by Kate McFarland | Oct 18, 2017 | News
The Social Prosperity Network, a research network at University College London’s Institute for Global Prosperity (IGP), released a report this month arguing for Universal Basic Services for the UK.
The authors propose that the UK expand its set of free and universal public services to include shelter (social housing), food, transportation (e.g. bus passes), and information (e.g. internet access), in addition to the National Health Service, public education, and public legal services.
Like universal basic income, Universal Basic Services (UBS) are intended to secure the necessary means to a life for everyone, unconditionally. The unconditionality of the benefits is a key distinctive feature. As IGP’s Andrew Percy writes in the introduction to the report, the Social Prosperity Network has been motivated by the challenge to design a modern social safety net that is “[m]ore flexible and effective than the conditional benefits system we have inherited”.
As IGP Director Henrietta Moore mentions in the forward to the report, the authors have been inspired in their thinking by the recent global interest in basic income. Percy refers to the policies as “complementary components of a sustainable future for social welfare”:
Progressive proponents of a UBI assume the pre-existence of a platform of social welfare services, and advocates of UBS must acknowledge that there are both personal and specific needs that will require some form of monetary distribution to preserve freedom and agency.
While it is clear that Percy does not rule out UBI on matters of principle, he does maintain that UBS is a more effective use of available government revenue.
Jonathan Portes, Professor of Economics and Public Policy at King’s College London, contributes a discussion paper to the report in which (in part) he contrasts UBS with several other potential solutions to challenges currently facing the UK economy. Although he devotes more attention to basic income than other competing options, Portes worries that UBI fails to address the main shortcomings of the UK welfare system (housing and disability benefits), that it would be prohibitively expensive if paid at an adequate level, and that it could devalue the importance of workforce participation. He concludes that “while some version of a basic income may be a useful complement to ambitious reforms of the welfare system, expecting basic income on its own to be ‘the answer’ is neither realistic nor desirable”.
Technical analyses of the cost and distributional impact of UBS are contributed by Howard Reed of Landman Economics (a name familiar in UBI circles as the coauthor of last year’s report “Universal Basic Income: An idea whose time has come?” for the UK think tank Compass).
Download the full report here: “Social prosperity for the future: A proposal for Universal Basic Services”
Reviewed by Dawn Howard
Photo: Demonstrators in London, UK, CC BY 2.0 DAVID HOLT
by Guest Contributor | Oct 16, 2017 | Opinion
In September 2016, Mexico City’s Chief of Government, Miguel Mancera, called for the development of a city constitution to grant formal recognition of the rights of all residents. An initial draft of the constitution included an article stating that each Mexico City resident is “entitled to a standard of living that is adequate for him or herself and their family, as well as to the continuous improvement of their living conditions,” a provision inspired by the basic income movement in Mexico (see the previous report in Basic Income News).
However, the proposal for an income guarantee was eventually dropped in the face of opposition from right and center parties. Instead, an article specifying the right to a “vital minimum” is the closest approach to a basic income to appear in the constitution ultimately ratified in February of this year.
In this Basic Income News special feature, Pablo Yanes of BIEN-Mexico describes the process by which a minimum income guarantee came to be replaced in the constitution by the idea of a “vital minimum”, and discusses how this might nonetheless be perceived as a victory for basic income supporters.
THE STRAIGHT LINE AND THE CURVED LINE:
BASIC INCOME, VITAL MINIMUM AND THE CONSTITUTION OF MEXICO CITY [1]
Pablo Yanes, BIEN-Mexico [2]
In Mexico, the discourse around basic income achieved never before seen dimensions and intensity this year due to the debates held by the Constitutional Assembly that deliberated and approved Mexico City’s Constitution.
As we will see later on, in the original proposal, the Chief of Government proposed the recognition of basic income as a right for all persons, from birth.
Finally however, after many negotiations, the universal right to a vital minimum was agreed upon as a compromise with regards to recognizing basic income. This was not the original proposal, but the phrasing contains the original intent and is close to its philosophical content. There is no doubt that this is a great step ahead in the never-straight path of politics.
Because of this, it is important to highlight that the basic income debate in Mexico now has a new status: it’s a political discussion with legislative implications. It’s a part of the discourse around different alternatives for the country’s development, which will only grow with the coming election cycle that will culminate in July of next year. In Mexico, within a very short timespan, basic income went from an idea confined to small academic and political circles, to one of the most important debates held in the Constitutional Assembly of one of the most relevant cities on the American continent.
