by Faun Rice | Feb 19, 2018 | News
Image by MaxPixel: Trakai Castle Lithuania
On December 6, 2017, Swedbank published a report on the Baltic Sea Region entitled “Heart-warming growth is a poor excuse to postpone reforms.” The report includes a chapter on Universal Basic Income, wherein the bank models the current economic feasibility of UBI in the Baltics.
Swedbank is a bank based in Stolkholm, Sweden. Its research arm publishes annual economic assessments of Baltic Sea region countries, which include Germany, Denmark, Norway, Sweden, Finland, Russia, Estonia, Latvia, Lithuania, and Poland. The December 2017 report and executive summary focus primarily on Swedbank’s four main markets: Sweden, Estonia, Latvia, and Lithuania.
The report highlights a time when global economic growth has helped Baltic Sea region countries reach cyclical economic peaks. However, it states that geopolitics, and populism in particular, remain risks to further growth.
Swedbank suggests that rising income inequality, combined with fears about unemployment driven by automation and globalization, contribute to populism and need to be combatted in order to ensure sustainable economic growth. The report proposes that populism can be circumvented by socioeconomic policy that ensures that growth is inclusive (i.e., where prosperity is distributed equitably across all of a country’s economic classes).
As such, Swedbank’s report argues that this period of prosperity in the Baltic Region has created an ideal context for reform and investment in long-term economic wellbeing. The report delivers an in-depth analysis of the economies of Sweden, Estonia, Latvia, and Lithuania, commenting on GDP growth and the potential to create new socioeconomic policies. It also targets specific needs in each country, referencing indicators based partially on the UN’s sustainable development goals.
Sweden scores higher than the Baltics on most of Swedbank’s UN SDG-based indicators. However, the report comments on the need for all identified countries to take the opportunity to enact policy reform.
Swedbank addresses Universal Basic Income as one potential option for reform that will reduce income inequality and encourage sustainable growth. The report concludes that UBI is currently unaffordable for the Baltics, but that elements of a basic or guaranteed income, introduced carefully, could come with numerous social benefits.
Swedbank in Lithuania. Credit to: Delfi
UBI: Current feasibility for the Baltic Region
Swedbank identifies several arguments for UBI, including the idea that it will increase income security and thus reduce fears around unemployment and job loss, along with suggestion that UBI solves or mitigates problems with existing social security systems. The argument that UBI will minimize bureaucratic costs associated with social security systems is less relevant in the Baltics, where only 1.2 to 2.1% of total “social protection” expenditure is administrative.
The report provides a summary overview of some of the questions associated with UBI implementation, such as its impact on employment and the economy, or the concern that it would negatively impact assistance given to the disabled or elderly.
Using 2015 data on government spending on social protections in Estonia, Latvia, and Lithuania, Swedbank evaluates the feasibility of a budget-neutral UBI in these countries. The report tries two different models, one in which old-age pensions are retained by the elderly, and the other in which pensions are included in the money redirected towards UBI. For each of these two scenarios, the report presents two further options: one wherein all residents of a country receive UBI, and another wherein children up to the age of 16 receive only 50% of adult UBI payments. Swedbank does not make any changes to tax revenue in these examples.
The report finds that, given existing budgets, UBI monthly payments to individuals would only reach 48-55% of the at-risk-of-poverty threshold for each Baltic country, less if old-age pensions were retained for the elderly. A UBI at the poverty line, distributed to all residents equally, would require doubling social security budgets in Latvia and Estonia, or an 82% increase in Lithuania, becoming 20-25% of each country’s GDP.
While Swedbank concludes that a UBI is currently unaffordable in the Baltics, the report comments that some components of a “basic income model” might simplify and improve existing social security programs. The authors suggest that governments could improve their systems’ accessibility by eliminating means testing and other conditions currently in place for those trying to get support. They also propose that a gradual decrease in benefits, rather than a sharp removal once a person becomes employed, might help incentivize recipients to stay in the labour market.
Another alternative discussed is a “partial” guaranteed income delivered only to particular cohorts of people. For example, Lithuania has an existing program that provides lump-sum cash benefits to every child born, with no conditions placed upon family income.
