by Citizens' Income Trust | Oct 23, 2012 | Opinion
Karl Hinrichs and Matteo Jessoula (eds), Labour Market Flexibility and Pension Reforms: Flexible Today, Secure Tomorrow? Palgrave Macmillan, 2012, xviii + 262 pp, hbk, 0 230 29006 8, £55
Time was when a lifetime of full-time employment would be followed by retirement on a contributory state pension supplemented, for the fortunate, by an occupational pension, and, for the less fortunate, by a means-tested state supplementary pension. Those who are even more fortunate may have invested in a life insurance policy that lasts into their elderly years. Nonetheless, this hasn’t stopped some people wondering does Guaranteed Universal Life expire? Both employment and retirement income were relatively secure. Employment is now less secure, and increasing numbers of people experience part-time employment, short-term contracts, and periods of unemployment, making ‘flexicurity’ an important social policy aim: flexible labour markets accompanied by secure incomes and public services. There are also fears of an uncertain pension future, especially when it comes to investment; saving for a pension can be risky. Just like with everything in life, there is most likely a solution for this issue.
The chapters in this book are the result of a European Commission funded research project on the prospects for income security in old age in a Europe increasingly characterised by insecure employment and therefore flexible employment patterns. The problem that policy-makers and the book’s authors face is that many state and occupational pension schemes are posited on the now outdated notion of the ‘standard employment relationship’ – lifelong, stable full-time employment. Such schemes, whether state, occupational, or private, are funded by employee and employer contributions. Less stable employment patterns mean fewer and lower contributions and thus less income security in old age.
Each of the book’s chapters studies the current pension structure, labour market position, and recent reforms, in a particular country. There are chapters on Germany, Italy, Poland, Switzerland, Denmark, the Netherlands, and the UK. The editors conclude that these countries fall into three groups and that each group exhibits a particular pattern of recent reforms. Countries that previously relied for retirement income on state contributory pensions have raised contribution rates and/or subsidized the insurance fund out of general taxation, and have now introduced private and occupational pension schemes, which could be worth looking into when finding the right time to step away from your business. In countries with already more than one of the three ‘pillars’ of pension provision – state, occupational, and private – the emphasis has tilted towards private and occupational schemes, and now towards compulsory enrolment in funded portable defined contribution schemes which blur the boundary between private and occupational pensions. Eastern European countries are seeing both the development of contributory public schemes and a transition into privately funded pensions.
On the basis of the research results presented in the individual chapters the editors conclude that in segmented labour markets (for instance, in Germany, where ‘insiders’ still experience considerable employment security, and ‘outsiders’ highly insecure employment) pension provision ‘dis-integrates’: that is, it is worse at poverty prevention and income maintenance for those experiencing more fragmented labour market participation than for those in more secure employment; that in countries with more homogenous labour markets (as in the UK, where employment insecurity is more equally shared across the labour market) there are integrating elements in the pension system; and that where the labour market is highly homogenous, as in Denmark, the pension system is highly integrated. Central to the integrating characteristics of Denmark’s and the Netherlands’ systems are their ‘generous basic pensions based on residence … These schemes are crucial in preventing poverty in old age, especially for workers with interrupted carers or on an atypical contract, as well as women, who mainly work part-time’ (p.244). What isn’t entirely clear is what’s causing what: Does a more or less homogenous labour market result in a particular pattern of reforms, or is there some third factor causing both the labour market type and the reform pattern?
In the UK we might soon be moving in a more universalist direction. If we want to prevent poverty in old age then the evidence of this book suggests that it is in this direction that we should move, because it is in this direction that flexicurity can be achieved. The more general lesson to be drawn from the book is that poverty prevention and income maintenance in old age will be best served across Europe by universal state pensions accompanied by compulsory enrolment in portable funded defined contribution schemes to which both employer and employee contribute.
This is a well researched, well edited, and clearly written book, and anyone with anything to do with pensions policy should be reading it.
by Citizens' Income Trust | Oct 22, 2012 | Opinion
It is always interesting to read detailed arguments for a Citizen’s Income, but might I invite your readers to consider a broader reform programme which would entail a long-term foundation for the Citizen’s Income we all want to see? A reform programme which would reconcile socialism and capitalism? Of course a claim such as this cannot be fully argued in the space of a letter, but the principles can be simply stated.
The most important element in a new framework for the economy would be the evaluation of the social costs and benefits of each kind of enterprise and, through a system of levies and grants, their introduction into market prices. Other demands on industry and commerce, most notably taxation of profits, would cease. Taxation would be confined to individual participants in the economy, but in their capacity as citizens or residents paying for the benefits society brings them. The Citizen’s Income should not be paid for out of a levy on economic enterprise.