A non-minimalist vital minimum
Thoughts on basic income, citizen income or a right to a vital minimum have been present at the heart of the Supreme Court of the Nation, which, in 2007, published a judicial thesis whose reading could help illuminate much of the ongoing debate. Due to its relevance I quote it extensively:
“The Constitutional right to a vital minimum is fully in force from the systemic interpretation of the fundamental rights enshrined in the General Constitution […]. A principle of underpinning for a Democratic State of Law is one that requires individuals to have, as a starting point, conditions such that they are allowed to lead a fully autonomous life plan, such that those who are governed can fully participate in democratic life. In this way, the enjoyment of a vital minimum is a principle of underpinning without which the central coordinates of our Constitutional order lack meaning, insofar as the intersection between the Powers of State and the trappings of rights and fundamental freedoms consist of the determination for dignified and autonomous subsistence, protected by the Constitution. This parameter constitutes the content of the right to a vital minimum, which coincides with the competencies, basic conditions and social benefits needed so that a person can lead a life free from the fears and burdens of misery, such that the aim of the right to a vital minimum encompasses all of the positive or negative measures that are indispensable in order to stop a person from being unconstitutionally reduced in his or her intrinsic value as a human being, because of a lack of material conditions needed for dignified existence. Thus this right seeks to guarantee that the person – the center of judicial ordering – does not become an instrument for other ends, objectives, purposes, goods or interests, no matter how important or valuable these are”. [3]
Even if a vital minimum and basic income are not the same thing, it can be deduced that a guaranteed basic income is a fundamental tool for enjoying a vital minimum alongside universal access to other rights and decommodified services such as health care, education and diverse social protection mechanisms. Basic income fits perfectly into a definition of a vital minimum that calls for a guaranteed basic income and access to different public services and goods to achieve maximum possible well-being.
Daring, voting and negotiating
Because of this, the inclusion of basic income as a right in the Mexico City Constitution Project is hugely important, as it attunes the proposal to the fundamental contents of the Human Rights reform in Mexico in 2011 and with the emerging international debates in anticipation of the challenges of the 21st century.
In it’s original proposal, the draft of the Constitution of Mexico City read as follows:
“Every person has a right to a standard of living that is adequate for them and their family, as well as a continued improvement of existence conditions. The right to a basic income is guaranteed, with priority for people in situations of poverty and those that cannot fulfill their material needs by their own means, as well as priority attention groups. In order to access basic income, this will defer to the common dispositions in this article.”
This wording generated intense debate, one of the most intense ones in the Constitutional Assembly, due to the opposition of certain political forces to the recognition of the right to basic income derived from the condition of being a person or from citizenship. The arguments for financial unsustainability and for the undesirability of the program due to possible political manipulation (thinking of it as a program and not a right) as well as the possible counter-incentives to work and personal effort were repeated. Nothing new.
It’s noteworthy that, in the original wording, this article not only recognized basic income as a right for all people, as well as including the principle of an adequate standard of living and the constant improvement of living conditions, but also included an operational element that watered down the strength of the recognition of the right by mentioning priorities (non-exclusivity) in its implementation regarding impoverished people and those lacking their own means.
These limitations notwithstanding, the recognition of basic income as a right was submitted to a vote by the Assembly and obtained 57% of the vote, a clear majority, but not the 66% majority required by the Assembly rules. This led to a round of negotiations just as or even more intense than the original debates.
Several alternatives were proposed by the different committees in the search for new wording. Fox example: “Art. 14: Every person has a right to a basic income.” and “Art. 22: Basic income will serve as a mechanism that will, progressively, guarantee access to a minimum basis of well-being, beginning with people in situations of poverty and vulnerability.”
This was not accepted because it mentioned income. Another proposal was made.
“3. Every person shall have the right to a minimum subsistence income that will cover the various dimensions of socio-economic well-being and contribute to a free and dignified existence. The authorities will progressively ensure its fulfillment.”
However, this was not accepted because it mentioned a minimum income for every person (universal).
A variant of this last proposal was created after some more negotiations:
“Every person, from birth, will enjoy the right to a subsistence minimum that covers the various dimensions of well-being and covers their basic human need. The authorities will progressively guarantee its fulfillment.”
This also was not accepted because of the mention of the various dimensions of well-being, in particular as a right for every person since birth.
Finally, after several long days and before the risk of not reaching a two thirds majority, the following wording was agreed upon:
“Article 9. Dignified Life
- Every person is entitled to a vital minimum to ensure a dignified life by the terms of this Constitution.
(Article 17) The mechanisms to make the right to a vital minimum, giving priority to people in a situation of poverty, which will be established according to the criteria of progressiveness, with the indicators determined by the appropriate federal Constitutional organism and the measurable goals established by the corresponding local organism.”
The debate on basic income in Mexico City’s Constitution coincides with both the Senate of the Republic and Congress having proposals for a Constitutional reform recognizing basic income as a right on a national level, introduced by Senator Luis Sánchez and Congresswomen Araceli Damián and Xóchitl Hernández.
That another state in the Republic, Jalisco, also introduced the concept of vital minimum as a guiding axis of its planning is also relevant, even if its relationship to basic income as a right is less clear than in the case of Mexico City. In any case, it is relevant and even older than the Mexico City case.
The Constitution for the State of Jalisco reads:
“Article 4. The human rights recognized for the people within the territory of the State of Jalisco are those in the Political Constitution of the United Mexican States as well as those enshrined in the Universal Declaration of Human Rights, emitted by the General Assembly of the United Nations, in the American Convention on Human Rights, […] and in the treaties, conventions and international accord that the Federal Government has signed or that is otherwise a part of, attendant to the principle of a vital minimum as an axis for democratic planning via which the State must create the conditions so that every person can fulfill his or her life plan.”
