by Guest Contributor | Jan 26, 2017 | News
San Francisco is not launching a basic income pilot yet
By: Sean Kline, Director of the San Francisco Office of Financial Empowerment
There is a lot of interest in basic income, and whether it could transform income inequality. The Office of Financial Empowerment (OFE)’s interest in basic income is a direct extension of its broader concern for economic security and intergenerational poverty.
Never heard of the OFE? We are the folks behind Kindergarten to College, the first and largest universal child savings program of its kind in the country now serving 27,000 public school children; Smart Money Coaching, which delivers financial coaching to low-income people at 27 sites across San Francisco; Summer Jobs Connect, which equips youth with a bank account, financial education, and strategies to save during summer employment; Bank On, which helps low-income residents access safe accounts at responsible banks and credit unions; and policy efforts to fight predatory financial practices and help families build assets.
Given the powerful evidence for cash transfers, both domestically and internationally, the OFE recently began exploring whether a basic income demonstration in San Francisco could add evidence to policy debates about reducing income inequality and increasing financial security. Here is what action we are taking:
- Actively participating in the Economic Security Project
- Planning a convening of UBI experimenters in Fall 2017
- Seeking funding to conduct a pilot in San Francisco and potentially with other cities across the country.
- Designing basic income demonstrations to pilot test
The OFE has engaged in thoughtful conversations inside and outside of city government to understand what such a demonstration could look like and what type of new research would be most helpful to inform policy. The OFE is not embarking on any proposal at this moment, but continues to explore when and how to launch a demonstration. In 2016, the OFE joined a three-city consortium to submit a proposal to the MacArthur Foundation for $100 million to fund the first large-scale basic income demonstration in the United States. While unsuccessful in this funding effort, the OFE has continued to explore smaller research demonstrations of a basic income at a cost of between $5 million and $30 million.
Reviewed by Kate McFarland
Image: San Francisco, CC BY-NC-ND 2.0 Florent Lamoureux
by Kate McFarland | Jan 26, 2017 | News
Videos of two lectures on Finland’s basic income pilot are now available online. The lectures, delivered by Marjukka Turunen and Olli Kangas of Kela, were originally aired as part of a public event on Finland’s “social innovations”.
As previously announced in Basic Income News, Kela, the Social Insurance Institution of Finland, held a series of short lectures called “Socially Innovative Finland” on January 12, 2017. The event, which was open to the public and streamed lived online, highlighted two “social innovations” from Kela: the eight-decade-old maternity package, under which all mothers-to-be receive a package of child necessities, and the two-year basic income experiment launched this year. Two speakers, Marjukka Turunen (Head of Legal Affairs Unit) and Olli Kangas (Director of Government and Community Relations), discussed the basic income experiment and fielded a variety of questions from the live and online audiences.
Olli Kangas: “Basic income – Part of tomorrow’s social security?”
Kangas situates Finland’s basic income experiment in its political and economic context: the center-right government that took office in May 2015 decided to investigate a basic income as a way to remove the disincentives to work and reduce the bureaucracy inherent in Kela’s current programs of unemployment compensation; meanwhile, changes in the labor force underscored the need for a revised system of social security.
Kangas describes the rise of short-term labor contract labor and the threat of automation as general sources of motivation for basic income. Then, focusing specifically on the Finnish context, he discusses the country’s increase in self-employment as well as its high rate of structural unemployment. He goes on to explain how Finland’s current welfare system can creates a disincentive to work. In some cases, as he describes, individuals who leave unemployment benefits to take a job face an effective marginal tax rate of 80-100%. Moreover, the current system creates “bureaucratic traps” whereby individuals are deterred from accepting short-term work (asking, e.g., “If I accept the job for six months or so, do I again qualify for the benefit I used to have?”).
Marjukka Turunen: “How the basic income experiment works in practice”
Turunen provides an introduction to Finland’s basic income experiment, including an overview of the experiment’s design, motivation, and implementation. She explains why the researchers hypothesize that the basic income will provide an incentive for unemployed persons to take on paid employment–the main outcome that the experiment has been designed to test–and describes other potential benefits to individuals. For example, she notes that financial security brings “peace of mind” and allows individuals to plan for the future with less uncertainty. Furthermore, the basic income eliminates the time-consuming task of applying to Kela to maintain unemployment benefits–which, as she mentions, requires the submission of paperwork every four weeks–or to change benefit status due to sickness or childbirth. Recipients of the basic income are not required to inform Kela of their employment status, income, or other life changes.
