A neoliberal Citizen’s Income?

A neoliberal Citizen’s Income?

An article by John Clarke, ‘Progressive Dreams Meet Neoliberal Realities’, poses an important question: Is it true that ‘we can draw a line between the models that are concerned with improving lives and raising living standards and those that are focused on intensifying the capacity for capitalist exploitation’?

First of all for some of the mistakes in the article. The ‘progressive’ camp is well described as offering a range of schemes that would be ‘responsibly redistributive, reduce poverty and inequality and ease up on bureaucratic intrusion’, and that would provide enough money to live on: but it is not true that those who propose schemes that would be ‘responsibly redistributive, reduce poverty and inequality and ease up on bureaucratic intrusion’ ‘pay great attention to explaining how nice their systems would be but give little if any thought to the concrete prospects of implementation’. Research published by the Institute for Social and Economic Research and by the Citizen’s Income Trust shows that schemes that would be ‘responsibly redistributive, reduce poverty and inequality and ease up on bureaucratic intrusion’ can be perfectly implementable.

A second mistake is to suggest that ‘there is a fight to be taken forward for living income, full entitlement and programs that meet the real needs of unemployed, poor and disabled people, as opposed to the present ‘rituals of degradation’ they embody.’ Unfortunately, it is precisely the fitting of benefits to needs that results in the ‘rituals of degradation’.

In the section of the article that matters, ‘Neoliberal version’, Clarke suggests that the motive underlying the schemes proposed by at least some of those governments proposing pilot projects is in fact the same as Charles Murray’s: the dismantling of all other welfare provision. He suggests that Citizen’s Income plans might be described with ‘progressive’ phrases, but their purpose is pernicious. He also suggests that Citizen’s Income proposals can provide cover for additional austerity within the current system; and that Citizen’s Income is being proposed in order to promote a more exploitative employment market.

In the section ‘Progressive Dreams’, Clarke suggests that ‘progressive’ versions of Citizen’s Income would be politically infeasible because they would tip the balance of power away from employers. He claims that it is neoliberal governments that seem to be interested in Citizen’s Income, suggesting that ‘progressive’ versions don’t stand a chance; that pursuing an infeasible Citizen’s Income might divert attention from tackling neoliberal depredations; and that Citizen’s Income would be an inadequate response to the problems facing our society. Clarke suggests that what we need is such public services as ‘free, massively expanded and fully accessible systems of healthcare and public transportation’, social housing, universal childcare, ‘living wages, workplace rights and real compensation for injured workers’.

Clarke’s final paragraph is worth quoting in full:

I am suggesting that our movements need to challenge, rather than come to terms with, the neoliberal order and the capitalist system that has produced it. For all its claims to be a sweeping measure, the notion of progressive BI is a futile attempt to make peace with that system. In reality, even that compromise is not available. The model of BI that governments are working on in their social policy laboratories will not ‘end the tyranny of the labour market’ but render it more dreadful. The agenda of austerity and privatization requires a system of income support that renders people as powerless and desperate as possible in the face of exploitation and that won’t change if it is relabelled as ‘Basic Income’.

The arguments need to be tackled one by one, starting with Charles Murray’s. Those who would like to replace public services such as healthcare with a Citizen’s Income confuse two different kinds of universality. The universality of healthcare must be one of availability, whereas the universality that characterises Citizen’s Income is one of provision. Whether healthcare is provided via the highly efficient NHS, or via an insurance system riddled with market failures, what individuals require is availability when it is needed, however much that costs. One person’s absorption of healthcare resources will be very different from another’s. Some people might spend months in hospital, and others might hardly ever see the inside of one: but they all need healthcare to be there when they need it. No standard amount of money can replace such a universality of availability. No doubt this argument will need to be made constantly. The important thing is that it is the only right argument and that it has to be made.

Some of Clarke’s other statements are genuine wake-up calls, and suggest that only Citizen’s Income schemes that do not impose losses at the point of implementation should be proposed. Similarly, nobody should be suggesting that a Citizen’s Income scheme could substitute for a National Minimum Wage or for a Living Wage. Citizen’s Income and a Living Wage would function very happily alongside each other, and would function far better than a Living Wage with a means-tested benefits system. Every time a Living Wage level is raised, means-tested in-work benefits fall, whereas this would not happen to a Citizen’s Income.

Some of Clarke’s arguments need to be tackled. No financially feasible Citizen’s Income would tip the balance of power very far away from employers and towards employees, if at all. Means-tested benefits function as dynamic subsidies – that is, they rise if wages fall – whereas Citizen’s Income functions as a static subsidy because it doesn’t rise if wages fall. Thus employers might experience more resistance if they attempt to cut wages. Also, because a Citizen’s Income might give to some employees more choice over employment patterns, and thus more ability to negotiate in the employment market, it might look as if the balance were shifting towards employees. However, because the overall effect would be to reduce the inefficiencies in the employment market, employers would find their firms becoming generally more efficient. This really could be a situation in which everyone wins.

No doubt some experiments are being conducted by neoliberal governments. This will not be a problem if researchers test the piloted schemes for household losses, and for changes in inequality and poverty. The best response, though, would be for governments across the political spectrum to research and pilot Citizen’s Income, and not to leave it to governments at only one end of it.

Finally, if universality and unconditionality are good for benefits systems, then they are good for everything else. The UK’s Sure Start childcare provision was designed to be universal, which removed the possibility of stigma. The NHS attracts no stigma, and it is highly efficient. Some services will need to be paid for, at least to some extent: experiments with free public transport can mean overloaded transport systems – but many public services are more efficient if free at the point of use. So far from Citizen’s Income being seen as a replacement for public services, it should be regarded as a default model for them unless proved otherwise.

As for Clarke’s final paragraph: let’s be realistic – the neoliberal age might be with us for some time to come, so what the situation requires is survival mechanisms and a modelling of how it might evolve to the benefit of people and planet. Citizen’s Income is precisely what is required. If Mr. Clarke would like to suggest a better alternative then we would be pleased to hear from him.

Unconditional minimum income as primary income

Unconditional minimum income as primary income

By: Andrea Fumagalli

Introduction: the minimum income

In Italy, the debate surrounding basic income has been ongoing for almost 20 years. It began, in fact, with the August 1997 publication online (on the site ecn.org) of my pamphlet entitled “Ten theses on citizenship income”. The pamphlet saw successful underground circulation, and was re-edited into the book “Tute Bianche[1]. The pamphlet presents a survey of the Italian debate around the introduction of a basic income, a proposal that had begun to circulate in the neo-workerist environments of the previous 2 years[2].

Twenty years later, it should be acknowledged that the definition of “citizenship income” has created more negative effects than positive: at that time, although starting to increase, the phenomenon of migration had not yet assumed today’s proportions. The term “citizenship” was used without considering the concept of “citizenship” in a way that was not terribly ambiguous. In fact, it could then be used as part of an ethical and philosophical framework for designating that every human being is born already a “world citizen”, regardless of nationality. But increasingly today, the concept of citizenship has to do with the legal-national sphere and then with a grid of limited rights ius soli, and is not extended to those who were born outside a nation’s borders. From this perspective, the idea of ​​a “citizen’s income” can only be misunderstood as a proposal limited to specific nationalities, in contradiction with what is our idea of a ​​”right to income”. The term “basic income” appears therefore more appropriate and inclusive.

There are now many examples of proposed basic income legislation, in Italy and abroad; policy initiatives and declarations in favor of the introduction of some form of income support independent of employment status.

And just as numerous, and well differentiated, are the various interpretations of such a measure. In the cultural political debate promoted by Bin-Italy[3], which for years has promoted a cultural and socio-political campaign aimed at introducing a guaranteed minimum income (basic income), it is necessary to define certain parameters, to reduce the interpretive confusion that has now reached a critical level that makes unclear what actually a “citizen’s income”, “minimum income” or “a dignity income” are (to use the most common names).