Two steps forward, but one step back?
The discussion around basic income in the Mexico City Constitution was resolved, likely provisionally, by recognizing the right to a vital minimum.
This contains several positives which cannot be underestimated:
- The vital minimum was recognized as a right and basic income was left as an underlying part of this.
- This recognition was based on the Supreme Court’s definition, which is not a minimalist one. On the contrary, it’s a bet on satisfying the material conditions that make a person’s independence and autonomy possible.
- It was established as a universal right (all people). Even if priorities are mentioned, it was never proposed as a mechanism only for poor people, or that it would be means-tested.
- It was framed within the guarantee of a dignified life and not a program for combating poverty, even if it is a powerful tool for the eradication of income poverty.
These are all highly meaningful advancements beyond a doubt. On the other hand, some limitations or risks remain, such as:
- The original proposal mentioned basic income as a right; this was not included in the final wording.
- Basic Income can be argued for within the vital minimum, but it can also become diluted within it.
- Normative definitions were mixed with operational criteria, which leads to lingering ambiguity regarding the vital minimum as a universal emancipation tool or as a measure for groups in a situation of poverty or social disadvantage.
- Potential legal competency or conceptualization conflicts are introduced by mentioning the utilization of criteria from the appropriate federal organism (CONEVAL) and the local organism (The Planning Institute and Autonomous Evaluation Council for the City) for determining measurable goals and indicators.
I would like to stress that it is feasible for this to be a preliminary wording, as the City’s Congress will begin working next year and will not be bound by the compositional rules or the interplay of forces present in the Constitutional Assembly. Consequently, new debates and modifications that are closer to the original project cannot be ruled out.
A balance of the content of the articles addressing the vital minimum in the Mexico City Constitution published on February 5th 2017 allows us to state that there is significant progress that will have to be landed later in the definition of the secondary legislation and the formulation of policies, without ruling out new debates and reforms for the Constitutional text itself.
Additionally, it must be remembered that Mexico City has been an entity that is advanced in the recognition of new rights (with strong repercussions at a national level) and that these rights have also gone through intermediate stages.
Here are some examples:
Today, the legal termination of a pregnancy is a reality in Mexico City. However, in order to reach this state, an intermediate step had to be taken in 2000 with a partial reform of the penal code, which was limited to increasing valid reasons for terminating a pregnancy.
Today, the right to equal same sex marriage is fully recognized in Mexico City, including the capacity to adopt, but the intermediate step of civil partnerships (Sociedades de Convivencia) first had to be established in a legal reform in 2006.
And today, the Mexico City Constitution recognizes a vital minimum as a right for all people. It’s convenient to ask ourselves if the recognition of this right is an intermediate step towards the fully recognition of basic income as a universal right in Mexico City.
Even beyond this, the inclusion of basic income as a right proposal in the Constitutional project for Mexico City and the recognition of the right to a vital minimum constitute a relevant step ahead in the discussions regarding social policy, human rights and the social state in the 21st century.
It is a debate that has reached the legislative sphere and is here to stay, both in Mexico and many other parts of the world. What could have seemed a wild idea a few years ago is now treated respectfully and considered a rational, reasoned proposal that has to be debated and talked about.
This is a welcome debate and one that we must congratulate ourselves on. It’s a debate that is just beginning and that will intensify in the foreseeable future with the same speed with which changes and challenges replace each other in this vertiginous time of doubt and hope.
[1] This article is based on a presentation written for the 17 BIEN Congress.
[2] Research Coordinator for the subregional ECLAC headquarters in Mexico. The opinions expressed within may not be those of the United Nations System.
[3] SCJN. Tipo de Tesis: Aislada. Fuente: Semanario Judicial de la Federación y su Gaceta. Tomo XXV, Mayo de 2007. Tesis: 1a. XCVII/2007.Página: 793
Kate McFarland also contributed to this report.
Heidi Karow, copy-editor.
by Andre Coelho | Oct 11, 2017 | News
Jim Chalmers. Credit to: Financial Review.
Jim Chalmers, a Labor Party MP in Australia, claims that basic income, a concept gaining traction in Australia, is a “backward step”. His concerns focus on perceived increases in inequality and affordability issues. Chalmers and Mike Quigley, former chief executive of NBN Co, have laid out these views in their latest book, “Changing Jobs: The Fair Go in the New Machine Age”, released on the 25th September 2017.
According to Chalmers and Quigley, the way forward is to aim for full employment, in the face of technological change. This generally aligns with previous claims by Labor Party shadow treasurer Chris Bowen. They also agree that introducing basic income will also equate to slashing on the welfare state. As for unemployment, Chalmers is blunt: “feared widespread loss of jobs in the coming age of automation will not be fixed by giving everyone a basic income”. He also views basic income as basically unfair, since it would amount to giving the same support to a millionaire and to “a single mom struggling to keep food on the table”. That, however, is given out of tax context, since basic income proposals usually revolve around redistribution of tax money from the relatively richer people towards relatively poorer ones. Within this context, a millionaire will naturally be a net contributor to the basic income scheme.