Turunen also describes Kela’s process of selecting a sample of 2000 individuals for the experiment, contacting them, and distributing the first funds. She points out that researchers will not conduct interviews of the subjects during the course of the experiment, in order to avoid a possible source of influence on their behavior. Moreover, it is the policy of Kela not to disclose information about the basic income recipients to the media. Nonetheless, Turunen notes, some recipients have themselves divulged information about their situations and reactions to the basic income trial; she reviews some of these preliminary reactions near the end of the lecture.
Reviewed by Danny Pearlberg
Photo: Helsinki, CC BY-NC-ND 2.0 Jonathan
by Tyler Prochazka | Jan 25, 2017 | Opinion
Among the political turmoil experienced by Hong Kongers, there is another crisis that is eroding the societal foundations of the global financial hub: debilitating poverty.
Hailed as one of the freest economies in the world, Hong Kong now has a higher per capita income than its former colonizer Great Britain. However, they also have a high and persistent poverty rate at nearly 20 percent.
It is not just relative poverty compared to the lavish lifestyles of many Hong Kongers. Many locals have become homeless or McRefugees (those who sleep in McDonalds at night) due to the prohibitively high cost of housing across the autonomous region.
One of the main contributors to the dissatisfaction with Hong Kong’s government is the sense of economic unfairness. Hong Kong youth have low social mobility; despite higher levels of education, they are unable to secure the wages their parents did at their age. The more serious factor is the high level of economic inequality, which threatens social stability.
Social welfare is severely lacking in Hong Kong, partly because many slip through the cracks. However, the lack of a comprehensive welfare system makes Hong Kong an ideal location to implement basic income. The large pool of wealthy individuals means a universal system would be feasible. The market-oriented nature and efficiency of basic income is also in line with its free market tradition.
The basic income would begin to address the various economic issues plaguing the youth and low-income individuals in Hong Kong. Youth will be able to search for more suitable jobs and have cash to afford rent. Those in poverty would not have to worry about finding a place to stay or finding their next meal.
Importantly, it would address many of the underlying factors that are causing tensions to undermine social harmony in the “city of protests.”
As of now, it appears the basic income movement does not have a significant presence in Hong Kong. A conversation with Hong Kong’s basic income Facebook page revealed the administrator was unaware of any prominent activists or academics in Hong Kong pushing the idea. Other regional activists were also unaware of individuals pushing for basic income in Hong Kong.
Due to the increasing awareness in interest in the basic income in China and Taiwan, as well as across Europe, it is probably only a matter of time before the idea gains greater traction in Hong Kong. For the sake of the people sleeping on the streets, and the youth worried about their future, let’s hope it is sooner rather than later.
by Roland Duchatelet | Jan 18, 2017 | Opinion
Finding the money to pay for our social security is becoming more difficult, because paid work is being replaced by robots — the financial foundation of the social security system is crumbling. This is true whether we talk about financing basic income or any other social security system. Increasingly, automation is replacing “productive” jobs. There is still room to create jobs in basic services. However, such jobs do not create enough “added value” to “contribute” to the financing of our social security system. We are happy that these new jobs provide an income to those families. But it is too far stretched to believe that prices for such “proximity” services, helping each other, can be inflated by social security contributions.
Because the distribution of purchasing power is essential to fuel our economic system, time has come to search for other sources of funding, other than “social security contributions” from labour.
An obvious tax-free way to help fund social security is to reduce the cost of public administration and public services through productivity gains. Another tax-free way is to use the profits of state owned companies to fund social security. Many countries own companies, in full or in part, such as in transportation, mobility, housing, banks, car manufacturing, electricity, water distribution, telecommunication etc. Some of those companies do well, others do not. In most countries, the sum of the profits (and losses) derived from those state-owned companies is low in comparison to the cost of the social security system. Sovereign wealth funds are a special category of state owned companies. Their goal is to generate profit out of the collective savings by the country to cover future social security expenses, like retirement benefits, but also to conduct economic stimuli programs in periods of economic decline.
This induces a discussion regarding to which part of the social security should be funded by savings and which part should come from “redistribution” (sometimes referred to as “repartition”). There are both public and private schemes to fund retirement benefits out of savings. However, in most countries repartition funds the biggest part of the retirement budget. In most countries, the non-retirement social security benefits like child allowances, unemployment, illness, and health care are almost entirely funded by redistribution. It is largely recommended that no matter what state your country’s economy is in, you should always save money yourself for your retirement too. It is possible that you might become incapacitated and unable to decide how this money is handled due to old age, therefore electing someone to have power of attorney on your behalf is also a crucial part of planning for your future. You can learn more about power of attorney here.
