largely mutually exclusive. This can be represented as a flowchart:
Please note: the figure of £15,000 for household earnings is very approximate. The exact cut-off point for any individual household will depend on that household’s composition and parents’ working hours.
The various schemes in more detail and their average costs per child per week
Free Early Education –average cost/value
Each child is nominally entitled to 15 hours per week free care for 38 weeks a year @ £5.49 per hour[7], an average of £60 per child per week.
Free Early Education – children aged 3 and 4
This is a non-means tested, non-contributory, non-taxable and largely non-conditional benefit. It has the largest caseload and the highest cost. It has been criticised for simply pushing up childcare costs because of barriers to entry, meaning that childcare providers simply charge higher fees[8], but this can be said of all such schemes apart from a free place in a reception class at a state primary school.
In practice what happens is that local council pays registered providers a total of £3,129 per child per year, which the provider deducts from their charges. Where the hourly rate is less than £5.49, the provider simply credits the surplus against the charge for hours in excess of 15 per week. Where the hourly rate is more than £5.49, the parent has to pay the difference.
Free Early Education – children aged 2
This is a conditional benefit[9].
A two-year-old will be eligible for the same funding (15 hours @ £5.49 per week for 39 weeks a year) if their parent(s) claims any one of the following:
- Income Support/Income-based Jobseekers Allowance
- Income-related Employment and Support Allowance
- Child Tax Credits or Working Tax Credits and have an annual gross household income of no more than £16,190
Working Tax Credits/Childcare Element
The average cost/value per child per week is £28 as explained below.
This can be claimed by single parents who work at least 16 hours a week or couples who both work at least 16 hours a week and who spend money on registered or approved childcare[10].
The official upper limits of £175 for a household with one child or £300 for two or more children are nigh meaningless. The eligible amount for which a parent can claim is actual nursery costs minus Free Early Education payments minus Employer Supported Childcare vouchers multiplied by 70%. The actual claim is then abated by 41p for every £1 of gross wages over the threshold of £6,420.
Official statistics show that 93% of household claims are for total weekly costs of £160 or less and the official average amount paid out is £29 per child[11].
Table 5: Typical eligible amount: single parent with both children in full time childcare @ £180 per week for 48 weeks a year
|
£ |
| Actual costs (2 x £180 x 48 weeks) |
17,280 |
| Less Early Years Education payments (2 x 15 x £5.49 x 38 weeks) |
-6,423 |
| Net actual costs |
10,857 |
| Multiplied by 70% = eligible amount |
7,600 |
Table 6: Typical actual benefit after Working Tax Credits withdrawal
| Gross wages |
Income over threshold |
Amount withdrawn |
Net payment per child per week |
Per child per week |
| A = gross wages |
B = A – £6,420 |
C = B x 41% |
D = £7,264 minus C |
E = D ¸52 ¸2 |
| 12,000 |
5,580 |
2,288 |
5,312 |
51 |
| 15,000 |
8,580 |
3,518 |
4,082 |
39 |
| 18,000 |
11,580 |
4,748 |
2,852 |
27 |
| 21,000 |
14,580 |
5,978 |
1,622 |
16 |
| 24,000 |
17,580 |
7,208 |
392 |
4 |
| Simple average |
|
|
|
27 |
Please note: this article assumes that Child Tax Credits and Child Benefit are replaced with a much higher Child Benefit of around £56 per child per week and thus that Working Tax Credits withdrawal applies only to the Working Tax Credits/Childcare Element
Employer Supported Childcare vouchers
The average cost/value per child per week is £19.
Under a scheme introduced circa 2003, any employee could receive vouchers with a face value of £55 per week (regardless of the number of children) tax free by waiving £55 taxable salary (a salary sacrifice). The employee’s gross pay goes down by £55 per week, saving £18 per week in PAYE (income tax and Employee’s NIC at 32%).
This benefit is conditional on being in work and since 2011 is quasi-means tested. Parents/employees paying higher or top-rate tax had their allowance adjusted so all taxpayers have roughly the same maximum tax saving. The limits are:
- Basic-rate (20%) taxpayer: £55/week voucher, max annual tax/NI saving £930.