However critical of basic income, Chalmers and Quigley present their own views of what can work for humanity in the near future, of which the Australian people are a close example. They think it is possible to use Big Data to predict “social problems at the household level before they emerge”. This, of course, comes along with high surveillance over people’s “work patterns, hours and wages”. With that and new ideas such as “income smoothing”, which will arguably complement low-paid workers incomes, or smooth their transition from better paid jobs to less paid ones (admitting that well paid jobs will definitely diminish, on average, in the foreseeable future). They also refer to reinforced unemployment benefits, financed by extra taxes on the general public and/or large corporations. To tackle future unemployment, Chalmers and Quigley recommend compulsory education on programming and robotics, while strengthening existing curricula with computational disciplines in order to elevate technological skills in everyone.
More information at:
Roberta Stewart, “AUSTRALIA: Shadow Treasurer Chris Bowen (Labor Party) Urges Party NOT to Support Universal Basic Income”, Basic Income News, 16th July 2017
Gareth Hutchens, “Labor MP ridicules universal basic income push and says it would worsen inequality”, The Guardian, 24th September 2017
Daniel Raventós, “Basic Income – The material conditions of freedom”, Pluto Press 2007
by Patrick Hoare | Oct 6, 2017 | News
Jon Altman and Eva Cox. Credit to: Alfred Deakin Institute (Deakin University, Melbourne)
The Alfred Deakin Institute at Deakin University in Melbourne, Australia, hosted a forum on the 17th and 18th August discussing the concept of a universal basic income.
Workshop co-convenor Jon Altman (Deakin University and ANU) suggested that part of the impetus for the workshop was the sense that discussion of UBI in Australia was not as advanced as it was in other countries. As evidence of this he cited the comment made by Chris Bowen (Shadow Treasurer for the Labor party), who said that UBI was “a terrible idea”. Tim Hollo – Executive Director of the Green Institute – also highlighted the fact that the Greens were the only major party in Australia currently in support of the concept.
Dr Tim Dunlop – author of Why the Future is Workless – gave context to the discussion by talking about the state of work, technology and automation. He said the “salient point” in labour market analysis is that many problems are current. Evidencing this, he summarized some figures from the International Labour Organization, including; global unemployment exceeding 200 million in 2017; stagnation of real wage growth; decline in proportion of wealth going to wages; 760 million men and women worldwide in “vulnerable work”, defined as work unable to bring them above the the world poverty threshold of AUD $3.10 per day; millions in refugee camps and jails; record levels of over and under-employment; and the creation of “increasingly precarious” work.
Looking at future technology, Dr Dunlop said that the consistent finding was that “around 40 to 50% of jobs are at high risk of automation in the next twenty years” (Oxford Martins School Report, 2015) under “currently existing technologies” (McKinzie Report) and that it would be “close to a form of denialism”, therefore, to state, as many do, that “concerns about technological unemployment are overstated”. Associate Professor Karl Widerquist agreed with this point, stating that “people are not interchangeable parts” and often find that their “learn[t] skills” are “not needed any more”. In this regard, he said a UBI could compensate for the continual disruption of technology, and the inherent inability of workers to adapt and provide themselves with income. Phillip Ablett (USC), summarising work by Mullally, added that neo-liberalism’s emphasis “on ‘individual responsibility’ for poverty” contributed to this persecution of workers, where we tend “to blame individuals for their ‘failure’ to succeed in the market economy rather than consider the structural impediments to achievement”.
Professor Widerquist said a shift away from labour prosperity to capital prosperity has led to an “incentive problem” where employers don’t have an incentive to treat their employees appropriately since employees don’t have any power to refuse their conditions. The universal nature of a UBI, as such, would allow for a “voluntary participation economy instead of a mandatory participation economy”. Dr Frances Flanagan agreed that “capital accumulation” was central to the problem of “acute inequality”, however she expressed concerns that discussions around UBI focused too heavily on wage leverage and monetary incentive. Citing “care work” as an example “utterly antithetical” to the taylorisms of tasking and efficiency, Dr Flanagan said we need a more positive definition of ‘work’ since there are always ‘jobs’ that “require empathy, judgement and relationships”. UBI, consequently, needs to be “supportive of the fight for better jobs” and “[be] supportive of the fight against marketisation”. Professor John Quiggin (UQ) echoed Dr Flanagan’s concerns that UBI risks the possibility of replacing social services with a single payment, though he did point out that an unconditional stipend could destigmatise the concept of welfare payments to individuals, undermining the concept of the “deserving and undeserving poor”. Professor Eva Cox (AO) was also critical of UBI as a means to empowering a “protestant, male, Anglo” market system, where humans are economically judged as being good or bad “consumers”. She reiterated the need to revisit the concept of ‘work’ through a lense where humans were considered “social”, “dependent” and “interdependent”, advocating a UBI that was used to redefine “the social contract between the nation state and the individual”, with “reciprocity built into it”.