Society, for its part, should recognise its capital value as an instrument which makes enterprise possible. And it should translate this value into a practical tool by the creation of a sovereign wealth fund which would invest in stocks and shares at home and abroad in parallel with other funds. Income from the fund would be dedicated to the citizens, thus providing a funding base for a true citizen’s income, though the fund could also be used for collective initiatives. The model would be Alaska’s Permanent Fund. I leave on one side the priority support needed by those who cannot be expected to support themselves in the economy, that is: children, who are too young to work; the very elderly, who are past working; and people who suffer chronic sickness or disability.
The size of the fund ultimately required to make it worthwhile should not be underestimated. As to practicalities, nations such as China already have sovereign wealth funds. The way forward will become clearer once the principles and implications are widely understood. Even if one doesn’t want to go the whole way in redesigning the framework of the economy, the creation of a sovereign wealth fund surely provides a way forward by translating the value of society into a practical reality for the benefit of all its members without imposing a levy on the economy. At the same time, the fund would help to reduce the serious inequality in the ownership of our capital.
The way to pursue the objectives of a basic income needs to be looked at in the light of a reconciliation of socialism and capitalism, which has been the great unsolved problem of the last 100 years. The advent of globalisation has pointed up a way to do this.
The starting point is the recognition that it is no longer satisfactory to treat the economy as if it were simply society at work, the way in which its members make their living. Globalisation has made it as clear as can be that society needs to clarify and redefine the framework within which it allows the economy to operate.
Here are the principal elements of a new framework:
- Capitalism must be required to operate in its most competitive forms, subject only to the laws of the land and effective constraints on monopoly ( whilst recognising that some monopolies are an indispensable adjunct of privately owned initiatives ).
- Market prices of products and services must reflect social as well as private costs and benefits. These costs would include such things as the use of public communications systems, the consequences of pollution and effects on health of products sold.
- The most instructive example of this is the labour market. Employers provide the indispensable benefit to society of gainful work by its members. On the other hand they receive the benefit from society of a readily available labour force. Recognising their joint interest society and industry and commerce should jointly meet the cost of maintaining the supply of readily available labour. A great advantage of this approach is that employers of all kinds would immediately apply their minds to the invention and support of all kinds of scheme for reducing and even eliminating unemployment.
- Alongside this would be a requirement that all those participating in the economy must insure themselves against the risk of unemployment – through ill health or redundancy for example – under a system of mandatory minimum cover and optional higher levels. Society would no longer pay benefit to unemployed people capable of working.
- Profits as such would no longer be subject to tax, for which there would no longer be any justification. Taxation would be confined to individuals as citizens or visitors.
- Society would, of course, continue to play its own direct part in the economy through social enterprises such as health services, and education and, increasingly it seems, local and national collective initiatives.
We turn now to the changes in society itself which will secure the objectives of socialism alongside its wholehearted commitment to capitalism as the best way of maximising the national product. Society’s financial support for its members should be concentrated in the first place on those who cannot be expected to support themselves in the economy, that is: children, who are too young to work; the very elderly, who are past it; and those who are chronically sick or disabled. The funds for this support should be provided by the collective ownership of productive capital. The amount of capital required to generate the necessary income should not be underestimated. But support will gather as taxpayers realise that the demands on them will fall as the capital increases.
Beneficiaries would receive their income as of right but expenditure would be administered in a three-way partnership with a family carer, if any, and the state, normally represented by a dedicated social worker. The capital funds would be managed by professional investment managers alongside their commercial analogues.
Once we have provided for those who cannot operate in the economy income from the sovereign funds can be used to introduce a basic income for all. It is entirely right that this, rather than the income of working taxpayers, should be the source of the basic income.
by Citizens' Income Trust | Oct 16, 2012 | Opinion
Neil Fraser, Rodolfo Gutiérrez and Ramón Peña-Casas, Working Poverty in Europe: A Comparative Approach, Palgrave Macmillan, 2011, xx + 342 pp, hbk, 0 230 29010 5, £60
This data-packed book is one of a series of publications to emerge from the EU-funded Programme on Reconciling Work and Welfare in Europe (RECWOWE). The programme’s context is the tensions between work and welfare –
the tension between employer demands for more labour market flexibility and citizens’ need for economic security; the tensions between the increased participation in paid work and the importance of family life, the greater fluidity in family relationships, and the greater flexibility in the labour markets; the friction between quantity and quality of the jobs to be created, between job creation and maintaining or improving the quality of employment and finally the conflicts raised by the need to adapt (industrial) social protection systems to new labour market structures (p.xviii)
and the programme’s task is to understand the relationship between work and welfare in the many different national contexts across Europe. This book’s task is to understand in-work poverty, and in particular the institutional and policy factors which affect it. The editors identify as particular worries the growing segmentation and casualisation of employment and the downward pressures on the wages of low-skilled workers (p.3).