- Higher-rate (40%) taxpayer: £28/week voucher, max annual tax/NI saving £630.
- Top-rate (45%) taxpayer: £25/week voucher, max annual tax/NI saving £590.[12]
In theory, a parent claiming Working Tax Credits/Childcare Element can also receive these vouchers, but it is a very marginal calculation. The PAYE saving is £18 per week but the eligible amount is reduced by £55 x 70% = £38. In turn, the amount of the abatement goes down by 41% x 55 = £23, so the net gain is £18 – £38 + £23 = £3. In some cases, parents claiming both can suffer a small net loss.
The scheme has been modified several times since inception and was closed to new entrants since the introduction of Tax Free Childcare in Autumn 2015.
Tax free childcare
This supersedes Employer Supported Childcare vouchers[13], although existing Employer Supported Childcare voucher recipients will be able to continue to receive them in the run off period.
To qualify, a single parent or both parents in a couple have to be in work, earning just over an average of £100 each a week and not more than £100,000 each per year[14]. Tax Free Childcare cannot be claimed if the household is also claiming Working Tax Credits. Vouchers with a face value of up to £10,000 per child can be acquired for 80% of the face value and used to pay for childcare costs.
The maximum saving per child per week is £38. In most cases this will be a larger saving than the superseded scheme Employer Supported Childcare vouchers, unless only one parent in a couple is in work (saving £930 a year as against nothing) or a couple are both in work, pay basic rate tax and pay less than £194 per week (net of Early Years Funding) for childcare for one child.
Summary
Around two-thirds of 4 year olds are in reception class at a state primary for free. I assume that the other one-third do not attend because there is no reception place available for them or because their working parents require care until later in the afternoon/evening and send them to a nursery or child minder for which they claim the Free Early Education payments.
The value of Free Early Education vouchers is £60 per child per week.
The cost/value of the three mutually exclusive schemes in the bottom row of the flowchart per child per week is as follows:
Working Tax Credits/Childcare Element – maximum £51, average £28.
Tax Free Childcare – maximum £38, average unknown but less than £38.
Employer Supported Childcare – maximum £36, average £19.
So the average total claim per child per week is between £79 and £98.
Proposal
Would it not make sense to harmonise the rates and increase the Free Early Education vouchers to £85 per week x 48 weeks a year for all 2, 3 and 4 years olds?
The total number of children in ‘paid for’ childcare is 1,451,000 (from Table 1). If each receives £85 per week in vouchers for 48 weeks a year, the total cost/value would be £5.9 billion. This represents a saving of £0.5 billion over the £6.4 billion expenditure forecast the House of Lords Select Committee from Table 3.
Winners will not just be those who would receive more per child per week, but all parents whose lives have been made much simpler and can now plan ahead and budget more sensibly.
Clearly, some would receive less in benefits than under the current schemes:
- Single parents on the minimum wage who would lose up to £26 per child per week in Working Tax Credits/Childcare Element,
- Parents with children in a reception class who receive claim for after school care,
- Parents in London, where childcare costs are 50% higher than the rest of the country, and
- Parents of children aged under 2 who currently claim for childcare costs.
I estimate that half a million children would be affected and the average shortfall is £20 per child per week, so the saving of £0.5 billion could be paid out as a transitional benefit of £20 per child per week for existing claimants until their children reach normal school age.
A slightly more radical proposal would be to spend the £6.4 billion on providing nursery classes at state primary schools for children aged 2 to 4. This will take time to implement but simplifies things for parents and does not have the unintended consequence of pushing up childcare costs.
Original article can be found at Citizen’s Income Trust.
[1] Fullfact
[2] Office for National Statistics
[3] House of Lords Select Committee
[4] National Audit Office
[5] Family and Childcare Trust
[6] Total from House of Lords Select Committee, individual items adjusted for other sources to reconcile with their sub-totals.