More information at:
“Baltic Sea Report: Heart-warming growth is a poor excuse to postpone reforms,” Swedbank, December 6th 2017
“Sustainable Development Goals,” United Nations
“Swedbank Macro Research: Baltic Archive,” Swedbank, February 2018
Vlada Stankūnienė and Aušra Maslauskaitė, “Family Policies: Lithuania (2015),” Population Europe Resource Finder & Archive, 2015
by Micah Kaats | Nov 24, 2017 | News
In recent years, basic income has found support across the political spectrum. While some have justified it as a human rights issue, others believe it to be necessary in the fight against poverty and rising inequality. According to many supporters, these are sufficient justifications in their own right. However, many basic income proponents also cite the growing threat of automation to employment. Put simply, as robots become smarter and cheaper, more and more workers will find themselves out of a job, and basic income programs will be required to offset rising unemployment and job displacement. This view is particularly popular in Silicon Valley and has been championed by the likes of Elon Musk, Richard Branson, and Mark Zuckerberg. However, a new report from Pearson, an education publishing company, challenges this line of reasoning.
Pearson’s analysis, with help from researchers at Nesta and the Oxford Martin School, diverges from previous reports on automation (Frey & Osborne, 2013; Arntz et. Al, 2016; McKinsey, 2017; Richard Berriman, 2017) in two key respects. While previous studies have tended to focus exclusively on the potentially destructive effects of automation, Pearson’s report also incorporates the potential for growth in jobs and skills that may be complemented by automation. The study also considers how automation may interact with seven specific global trends to affect supply and demand in the labor market over the next decade: (1) environmental sustainability, (2) urbanization, (3) increasing inequality, (4) political uncertainty, (5) technological change, (6) globalization, and (7) demographic change.
Pearson’s report relies on a combination of expert testimony and, perhaps fittingly, machine-learning. Two panels of artificial intelligence experts in the United States and United Kingdom were asked to rate the future prospects of thirty occupations in the context of the seven global trends identified by the researchers, and to report on how certain they were in their predictions. This information was then fed into machine-learning algorithms, along with data from the U.S. Department of Labor, to generate predictions for more than 1,000 occupations in the United States and United Kingdom.
Using this model, the researchers at Pearson reached the following six conclusions:
- 20% of the workforce are in occupations that will shrink.
This figure is smaller than previous high-end estimates of 47% (Frey & Osborne, 2013), but also larger than more conservative estimates of 9% (Arntz et. Al, 2016). In line with previous findings, Pearson reports that routine, physical or manual abilities will become less valuable over time. However, Pearson also notes that certain sectors typically considered doomed by automation such as agriculture, trades, and construction, may actually show pockets of job growth where new skills are required to complement new technologies. So, it can be said that there cannot be a complete elimination of people in the workforce. Instead, building skill sets to work alongside automated machines could be the way to go. For example, with large industries adopting newer technologies and automation to improve the production process, an automation parts supplier could be the need of the hour, as there will always be a requirement for people who have the necessary knowledge to handle new machines and implement efficient functionalities.
- 10% of the workforce are in occupations that will grow.
Specifically, the researchers argue that jobs involving judgment and decision making, teaching, active learning, interpersonal skills, complex problem-solving, originality, fluency of ideas, and systems thinking will all grow in value. Jobs in high demand will include teachers and education professionals, sports and fitness workers, caregivers, managers, hospitality workers, legal professionals, and engineers. Occupations in the public sector, as well as those resistant to globalization, emerge as particularly resilient. Further, jobs in the construction sector and those that involve outdoor manual work could also need constant manpower, as we see companies such as Crane Renovation Group reaching out to potential workforce to increase hiring and provide consistent jobs. Pearson also points out that jobs and skills that will become more valuable are not specifically confined to any one particular income bracket or skill level.
- 70% of the workforce are in occupations where their future is uncertain.
- So-called “21st century” skills will experience higher demand.
- Both knowledge and skills will be required for the future economy.
- Occupations can be re-designed to pair uniquely human skills with technology.
A global leader in education publishing itself, Pearson argues for sweeping reforms to education systems so that they may adapt faster to the changing needs of labor markets, and begin offering more flexible pathways to employment including credentials and microdegrees. Pearson also advises business leaders to start thinking of ways to redesign roles to balance technological and human resources. Finally, the researchers encourage individuals to develop skills that are “uniquely human” and commit to becoming lifelong learners.
