by Tyler Prochazka | Jun 4, 2016 | Opinion
One of the masterminds behind the upcoming Swiss referendum on the basic income Enno Schmidt said that no matter the outcome on June 5, he will still have achieved his goal of starting a widespread discussion about the issue.
Schmidt started his basic income advocacy back in 2006 and has been pushing the idea through films, lectures and articles ever since. In 2013, he and others collected over 120,000 signatures in order to get the basic income up for a referendum in Switzerland, which he said was not an easy task.
In anticipation of the upcoming referendum, Schmidt answered some questions about the past, present and future of the basic income in Switzerland and beyond. Some of the quotations have been edited for clarity.
Why did you found the initiative basic income? What was your intention for the initiative in 2006? Have your goal’s changed?
The reason was to make the people more free in their decisions about their life and in their personal responsibility to live according to their own intentions.
The right to political initiatives for everyone in Switzerland and the Direct Democracy made it possible to come up with this proposal to create a general discussion throughout the entire population and to finally achieve a referendum.
The intention was to give all people a basic income unconditional in order to create a society with more variety, less fear, and more productivity in a much broader sense. Also part of the goal was to bring the idea of unconditionality to our otherwise purely functional conceptions of living. Ultimately it represents the question about what it means to be human. The goal did not change but has been enriched with more and more significance. Aspects such as the upcoming data economy, the need to strengthen civil society, the necessary power shift towards the citizens all contributed to this conception.
How did you happen upon the concept of the basic income? Why do you think you were drawn to the idea?
Because the basic income refers to the individual, not to a specific circumstances. It does not determine people, it enables everyone to come into play in society. It does not judge what people do. It’s a base of human kindness and a protection of privacy. It’s about respect and appreciation towards the other and it’s about self-determination. Thus new the new and unforeseen can happen and develop. Today there is no more lack of material goods. The productiveness in the old sense increases with ever less human labor. We need a space for the new productivity as we face our current challenges. We have to rethink the income supply and examine our values. Separating income and work reveals the value of work. No one should be blackmailed with his livelihood. The right to work is the right to do what you really want to do. This right needs a right to income. The unconditional basic income is a democratically coordinated income, not negotiated economically. The logic and beauty of the idea has drawn me.
How would you compare the public’s interest in the basic income in 2006 to the interest/support right now?
Ten years ago, we moved across the country, organized events and let others come up for discussion. We still do. But now the media has come from all over to us and spread the idea worldwide. We started from a little point with nearly no knowledge in society about the idea. And still we are far from a majority convinced of the basic income. But attention and acceptance has greatly increased. Not only in Switzerland. But Switzerland has the benefit of direct democracy. With our campaign for the vote we managed to even get some of the opponents of the basic income to acclaim the concept as the new idea for Europe. The interest grew rapidly after the World Economic Forum in Davos discussed the unconditional basic income as the most innovative and intelligent solution for the upcoming digitalization era, and once again grew rapidly due to the upcoming vote.
How do you feel about your chances with the upcoming vote?
With this vote, we will have established the subject firmly in society. If one in five votes is yes, then that is incredible progress. So much has moved in the minds, in fixed opinions, and new eyes have appeared. It’s the first time in history that this issue is discussed in an entire population with the serious background of a referendum to vote on and decide.
By this vote the majority may vote no, but the vote itself is an opportunity to introduce an unconditional basic income to society. But maybe in ten years the next referendum will result in a majority voting yes. Therefore, it is not so much a question about how we feel about our chances, but we already have taken the chance to create a public and broad debate about the basic income unlike anything seen before. This vote is a milestone on a path on which the debate is getting stronger at home and abroad.
Can you describe the process of getting the initiative on the ballot? How did you feel when the initiative was successfully scheduled for a public vote?
I felt as if the gate was opened for a heavenly reality and a really human approach, for an big event and great chance. When the Federal Chancellery had approved the people’s initiative, we had 18 months’ time to gather at least 100,000 valid signatures of Swiss citizens. This is not online. You have to go on the street in all types of weather. That is not easy. While doing so a new dynamic developed. “Generation basic income” converted the severe toil into a sporting competition. We turned the large number into achievable goals, with each individual collecting visible results, and over the long run a series of successes.