[7] Surrey County Council
[8] Institute for Economic Affairs
[9] Netmums
[10] HMRC leaflet
[11] HMRC, 2013-14
[12] Money Saving Expert
[13] HM Treasury
[14] Government News
by Guest Contributor | Mar 29, 2016 | Opinion
By Clive Lord
Almost everyone I know of who supports the Basic Income (BI) does so on the grounds of social justice. I agree of course, but for me less inequality is only the second most important of three reasons to support the Basic, or as we call it in Britain, the Citizen’s Income.
When I joined the embryonic PEOPLE, now the UK Green Party, in 1973, I listened as an enquirer to a spiel based on the threats to the global environment caused by indiscriminate economic growth, which had been exposed by the Massachusetts Institute of Technology report Limits to Growth in 1972. I agreed with every word, but I had a question:
“What is your social policy? You are proposing a deep recession. I agree it will be necessary, but every recession to date has caused widespread hardship. What will you do when desperate people start looting?”
The answer was: “If we have to, we shall shoot them in the street. Social breakdown is hardly the best way to alleviate poverty.”
It is all very well readers being as appalled as I was, because the basic premise was right. The speaker then challenged me:
“Do you have a better social policy in mind?”
I didn’t. I spent the journey home wrestling with my own question. Guess what I came up with. I discovered later that the Basic Income had already been invented several times, for different reasons, starting with Thomas Paine in 1798. But even now, 43 years later, limiting economic activity to the ability of the ecosphere to cope was not part of the “successful” Paris climate agreement in December 2015. It will fail without that. A Basic Income will allow a steady state economy to be acceptable to whole populations, and so become a policy option, but it will have to be world-wide.
It will be dismissed as “unaffordable” – this would only be true if the economy has collapsed beyond the ability to provide basic necessities for all, but if linked to ecological realities it will entail drastic redistribution. This brings us to the more common justification for a BI of reducing inequality, but if all the Basic Income does is allow the poor to spend money confiscated from the rich, the Paris agreement is doomed.
However, I am continually perplexed by the widespread failure to grasp the malevolence of means testing – taking benefits away as soon as the claimant has any other income.
The next few paragraphs refer to the UK but will apply anywhere means tested benefits are used. For the person losing a means tested benefit, the effect is identical to a massive marginal tax. The clearest demonstration of this can be found in an unexpected source: the 2009 report Dynamic Benefits: towards welfare that works, released by the Centre for Social Justice. The Centre was set up by Iain Duncan Smith, who has been Work and Pensions secretary in the UK Coalition, now Conservative government since 2010 – and has recently resigned in protest against announced cuts to disability benefits. Dynamic Benefits was the foundation for the government’s welfare ‘reform’ policies. Its key recommendation was the Universal Credit (UC), whereby on finding employment a claimant would retain 45% of their former benefits. The former Work and Pensions secretary reduced this to 35% on taking office. This means that the former claimant is faced with a tax rate equivalent of 65%. Bankers on the highest tax rate lose 45% of their income.
In Dynamic Benefits, there are several graphs showing benefit withdrawal rates as though they were taxes. In fact, the first part of the report, outlining the problem, is an excellent statement of the case for a Basic income. The UC is an emaciated BI which attempts to remove the work disincentive of means testing, but still penalises beneficiaries disproportionately vis-à-vis high-income earners.
While Iain Duncan Smith’s stated reason for resigning was cuts to disability benefits, I believe the real reason is the imminent scrapping of the UC. In four years since being announced, the UC has only reached 5% of the 4.5 million who should be eligible. The Department of Work and Pensions is claiming that the UC will be fully rolled out by May 2021. The track record of slippage to date makes that improbable. That the initiator of benefit sanctions, the bedroom tax, and Work Capability Assessments presents himself as the defender of the weak and vulnerable is sickening, but Dynamic Benefits remains a useful document for basic income debates.
But my third reason is much more fundamental. A Basic income can begin a shift to a totally new culture. Instead of haves vs have nots, or bosses vs workers , the new fault line will be those who want to preserve natural systems versus those who believe there will always be a technological answer. This will enable a low growth economy to protect the ecosphere.