However, the report is not without limitations and the researchers note the large degree of uncertainty baked into any analysis of job creation, which is notoriously more difficult to predict than job destruction. Critics have also argued that Pearson greatly underestimates the difficulty of implementing public and private reforms in the context of the political and social turbulence accompanying severe job displacement.
Nevertheless, despite these limitations and the challenges that lie ahead, Pearson’s researchers remain optimistic about the future of work. They summarize their findings rather succinctly: “The bottom line of our research, we can all stop agonizing about machines taking our jobs.”
You can download the full report here, or visit the microsite.
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.↩
by Peter Vandevanter | Aug 25, 2017 | News
Guy Standing. Credit to: Lighthouse.
Guy Standing, co-founder of Bien and a University of London professor, in an interview for the Moon magazine says people with a precarious future are preyed upon by right-wing politicians.
Neo-liberal economic policies, “globalization, automation, and outsourcing” have, according to Standing, created a large and rising number of precariats (estimated as 40-50% of world population), who compete for low wages so much so that they can’t “pay off student loans or consumer debt, qualify for mortgages, save for retirement, or make plans for the future.”
The Moon magazine reports that Standing, in his 2011 book The Precariat: The New Dangerous Class “argued that if governments failed to satisfy the precariat class, their societies would witness increasing violence and the rise of far-right politicians – scenarios that appear to be playing out in many countries around the globe,” including the UK and the US.
Standing, whose latest book Basic Income and How We Can Make It Happen is quoted in Moon magazine saying “Right-wing politicians are playing on the fears and insecurities” of precariats by demonizing other groups, such as migrants. In this book, the precariat sits below the 62 richest people in the world (who own as much as the poorest half of the rest of the world). Other population groups are economically divided into an elite (5%, who serve the richest), the salariats (20%, who have long term employment security), the proficians (10%, who don’t necessarily want long term employment, freelancers in the gig economy), the classic proletariat (10%, who a generation ago inhabited unions), and at the bottom an underclass (5%, who are dying in the streets from social diseases).
A universal basic income would eliminate this class breakdown in favor of an economy that works for all.
Standing believes that basically the income distribution system of the 20th century has broken down. He says that societies, if they are to survive, must reduce “the inequalities and insecurities that are the terror of the precariat”.
More information at:
Leslee Goodman, “Guy Standing on an economy that works for everyone”, The Moon Magazine, Interview with Guy Standing, 2017
by Guest Contributor | Aug 21, 2017 | Opinion
Why do so many leading economists pronounce themselves in favor of a Basic Income? Because of its positive economic effects on the distribution side, for example. Basic Income stabilizes the overall domestic consumption and provides a kind of regulation for the ratio between expenditures and savings. Furthermore, the Basic Income helps up to a certain degree to equalize the “unnecessary” distortions arising from the free play of market forces within the context of automation, digitalization, delocalization and further developments in society. And finally, Basic Income constitutes a lean and just system to provide every single individual with the minimal share of the wealth of nations that he/she is entitled to.
The economist and former head of the Hamburg World Economic Institute Thomas Straubhaar does not put the emphasis on the macroeconomic aspects. In 2006, he was one of the originators of the liberal Basic Income proposal “Solidary Citizens’ income” promoted by Dieter Althaus, member of the center-right party CDU and Thuringia’s prime minister at the time. Straubhaar’s new publication “Radikal gerecht” (radically just) shows some interesting development, while maintaining the core of the arguments in favor of a Basic Income from a liberal perspective.
The principles remain the same: Basic Income is paid unconditionally, to each individual, in addition to existing income and an amount that allows for a dignified living of each person. According to Straubhaar, Basic Income is a liberal concept because it promotes free choice of the individual (including the poor) and abolishes social bureaucracy. And it is a just cause because people with a high income pay more net taxes than those with a low income. While the citizen’s income of 2006 was calculated at €600 per adult per month (Bürgergeld), Straubhaar now speaks of €1,000 per person. He does not insist on this sum, saying that a) the basic needs of the individuals have to be re-evaluated periodically by the responsible office, for instance the federal statistical office, and b) in addition the amount is and will be a function of the political debate. A higher Basic Income requires higher taxes, which is the expression of the political will respectively of the political majorities. “It is obvious that the amount of the Basic Income and the tax rate are the levers of the policy makers and of the population to steer this new social system”, he writes on page 17.