The first part of the book offers comparative statistical analysis of the situation across Europe. Amongst the conclusions are that in the UK in-work poverty is caused both by partners’ low labour market participation and by low wages (p.32) and that in an era of high unemployment active labour market policies cannot on their own prevent poverty.
The second part contains chapters on various countries. The chapter on the UK concludes that working poverty is rising, that it is due mainly to low work intensity (p.91), and that means-tested in-work benefits have kept in-work poverty down to average European levels, which our earnings inequalities would otherwise have taken us above.
The third part of the book tackles cross-cutting themes and finds high mobility (in-work poverty is often transitory and recurrent) (p.199). Studied as individuals, women more often suffer in-work poverty than men (a fact not often noticed because so many women are in households with men) (p.229), that standard of living inequalities correlate closely to individual wage inequalities (p.246), and that in-work poverty is higher amongst non-EU migrant workers than amongst migrant workers from within the EU (p.271). A chapter on the effect of tax and benefits policies on in-work poverty finds, unsurprisingly, that means-tested benefits mean that higher earnings often don’t translate into higher disposable incomes (p.281). It also suggests that there is a trade-off between redistribution and employment incentives, and finds that in-work benefits can cause a particularly acute disincentive problem for a household’s second earner, resulting in adverse effects on the incentive structure for couple households (p.302). The authors find that incentives are not an important determinant of employment rates amongst the low-skilled. In countries where work pays the least, in-work poverty is lower because general anti-poverty policies reduce in-work poverty as well as out-of-work poverty, and that in-work benefits most effectively increase employment and reduce inequality where wage inequalities are high. The authors ‘question the political pertinence of an instrument whose effectiveness is greatly reduced when approaching its apparent objective’. It is stating the obvious to suggest that in an economic downturn the priority should be generous universal unemployment benefits (p.302).
In their overall conclusions, the editors find labour market activation policies to be expensive and relatively ineffective, and the UK’s in-work means-tested benefits expensive and a source of disincentives, particularly for a household’s second earner: ‘Research … does not indicate a strong effect overall on employment levels in spite of claims to ‘make work pay’. This is likely to be affected by other aspects of the institutional context, notably benefits for those not working and the conditions attached to them.’ (p.314)
This comprehensive and thoroughly-researched book quite rightly offers no simple political programme for the reduction of in-work poverty. What it does offer is a sense of the complexity of this policy field, and a source of information and properly tentative conclusions which anyone attempting to develop policy in the field really ought to read.
by Yannick Vanderborght | Oct 1, 2012 | Opinion
What did I learn from this splendidly organized gathering of academic and activists from over thirty countries? As usual, many things. About people and about things. About facts and about dreams. I discovered, for example, that Götz Werner was perhaps even better at reciting Goethe than Eduardo Suplicy at singing Dylan. I also admired how much progress had been made in the sophistication of the study of small-scale basic income experiments. Long gone is the time when all that seemed to be needed was to hand out some cash and enthusiastically report that all recipients were delighted to get it and that at least some made laudable use of it. Serious assessments of the effects of duly specified basic income schemes require control groups of similarly situated communities who do not receive anything, or who receive the same total amount but distributed according to different rules. And even the best assessment of this sort cannot claim to tell us what a real-life basic income scheme would bring about, if only because the funding side tends to be left out, or because of the recipients’ awareness that the experiment is limited in time, or because the political packaging of a real-life reform is most likely to affect individual responses. Nonetheless, these experiments are instructive in all sorts of ways and are well worth the hard work they require: conducting laborious interviews and processing recalcitrant statistics, sometimes even in flooded villages, as reported by Guy Standing, with water above the waist and the laptop above the water.
Ecological sustainability and basic income: three links
In these brief remarks, however, I shall concentrate on two points that struck me particularly because of they ran through several of the workshops I attended. The first one is the link between basic income and ecological sustainability, which featured was central in many presentations and the subsequent exchanges. On reflection, however, there is not one but there are three such links, logically independent and profoundly different from each other.