Milton Friedman, an archetypal neo-liberal, was in favour of the Basic income. Market forces are a basic pillar of neo-liberalism, but instead of the current system whereby the strong can exploit the weak, persuasion will replace work compulsion. The would-be employee will have equal bargaining power with the boss. Needless to say, Employee Benefits such as healthcare cover will also need to be negotiable. Experiences in India and Namibia
show that far from encouraging idleness, a BI facilitates entrepreneurship. But it will also allow people generally to heed eco-constraints, notably climate change, where competitive capitalism does not.
Anyone curious to know more, my Book, Citizens’ Income and Green Economics (2011) is available from the Green Economic Institute. My blog www.clivelord.wordpress.com which is more up to date, but 
inevitably less coherent, discusses the Tragedy of the Commons, population, the Greek crisis, migration and fracking.
We may yet save “Paris” (and the planet), and feed everyone. There is even something in it for the capitalists.
Clive Lord is a founding member of the British Green Party, a major contributor to the party’s first “Manifesto for a Sustainable Society” and a basic income advocate.
by Guest Contributor | Mar 25, 2016 | Opinion
By Johanna Perkiö
First published on January 25, 2016, by Kela, the Finnish government agency in charge of welfare benefits. The original article is available here.
With the expressed commitment of the Prime minister Juha Sipilä’s centre-to-right Government to conduct an experiment to evaluate the effects of a basic income system, the idea of a universal basic income has come to the forefront of the Finnish political discourse. Discussions centring on the idea of a universally guaranteed basic income have a long and varied history in the Finnish political arena, and several initiatives and practical models have been made public since the 1980s.
A recent working paper published by the Finnish Social Insurance Institution (Kela) charts the history of the basic income debate and outlines solutions put forward for a true basic income system or one that bears some features of a universal basic income. The working paper will be used as background to analysis preparing the ground for the planned basic income experiment.
An idea with a long history
The working paper begins by presenting the history of ideas behind the discussion on a universal basic income or citizen’s wage, the latter being a term which is often used alongside ’basic income’ in the Finnish debate.
The way in which a universal basic income is conceptualized and the goals that are attached to it have varied throughout the years. In the 1980s, a universal basic income was presented as a response to unemployment caused by a decline in industrial employment and as a way to achieve meaningful participation in society for individuals outside the labour market. In the aftermath of the economic depression of the 1990s, discussion turned towards the potential of the universal basic income to increase flexibility in the labour market and to offer support to those in irregular and low-wage work. In the 21st century, the universal basic income has been discussed mainly in terms of improving incentives for work and as a way to provide economic security to those who are self-employed or employed only intermittently.
Various models for a universal basic income system have emerged from both political and academic sources. The models differ with regard to the level of the proposed income, eligibility for it, and how it would relate to the rest of the welfare system, as well as in terms of how the reform should be funded and what would be its main objectives. In addition to actual basic income models, a number of other social security reforms have been proposed that somewhat resemble a universal basic income system. The objectives that the universal basic income and other similar reforms have been proposed to meet include streamlining the benefits system, simplifying administrative structures, eliminating disincentives that have to do with the interplay between various benefits, and preventing needy persons from falling between the cracks of the welfare system.
Most of the proposals published in Finland are partial basic income models where the level of provision would be so low as to necessitate supplemental income-tested benefits, which usually means at least housing benefits. Also insurance-based income-related benefits would be left intact.
A number of alternatives exist for funding a basic income system. Generally, a reform of income taxation is proposed, which would entail clawing back via the tax system the additional money that those with medium and large incomes would gain under the basic income system. Income taxes could be accompanied by other direct and indirect taxes or fiscal policy measures. Shifting the emphasis in funding away from income taxes would make it possible to reduce marginal tax rates, which are perceived as a disincentive.