To actually talk about “basic minimum income” (we use this term in a broad sense and provisionally), we believe that at least 5 criteria have to be met:

  1. Individuality: the minimum income must be paid at the individual level and not at the level of the family. Following this, there can then be a discussion as to whether children under 18 years of age will have the right or not.
  2. Residence: the minimum wage must be paid to all people who, residing in a given territory, live, rejoice, suffer and participate in production and social cooperation regardless of their marital status, gender, ethnicity, religious belief, etc.
  3. Maximum extension of unconditionality: the minimum income must be provided by minimizing any form of compensation and/or obligation and be as free an individual choice as possible.
  4. Access: the minimum income is paid in its initial phase of experimentation to all who have an income below a certain threshold. This threshold may, however, be greater than the relative poverty line and converge toward the median level of the personal distribution of existing income. Moreover, this level of income must be expressed in relative terms, not absolute, so that increasing the minimum threshold (as a result of the initial introduction of the measure) the range of beneficiaries will increase continuously until it hasrisen to graded levels of universality.
  5. Funding and transparency: the modalities of financing the minimum income must always be set out on the basis of economic viability studies, detailing where resources are obtained based on an estimate of cost when necessary. These resources have to fall on general taxation and not on other assets of origin (such as, for example, social security contributions, sale of public assets, privatization proceeds, etc.).

The criteria 1, 2, 5 should not be amendable, while criteria 3 and 4, are expressed in relative terms, may be subject to additional definitions depending on the context, but within the principle directives we have just outlined.

When basic income is the primary income it is therefore unconditional

That basic income is good and necessary, is a claim inspired by the composition of labor and the modalities of accumulation and exploitation which are today dominate.

In this regard, it is necessary to propose a cultural leap before political steps are taken, and to affirm that Basic Income is a primary distribution variable: the basic income must intervene, in fact, directly in the income distribution of productive factors: such as salary, which remunerates certified labor time as such, or profit, that rewards the business entity or rent, which derives from a property right. Being a primary distribution variable means that it is not a re-distributive variable:  it directly occurs at the level of the balance of power and social relations within a certain process of accumulation. Despite this, a redistribution of income, which occurs at a later stage, is the outcome of a second level of indirect distribution, an extra market level, thanks to appropriate discretionary economic policies.

If a basic income is remuneration, the question that naturally follows is what it is that it pays. To answer, it is necessary first to analyze what in contemporary capitalism the main sources of exploitation/valorization are. More and more studies and case studies confirm that today life itself, in every daily event, is the productive factor par excellence.[4] If we take into account the many acts of daily life that characterize our existence, they can be categorized into four types: labor, work, leisure, entertainment. More and more today no only labor is to be the basis of added value but also the time spent in creation (opus/work), the otium/leisure time, and entertainment time: all are included in a growing and continuous enhancement mechanism. The classic dichotomy of the Fordist paradigm between labor and non-labor time, between production and consumption, between production and reproduction are now partially obsolete. It is the result of a historic process of structural changes in manufacturing processes and labor organization, which marked the transition from a material Fordist capitalism to a bio-cognitive and financialized capitalism.

Today, wealth production derives, at the same time, from absolute surplus value and relative surplus value extraction, where for absolute surplus value there is intended a sort of primitive accumulation, in capitalist organization based on capital employment and on private property. The result is the change of the relationship between productive and unproductive labor. What in the material Fordist capitalism was considered unproductive (i.e. no production of surplus value and therefore not remunerable), has now become productive, while the remuneration remained anchored to that of Fordist era (the crisis of salarization, for example). As a result, we are facing new kinds of valorization such as “dispossesion” (Harvey[5]) and “extraction”, to which no remuneration is applied, according to the dominant rules (legal, industrial relations, uses and so on).

It is no coincidence that unpaid labor is sharply increasing, as it is from those sectors that more has been invested by the transformation of enhancement methods and the adoption of the new linguistic-communicative technological paradigms (new cognitve-relational activities).

Against this background, one proposal could be advanced to counter this phenomenon of unpaid labor (i.e., basically “slavery” with another name, even though for most it is not perceived as such) is to proceed with its salarization. But, we might ask: is this possible? If the answer is yes, no longer necessary is a basic income.

The vagueness of labor time

This question opens a second theoretical problem –  political and, at the same time, methodological. When technological and organizational transformations favor the spread of increasingly intangible productions with a high degree of non-measurability, when value is created by a whole range of life activities, from learning processes, to social reproduction[6] and networks of relationships, there arises the problem of “measure.”

The theme of measure is linked to the calculation/quantification of labor productivity. Unlike in the past, where this calculation was possible because employee labor activity could be measured in hours and by an equally measurable amount of production on an individual basis, productivity today has changed shape: it depends on the increasing use of new forms of scale economies: learning and network economies). These are scale economies no longer static but dynamic, because it is the flow (continuously) of time that allows for growth and learning of social skills as well as social reproduction and thus increased productivity, whose effects can be seen no more on individual basis but on the social one. Both learning and networking, in fact, need a social context and social cooperation. Productivity in bio-cognitive capitalism is therefore primarily social productivity or, with reference to the role of knowledge, general intellect.

Learning economies are based on the generation and dissemination of knowledge. Knowledge is not a scarce resource, such as material goods, but abundant: the more you swap, the more it spreads, the more it grows, a highly productive cumulative mechanism: cumulativeness requires relationships and social networks. Learning and networking are two sides of the same coin: if knowledge is not spread through relationships, individual processes are not economically productive. Only if you develop social cooperation and general intellect do you become productive.

We’re not talking about the traditional sense of the term co-operation, that is, “join forces” but co-operation, namely the interaction of individual operations that only achieve synergy in the common processes of accumulation and thus of surplus value creation. These relational activities often hide forms of hierarchy and exploitation, whose value is difficult to measure, not only on individual bases but collective ones, too. If the traditional factory productivity was based on precise technical mechanisms that allow you to measure individual productivity in the labor places today, the productivity of social cooperation cannot be measured in terms of individual productivity.

Not just individual productivity but also the same product of social cooperation is not measurable. When you are producing symbols, languages, ideas, forms of communication, social control, what kind of measurement we can take? Every relationship between output value, its production time (measured in hours) and its remuneration (measured in wages) becomes almost impossible or very difficult and subjective.

The crisis of the labor theory of value derives from the fact that not only the individual contribution today is not measurable but also the output tends to escape a unit of measurement, the more the more the production tends to become immaterial. And this takes place in a context in which the measure of value is no longer constrained by a scarcity factor. As was pointed out earlier, learning (knowledge) and network (space) are as abundant, and theoretically unlimited (especially if we consider the virtual space), as human nature. A theory of value based on the principle of scarcity, such as the one implicit in the theory of free market founded on the law of supply and demand, today has no longer any economic and social relevance. It is only artificially perpetuated in market dynamics where are continuously defined by power relationships. Paradoxically, the only theory of value that appears adequate to contemporary bio-cognitive capitalism, the labor theory of value, is not able to provide any measure.

How measure social cooperation and general intellect?

One possible aspect to consider has to do with the sphere of financialization: the pervasive and central role of financial markets, such as investment financing tools, privatization of social welfare and the partial compensation of knowledge labor, has affected not only the sphere of realization but also that of production. In capital gains, the speculative activity partially derives from the value produced by the cognitive-relational living labor. It is in financial markets that we can roughly see the implementation of the process of expropriation of social cooperation and of general intellect.

This process is not immediate and direct. It is often handled by the dominant bio-power management and the hierarchical relationships that continually redefine the property structure and market structure.

From this point of view, basic income, as a primary income, becomes even more a tool of direct re-appropriation of the wealth that is generated by the common life time put to labor.

The inadequacy of wages: body and mind

The order of discourse leads us to say that the traditional salary structure is no longer adequate, it does not fully capture the transformations in the valorization process. The classic wage structure can still be useful in those parts of the overall production cycle in which there is a measure of the value of labor in terms of time. But it cannot be generalized. From a theoretical point of view, this issue leads to the need to review, rethink and redefine the Marxian labor theory of value.