When we submitted 126,000 signatures on October 4, 2013 in the Federal Chancellery, I had the feeling of having made gotten the essentials, that the way was now open for a general major debate in society. The referendum itself is already a point of arrival. We offer the proposal: The citizens vote.
How has your outlook changed for the prospect of the basic income over the last ten years?
I realized early on that a basic income will come. The idea is as strong as the idea of democracy or human rights. It is of the same kind. It is even the same idea. The question is not whether it comes, but how it comes and by whom, by what interests. This prospect has been confirmed over the time. Already in the design of the meaning of an unconditional basic income is its way of being introduced. An unconditional basic income not only allows more flexibility, it also requires more. It comes through the people who are affected or it comes out wrong. It may not come automatically as a result of automation. It may not come from the rich to the poor and not as an economy measure. It should not be a new feudalism, no philanthropic colonialism and not to plug old holes. If the unconditional does not affect everybody, it is for no one. The comprehensive and greatness of this idea became even clearer for me and thus also the possibilities to use it quite differently.
What would the implications be if the Swiss vote yes on the referendum? What would the implications be if they vote no — including for you and your advocacy?
With a majority yes the introduction will be prepared and probably start with pilot projects such as in Finland. This will take some years. About the amount of a basic income and the type of finance it probably will come to next public votes. Also other points of the basic income can lead to new referendums. Overall, I think, it will need 20 years. With a majority no the discussion also will go on. This referendum has given such a strong thrust to the debate. The development will go along as well, just not within the authorities. Also pilot projects can arise in some cities and cantons. And the development in other countries continues. We see things not isolated in Switzerland. We see it in conjunction with the other areas experimenting with the basic income. Another referendum in Switzerland is possible and the introduction will go more quickly. Time does not stand still and an unconditional basic income becomes more and more inevitable.
by Tyler Prochazka | May 16, 2016 | Opinion
Back in the 1990s, China started experimenting with a minimum income guarantee that topped off incomes to a minimum level set by local governments. China called the program dibao, meaning minimum livelihood guarantee, expanding the program nationwide in 2007.
In Beijing the urban monthly dibao standard is 1050 RMB ($161.50 USD) and the rural standard is 800 RMB ($123.04 USD). For urban residents, this is about five dollars USD a day.
However, even this paltry amount often does not make it to those in poverty.
A report by the World Bank found that for every 10 RMB spent on the dibao, only 1 to 2.4 RMB reached individuals in poverty (cited by the Economist). The World Bank also found the dibao program only lowered the poverty gap by 6.5 percent.
Corruption and inability to determine households’ poverty status have plagued the program. According to Lu Yang in the Indian Journal of Labour Economics, based on 2010 survey data only 21 percent of poor households were able to receive the dibao, while more than half of dibao recipients were above the poverty line.
Many local governments go to great lengths to investigate whether dibao households are secretly hoarding wealth, visiting recipients’ homes and observing whether the household has too many “high quality” products to qualify.
Others are concerned with the dibao’s effect on the poor’s effective marginal tax rate. Higher effective marginal tax rates lower the likelihood that a household member will seek work.
If a household’s average income per person goes above the dibao standard, they could sacrifice the entirety of the benefit. Each household member raises the household’s dibao standard by 100 percent. For example, in Beijing where the standard is 1050 RMB per month, a two-person household would face a 2100 RMB dibao standard. In turn, larger households are more susceptible to the problem of high effective marginal tax rates.
In some instances, it is possible that a household will have a 100 percent effective tax rate due to the dibao benefit. In these cases, the household will have the same income regardless of whether a household member chooses to work or not. Based on data from an essay in Population and Development a family of three in Tianjin with one household member employed would have the same income as an identical family that does not work at all. Clearly this has the potential to undermine labor participation if the drop off is this steep in reality.
China plans to lift 70 million people out of poverty by 2020. Such a massive undertaking requires a robust social welfare system. As it stands, the dibao program is not equipped to do this heavy lifting.
However, the dibao does provide a starting point for China to experiment with universal coverage.
The 2014 World Bank report conducted economic simulations that demonstrated expanding dibao coverage was more effective than increasing the benefit size at lowering the poverty gap.