Recent proposals for a universal basic income reform
Most recently, theoretical models for a universal basic income system have been put forward by the Green Party (in 2007/2014) and the Left Alliance (in 2011). Under the Green Party model, all persons of working age who are covered by the Finnish residence-based social security system would receive a basic income of EUR 560. This would be financed by taxing annual earnings of less than EUR 50,000 at a rate of 41 percent and any earnings above that at 49 percent. Investment income under EUR 40,000 per year would be taxed at 33 percent and at 35 percent above that. Additional funding would come from raising the property tax rate and from reducing environmentally harmful tax subsidies. The model also incorporates a small basic tax deduction for individuals with low earnings in order to incentivize employment.
Under the model proposed by the Left Alliance, all persons of working age would receive a basic income of EUR 620 per month. This could be supplemented by an additional EUR 130 which is subject to welfare eligibility conditions. The basic income would be financed by taxing earnings and investment income on a progressive scale of 30-57 percent.
Under both models, supplementary provision would be available in the form of housing benefits, additional payments under the social assistance programme, and certain earnings-related benefits. Microsimulation analyses show both models to reduce poverty and income disparity by a small amount. The Left Alliance model has a greater impact on poverty and income disparity because of the proposed higher level of basic income and supplemental welfare provision and the progressive tax rates outlined in the model. Other analyses show that the desired effects of the basic income models described above, especially in regard to creating greater incentives for employment, might not necessarily be achieved. This is due to reciprocal effects between the various forms of welfare.
A handful of models for reforming the social security system with certain similarities to a universal basic income have been published in recent years. The ”basic account” model advanced in 2014 by Libera, a Finnish think tank, is founded on the idea of a loan-based system of social provision. Under this model, each person would receive an initial payment of EUR 20,000 which would be deposited into their personal account and which they would grow by paying 10 percent of their income taxes into the account. The model would allow unlimited withdrawals as long as the account remained at least at its initial level, or EUR 400 per month should the account dip below the initial balance. The account could have a negative balance of any amount, and any deficit would be forgiven when the account-holder reaches the age of 65 years. Means-tested welfare benefits could be retained to supplement the basic account. According to Libera, by adjusting the parameters of the model it can be aligned more closely with either side of the political spectrum.
Also the model put forward in autumn 2015 by the Christian Democratic Party, which it refers to as ”active welfare”, includes the idea of an individual citizen’s account to which both salaries and social security payments would be deposited. This model is akin to a universal basic income in the sense that it would consolidate all welfare benefits into a single form of support which (unlike the basic income) would be means tested. Taxes and benefit payments would be adjusted in real time according to each person’s current level of income so as to retain financial incentives for work.
The ”general security” model proposed by the Social Democratic Youth Organization consists of three tiers: the lowest is a means-tested but automatically disbursed guaranteed income, which functions in the same way as a negative income tax; the middle tier is a conditional “general” income; and the highest tier is an ”active” income provided in reward for taking personal initiative in improving one’s employability. Also under this model, there is real-time coordination between earned income, social security and taxation so as to ensure that any amount of gainful employment will always provide additional income.
The challenge of removing disincentives
An analysis of the universal basic income models proposed shows that each of the models require further development if they are to eliminate the disincentives in the way of employment. Because the welfare system is complex, and there would still remain benefits which supplement the basic income, the desired incentivizing effects might not be achieved. One potential solution to this would be to adjust the link between earnings and benefits, most importantly housing benefits (or even to include housing benefits in the basic income scheme), and a suitably high level of basic income that would prevent continual need for social assistance. Any incremental amounts paid for dependent children should also be factored into the proposed models for a universal basic income.
One possibility would be a negative income tax system offering benefits only to those under a certain income limit and reducing, on a sliding scale, the amount of income transfers as personal income increases. A proposed national registry of incomes, allowing the real-time tracking of incomes from any source, would make this possible. Compared to a proper basic income, a system based on negative income tax would be more responsive, for example, to fluctuations in housing costs or to the type or amount of assistance needed as family circumstances change.