The inadequacy of the wage form as remuneration for all the productive aspects of life, leads to say that we need another way of remuneration (in addition to the wage forms where these are measurable). From this point of view, a basic income is something structurally different from a salary (though potentially, in the future, convergent): it cannot simply be understood as an extension of the wage form, because it is necessary to take into account the quantitative and qualitative change that new technologies have generated.

In particular, I’d like to stress the relationship between human and machine.

In the sixties, the relationship between human beings (with his body, his nerves, his muscles, his brain, his heart, his eros) and the machine was a relationship between separate domains: on the one hand, the human being, living labor, on the other hand, the machine, dead labor. The relationship between life and death was clear, physically traceable. From the point of view of human inner, the machine was something external and tangible, separate from himself.

Since the nineties to the present, such a separation is no longer so clear. The machine loses some of its materiality: the old Tayloristic machine becomes increasingly linguistic and relational. In presence of linguistic-communication technologies (ICT), only the support is material (hardware) but the core depends more and more on cognitive-relational human faculties processes. The use of language as the main tool of the operation changes the relationship of interdependence between human and machine typical of Taylorist technologies.

What kind of direction does this hybrid between man and machine take? And is it ‘the machine that is humanized or rather the human becoming mechanical?’ Are we witnessing the becoming human of the machine, or rather the becoming machine of humans? That’s the challenge of bio-robotics.

Consider the web 2.0 and the recent spread of social media. “The profit of advertising agencies, just like the profit of all firms web 2.0, [is] almost entirely depend on the ability to develop [and] control technologies.” Social control is then presented as the only way to innovate, develop in the future. But what is checked, exactly, today? Our identities and how they change. “The profiling algorithms of digital technologies feed on human biodiversity that it is itself channeled and integrated “in a Panopticon space, completely transparent, where we are called to act publicly.” See Google Pagerank, for instance.

Control of the body-mind becomes today (in agreement with the unpaid labor) the new enhancement border. Even if such activities could be salarized or simply paid otherwise (which is not the case), our freedom of choice would be conditioned.

An unconditional basic income is also a tool not only to recognize that our life is an active part (though often not aware) of contemporary exploitation but also able to exercise the right of choice, that is towards an individual and social self-determination: the right to choose our destiny as far as social participation is concerned, and also the right to refuse bad and indecent labor conditions. And this cannot be allowed, otherwise there is the risk of breaking the fragile balance of social control and supine conditions of subordination. From this point of view an unconditional income is subversive and that is the political struggle.

Andrea Fumagalli

(Università di Pavia – BIN Italia)

Andrea Fumagalli note for the conference: “Future of Work” Zurich 4 May 2016

Notes:

[1] A. Fumagalli, M. Lazzarato (eds), Tute Bianche, Derive-Approdi, Roma, 1999

[2] M. Bascetta, G. Bronzini (eds), La democrazia del reddito universale, Manifestolibri, 1997. Il tema di un reddito sganciato dal lavoro, etichettato con il termine salario sociale era già stato patrimonio del dibattito degli anni Settanta a parte dalla formulazione del rifiuto del lavoro (salariato).

[3] See www.bin-italy.org

[4] A. Fumagalli, C. Morini, “Life put to work: towards a theory of life-value”, in Ephemera, vol. 10, 2011, p. 234-252

[5] D. Harvey, “The new imperialism. The accumulation by dispossession”, in Socialist Register, 2004

[6] C. Morini, “Riproduzione sociale” in C. Morini, P. Vignola (eds), Piccola Enciclopedia Precaria, Milano X, Milano, 2015

 

Reviewed by Cameron McLeod

CHINA: A new paradigm in the current basic income debate

CHINA: A new paradigm in the current basic income debate

Furui Cheng

 

In the discourse of global basic income debates, China provides the most recent example of a social dividend-style basic income, similar to the Alaskan model. In discussions surrounding Nixon’s welfare reform in the 1970s, which was a quasi-basic income proposal, four different anti-poverty paradigms competed for influence. None of them can well explain today’s social dividend examples. We need a new paradigm in the current round of worldwide basic income debates.

China’s new facts

In November of last year I introduced the Huaidi case from China, in which villagers cooperated in urbanization and received high levels of welfare from their collectively owned land. This is not the only such case in China, however. The Chinese Famous Villages Influence Ranking was published in 2016, and 300 villages were selected from thousands in a joint effort by the Working Committee of Chinese Village Development Association, the Modern Village and Town Development Research Center of Tongji University, the Chinese Council of APCRD (the Chinese Association for Rural Community Development) and the Chinese Reputation Center (CPPC). The evaluation of the influence of Chinese villages in 2016 was mainly based on the comprehensive evaluation of the following factors: the village development index, people’s livelihood index, management index, charm index, green index and reputation index. In this way, the evaluation depends not only on per capita GDP or income, but also on living conditions, security conditions and interpersonal relationships, as well as the temperament of the villagers, including their mental state, sense of ownership and so on. This evaluation incorporates the well-being of the people and promotes the comprehensive development of further villages. The Zhejiang province has 37 villages in the ranking list, the most of all the provinces. Huaidi is one of the Hebei province’s 15 ranking villages, which ranks 77th of the total 300.

In addition to the regional welfare from land, China’s fiscal contribution by national state-owned enterprises (SOEs) has increased in recent years. In the past, Chinese SOEs only paid tax to the budget, but kept all their after tax profits. Since 2007, SOEs have increasingly paid part of their net profits to the national budget. This proportion will rise to 30% of total profits in 2020. There are four different categories of SOEs. The first type includes tobacco, petroleum and petrochemical, electricity production, telecommunications, coal and other resource monopoly industries and enterprises, which pay 20% of their net profits to the state. The second type includes steel, transportation, electronics, trade, construction and others in the competitive industries, paying a proportion of 15%. The third category includes the military and scientific research institutes, contributing 10%. The fourth category encompasses policy companies, including the Chinese Grain Reserves Corporation and the Chinese Cotton Reserves Corporation, which are exempt from turning over their net profits. Of interest, the proportion of the China National Tobacco Corporation’s net profits to be paid to the state has increased to 25%, singling the corporation out as a fifth category of its own. Part of the revenue from SOEs’ profits has been injected into the national social security system to benefit the majority.

Regardless of the origin of the social dividend – whether public land or SOEs – it is similar to Alaska’s Permanent Fund Dividend (PFD) model.

A new paradigm?

What are the key elements in the current global discussions about basic income? Is it simply an anti-poverty strategy, just like any other kind of social assistance program in operation? Or is it a comprehensive overhaul of the welfare system, like the New Deal transformation was in the 1930s, which came to form the very basis of the current social security system? The most controversial elements of debates surrounding present public welfare systems and basic income proposals include work ethic, fiscal affordability, a culture of desert and civil rights, among other aspects. The latter has been reviewed in detail in recent history, especially since Nixon’s Family Assistance Plan (FAP) legislation. The main characteristic of FAP is that people can receive the benefit without work requirement, and independently of their family structure. This is very similar to today’s unconditional basic income definition, although FAP is not universal.

At the outset of the Nixon administration, proponents of four fundamentally different anti-poverty paradigms, each of which contained a different causal story, competed for influence. Three of these paradigms supported Guaranteed Annual Income (GAI) plans. Proponents of an economic citizenship paradigm identified the economic system, especially structural unemployment and the wage structure, as the source of poverty. For proponents of this view, the objective of GAI policy was to alleviate poverty and provide citizens with basic income security.

The family stability paradigm identified the social system, especially changing family structures within poor, typically black communities, as the source of poverty. Proponents of this view hoped that GAI policies would decrease poverty by providing additional support for maintaining two-parent families, since rates of marital breakup appeared to be correlated with poverty rates.

The laissez-faire paradigm, which GAI supporters with a libertarian orientation invoked, identified the welfare system and its alleged perverse incentives against work as the root of the problem. Laissez-faire proponents felt that GAI plans would rationalize the welfare system by creating stronger incentives for labor market participation while also granting the poor greater freedom.