On the subject of evidence to support a UBI’s practical plausibility, both Professor Widerquist and Professor Greg Marston (University of Queensland) said that trials investigating the effects could be strategically dangerous since the trial conditions are often neither unconditional nor universal. Marston pointed to climate change as an example of where the accumulation of data has brought about, in many cases, confirmation bias in support of inactivity rather than impetus to instigate change. It was generally agreed that the issues of design and implementation were not, therefore, easily separated. Professor Quiggin, Troy Henderson and Dr Ben Spies-Butcher advanced the idea of a staged introduction, a “stepping-stone” approach which would retain the “big idea” excitement for voters and simultaneously satisfy technocrats. Quiggin’s preferred model was to favour the “basic” over the “universal” through various mechanisms and adjustments to tax regimes, introducing a full UBI payment to selected, vulnerable populations, and then gradually increase the number of people covered. The cost of everyone in Australia receiving a full UBI was estimated to be around 5-10% of GDP. Henderson and Spies-Butcher offered modelling that began by universalising the age pension, and by also introducing an “unconditional Youth Basic Income paid to those aged 20-24 based on a negative income tax model.”
In conclusion, the consistent theme of the two days was that UBI cannot be offered as a silver-bullet solution to issues around inequality, welfare, social security and the potential growing precarity of work. So while there is a tendency amongst advocates (worldwide) to present UBI as a single policy response for addressing many of the problems societies have with these issues, the very strong feeling of the workshop was that this could be a dangerous over-reach.
You can view some of the contributors speaking here.
More information at:
Kate McFarland, ‘NEW BOOK: Why the Future is Workless’, Basic Income News, November 5th 2016
Hilde Latour, ‘KARL WIDERQUIST: About Universal Basic Income and Freedom’, Basic Income News, July 31st 2017
Homepage of the International Labour Organization
James Manyika, Michael Chui, Brad Brown, Jacques Bughin, Richard Dobbs, Charles Roxburgh, Angela Hung Byers, ‘Big data: The next frontier for innovation, competition, and productivity’, McKinsey Global Institute, May 2011
Karl Benedikt Frey and Michael Osborne, ‘Technology at Work: The Future of Innovation and Employment’, Oxford Martin School, University of Oxford, February 2015
Oxford University Press, ‘The New Structural Social Work: Ideology, Theory, Practice 3rd Edition’, Bob Mullaly
by Florie Barnhoorn | Oct 4, 2017 | News
Introduction
Because of the publication of Thomas Straubhaar’s latest book Radikal gerecht – Wie das bedingungslose Grundeinkommen den Sozialstaat revolutioniert (Radically just – How Universal Basic Income Can Revolutionize the Welfare State) in February 2017 by the Körber Foundation, several articles in the German media appeared reflecting on the ideas outlined in the book. This gives me the opportunity to share with Basic Income News readers some of professor Straubhaar’s main ideas about Germany’s current social system, the modern challenges that in his view might jeopardize the old social fabric and his proposed response: a radical tax reform consisting of both the introduction of an unconditional basic income and a fifty percent tax rate on all value creation. The articles that I have used most, translated, summarized and from which I cite, are written down in the first footnote[1], see below at the end of the piece.
But first, I like to present two professionals whose stories will illustrate with what problems average Germans may have to deal with in today’s daily life under the current social welfare system. After that, I will depict the historic development of Germany’s social insurance system by introducing the social politics of its two founders.
Background: Germany worries that current social system shows more and more cracks
Baukje Dobberstein is a family doctor and psychotherapist in Hanover, Germany. Everyday she is confronted with the negative consequences of poor working conditions and the social security system in her country. She says: “Our work and social system makes people sick. Not only those who have lost their jobs, but also those who have accepted sickening work conditions, because they are afraid of a repressive social insurance system. Many of us experience stress. They fear existence insecurity, are afraid of terror, of strangers, of change,” and she adds, “Stress in itself is not a disease, but too much stress can make a person ill.” That is why she fights for her dream: an unconditional basic income.
Mayor Werner Wölfle (The Greens) also expressed his concerns. In an interview with the Stuttgarter Nachrichten, a local newspaper, he said, “Yes, also in this rich city, the capital of the German state of Baden-Württemberg, Stuttgart, more than 60.000 or over ten percent of all inhabitants depends on some form of social benefits.” The most vulnerable groups to poverty are women, singles and (older) migrants. Old-age poverty is on the rise too.[2] These figures have increased steadily. In 2004, 2787 low-income earners over age 65 received additional social assistance (or Grundsicherung im Alter), which counted for nearly three percent in this age group. In 2013, it was 4536, which is already more than four percent. For the future, Wölfle fears significantly higher levels. Elderly people with broken employment biographies, long part-time working periods, low-income earners and the effects of the Hartz IV regulation reforms, that is the downsizing of employment conditions, will become much more apparent in the coming years.