Very little academic work has been done on the ideal mix of social security funding between savings or repartition. Imagine a social security system which would be completely funded by (public and private) savings. That would be a huge challenge for any economic system because the percentage of required savings in the real economy would be extremely high. Moreover, there would be huge asset inflation leading to high volatility in stock markets and perceived personal wealth, this in turn yielding high instability in spending in the real economy. The short answer therefore is that the part of savings in our social security system should be relatively low.
Some defend the idea of money creation to fund basic income. The problem with this proposal is that it supposes an expanding economy while the population in most European countries are starting to shrink.
What would happen if we dig a hole into the ground and we discover tonnes of gold, gold available in massive quantities, just like water? What would be its value? Except for a few industrial applications, gold is useless. The reason it is used in jewels is based on its scarcity rather than its beauty.
However, we found something more useful while digging: oil. It can be used to make plastics and all sorts of other useful materials. Moreover, it can be used to produce heat or electricity. In oil or gas-rich countries the oil industry is massively contributing to the state income: social security is funded, at least in part but often completely, by this “black gold.”
Astonishingly, so far, the benefits of the black gold bonanza were only moderately used in countries which do not have these natural resources. They could have levied far higher import or consumption taxes on oil products than they actually did.
Higher taxes on energy consumption is an obvious way to finance social security in 2017, rather than demanding low income workers to share a big part of their small income to fund their health care and future retirement. Such a tax would surely reduce energy consumption and lower CO2 emissions. What is wrong with that? Either way when it comes to finances and especially retirement in our day in age now, more people are in fear of their own instability, if you’re one of these people you should be looking at ways to increase your retirement pot.
Maybe there are other “good” taxes? In Macau, the gambling tax, which is mainly contributed by visitors, finances a yearly basic income for all inhabitants as well as a fair share of the health care system. While in Sweden, their gambling tax seems to be in order to regulate their gambling market, preventing it from spiraling. You can read more here – https://battrenyheter.se/artikel/spelskatten-taljer-guld-at-svensk-ekonomi/. Different countries require gamblers to file their winnings in different ways, so it’s important for people to check their country’s regulations on gambling income. For anyone who is interested in bringing in some gambling income, it might be worth looking for an online livemobile66 slot game. That will give users the option to play for money, allowing them to start bringing in some gambling money.
Any other taxes?
Taxes should fulfill 3 requirements:
- They should be significant enough such that the cost of enforcing and collecting them is small compared to the revenues.
- They should be socially desirable. For example, a tax on exchanging services with each other is undesirable. A tax on cigarettes is a very good tax, a tax on alcoholic beverages as well, just like a tax on electricity or oil products.
- They should be difficult to avoid or defraud.
Why not a smart tax on robots? For example, a tax on products made by robots, while it doesn’t matter if those products are made in the country or elsewhere. However, even if a smart phone would cost twice the current price, we still would buy it, just like we would buy our PC or fridge at twice the price. The easy way to implement such a tax in practice is to increase the value added tax or the sales tax on such products. The goal is to replace the “social security contributions” on low wage labour, because tax on low paid jobs is a bad tax. The problem is that the political world is not aware of that yet.
The replacement of high added value jobs by robots undermines the current mechanism of redistribution of wealth, such that some political voices emerge which are pleading to reduce social security benefits. We need to find a better way to fund our social security. This is essential to win the battle for basic income.
by BIEN | Jan 17, 2017 | News
Mike Seccombe, National Correspondent for The Saturday Paper, reported on the recent championing of a universal basic income (UBI) by those interested in the cause and concerned about “wage inequality at record highs and technology plundering jobs.” In particular, the article focuses on the support for UBI shown by Elon Musk.
Musk is heavily invested and involved in the technology world: he founded Tesla, an electric car company, and SpaceX, a private rocket engine and spacecraft builder. He has a net worth reported at $11.5 billion.
There is “a pretty good chance we end up with a universal basic income, or something like that, due to automation,” Musk said.
The article goes on to talk about interest in UBI in general in Silicon Valley, the impact of automation on the labor market, and recent changes in education and job creation.
Read the full article here:
Mike Seccombe, “Changing employment trends and universal basic income”, The Saturday Paper, Dec 17, 2016.
https://www.thesaturdaypaper.com.au/news/economy/2016/12/17/changing-employment-trends-and-universal-basic-income/14818932004100.