Among the effects that a universal basic income system would be likely to produce, the most interesting are obviously those which are of a dynamic nature, i.e., related to the behaviour of people and enterprises. The experiment planned by the Government will go some way towards meeting the need for such information. It is quite likely, however, that many of the psychological, social and structural effects of a universal basic income system will not emerge during the two-year experiment. The choice of model included in the experiment, as well as the overall economic situation, naturally will also affect the final results. Still, the experiment is an important step towards creating a more functional system of basic welfare provision.
Source: Perkiö, Johanna (2016) Suomalainen perustulokeskustelu ja mallit. (Public debate and proposed models for a universal basic income system in Finland.) Kelan työpapereita.
Johanna Perkiö is a basic income expert and a doctoral student at the University of Tampere (Finland).
by Andre Coelho | Mar 17, 2016 | Opinion
Informal settlement in Soweto. Credit to: The Conversation
The hypothesis: basic income has not been deployed in South Africa in part because the powers that be do not let go of their interest and ability to explore people.
The following article attempts to demonstrate the validity of this hypothesis.
Let’s begin with some background. Basic Income (BI) is not a new idea in South Africa. In fact a thorough economic analysis for BI implementation has existed since 2004. The analysis was drawn from the work of recognized economists, specialists in the field, and the findings were summarized in what became known as the Taylor Committee. The Basic Income Coalition (composed of Black Sash, COSATU and SAAC), used these results to prove that BI is feasible, or at least should be tested, in South Africa.
More than 10 years have passed, and yet nothing resembling BI has been implemented or even tested in South Africa. Why not?
It is not due to lack of need: 54%1 of South Africans – over 29 million people – live under the country’s poverty line, and over 40% of the labor force is unemployed2. Moreover, according to the BIG Financing Reference Group report, it is also not due to a lack of funds:
“The Basic Income Grant is an affordable option for South Africa. Although the four economists [Economic Policy Research Institute (EPRI), Prof. Pieter le Roux, Prof. Charles Meth and Dr. Ingrid Woolard] posit slightly different net costs for the BIG, representing transfers to the poor of different amounts, there was consensus that the grant is affordable without necessitating increased deficit spending be government.”
In spite of this, the same report also states that government officials believe that BI cannot combat poverty. They have refused to consider a BI, despite knowing that current social assistance plans fail to reach over 50% of those living under the poverty line, or nearly 15 million people. These officials have continued to say that BI would not be effective despite demonstration by the Taylor Committee that basic income is the best way to diminish or even eradicate poverty in the shortest amount of time. They also ignore fiscal collection and social security savings when speaking of BI, which more than doubles its actual net cost of about 24 million ZAR/year (1.35 billion €/year), according to the calculations of the Taylor Committee. In short, most government officials completely ignore these very consistent and thought-out analyses from the Taylor Committee. Why is that?
Well, the answer may lie in the kind of structure of South African economy. The private sector accounts for around 80% of the country’s economy3. The median income is 3036 ZAR/month (171 €/month)4, which is low compared to European standards. Taking the United Kingdom as reference, the following table can be set up (Table 1).
Table 1 – Income relationships, South Africa / UK
The relationship between the median income and the average living income is considerably higher in the UK than it is in South Africa. Moreover, the ratio of median income to statutory minimum income is also much higher in the UK. Indeed, while the median income in the UK is above the minimum income (as it should be), this is not the case in South Africa: more than half of South Africans have wages below the statutory minimum income. Finally, as we can see on the graph below, the spread of incomes in South Africa is clearly skewed to the lower end on the income axis, while incomes in the UK are much more evenly distributed around the center (Figure 1 and Figure 2).
Figure 1 – Income spread in South Africa4
Figure 2 – Income spread in the UK5
These data show that the South African economy is impoverished compared to a country like the UK, and that most economic activity depends on a low-wage, low-skilled work force6. This situation is best maintained when a large number of poor, dependent people are craving for jobs in the economy. Given their subservient position, these millions of people will naturally accept low wages and substandard working conditions that they might not otherwise accept. They are also kept away from most schooling and higher education, which could provide them with extra skills and allow them to apply to other jobs or start their own businesses. This is convenient for large corporations, and these corporations lobby and finance politicians and governments to protect their interests by providing them with access to cheap labor and lax environmental laws. The Transatlantic Trade and Investment Partnership (TTIP) deals, for example, are just a formally imposed recognition of the attitudes of domination that large corporations foist upon governments and the people at large.