The main opposition to GAI proposals within the administration came from officials who saw the behavior of the poor themselves as the primary cause of poverty and believed that welfare reform should rehabilitate the poor by exposing them to the discipline of the labor market. This rehabilitation paradigm argued that limiting eligibility for social provisions and requiring recipients of government benefits to work would be the best path to eliminating poverty.

Is Alaska’s PFD or China’s current social policy context embedded in any of the above paradigms? I don’t think so. At least, that is to say, the four paradigms that undergirded this decade-long debate half a century ago are not sufficient to underpin a new round of worldwide debates on basic income. For example, many countries are considering levying a tax on various kinds of resources, including land, minerals, oil and gas, internet infrastructure, etc. (1). But if we want to justify these different kinds of taxes for financing basic income, the world need a new paradigm. As Philippe Van Parijs says: “It needs to recognize fully that the bulk of our real incomes is not the fruit of the efforts of today’s workers (let alone of the abstinence of today’s capitalists), but a gift from nature increasingly combined with capital accumulation, technological innovation and institutional improvements inherited from the past.”

 

Notes:

(1)      Karl Widerquist and Michael W. Howard (edited), “Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World”, Palgrave Macmillan, 2012

More information at:

Furui Cheng, “Cooperative Society and Basic Income: A Case from China”, Basic Income News, November 10th 2016

Brian Steensland, “The Failed Welfare Revolution: America’s Struggle over Guaranteed Income Policy”, Princeton University Press, September 2007

Philippe Van Parijs, “Basic Income and Social Democracy”, Social Europe, April 11th 2016

[in Chinese]

The editor, “The Chinese Famous Villages Influence Ranking”, The Orientation News, December 16th 2016

HEB101, “Famous Villages in Hebei Province”, Hebei News, December 14th 2016

 

About the author: Cheng Furui is undertaking a post-doctoral program in the Institute of American Studies of the Chinese Academy of Social Sciences. She got her PhD from Tsinghua University and her research interest is public policy. “Social Assistance and Poverty Alleviation Divergence: A Capability Approach” is her first published book based on her doctoral dissertation, which explores the Chinese social safety net in detail. She is now a voluntary news editor of BIEN, and also one of the organizers of China Social Dividend/Basic Income Network: bienchina.com.

Article reviewed by André Coelho and Genevieve Shanahan.

Behavioural Effects of a Citizen’s Income on wages, job security and labour supply

Behavioural Effects of a Citizen’s Income on wages, job security and labour supply

Written by: Anne Gray

Abstract.

What would be the effect of a citizen’s income (CI), aka basic income or BI, on wage levels – how would employers respond to its introduction? What would be its effect on the supply of labour, and on the total amount of paid work done in the economy? Would we still need a legally enforced minimum wage? This article explores the behavioural effects of a BI, on workers, jobseekers and employers. It first examines contrasting hypotheses as to the effects on wages and labour supply, then use official data to make a rough estimate of these effects for individuals in different socioeconomic and household circumstances. Analysis indicates that a Minimum Wage will remain essential after the introduction of a modest BI, to prevent the latter substituting for wages and job security, especially in the case of individuals in less advantaged circumstances.

Introduction

Frequently mentioned arguments for a BI include two different groups of incentive effects that can’t all take place at once for the same person or household. The first is the category of effects that increase labour supply to employers; that it would help people out of the ‘poverty trap’ and encourage them to get a job, or to move from part-time to full-time work. The second is the category of effects that would reduce labour supply to the market; that it would encourage shorter working hours and more leisure; that it would encourage some people to take time off work to study or to care for elderly loved ones or to do unpaid volunteer work. Which groups in the labour force would increase their ‘offer’ of work to the market and which would reduce it? Under what circumstances, and in response to what level of BI, would people work more, or work less ?

We are in the dark here for a number of reasons. Firstly, most previous experiences of anything like a BI have been in other countries, often in much poorer countries than the UK with much more self-employment – Brazil, India and Namibia to mention examples. The US and Canadian experiments of the 1970s were far from ‘universal’, all being a variant of income maintenance for previous welfare claimants only. All we have to go on to tell us what might be the labour market effects of BI are the responses of claimants and employers to previous benefit systems in the UK or in comparable European contexts, and informed guesses about what claimants and employers would do in response to a new type of benefit which has no very similar precedent in nature or scale.

The risk of BI reducing wage rates and job security

Benefit systems have in some instances been found in practice to lead to lower wage rates (Gray 2014). Among these examples, the oldest was the Speenhamland system of poor relief in the early nineteenth century (Polanyi 1957). More recently, lower wage rates, increased precarity and job splitting – leading to jobs with very short hours in place of the full time work that most jobseekers wanted – was an evidenced effect of the high ‘earnings disregard’ levels present in French, German and Belgian systems of unemployment benefit in the 1980s and early 1990s (Gray 2002, 2004). In the UK, Wilkinson (2001) found a ‘Speenhamland effect’ of Working Families Tax Credit. The same argument was made in relation to tax credits when they were first introduced (Bennett and Hirsch 2001). Since 2014, the UK government itself hinted that employers had taken advantage of tax credit, defending their 2015 plan to reduce tax credit allowances (later reversed, but only partly) by saying that ‘the tax credit system had, for too long, been used to subsidise low pay’ (BBC News, 15.9.15). This view was underlined by the statement that corporation tax was being cut to ‘introduce incentives for business to remove the need for tax credits with pay rises ‘ (George Osborne’s budget speech on 8.7.15).

Thus benefit systems that allow unemployed people to move into temporary employment like that offered by this denver staffing agency, without total loss of benefit, as in the examples above, can lead to reduced wages. With WFTC (and the later Working Tax Credit), when unemployed people got a job they re-applied for in-work benefits to partially replace their out-of-work benefits, whilst with Speenhamland and the continental disregards (Polanyi, op.cit; Gray 2002) they just kept some of the benefit they had whilst they were unemployed. Such systems, to a greater or lesser degree, alleviate the ‘poverty trap’ where almost 100% of benefits are lost on taking a job, as with JSA, discouraging employment. But unfortunately downward pressure on wage rates is an inevitable effect of allowing unemployed people to keep getting state money when they get a job, if that is all we do. If ending the ‘poverty trap’ persuades some unemployed people to take jobs they previously wouldn’t have accepted because the wage was too low, employers will then find it easier than before to recruit the numbers they want at a lower wage – unless a minimum wage law prevents this . In fact right wing writers (e.g. Friedman 1962, Parker 1989) have argued for BI precisely because it helps and encourages people to take low paid jobs. And if pay falls, it falls not just for those who may be desperate for any job, but for all those changing jobs – and possibly even for those in jobs and staying in the same workplace. Many recent press reports show how easy it is for employers to issue new, worse contracts in the current under-regulated, under-unionised environment. Some defenders of BI argue that if the BI was high enough, a minimum wage law would not be needed – and even that some element of ‘wage subsidy’ is beneficial because it would protect small businesses like rural shops. (Or, one might add, this would help socially important sectors currently placed in serious difficulty by the recent rise in the legal minimum wage, in particular social care). But pay would fall not just for small businesses (including small shops and care homes, which some people might want to have lower costs to prevent them from closing). It would fall for supermarket chains and other corporate giants as well. In any case there are alternative, more targeted, ways of helping small businesses or particular sectors – especially those where, as with social care, the public sector is the main customer.

Can we avoid the Speenhamland effect and the poverty trap with a single measure? Probably not , for two reasons, as follows. First of all there is the question of whether a BI would be affordable at a level high enough to enable people to refuse all jobs below whatever we consider to be a reasonable wage level. Secondly any measure which increases labour supply is likely to induce easier recruitment at low wages. BI removes the poverty trap for the unwaged, and many of their job applications are directed at low paid sectors. So BI on its own, even at a high level, is liable to induce wage freezing, or recruitment at lower than previous hourly rates, just as did tax credit and the continental high-disregard systems. This can be avoided by ensuring that employers are obliged by law to pay a minimum wage – as I argued in 2014, such a regulation is an important safeguard against the BI being use to benefit employers rather than employees.