The first link is connected to the theme full employment. In good Keynesian fashion, an unconditional basic income is sometimes defended on the ground that it boosts economic growth and thereby employment. Like any other minimum income scheme, it redistributes from the rich, who save more, to the poor, who spend more, and it thereby helps sustain effective demand and business confidence. More often, however, and in contrast to many other schemes, an unconditional basic income is defended instead on the ground that it provides an alternative to the pursuit of full employment through economic growth: Freiheit statt Vollbeschäftigung. The underlying idea is that we must manage to tackle involuntary unemployment in a way that does not rely on a growth of production that constantly outpaces the growth of productivity, indeed — as discussed in a fascinating session of our congress — in a way that is consistent with de-growth. This way consists in transforming both some involuntary employment and some involuntary unemployment into voluntary unemployment. Or, to put it differently, some people make themselves sick by working too much and must be enabled to work less, while others get sick because of being excluded from work and must be enabled to access the jobs freed by those working too much. There is one simple way of achieving this: an unconditional basic income. This is a conclusion reached in the early eighties by some of the earliest basic income advocates in the context of the first signs of awareness of the “limits to growth”. It is also, fundamentally, the view now held by Baptiste Mylongo and the décroissants. The recognition of the right to idleness is here meant as the supply-side, anti-Keynesian, earth-friendly solution to the problem of unemployment
The second link passes through the price mechanism. Prices are a handy tool for guiding both consumption and production. They condense in a single figure millions of data about the preferences of consumers and the scarcity of factors of production. But they can go badly wrong because they do not spontaneously incorporate either the damage inflicted on the environment or the right of unborn generations to use their share of the resources of the earth. In order to correct this twofold major defect, some prices must be dramatically increased to reflect so-called negative externalities and to protect the legitimate interests of the unborn. One salient example of this is a carbon tax sufficiently high to keep the total of emissions below the ceiling that should not be exceed, or equivalently the sale to the highest bidder of carbon emission permits whose total amounts to this ceiling. In either case, the consumers will ultimately pay the price, but something must be done with the huge proceeds. Whether at the world level or at the European level, there is one simple way, both efficient and fair, of distributing them: an unconditional basic income. The logic is fundamentally analogous to the equal distribution of the rent on land advocated in Thomas Paine’s Agrarian Justice (1796). Three “eco-bonus” proposals along these lines were proposed at one of our sessions, in greatest detail by Ulrich Schachtschneider.
There is, however, yet another quite distinct link between basic income and ecological sustainability. At its core is the role that will need to be given to trans-national transfers. Those who make this third link may share with the décroissants the view that we in the “North” need to reduce our consumption. But they do not conclude that we need to reduce our working time, because there is no good reason to believe that we should reduce our production as well as our consumption. This sounds paradoxical but is easy to understand. No one visiting, for example, the Democratic Republic of the Congo can resist the conclusion that achieving a decent standard of living for all inhabitants of the world through local production within a foreseeable future is simply out of the question. This is so because of a combination of sustained demographic growth, deeply dysfunctioning and under-resourced administrative, judiciary and educational systems, and sheer climatic conditions which, in the absence of unaffordable generalized air conditioning, cannot but keep productivity down in quite a large number of countries. To believe that fair trade or the end of exploitation of the “South” by the “North” would enable these countries to get out of trouble is sheer self-serving wishful thinking. The growth of production in poor countries can and will help, of course, but access to a minimally decent living standard for all within a foreseeable future cannot count on it as its main means. It must also count on a massive dose of one or both of two other means: massive migration to the North and massive transfers to the South.