There is a link between corporate interests and government policy. Furthermore, the implementation of a basic income would basically be contrary to corporate interests: BI would lift millions of people out of poverty, empower them to refuse conditions of exploitation and start their own business, invest in education and bettering their lives – depriving the corporations of their pool of cheap labor. Government policymakers may also respond out of ideology or prejudice, but corporate political sponsoring response must not be ruled out, given the entrenchment and longevity of their denial (relative to progressive policies like basic income).
More information at:
A. BIG Financing Reference Group, 2004. ““Breaking the poverty trap”: Financing a basic income grant in South Africa.” Basic Income Grant (BIG) Financing Reference Group conference, Johannesburg, 24 November 2003. March, 2004.
Notes:
1 – World Development Indicators – Poverty headcount ratio at national poverty lines (% of population), 2010
2 – A more accurate, expanded definition of unemployment, including the so-called ‘discouraged jobseekers’, according to reference A.
3 – World Development Indicators – General government final consumption expenditure (% of GDP) = 20.3. Hence Non-government (private) final consumption expenditure (% of GDP) = 79.7
4 – From the spread of households within the income distribution in South Africa, 2008.
5 – From Measuring National Well-being – Personal Finance, 2012 (UK)
6 – Higher skilled professionals are usually paid on or above the median income, so a low income distribution as shown in Figure 1 must be related with a high proportion of low skilled workers.
by Guest Contributor | Mar 8, 2016 | Opinion
By Liane Gale and Ann Withorn
for the Basic Income Woman Action Group (BIWAG)
Since 1909, International Women’s Day has been a day for recognizing women’s economic, political and social achievements. Yet over the past century, March 8 Women’s Day celebrations have revealed tensions between feminists, socialists and anarchists about the meaning of women’s roles in society. Feminists saw full equality through equal participation in the polity as the major way women would gain power. Socialists argued that full inclusion of women as workers within a self-aware proletariat was the way for women to achieve solidarity, and therefore power. Anarchists envisioned women’s liberation as based on learning new ways of living and loving, so that a new way organizing society would become possible.
Today, we view the Basic Income Guarantee (BIG) as a means to transcend such historic differences. BIG offers a way for women to achieve basic economic security outside of the labor market. It firmly denies that only certain activities done outside the home and community should be rewarded, much less be the chief source of one’s respect and social value in society. With a meaningful basic income as a secure base for living, women everywhere should be more able to live a life without fear, and of their own design.
If basic income could fundamentally change the lives and fates of women and girls, and with it the fate of humanity, then why is this not widely discussed in the community? One case in point is the appeal by Martha Beéry to the national media agency in Switzerland to invoke bias towards male views in a panel on basic income on national television in 2012 that only included men. The decision was in her favor, but the inclusion of women’s points of view in regards to basic income has been slow both in mainstream and social media. Despite this, recently we have seen a welcome surge of contributions about the economic and social realities of women, that often offer basic income as a solution to some of the disadvantages women face.
These analyses include calls to elevate the value of care work and other contributions to society (such as community work), which are underpaid or not paid at all, and as a result do not elicit much respect by a society which largely equates money-making abilities with importance and status. Organizations, such as the Care Revolution Netzwerk, that is active in German-speaking countries, Mothers at Home Matter from the UK, and initiators and supporters of the “Leap Manifesto: A Call For a Canada Based on Caring for the Earth and One Another” are all grassroots efforts to change the current narrative. With the Basic Income Woman Action Group (BIWAG), we strive to contribute to this international effort. To that end, we are facilitating national and international conference calls with interested members and maintain a BIWAG Facebook Group.