The historical context of the social insurance system in Germany
This country’s social policy, largely based on work, is showing serious cracks, warns Professor Straubhaar. It was Otto von Bismarck, the first chancellor of the united German states, who created the world’s oldest welfare state in the 1880s. His main goal was to gain working class support that might otherwise go to his socialist enemies. Bismarck worked closely with the large industrial sector and aimed to stimulate economic growth by giving workers greater security. In 1884 he declared
The real grievance of the worker is the insecurity of his existence; he is not sure that he will always have work, he is not sure that he will always be healthy, and he foresees that he will one day be old and unfit to work. If he falls into poverty, even if only through a prolonged illness, he is then completely helpless, left to his own devices, and society does not currently recognize any real obligation towards him beyond the usual help for the poor, even if he has been working all the time ever so faithfully and diligently. The usual help for the poor, however, leaves a lot to be desired, especially in large cities, where it is very much worse than in the country.
In the next years Bismarck implemented his social legislation: sickness, accident, old age and disability insurance, in that order, although he believed that welfare programs “with too much socialist aspects” would force workers and employers to reduce work and production and thus would harm the economy. The introduction of these laws, and the accompanying social benefits helped to reduce the emigration of young Germans to the United States.
Germany’s social system was further developed during its ‘Wirtschafstwunder’ (economic miracle), the post World War II period of rapid industrial growth and low inflation. Ludwig Erhard, Minister of Economic Affairs in Adenauer’s Cabinet, was the architect of these glorious economic days. He was able to combine market forces with a well functioning system of social security benefits in order to achieve “Prosperity for All”. The system is financed by contributions paid by employers and employees, each contributing for fifty percent. As a consequence, coverage is mostly confined to the formal workforce consisting mainly of workers depending on wages.
Modern challenges: globalization, digitization and individualization
“It is a time that no longer exists,” says Thomas Straubhaar, “Recent phenomena like globalization, digitization and individualization have made an anachronism of this social policy.” He continues: “A social security system, which is unilaterally based on contributions from wage income, stems from the time of industrialization and the unbroken lifelong work careers, when the salary of the husband was the most important source of a family income. Individualization has questioned the traditional role models and the solidarity within families. Digitization will lead to vending machines and robots will displace people from production. Not only standardized simple work on the assembly line, supermarket checkout or office will disappear. Even in more qualified areas of activity, such as locomotive drivers, insurance brokers or accountants, employees will become increasingly superfluous. He cites forecasts, according to which digitization could lead to the withdrawal of almost 50 percent of all jobs in the long term. Nonetheless, he welcomes the new mega trends, which will change everyday life, social relationships and the working world at a rapid pace, fundamentally and in every respect. “But”, he stresses, “Only as long as all people benefit”.
Professor Straubhaar considers digitization as a blessing, where people had previously to perform hazardous, dirty or risky jobs – for instance, in civil engineering, roofing and tunnels, slaughterhouses and laboratories, as well as control and watch services. In the future, he foresees construction robots that will drag bricks and windows, industrial robots that will use new construction and reusable materials. Intelligent machines and self-controlled cameras will control and react, and three-dimensional police robots will ensure internal security. According to him, everything that is possible must be done so that people can be physically and mentally healthy and unharmed during work and not become ill, burned-out or even permanently damaged. “People are economically too valuable to make them do dangerous, risky or damaging work, and then drag them through the welfare state over decades, some of them until they die,” he says, “This is a privatization of labor income and a socialization of the follow-up costs. And this can not be economically efficient.”
In the age of digitization and automation, robots and artificial intelligence, it is uninspired to maintain a system of exploitation, that forces people to do work that nobody wants to do. It is more appropriate to let robots, computers and machines do the dangerous, dirty, harmful and unworthy jobs for us and to train people in the freed up time for better and less strenuous work. We need a system that is able to ensure the participation of all, that can provide equality of opportunity for all, writes Straubhaar in his recent published book Radikal gerecht.
“Furthermore”, he told the reporter of Technology Review, “Life expectancy has risen sharply, which means that the start of a pension in the middle of 60 can hardly be financed in the long term. During the introduction of Bismarck’s pension insurance in 1889, the life expectancy for men was 36 years and for women 39 years, today it is 78 years for men and 83 years for women.”
A radical response: introduction of an unconditional basic income
No wonder that against this background the old idea of a basic income is being given new support all over the world. This is especially true for Germany, where a representative survey found early this year, that a majority of 75 percent is in favor of the introduction of an unconditional basic income.
This summer, during an Economic Forum of the CDU (Christian Democratic Union of Germany), Straubhaar advocated a radical reorganization of the welfare state by implementing a universal basic income. “Our current system cannot be reformed. This is the only way to achieve prosperity for all again”.
In Straubhaar’s view, the introduction of a basic income is nothing less than a radical tax reform. “Money for all means an income at the level of the subsistence minimum from the state without compensation such as an obligation to accept jobs or putting someone through activating measures. It is a fundamental change of perspective, from what previously has gone wrong. No more financing over taxes from work income, no more working worlds, family pictures and life-cycles, which no longer exist and do not correspond to daily life in the future. Towards a guaranteed participation and an empowerment of all. No other model takes into account both the effects of digitization and of individualization. In the social state of the 21st century, interrupted careers due to alternate periods of retraining, part time work, job change, informal care, volunteerism and so on, will be the new normal.”