Like the dibao, the central government of China could initiate pilot programs that universalize the dibao cash transfer, eliminating the income and wealth requirements to qualify for the dibao benefit.
Universalizing the program would potentially address many of the issues plaguing dibao, such as the high effective marginal tax rates and low rate of impoverished individuals that receive the dibao.
China’s economic miracle successfully lifted the most individuals out of poverty in world history. To do so, China undertook some dramatic reforms that completely reshaped Chinese society. Now in order to completely eradicate poverty, China may want to take yet another drastic step with a universal basic income guarantee.
by Karl Widerquist | Apr 30, 2016 | News
The highly popular U.S. website, 538.com, known for accurate poll-based predictions of political campaigns and number-crunching analysis, has starting reporting on basic income. This article knowledgeably summarizes some of the history and some of the recent research on it and movement for it.
Andrew Flowers, “What Would Happen If We Just Gave People Money?” 538.com, April 2016
Andrew Flowers, 538.com, from DBO data
by Joe Timothy | Apr 1, 2016 | News
Over the last 12 months, the debate around basic income has seemingly gained interest by the week. Nations throughout the world — including Finland, Switzerland, France and Holland, among others — are currently exploring this policy as a solution to a plethora of different problems, in some cases even planning full-blown pilot studies. Recently, Canada has joined this list of nations ready to test a basic income. In 2016, since the election of the liberal Justin Trudeau, news has been streaming out of Canada about the adoption of basic income initiatives in various regions of the country — so many that we have decided to helpfully summarise the key news stories for you to consume in one go.
First, in the last few weeks, there has been a mountain of articles about the proposed implementation of a pilot study of basic income in Ontario, Canada. The idea of working towards developing a pilot study was announced in the 2016 budget statement. Few details were released at the time. It was stated that “the government will work with communities, researchers and other stakeholders” to develop a project into basic income. The statement also said that “The pilot project will test a growing view at home and abroad that a basic income could build on the success of minimum wage policies and increases in child benefits by providing more consistent and predictable support in the context of today’s dynamic labour market.”
A strategy to reduce poverty and expand the safety net
This push in Ontario towards a basic income is part of a larger strategy “to reduce poverty and expand the safety net”. Accompanying this initiative is a plan to give free university places to low income students. The Ontario government is also concerned with the precarious nature of the modern job market. They stated that there is a growing need for “consistent and predictable” support for working people. Ben Schiller, in Co.exist, wrote that “In Canada, temporary and part-time employment grew twice as fast as full-time work between 1997 and 2015.” It is within this environment that the Ontario government feel a basic income could be a good solution to help their communities.
In addition to the initiative in Ontario, it has also been noted that François Blais has been appointed as the minister of employment and social solidarity in the province of Quebec. Blais’ long term support for basic income has lead to speculation that Quebec may follow Ontario’s lead and look into adopting it as a policy. Schiller also pointed out that this idea has already received support, “Quebec Prime Minister Philippe Couillard says a basic income could simplify the welfare system and encourage work among benefit claimants.”
With the well known Manitoba trails of Minicome (a variant on basic income) in 1970’s, Canada is already an integral part of the history of basic income. However, when the Minicome program was cancelled, its results were filed away, and little was done over the following decades to try to understand the value of such a policy. But now, with the upsurge in interest in the last few years, we find Canada at the forefront of the basic income movement yet again. It is going to be fascinating to watch what comes out of this country over the coming months and see if this time a basic income is here to stay.
Olivia Goldhill, “Ontario, Canada announced a plan to test Universal Basic Income for all citizens”, Quartz, March 8th, 2016
Shane Ferro, “Canada Is About To Start Giving Away Free Money”, The Huffington Post, March 9th, 2016
Jack Smith IV, “Canada Will Experiment With Basic Income — Giving Out Salaries Just for Being Human”, Tech.Mic, March 7th, 2016
Ben Schiller, “Ontario Is The Latest Place To Test A Basic-Income Guarantee”, Co.Exist, March 2nd, 2016
Ashley Cowburn, “Canadian province Ontario plans to trial universal basic income”, The Independent, March 7th, 2016
Chris Weller, “Canada plans to experiment with giving people unconditional free money”, Tech Insider, March 4th, 2016
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).