If the migration of hundreds of millions of Africans to Europe is regarded as undesirable for both the communities they leave and the communities they join, only trans-national transfers are left. And to be sustainable at a high level, such transfers arguably need to be both inter-personal (as opposed to inter-governmental) and universal (as opposed to means-tested), i.e. take the form of something like a universal basic income. As was the case with the first link I mentioned above, sustainability here requires a reduction of consumption in the North and the introduction of a basic income. But in the first case, the basic income was there to help increase the leisure enjoyed in the North, and in the second case to channel wealth to the South. Unlike the former, this latter argument, frankly, has nothing to do with what triggered my interest in basic income thirty years ago. But it is closely related to the argument I used in my contribution to one of the sessions of this congress to explain why the buffering device needed to save the euro needs to take the form of a universal basic income.[1]
Universality and unconditionality: the crucial conjunction
The second point I want to mention emerged particularly clearly from the session that hosted a conversation between Götz Werner, CEO of the large drugstore DM, and Wolfgang Strengmann-Kuhn, member of the Bundestag for the Green Party. A central part of the background of any discussion on social policy in Germany is the dramatic reform of the German welfare state by Gerhard Schröder’s red-green government known as Agenda 2010 or Hartz IV (2005). By reducing the duration of unemployment benefits, lowering the average level of social assistance and increasing the pressure on benefit recipients to seek and accept jobs, it is fair to say that the reform has improved the competitiveness of the German economy. But in a free trade area, making one country more competitive means making the other countries less competitive, and if this free trade area is also a single currency area, this means, for these other countries, deficits in the balance of trade, persistent unemployment and a pressure to restore their competitiveness by similarly scaling down their welfare states. For this reason, Hartz IV is no small factor in the current crisis of the Eurozone.[2]
Nonetheless, it is also fair to say that nothing ever happened in Germany that was better than Hartz IV at triggering a lively basic income debate. To understand why, note, first of all, that about half the recipients of the new social assistance scheme officially called Arbeitslosengeld II (but colloquially called “Hartz IV”) are at work. The reform massively extended the possibility of the Kombilohn, of low earnings combined with benefits. As such, this is not something basic income supporters should object to, as it is inherent in a universal basic income that it would generalize this possibility. But there is a major difference. Gerard Schröder himself complained that Hartz IV was “misused” by employers, as they used it to get workers into lousy jobs, with harsh conditions, no on-the-job training and no prospects of improvement. This is precisely why basic income supporters find unconditionality so important: a benefit granted to (potential) workers irrespective of whether they are willing to accept a job enhances their bargaining power and enables them to turn down poorly paid jobs of no intrinsic interest.
Put differently, the universality of the basic income — its not being means-tested — is what enables a person to say yes to a low-paid job. Its unconditionality — its not being work-tested — is what enables a person to say no to a low-paid job. Universality without unconditionality is a recipe for exploitation, because of the potential misuse of the Kombilohn by employers. Unconditionality without universality is a recipe for exclusion, because of the trap created by means-tested handouts. Instead, the conjunction of universality and unconditionality — so central to the basic income movement since its inception — is a path to emancipation. How emancipatory it can be will of course depend on its level. As stressed by Wolfgang Strengmann-Kuhn, however, the emancipatory effect starts being produced even with a level of basic income far below what would be deemed sufficient to live on for one’s whole life, even in a city, even on one’s own. Even a much lower universal and unconditional basic income broadens life options and thereby empowers its beneficiaries: it can make it realistic, for example, to accept an internship or an apprenticeship, or to combine further education with a part-time job, or to take the risk of becoming self-employed or of starting a cooperative, in situations in which today, in the absence of a basic income, one would be forced to accept a lousy full-time job.
A “partial” basic income, i.e. a low but genuinely universal and unconditional basic income, is therefore one obvious way in which one can move forward. But there are many others, more or less suited to local circumstances, more or less achievable in a particular political context, more or less likely to trigger a sequence of further emancipatory steps rather than unleash a damaging backlash. To move forward, we must dare to be “visionaries”, as emphasized by Götz Werner, while not hesitating to be “opportunists”, as demonstrated by Wolfgang Strengmann-Kuhn. Guided by our vision of a just society and a just world, we must be on the lookout for political opportunities to get closer to it, without denying the size of the challenges ahead — not least those arising from globalization — and without too much optimism about immediate success. Some good surprises are then bound to come our way…
[1] “No Eurozone without euro-dividend”, downloadable from www.uclouvain.be/8609.
[2] See my response to Gerard Schröder’s defence of Agenda 2010 on the occasion of his visit to Brussels in April 2012 : “L’Agenda 2010: un modèle pour l’Europe?”, downloadable from www.uclouvain.be/8611
by Karl Widerquist | Aug 8, 2012 | Research
In this article published in World Without War, D. R. Thompson proposes several ideas to replace the existing ideas and systems all of which support capitalism and benefit few. Thompson suggests creating a centrally planned, cooperatively managed, separate from federal government, transparent, and citizen owned Cooperative Central Bank that will finance BIG and infrastructure on which freedom and innovation will flourish. The author argues that BIG should replace social welfare and unemployment money so that people will have a choice to be employed or not. Thompson basis this argument on the fact that the developing technology is already replacing human work and the end result does not need to be poverty for the unemployed. For the financing of such an initiative, the author recommends money that will be taken from the physical infrastructure such as public lands and assets.
This article is online at: https://www.worldwithoutwarbook.com/article-01.html.