The program of the 15th Annual North American Basic Income Congress in Winnipeg, Canada (May 12-15) is especially attentive to women’s concerns and to enhancing women’s roles in the movement. More than half of the planning committee members are women. Dr. Felicia Kornbluh, professor of Gender Studies, writer, welfare rights advocate and member of the Vermont Commission on Women, will give a keynote on “Two, Three, Many Precariats: Basic Income and the Fight for Gender, Class and Disability Justice”. Two other keynotes will also be given by women. At least sixteen panel presentations and speakers will be directly addressing links between basic income and women. In addition, three BIWAG sponsored roundtables will allow serious time for discussion of “Women’s Roles within the Basic Income Movement”, “Basic Income and the Care-Centered Economy”, and “Basic Income’s Role in Ending Violence Against Women.” A panel on the Color of Poverty and speakers from the Aboriginal Council of Winnipeg will also bring much immediacy to the event.
The 2016 theme of International Women’s Day includes the goals of ending all forms of discrimination and violence against all women and girls everywhere, and we believe that a basic income would be a firm step into the direction of a more humane world for all.
To learn more about BIWAG or to get involved, please join our Facebook group or contact us at withorn.ann@gmail.com or liane.gale@gmail.com.
Recent contributions on women and basic income, and closely related issues and causes:
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Nicole M. Aschoff, “Feminism Against Capitalism,” Jacobin, February 29, 2016.
Allissa Battistoni, “Why Women’s Work is Key to a Just and Sustainable Future,” Feministing, August 6, 2015.
Alyssa Battistoni, “Why Establishing a Guaranteed Income for All Can Help Prevent Environmental Catastrophe,”, Alternet (reprinted from Jacobin), February 19, 2014.
Madeleine Bunting, “Who Will Care for Us in the Future? Watch Out for the Rise of the Robots,” The Guardian, March 6, 2016.
Petra Buskins, “‘Flexibility’ Won’t Stop Women Retiring In Poverty,” New Matilda, October 30, 2015.
Liane Gale and Ann Withorn, “Basic Income Women Action Group”, Google Hangout, hosted by Marlen Vargas Del Razo, Living Income Guaranteed, Streamed Live, August 23, 2013.
Claire Cain Miller, “How Society Pays When Women’s Work is Unpaid,” New York Times, February 22, 2016.
Helen Ninnies, “As Rental Prices Rise, Women Stay in Bad Relationships to Survive,” Broadly, February 20, 2016.
Vanessa Olorenshaw, “Mothers at Home Matter and the Politics of Mothering – When Maternal Care is Taboo and Politicians Have No Clue
,” Huffington Post U.K., March 17, 2015.
Meera Lee Patel: “Idea: All Work Deserves Pay,” Fast Company, January 20, 2016.
Ina Praetorius: “The Care-Centered Economy: Rediscovering What Has Been Taken for Granted,” e-book published by Heinrich Böll Stiftung, April 7, 2015.
Judith Shulevitz: “It’s Payback Time for Women,” New York Times, January 8, 2016.
by Toru Yamamori | Mar 1, 2016 | Opinion
Yanis Varoufakis, the former Greece prime minister, recommends Swiss people to vote ‘yes’ for UBI at the national referendum scheduled on 5th June.
Varoufakis, who’ve recently made his support for UBI clear in the interview published for the Economist, calls ‘yes vote’ for the UBI referendum in the recent two interviews.
In the video interview with the Gottlieb Duttweiler Institute, the Greek economist argues that the future picture of technological progress would be either the Star Treck version that the progress can make us equal and free or the Matrix version that the progress enslaves us.
In another interview with Swiss newspaper “Tagesanzeiger“, the translation of which is available here, he says:
Because Switzerland is doing so well, it is ideal for experiments with the basic income. But don’t forget, in spite of the wealth, the quality of life is decreasing. What good is a well-paid job if you are scared to lose it? This constant fear paralyzes people and makes them ill. Switzerland should see the basic income as an investment in the future.
Varoufakis will be one of speakers for the UBI event on 4th May in Zurich, Switzerland.