Straubhaar presents the Basic Income as a kind of radical reform of the tax system. He calls it a negative income tax, however. A core element of this tax reform would be a flat rate tax on all kinds of income, not only wages, but also capital revenues and revenues from automats and robots. Here, Straubhaar reacts in a raw form to the fact that in the future, products from fully automated factories are going to have a price as well. Hence these have to be taxed like any other income. This is a major difference to most other models (and specifically the solidary citizen’s income of 2006) which deal mostly or exclusively with revenue taxes, and it is very welcome to see such an adaptation from the liberal side and in a systemic (even if at this moment still rather crude) form.
Concerning the financing, Straubhaar argues that the €960 billion cost of a Basic Income of €1,000 per person per month (80 million x €12’000) is somewhat higher than the actual expenses for the social state in Germany of €880 billion. The actual gross value-added amounts to €2.73 trillion (2015), which means that a flat rate of tax of 40% on this (at the moment it is transformed into income) would provide €1.1 trillion. The rest of the state’s expense would be covered by indirect taxes. At the same time, the contributions for the classical social insurance that actually are deducted from the gross salaries would largely be abolished.
Straubhaar admits this calculation to be very rough and not able to reflect all the possible and dynamic effects of the introduction of a Basic Income scheme, and insists on the flexible elements such an introduction will imply (estimation of cost of living, political process etc.). As with other authors, financing is not the core of this motivation. He sees the Basic Income as the best and most viable solution to adapt the classical system of social insurance of the 19th century to the 21th century. It creates a sort of a “blind” social policy, contrary to the targeted schemes whose advantage all too often is only to maintain a class of social bureaucrats who decide on sums and subjects. Furthermore, it is a core contribution to big issues of our times, namely an ageing population, digitalization/automation, individualization, and so on. Economically, it is not only viable, but it makes sense within the context of globalization and full automation. And he insists on paid labor continuing to be the main source of income but in new, more flexible and open forms, as activities and careers keep changing, as we witness already today. In this context, the existing organizations like trade unions or entrepreneurs’ federations will maintain their significance. The work motivation, which some economists see threatened by a Basic Income, will not decrease, but on the contrary increase thanks to the increased degree of freedom.
Straubhaar’s book is an important step for the liberal promotors of the Basic Income scheme in Germany. He aligns in practice with the other wings (Netzwerk Grundeinkommen, Goetz Werner) by speaking now of a sum of €1,000 per person per month (without being categoric about it). He urges it as a core element for the rebuilding of the social state, an adaptation to the 21th century and a blind social policy with arguments that are widely acknowledged by intelligent people. However, it is not certain that his fellow liberal economist colleagues in Germany are willing to follow his arguments. Many of them are still anchored in the concept of a 19th century social state. On the promotor’s side, some might be tempted to criticize Straubhaar’s concept of a negative income tax. Furthermore, several questions about the additional tasks of the social state remain.
There is one point that cannot be conceived in the way Straubhaar does. On page 98, he writes that every German citizen is part of the Basic Income scheme from birth until death, and those living abroad would have a right to their full claim, independent of their new country of residence. This is a flashback to the 19th century concepts of citizenship and nationality. Today, we speak of resident population and debate the introduction of a Basic Income in the whole world. Thus, if a German citizen would live in France, he would get the French Basic Income without the German Basic Income. But this is a tiny remark and does not impair the substantial progress of “Radikal gerecht”.
Finally, although Straubhaar labels Basic Income as radically just, he does not close the loop from a moral perspective to a legal standpoint, by omitting the step from basic income to basic right. As Thomas Paine wrote in 1796, the whole earth was originally in the possession of the whole human race. Now, on the base of an immensely increased wealth of nations and individuals, Basic Income represents the entitlement of every individual to a minimal (or basic) share of this wealth.
More information at:
(in German)
Thomas Straubhaar, Radikal gerecht [Radically just], Edition Körber-Stiftung, 2017
Written by: Albert Jörimann
Albert Jörimann, was president of BIEN-Switzerland from 2008 until 2013. His main research subject is financing questions of basic income.
Works cited:
Das Solidarische Bürgergeld. Analyse einer Reformidee.» Konrad Adenauer Stiftung, Edited by Michael Burchard, Lucius & Lucius, Stuttgart 2007.