How will Germany pay for a basic income?
“The future requires a ‘blind’ social state”, writes Thomas Straubhaar in Welt und N24. “Social schemes must treat all income equally, which means wages, interest, distributed profits, dividends, royalties, rental income, transaction and speculative gains, and should implement the same tax rate upon them, rather than preferring or discriminating against the other. Whether humans, robots or machines are at work, there are many good reasons, to tax every form of value creation at the source of their origins with a uniform tax rate for the financing of state tasks. All types of income should be charged with the same tax rate.”
The tax reform of the future will bundle all social policy measures into one single instrument, the unconditionally paid basic income. The concrete elaboration – that is to say the politically determined level of the subsistence minimum, which corresponds to the amount of the basic income – should provide sufficient scope for specific adaptations to new challenges in the future which are still unknown.
According to Straubhaar, the funding of an unconditional basic income follows a simple logic. It puts an end to all social insurance and social benefit payments financed by taxes and charges from the income of work. Instead, it consolidates as an universal payment all personal financial transfers and follows the concept of a negative income tax. This means that all Germans will receive money from the state, which corresponds to an outflow from the state’s perspective and thus the opposite of a tax inflow. If the whole welfare state should be replaced by an unconditional basic income, writes Straubhaar, this would suffice to pay everybody a monthly basic income of 925 euros.
More justice in society
As a result, according to Straubhaar, this fundamental tax reform will lead to more justice and efficiency to society and will create more support, security and freedom for the individual. People will be “relieved of the worries of economic survival”. With a guaranteed basic income, “it will not be economically necessary to force all people into labor for an ever-longer life”.
The basic income will guarantee a minimum subsistence level for all, from the infant to the old, for women and men, from the cradle to the grave through a financial payment by the state. No more, no less. If someone desires more than his or her basic income, this person can simply generate additional income. A smaller number of workers will have the chance to earn more than before due to productivity gains achieved through intelligent machines. However, all who earn income, will pay income taxes – at the source, from the first euro – in accordance with this principle: Whoever earns more, pays more taxes than those who earn less, emphasizes Thomas Straubhaar. At the end of the day, it will turn out that the majority of the population still pays positive taxes from the perspective of the state, so that in order to get a balance at the state’s level, the paid basic incomes are compensated by the tax revenues.
It is important, stresses Straubhaar once more, that the German government will tax capital income just as much as working income. This also applies to the profits, generated by robots. As soon as they are distributed to the owners of the robots, that is to say the shareholders, the same tax rate as for wages is applied to the source.
In Berlin, I saw a vivid culture around bottles: people drink beer or another (alcoholic) drink from a bottle and leave it behind for people whose job it has become to collect these empty bottles in order to cash the deposit money.
In an interview with Brand Eins, Straubhaar goes into more detail. When asked, who will pay for this unconditional basic income, he answered: “We all do by means of a taxation on value creation. When a company pays out money to one of the production factors, either to labor in the form of wages or to capital, as dividend or profits, a tax becomes due, and in both cases the same tax rate will be applied. If the profit remains in the company, thus continues to be part of the production process, no tax is payable. Only when money flows from the process to people – and not to legal entities – this money will be taxed.”
According to Straubhaar, there is nowadays in Germany a net added value of about 2,5 trillion euros and government expenditures at the federal level, at the state’s level, at municipalities and social insurance funds of a total of around 1,3 trillion euros per year. With a value-added tax of 50 percent, we would therefore come to an equilibrium, only taxes will be borne equally by labor and capital. The state does not need extra money to finance a basic income. In 2015 the social budget stood at 888 billion euros. This amount of money is enough to pay every German a monthly basic income of about 1000 euros. At present, we already pay nearly 50 percent for deductions when you sum up taxes and social security contributions in this country. It is only higher from a work income of 240,000 euros. According to statistics, this is not even one percent of the taxpayers. In the future welfare state, you don’t need to pay anymore for social insurances, because you have your basic income, you only pay for your health insurance. Everyone contributes financially to the basic income: self-employed persons, freelancers, civil servants, public representatives and the recipients of capital gains.
Asked if such a major change is politically feasible, professor Straubhaar answers: “If you really want to introduce big changes, you need a large group of winners who also recognize their advantages and are willing to fight for it. This is why both sides are of equal importance for the acceptance of a basic income: the expenditure side, that is, the securing of a subsistence minimum – and the income side, that is the taxation of value creation.”
What does it mean a tax rate of 50 percent?
Thomas Straubhaar continues enthusiastically by giving some examples to the interviewers of Brand Eins. Supposing a professor with an annual salary of 120,000 euros, from which she – like all others – must pay 50 percent for taxes. At the same time, like all the others, she receives a basic income of 12,000 euros, which means she pays a net tax of 48,000 euros, equivalent to a rate of 40%. She only has to buy her health insurance, there are no further social expenses. The financial picture of a branch manager with 60,000 euros per year looks as follows: 30,000 euros for taxes plus 12,000 euros of his basic income results in a net tax of 18,000 euros or 30%. At Grundeinkommensrechner.de everyone can calculate what such a basic income means for him or her. Regarding low-wage earners, for instance a cleaning aid, who earns 24,000 euros a year, in this tax system he or she has to pay 12,000, and at the same time he or she receives 12,000 euros as basic income. The net tax rate is therefore zero, and this person also only has to insure his or her health.