However, also at stake are other aspects of labour standards, and these are at issue even with a very high level of BI. Guy Standing (1999) amongst others has argued that a BI is a good defence against precarity – in these days of widespread temporary jobs, zero hours contracts and part-time unemployment, it makes such conditions more tolerable and less exposed to poverty. But if such jobs become more tolerable, employers will find it easier to recruit to them. In effect, such employers would be using state funds as a subsidy to support their practice of laying off workers for the weeks or days they are not needed, rather than meeting the costs of continuous maintenance of their labour force as they do in long-term employment contracts with specified hours. Again repeating the argument of my 2014 paper, limiting the use of temporary labour, and in particular zero hours contracts, is an important form of regulation to prevent this. What is important here is the similarity between a BI and the high disregards in these French, Belgian and German benefit schemes, which did encourage the offer of temporary and ‘mini-jobs’. They were like a partial BI for the unemployed. To combat these effects of encouraging more precarity, alongside a BI we need regulation of zero hours and limitation of temporary work. This is essential if the BI is not to end up subsidising employers who show no long-term responsibility for training or supporting their workforce and want to turn labour supply on and off like a tap.

Moreover, the problems of precarity are not solved by a BI without other measures. A prospective landlord or mortgage company will be unimpressed by someone who doesn’t know whether next week’s income will be her wage for 40 hours (say £400) plus her £80 BI, or just her £80 BI. It is creditworthiness and a secure long-term income that gets people a home – which is a good reason for minimising insecurity in the jobs market. A stable and secure income is important for individuals’ credit rating and thus their financial wellbeing, according to journalists’ advice on how to obtain a good credit rating.

An ‘on your bike’ economy where individuals have unpredictable changes in jobs and housing may also be inimical to family relationships and children’s education ‘

BI and the freedom to with-hold one’s labour

So far this paper has focussed on one potential effect of BI –the increase in the supply of labour. That is, the unemployed would move more easily into employment because they would face no poverty trap, and precarious jobs would become more acceptable. But it is often said that BI would enable people not to work, that is not to work for so long or all the time because they chose study, caring, or volunteering; or not to work because they wanted to refuse exploitative conditions. At first sight these two expectations seem in contradiction to each other; would BI induce more paid work or less? Firstly, it depends on the level of BI compared to average wages. Secondly, the effects would differ between various population groups.

Let us consider first the effect of BI on the unemployed. Unemployed people fall mainly into two groups – those receiving JSA and those who are ineligible – plus some eligible non-claimants who feel they cannot meet the very strict conditions, or have no fixed address. The ineligible group are mainly people whose 6 months’ entitlement to insurance-based JSA has expired and they cannot claim income-tested JSA because they have an employed partner . Ineligible unemployed also include those aged under 18. The argument that people are deterred from working by the benefits poverty trap applies mainly to this non-claimant group, because for those on JSA, the benefit conditions are the main factor. People on JSA are currently under such strict rules as to what jobs they can refuse that they are often obliged through fear of sanctions to apply for rock bottom pay and conditions regardless of the ‘poverty trap’ (Gray 2004). The financial incentive effect of a BI (that is, removing the poverty trap) would make little difference to them. What would make a big difference is that BI is unconditional : all the job centre rules about applying for so many jobs each week, with sanctions for even minor rule infringements, would not apply.

Current JSA rules have been getting gradually tighter, with sanctions and the imposition of compulsory work-for-benefit placements becoming more common, even since 1996. These aspects of the job centre system, described by labour economists as ‘conditionality’ and by critics also as ‘workfarist (Gray, 2004; Peck and Theodore, 2000) were designed to chase people into bad jobs. According to OECD-reported research, greater conditionality of benefits systems do increase the outflow from unemployment into jobs (OECD, 1994, 2000). That is, greater conditionality leads to an increase in labour supply. Conversely, relaxing the punitive sanctions and workfare regime would enable people to spend longer looking for a good job, or re-training in new skills, with nobody forcing them to take the first offer even if this does not meet their income and job security needs or fully use their skills. That is, less conditionality could be expected to lead to a fall in labour supply; this option to turn down bad jobs would work against the Speenhamland effect explained earlier. If a BI was introduced, it is hard to say which effect would win out – easier recruitment by employers to low paid or casual work because of the cushion of BI, or more difficult recruitment on low wages/temporary contracts because of the end to benefit ‘conditionality’.

It is because of the threat of sanctions and workfare that some voices in the trade union movement have recently taken up the historically popular claimants’ movement demand for a BI, a demand first flagged up by Bill Jordan (1989). BI was enthusiastically discussed at a conference on welfare held by UNITE and the PCS in autumn 2014, leading to the publication by UNITE of the ‘National Welfare Charter’ linking BI to the demands to end sanctions and workfare, which was endorsed by a fringe meeting of the TUC in 2015 (see

There was also a UNITE/USDAW motion supporting the principle of BI passed at the TUC itself in 2016.

Over and above the virtue of abolishing benefit sanctions, a BI that was high enough to enable people to refuse low pay or very insecure work would probably reduce the total of hours worked and the number of jobs offered. Some of the worst jobs would not be offered because they would attract few applicants. But if the BI was not high enough to enable people to refuse ‘bad’ jobs, it would have the opposite effect – low pay would be more acceptable and employers would recruit more easily at low wages than if there was no BI. It is impossible to say, a priori, how much would be ‘high enough’ to mark the tipping point or boundary between these two effects, above which labour supply falls. Moreover, the tipping point could vary according to socioeconomic group and region.

Turning to people who are not on out-of-work benefits – that is, people in paid work, mothers and other carers, students and would-be students, the level of the BI would be the key factor in their decisions about whether and how much to work. Just as people clearly find it hard to manage on JSA of £73.10 per week, they would probably not stay completely out of work for long on a BI of £70 or £80 per week unless they had some parental support. However for many students that might be riches, given that the maximum maintenance grant of £65 per week in England has just been abolished for new starters. Some parents might work more if they found £70 or £80 a handy childcare grant, but others might want to spend more time with their children. Some older people might find it was enough to make up any deficit in their pension entitlement and therefore retire sooner than they would otherwise. Some full-time workers might do less overtime, and some people (in particular students or those in poor health) might give up part-time jobs. Some people might feel more confident about starting their own business with even a small BI as a cushion in the early stages, rather as they were once encouraged by the Enterprise Allowance Scheme of the 1980s – but they could be people moving out of unemployment or out of jobs they found boring or ill-paid, so the net effect on labour supply is again unpredictable.

If a BI were high enough (how high we don’t know) it would encourage more people to work part-time, even those used to quite high hourly rates. For there to be any substantial effect of a BI in terms of people withdrawing, at least by working shorter hours, from jobs they already had, a BI would have to offer enough for them to feel that the loss of income was worth the gain in non-work time. For example if a BI of £150 per week was introduced, this would enable someone to give up 10 hours work per week without loss of income if s/he earned £15 per hour after tax, but to give up 15 hours work per week and have the same weekly income as before if s/he only earned £10 net per hour. But if the BI were only £60, the person on £15 per hour would only feel motivated to work 4 hours per week less whilst the person on £10 per hour might work 6 hours less. The higher the BI in relation to the individual’s hourly wage, the greater would be the likely reduction in labour supply from people already in paid work. The ‘value of leisure’ (whether used as leisure, or for some form of unpaid work or study) clearly varies considerably with the individual, depending on their tastes, commitments and current hourly wage rate. As a rule of thumb, one might expect that if – and only if – people have a ‘target weekly income’ they want, irrespective of the amount of effort it takes to obtain it, the ratio of the BI to the hourly wage rate gives us the maximum number of hours by which they would seek to reduce their work time. So for example, if the hourly wage was £10, a BI of £100 would induce people working 45 hours to seek only 35 hours, and a BI of £140 would induce people to seek 31 hours rather than 45. But things might not be as simple as that, firstly because the value of the first extra hour of leisure may be greater than further hours, secondly because employers are not that flexible, and thirdly because the ‘target weekly income’ may vary with the extent of income security, the effort involved in earning, the costs of commuting, work clothes and lunches, and the influence of other family members in response to the introduction of a BI.

Conversely, if we consider new graduates or school leavers, or mothers returning to work, the question might be, ‘what is the minimum extra income I need?’ The higher the BI, the more likely they would be to meet that target with a small number of hours’ work per week. The higher the ratio of the BI to the hourly wage, the more likely are new entrants or re-entrants to the labour market to be satisfied with a small number of hours of work. But independently of the level of the BI, the higher their hourly wage rate the more likely people are to achieve their ‘target’ income with a short working week. So if we want to encourage part-time work to reduce any pressure placed by automation on the ‘supply’ of jobs, a high legal minimum wage would help, whatever the level of BI offered.

Clearly not everyone would react to the introduction of BI in the same way. How it would affect their ‘propensity to work’ would vary with the level of wages individuals can obtain, depending on occupation, skills, experience; their entitlements (or lack of them) under the previous benefit system; caring commitments; the desire to study; their partner’s work, their health/disability; and heir closeness to pensionable age.

Who would work less and who would work more ?

This section attempts to investigate what the effect of a BI might be on the employment behaviour of different groups in the population. Who would respond to a BI by offering more labour to the market – taking a job when they hadn’t before, or seeking longer hours? And who would respond to a BI by reducing their personal labour supply, dropping out of paid work or seeking shorter hours?

The method used here is first to consider which categories of people would gain from a BI introduced in the range of £70 to £90 per week for a working age adult, and which categories would lose through paying higher taxes to finance the BI. Both gainers and losers are categorised by their current employment status. They include full time workers, who can vary their hours only by doing overtime in some instances: and part-time workers or self-employed people, both of whom can in theory at least vary their working hours quite a lot, in the case of the part-timers possibly by changing jobs or taking two jobs. Then there are unemployed jobseekers (divided into those claiming JSA and those who are not claiming); people who are medically unfit for employment or whose job choices are heavily constrained by their health; people whose main activity is caring for relatives; students; and those who are still under pension age but wholly or partly retired. Most of these groups can be identified from the Labour Force Survey; however, the published data for 2016 do not identify all the categories in the table separately, and have been supplemented by published LFS data for earlier dates, and from other sources as detailed in the notes. There may be an unintended overlap, thus some double counting, for some categories. Thus the estimates of numbers are very rough, and may be regarded as guesstimates of the rough order of magnitude of numbers pending the possibility of access to the raw data which one could interrogate to provide better estimates of the numbers in these various categories. Further information about sources, and some caveats, is given in the note to the two tables below.

 

 

Table 1 shows roughly how many people are in each sub-group, and hazards a guess at what the effects might be for different sections of the labour force of a BI in the region of current JSA entitlement or not much higher. For clarity, those whom we can expect would be likely to raise their hours of work in response to a BI are highlighted in yellow and those whom we expect to reduce their hours in grey. This table suggests what might be the direction of change in offer of paid work to the market from each group, considering both the likely effects of the BI itself and the likely effects of higher taxes to pay for it, compared to the current system. The higher tax burden would of course impact on income groups above the ‘breakeven’ level where BI and income tax bill would be equal. Table 2 shows guesstimates for what might be the total effect on labour supply in terms of hours per week. It should be emphasised that this is highly speculative and needs to be informed by more research on labour supply elasticities and the gains/losses produced by a BI system compared to the current benefits system, as well as by interrogation of the Labour Force Survey and other large data sets to obtain better estimates of the numbers in each labour market category. The guesstimates of what proportion of people in each of the categories would respond by working more or less are mere hypotheses and not based on evidence. However, the table may serve to show the very rough orders of magnitude of the changes expected.

In Table 1 there are four quadrants; on the left side are those who are currently not in paid work and on the right side those who are employed or self-employed. In the upper half of the table are the ‘gainers’ from BI (‘G’ groups) and in the lower half the ‘losers’ who would pay more tax than their BI – that is, their income is above the breakeven point. These two variables – in paid work or not, gainers or losers, divide the table into four.

In the upper left quadrant (gainers from BI, not employed) we have those with non-economic reasons for staying out of the labour market, plus those most affected by the ‘poverty trap’ in the current benefits system. Unemployed people, if claiming benefit, would be more likely to enter work quickly because their BI would remove the poverty trap, although as noted earlier the effect of removing benefit conditionality would work in the opposite direction and modify this incentive effect. Unemployed people not claiming benefit would especially gain from a BI taking them out of the poverty trap if any money they earn currently results in a loss of JSA or tax credit for their partner. But the published LFS data do not tell us how many of them are in this kind of household situation. So the table makes a very arbitrary guess that half of the non-claimant unemployed are in this situation.

In the bottom left quadrant (non-employed ‘losers’ from BI) we have the ‘early retired’ and a few others who are not working by choice – taking a gap year, ‘housewives’ (or ‘househusbands’) without young children, etc. It is assumed that most of these, in particular ‘early retired’ people (those aged 50 to 64, not in paid work, nor disabled nor engaged in care ) are in the ‘loser’ category since they have decided they do not need earnings, so they are probably people of above average means due to wealth, partner’s income or early pension entitlement. Also in the bottom left quadrant, a few early retired people (defined as aged 50-64 and not working or claiming unwaged benefits) might respond to higher tax by thinking their money is no longer enough and they should take a part time job – or keep up some activity in their former profession. In the bottom right quadrant (employed or self-employed, ‘losers’) other workers aged 50 plus, if already partly retired and working part-time, might decide that the extra tax makes it no longer worth working and would retire completely. Also in this quadrant are some other part-time workers who are not carers, nor over 50, nor disabled nor students – it is assumed that they have non-economic reasons for their choice of paid hours and that a BI would probably not affect this choice.

In the top right quadrant of the table (in paid work, whether full or part time, gainers from BI) we have people who are employed (or self-employed) part-time because of caring or for health reasons, plus students. Many students can be expected to drop their part-time jobs if they had a BI, at least in term time, and this is important because there are over 2.3 million students employed part-time – they are a larger category than the unemployed. Then there are mothers who are in paid work part-time; they might be affected by the poverty trap associated with tax credits, and welcome the lower withdrawal rate of a BI, so they might seek longer hours. However research on American and Canadian experiments in offering something like a BI suggests that women with children tend to reduce their hours (or delay return to work) when offered a BI (Prescott et al. 1986, Hum and Simpson 1993). But if they are lone parents on benefit or their partner is not working (and therefore claiming income based JSA in the current system), they might work longer hours because they would no longer penalised by a loss of benefits from the household as their earnings rise. Blundell, Dias, Meghir and Shaw (2012,2015), when modelling the effects of the 1999 introduction of WFTC, found that more generous in-work benefits overall reduce mothers’ work offer to the market. The change from Family Income Supplement to WFTC in 1999 made the in-work benefits regime more generous with a lower ‘taper’ rate and by starting the taper at a higher level of income. This change was rather like what a BI would do since it offered, in effect, a higher ‘disregard’ of earnings and partial alleviation of the poverty trap. Modelling the introduction of WFTC showed a positive effect on lone mothers’ employment rates – but only very small unless they were home owners. For the much larger number of partnered mothers, there was a negative effect on employment rates of 2-3%, and also a negative effect on their hours. On balance it seems likely that the effect of a BI on the employment seeking behaviour of part-time-employed mothers would be a small reduction in the hours they offer to the labour market.