Straubhaar goes on: “Anyone who today receives unemployment benefits (Arbeitslosengeld II or Hartz-IV) and who earns something, has a marginal tax rate of 80 to 90 percent, because with each earned euro the social benefit payments diminish. With this proposal, this person will only pay the obligatory 50 percent. He also does not have to consume his entire fortune before he receives any payment, he does not have to justify himself and is not harassed anymore by anyone. And with this proposal, a policy instrument that bundles both a guaranteed basic income and the added value tax, it is not necessary to fix a general retirement age, which is anachronistic in a digital society: everyone works as long as he or she wants, and deducts 50 percent of the earnings.”
Some problems might occur from Straubhaar’s model
In her column at Piqd, entitled The welfare state of the future is called ‘basic income’, Antje Schrupp emphasizes the importance of a discussion about the future of the welfare state and the place of a basic income therein. That said, she also has doubts about the model of a basic income, as described by Thomas Straubhaar, in his interview with Brand Eins.
The model is a good basis, she writes, but she foresees problems in the elaboration. For example, in Germany one cannot get around with 1000 euros per month of which also the health insurance has to be paid. This is especially true for the chronically ill and elderly, who cannot afford 1000 euros per month for both their health care costs and costs of living. Furthermore, medical and nursing care of the sick and aging adults is too valuable to leave it to the nonprofessional hands of family and friends.
Meanwhile, Dr. Dobberstein, who is also a blogger and activist for an unconditional basic income, has become a candidate for Lower Saxony in the newly formed political party Bündnis Grundeinkommen (Basic Income League), that will take part in the Bundestag (federal) elections next September 24 (2017).[3]
Further reading or listening:
Book Review: Basic Income as a ‘realistic revolution of the welfare state’ by Albert Jörimann.
Radikal gerecht – Wie das bedingungslose Grundeinkommen den Sozialstaat revolutioniert (Radically just – How Universal Basic Income Can Revolutionize the Welfare State) by Thomas Straubhaar, Edition Körber-Stiftung, 2017 (in German).
Radically Fair: Lecture with Thomas Straubhaar, New York, March 2017 (English)
Thanks to Kate McFarland and Dave Clegg for reviewing this article.
Credit Photos: Wikimedia Commons (Hamburg), Wikipedia, Körber Foundation, Florie Barnhoorn (Berlijn).
1. Bedingungsloses Grundeinkommen: Der langsame Weg von der Utopie zur Realität! (Unconditional basic income: the slow path from utopia to reality!), by Thomas Straubhaar, 2013.
Warum wir ein bedingungsloses Grundeinkommen brauchen (Why we need an unconditional basic income), by Thomas Straubhaar, Welt und N24, May 2017.
Das Grundeinkommen ist nichts anderes als eine Steuerreform (Basic income is nothing but a tax reform) by Thomas Straubhaar, Zeit Online, February 2017.
Grundeinkommen ist eine große Steuerreform (Basic income is a large tax reform) by Sascha Mattke, Technology Reform, March 2017.
Straubhaar: Heutige Sozialstaat-Ausgaben würden für 925 Euro Grundeinkommen reichen (Straubhaar: Today’s social-state expenditure would suffice for 925 euro basic income) by Sascha Mattke, Heise Online, March 2017.
Umdenken bei der CDU? Ökonom Straubhaar plädiert für bedingungsloses Grundeinkommen (Re-thinking at the CDU? Economist Straubhaar pleads for unconditional basic income), Pfefferminzia.de by Juliana Demski, July 2017.
Wie überlebt der Sozialstaat die Digitalisierung? (How will the welfare state survive the digitalization?) interview with Thomas Straubhaar by Gabriele Fischer and Wolf Lotter, Brand Eins, May 2017.
Der Sozialstaat der Zukunft heißt “Grundeinkommen” (The welfare state of the future is called “basic income”), by Antje Schrupp, Piqd, July 2017.↩
2. The website Altersarmut – Armut im Alter has asked attention for the increasing poverty among the elderly in Germany. An important cause is the depreciation of the pensions. According to the Deutsche Rentenversicherung (German Pension Insurance), the standard pension in the Western states of the country will decrease as follows:
2010: 1083 euros
2020: 1069 euros
2030: 1024 euros
2040: 988 euros
In the former Eastern Germany the situation is even worse. When asked, “Are you afraid to be able to keep your living standards after your retirement or, if you are already retired, in the next few years?” 72 percent of respondents answered “yes”.↩
3. Sadly, Bündnis Grundeinkommen only got 0,2 percent of the votes on Sunday, September 24, 2017. This means that nearly 100.000 persons voted for the one-theme-party. However, it is not enough for a seat in Parliament.↩