Table 2 attempts to gauge the rough orders of magnitude of these effects, to determine whether it is more likely that a BI would lead to a rise in aggregate labour supply or a fall. This second table takes each of the groups identified in Table 1 and hazards a guess at how large the effect per person in each group would be. Thus, having established hypotheses about the direction of labour supply effect in Table 1, Table 2 offers a guesstimate of how large these effects would be. It suggests that a BI for working age adults in the range of £70 to £90 per week, if all benefits for children and disabled people remain as now, would produce a substantial increase in labour supply, of 3.92 million hours or the equivalent of 98,000 full time workers. Compared to the overall 31.56 million people in paid employment or self-employment, this seems small – but in certain sectors and places where jobs are scarce, it could have a substantial effect on wage levels. As shown at the end of Table 2, there is a particularly large increase in labour supply for unskilled or entry level jobs – altogether possibly almost 12.3 million hours. This is a very powerful argument for keeping a minimum wage law in place.

The overall result is highly sensitive to the size of the effect on the unemployed, which is likely to be the largest of all the effects on separate labour force groups. Alongside the effect on the unemployed, there would be substantial effects on students and mothers. The potential increase in labour supply from the unemployed, if the BI reduced their number by one third, would be perhaps 21 million hours per week. But the contrary fall in labour supply from students might be over 11 million hours per week. This is useful to the job prospects of the unemployed, since they often compete with students for unskilled part-time jobs.

For mothers, the effects are particularly unpredictable and would depend a great deal on what regime is in place to help with childcare costs, as well as on the income tax rate. In the table, if a 5% increase is assumed in the number of working mothers and their average hours were 19 per week (as estimated by Alakeson, 2012), this would lead to an increase in labour supply of 2.09 million hours.

Full time workers who do not currently get WTC but who would gain from BI might reduce their overtime, which in aggregate amounts to a large effect even though paid overtime per person across the labour force is very small anyway in the current state of the economy. The full time workers who don’t gain from BI, but find themselves with a higher tax rate than before or in a higher tax band, might also do less overtime because of the disincentive effect. A guesstimate is a fall of 7.7 million hours per week, if say average overtime per worker was reduced from one hour to half an hour across all these full time workers.

At this level of BI few full timers would feel able to switch to part-time jobs, unless perhaps nearing retirement. But assuming a BI would mean a higher income tax bill for some groups, some early-retired workers might re-enter the labour force for ‘mini-jobs’ (‘unretirement’) and some might postpone their retirement. Others might reduce their hours, whether because they felt the BI enabled them to do so, or because if they were well paid and therefore in a higher tax band to pay for the BI, they felt deterred from continuing full time. These effects are small and comprise increases in hours from some older workers set against reductions from others – the net effect might be less than one million hours per week. (Effects on people over 64 are not considered here; however depending on the level of BI for people currently receiving state pension, there obviously would be some labour market effects in so far as some pensioners do also have jobs)

Conclusion

The interesting points shown by this series of guesstimates are that firstly whilst the effect of a BI on unemployed people’s job seeking and job acceptance is the largest effect, the effects on mothers, students and choice of retirement age are also important. Whereas much discussion of the labour market effects of BI has focussed on the unemployed or ‘prime age’ full time workers, the responses of other groups in the labour force may be of considerable impact on the likely change in overall labour supply. Despite the likely fall in students’ working hours, one would expect a large rise in labour supply will be at the lower end of the pay ladder, making the retention of a minimum wage very important. It must be emphasised that the guesstimates of both size and direction of the labour supply effects mentioned here are highly speculative, and no more than an initial sketch of the several different effects that need to be subjected to proper econometric modelling in order to assess what would really be the effects of introducing a BI.

If we now consider a considerably higher BI – say £150 per week – it is likely that some full time workers with no caring commitments and of ‘prime’ working age would reduce their hours to part-time, if their job conditions permitted that. There would probably be a demand for three or four-day a week jobs. Here the previous analysis about the trade-off between the hourly value of leisure and the wage rate comes into play.

If people did reduce their income from work it would erode the income tax base, which must be taken into account in assessing how large a BI would be affordable. Ensuring that a BI does not induce a fall in the tax revenue used to pay for it is one of several reasons why it would be desirable to fund it partly from non-income tax sources – such as taxes on personal wealth, land value tax, capital gains tax and corporation tax.

References

Alakeson, Vidhya, 2012. The price of motherhood: women and part-time work. Resolution Foundation, London. Downloaded from https://www.resolutionfoundation.org/app/uploads/2014/08/The-price-of-motherhood-women-and-part-time-work.pdf%20on%2027.12.16

Bennett, Fran and Hirsch, Donald, 2001. Balancing Support and Opportunity, in Bennett and Hirsch, eds., The Employment Tax Credit and issues for the future of in-work support, Joseph Rowntree Foundation, downloaded from https://www.jrf.org.uk/report/employment-tax-credit-and-issues-future-work-support on 4.12.16.

Blundell, Richard _ Dias, Monica Costa, Meghir, Costas and Shaw, Jonathan, 2012. Education,labour supply and welfare. Institute of Fiscal Studies/University of Sheffield, downloaded from https://www.sheffield.ac.uk/polopoly_fs/1.247215!/file/E2_dias.pdf on 4.12.16

Blundell, Richard _ Dias, Monica Costa, Meghir, Costas and Shaw, Jonathan, 2015. Female Labor Supply, Human Capital and Welfare Reform , downloaded from https://www.ifs.org.uk/uploads/publications/mimeos/Dias_NBERwps_2015.pdf on 22.12.16

Friedman, Milton 1962. Capitalism and Freedom, University of Chicago Press.

Gray, Anne, 2002. European Perspectives on Welfare Reform, European Societies 4,4; 359-80.

Gray, Anne, 2004. Unsocial Europe; Social Protection or Flexploitation. Pluto.

Hum, Derek; Simpson, Wayne (1993). “Economic Response to a Guaranteed Annual Income: Experience from Canada and the United States”.Journal of Labor Economics. 11 (1, part 2).JSTOR 2535174.

Jordan, Bill, 1998. The New Politics of Welfare: Social Justice in a Global Context, Sage.

Parker, Hermione,1989. Instead of the Dole, Routledge.

Peck, J., and Theodore, N. 2000. Work first; workfare and the regulation of contingent labour markets, Cambridge Journal of Economics, 24.1; 119-38.

Polanyi, K, 1957. The Great Transformation, Beacon Press, Boston.

Prescott, David, Swidinsky, Robert, and Wilton, David, 1986. Labour supply estimates for low-income female heads of household using Mincom Data. Canadian Journal of Economics, 86:134-141.

Standing, Guy,1999. Global Labour Flexibility; Seeking Distributive Justice, Macmillan, Basingstoke.

Review: ‘Radical proposal’ provides basic income details

Review: ‘Radical proposal’ provides basic income details

Philippe Van Parijs and Yannick Vanderborght, Basic Income: A radical proposal for a free society and a sane economy, Harvard University Press, 2017, 384 pp, 0 6740 5228 4, hbk, $29.95

This book revolves around two focal points: freedom, and Basic Income; and it might best be understood as a meditation on the relationship between them.

The introductory first chapter outlines what a Basic Income is and how it would tackle poverty, unemployment, and the quality of employment, and how it would enhance an individual’s freedom: freedom within the household, freedom in the employment market, freedom from bureaucratic intrusion… The relationship between ‘universal’ and ‘unconditional’ needs more work, and a Basic Income that varied across a country would not achieve the kind of redistribution that the authors would like to see achieved across Europe in chapter 8, as it would be conditional and therefore not a Basic Income, and would pose considerable practical difficulties: but otherwise this chapter offers a reliable discussion. Persistence with the significant amount of detail will reward the reader.

Chapter 2 discusses such alternatives as Negative Income Tax, Earned Income Tax Credits, and wage subsidies, all of which fare badly in a variety of respects when compared to Basic Income. Basic Income is preferred to a Basic Endowment because it protects our lifelong freedom against freedom badly exercised in our youth; and a reduced working week is criticised on the grounds that it would control the number of hours of paid employment that we were permitted to work, whereas a Basic Income would enhance our freedom at the same time as offering the possibility of a shorter working week. A Participation Income ought to have been tackled here as an undesirable alternative to Basic Income rather than later in the book as a feasible step on the way to Basic Income.

The following two chapters contain some of the relevant history: chapter 3 the history of social insurance and means-tested benefits, and chapter 4 the history of the Basic Income debate. Then chapter 5 argues that a Basic Income would be both ethical and just, with both of those criteria focused on the notion of individual freedom, and in particular on the freedom not to seek paid employment. Among the dialogue partners are John Rawls, Ronald Dworkin, Amartya Sen, Brian Barry, and Karl Marx. This is a chapter that the ‘philosophically inclined’ (p.113) reader will greatly enjoy, although whether the unphilosphically inclined will find that it satisfactorily answers the objections to Basic Income listed at the beginning of the chapter is an interesting question. Rather more likely to do that would be the fact that the lower marginal deduction rates that a Basic Income would deliver would make it more likely that someone would seek paid employment, not less. More practical considerations are permitted to intrude when a land value tax is found to be impractical; and the reader is plausibly counselled to seek a more just society rather than a happier one.

In chapter 6, on funding, experiments, and transitions, there is a usefully detailed discussion of the different marginal deduction rates that would be experienced by individuals at different points on the earnings spectrum if income tax rates were raised to pay for a Basic Income. The discussion suggests that such increases need to be kept to a minimum. A variety of natural and constructed experiments are discussed, and the difficulty of employing their results in debate on Basic Income is well argued. There is an equally useful discussion on the difficulty of transferring labour market models and empirical results from contexts within current tax and benefits systems to the context of the Basic Income debate. A number of taxation options are discussed: taxes on capital, on land, on other natural resources, on financial transactions, and on consumption. When the authors turn to implementation options, they correctly recognise that a ‘partial Basic Income’ (which ought in relation to their original definition of Basic Income to have been called a ‘small Basic Income’) would need to be the first step. They then consider options for how such a Basic Income might be implemented, and suggest that implementing it first for a single age cohort would create unfairness between cohorts (p.160). However, if the Basic Income replaced income tax personal allowances and other benefits then members of the relevant cohort would not necessarily receive any immediate financial advantage, and any perceived unfairness relating to a Basic Income’s various advantages over existing benefits systems would result in pressure to extend the Basic Income to neighbouring cohorts. This implementation method has more to be said for it than the authors realise.

Chapter 7 tackles political achievability. A survey of opinion poll results finds the public broadly in favour, except for Swiss, most of whom voted against the referendum resolution on Basic Income because they were not convinced that it would be possible to pay for the high Basic Income recommended by the campaigners. The chapter goes on to find growing understanding of the advantages of Basic Income among trades unionists ( – the UK’s Unite receives an honourable mention). The complexity of feminist, socialist and Green Basic Income debates is well understood. Somewhat incongruously the UK’s Liberal Democrats and Charles Murray are located together in a section titled ‘Liberals’. Separate sections on ‘Liberals’ and ‘Neoliberals’ would have made more sense. Similarly, the section entitled ‘Christians’ should have been two sections: ‘Christian Democrats’ and ‘Christians’. Social movements such as Occupy and the movement that promoted the European Citizens’ Initiative on Basic Income are correctly seen as significant locations for future debate on Basic Income.

The latter half of chapter 7 evaluates social policies that the authors believe would be useful steps on the way to a Basic Income. They recognise that a Participation Income (an income conditional on the recipient’s ‘participation’ in society) would face administrative challenges, and believe that these would result in the participation condition being phased out. They would not. The participation-testing of the entire population would be so unpopular that the Participation Income would soon be abolished along with any thought of it becoming a Basic Income. A Negative Income Tax, which the authors also believe could be a step towards a Basic Income, could suffer the same fate. As the authors recognise at the end of the chapter, the only viable first step on the way to a Basic Income would be a Basic Income paid at an easily fundable level to a single or multiple cohorts. Unfortunately, the last line returns to the possibility of ‘participation’ conditions. The temptation to suggest this should be resisted.

Both chapters 6 and 7 contain material on implementation routes. To have brought this material together into a single chapter titled ‘roads to Basic Income’ would have been helpful. As it is, issues relating to implementation look as if they are of secondary significance. They are not. They are where the debate is now going.

Chapter 8 ponders the difficulties that globalisation, immigration and emigration could pose for a Basic Income in a single country, and the authors speculate about the possibility of a global Basic Income. They suggest that a Europe-wide Basic Income funded by a financial transactions tax or a carbon tax would reduce the economic pressures that give rise to migration within Europe, and would therefore reduce levels of migration, and make it more likely that freedom of movement would survive. Such a Basic Income would also help to preserve the Euro’s viability.

This book is a triumph, and will remain the definitive liberal argument for a Basic Income for many years. At its heart is a utopia in which every individual experiences the maximum possible freedom, and Basic Income as a means to that end. ‘Equality’, ‘inequality’ and ‘social cohesion’ are missing from the index, and Basic Income’s promise of a more equal and more cohesive society might have been given a little more attention alongside the ubiquitous emphasis on individual freedom: but readers from a wide variety of ideological commitments will still find this book useful. It is well written, well referenced, and generally well organised, and it tackles many of the issues central to the current debate.

There will be a lot more books on Basic Income, as there should be given the increasingly diverse and widespread debate. Some of those books will be from the same standpoint as this one, others will be from a different ideological standpoint, and some will be from a more pragmatic point of view. Whatever standpoint they come from, they will find it difficult to exceed the intellectual quality of Basic Income: A radical proposal for a free society and a sane economy.

Interview: Is school choice an ally of basic income?

Interview: Is school choice an ally of basic income?

The views expressed below and in the UBI Podcast do not necessarily express those of Basic Income Earth Network, or BI News.

While school choice and basic income advocates may not always see eye to eye, they may have more in common than they realize.

In my new UBI Podcast series, I interviewed Emily Runge, an education policy researcher for the Show-Me Institute. Runge advocates that the government provide parents more choice in how their children is educated, including providing families cash grants for education.

UBI Podcast tinyurl.com/UBIpodcast

The way Runge described her advocacy for school choice parallels much of the rhetoric that basic income advocates use.

“The overlap that I see, is there’s a recognition that there are vulnerable populations and the status quo is working against them. And the way the government treats them, for example the public school system, is not always the best.”

The intention of school choice, Runge said, is to allow individuals to decide what is best for their families and children.

“With the school choice movement, and the Universal Basic Income movement, is we are empowering individuals, giving them more agency, and this is a more innovative way to deal with problems that we see,” she said.

Arizona recently signed into law America’s first ever universal education savings account (ESA) program. This system will eventually allow any student to apply for a state-funded savings account that can be spent on education services, including tuition, online services, tutoring, and education materials. In theory, this will unlock a host of degree paths and careers for low-income families.

High school students can receive up to $5,000 per year in their ESA, and $4,600 is available for K-8.

For now, the number of students that can enroll in an ESA is capped at 5,500. Children with disabilities can receive a higher cash grant, depending on the services needed.

Runge said a universal ESA may be the ultimate goal, and other school choice offerings should also be pursued. In the meantime, Runge said that there are many good public schools that should be allowed to continue to operate.

The choice, she said, should be given to the parents not the government.

“Instead of children being assigned to a particular school, we advocate that money should follow the child,” she said.

As it stands, Runge said those with a lot of wealth can afford school choice, it is vulnerable and low-income populations that do not have the choice.

The intersection between poverty and education disparities is well known. And children of wealthy parents certainly have more opportunities for a superior education, simply because they have the cash to pay for these services.

Like basic income, an ESA has the potential to shift power from bureaucrats to individuals. There would still be conditions on the money, as ESA cash would necessarily be ear-marked for education, although the choices would be infinitely more for poor families in the status quo.

However, there are likely many basic income advocates that are skeptical of a cash-grant system when it comes to education. And there are likely many school choice advocates that are skeptical of no-strings attached cash grants to families.

Nonetheless, there should be more discussions between movements, such as basic income and school choice, on the areas that they overlap and how both can achieve their goal of empowering all families regardless of their background and situation.