Book review: ‘Could a Citizen’s Income work?’

by Citizens' Income Trust | May 24, 2015 | Opinion

Donald Hirsch, ‘Could a Citizen’s Income work?’ A paper commissioned by the Joseph Rowntree Foundation as part of its Minimum Income Standard programme, and published in March 2015. www.jrf.org.uk/publications/could-citizens-income-work

The Citizen’s Income Newsletter usually mentions relevant think tank research and working papers in the ‘news’ section, or occasionally in the context of an editorial, but Donald Hirsch’s paper is particularly significant and so demands a full review. Its importance is twofold: it evaluates a number of Citizen’s Income schemes for viability; and it identifies the changes that might be required in the ways in which the public and policymakers think about income maintenance if a Citizen’s Income were to be a possibility. The paper therefore tackles a number of different feasibilities: financial feasibility, psychological feasibility, and what we might call institutional or policy process feasibility.

The paper recognises that a Citizen’s Income would address some very real problems experienced by the UK’s current largely means-tested benefits system. For instance: a Citizen’s Income would not be withdrawn as earnings rose, and so would not impose the employment disincentives that means-tested benefits currently impose; no stigma would be attached to a Citizen’s Income; and a Citizen’s Income would be simple in structure and so would not suffer from the complexities of much of the current system. The full list of arguments on page 4 of the paper is a model summary of the case for a Citizen’s Income.

The major contribution of the paper is the way in which it outlines the three ‘seismic shifts’ that would need to occur in public attitudes if a Citizen’s Income were to be implemented. The public and policymakers would need to be convinced

1. ‘that everyone should be given some baseline level of financial support from the state, even if they choose not to do anything to try to earn money for themselves;’ (p.5)
2. ‘that the basic marginal tax rate should be substantially higher than it now is, since otherwise almost everybody’s net income from the state would rise, and there is no obvious way to finance this.’ (p.5)
3. ‘potentially a reduced role of the state in ensuring that each citizen can afford particular essentials, notably housing and childcare, through income transfers, if a citizen’s income replaced means-tested payments for these.’ (p.3)

Hirsch says of the first two of these seismic shifts:

Politicians are likely to perceive both of these as unacceptable to voters, a view supported by evidence on social attitudes. It can be argued that both of these conditions could become more acceptable under a regime with a citizen’s income than they are now. Persuading the public and politicians of these arguments, however, would not be easy. (p.5)

And he says of the third:

Under a system of largely market-based rents, it would not be easy to include a simple rent element in a citizen’s income payment without creating shortfalls for some or large surpluses for others. (p.5)

Particularly in relation to the first two seismic shifts, Hirsch’s conclusion is that ‘a debate about the principle of a citizen’s income may thus contribute to a long-term reconsideration of policies and attitudes towards state support’ (p.3).

The paper contains a useful study of the differences between Universal Credit, Negative Income Tax, and Citizen’s Income; a discussion of the ways in which Income Tax would have to rise to pay for different levels of Citizen’s Income; an exploration of the different ways in which Citizen’s Income schemes might tackle differing housing costs; and a discussion of the way in which abolishing tax allowances, such as the Personal Allowance, rather than simply raising Income Tax rates, could pay for a Citizen’s Income. It also contains a description of the differences between the levels envisaged in various researched schemes and the Minimum Income Standards researched by the Joseph Rowntree Foundation ( – although it has to be said, of course, that the current benefits system does not come anywhere near to the levels of the Minimum Income Standards). Then follow descriptions of the kinds of households to which a Citizen’s Income would tend to redistribute income, and the important statement that ‘all the [paper’s] calculations make the simplified assumption of no behavioural change. Knowing what would actually happen to earned incomes as a result of a citizen’s income is very difficult, but is likely to affect outcomes quite profoundly’ (p.16). Then come discussions of household and individual assessment units, the effects of different approaches to meeting housing costs, and lifecycle redistribution. A particularly important section is a discussion of a Partial Citizen’s Income as a stepping stone towards a full one. A partial Citizen’s Income would be likely to impose losses on low income families if means-tested benefits were abolished, and to impose additional complexity if they were not. Hirsch suggests that a Partial Citizen’s Income might be useful if it could be implemented as one stage of an already agreed plan to implement a full Citizen’s Income. There is much merit in this suggestion.

Hirsch describes the Alaska Permanent Fund, and the Namibian and Iranian schemes, but not the more recent Indian pilot project. He correctly points out that these schemes have not reduced employment market activity, and might also have said that in the Namibian pilot project a significant increase was in evidence.

Hirsch makes the important point that income is different from such services as healthcare and education because households generate income as well as require it. This means that it is important to ensure that a Citizen’s Income scheme does not inadvertently reduce the amount of income created, and that both removal of the Personal Tax Allowance and higher Income Tax rates might have such effects on earned incomes. In his concluding section, Hirsch suggests that a Universal Credit with a lower taper rate might be a useful step in the direction of a Citizen’s Income. He might also have pointed out that Universal Credit is not universal, is not based on the individual, is not unconditional, is still means-tested, and is regressive.

When it comes to the study of particular Citizen’s Income schemes in the paper’s appendices, the paper makes two valid points: that the immediate implementation of a ‘full’ Citizen’s Income is unlikely to be feasible in the short term; and that, because a ‘partial’ Citizen’s Income would not fully replace means-tested benefits, it could make the system even more complicated.

Following a description of the Citizen’s Income Trust’s 2013 illustrative scheme, Hirsch proposes changes and lists their additional costs, which is useful, but is not itself a criticism of the scheme as published. He then studies the Institute for Social and Economic Research working paper proposals (reprinted in the previous edition of this Newsletter), and correctly recognises that in order to reduce losses in disposable income, a means-tested system needs to be retained and that this would create an additional level of complexity.

Hirsch’s descriptions of these recently researched Citizen’s Income schemes are largely accurate. There are places in the discussion at which a broader canvas would have been helpful. For instance, the discussion of the higher rates of Income Tax that would be required might have included consideration of overall gains and losses – for if a household’s Income Tax rate rises, but the overall effect of the Citizen’s Income, increased Income Tax, and alterations in other benefits, leaves the household with the same disposable income, then for households originally on in-work or out-of-work means-tested benefits, it really is no problem that Income Tax rates have risen – except that, as Hirsch correctly points out, Income Tax rates are a psychological issue as well as a fiscal one: and it is in the area of the psychological issues related to Citizen’s Income that his paper makes a most useful contribution. An additional important issue is that where households are not currently on means-tested benefits, and Income Tax rates rise, then even if there is no overall loss in disposable income at the point of implementation of a Citizen’s Income, those households’ marginal deduction rates will rise. This might result in behavioural change in the employment market.

A further issue to which Hirsch correctly draws attention is that of redistribution. For schemes in which means-tested benefits are abolished, redistribution effects could be substantial. Hirsch evaluates a particular scheme of this nature, and concludes that

the overall distributional effects would include, but not be restricted to, a redistribution of income from better to worse off groups. There would also be a significant redistribution from people without children to those with children among lower earners, and also some losses for those with very low part-time earnings. Finally, … among groups presently receiving transfers from the state, couples would do relatively better than single adults (with and without children). (p.15)

So either such redistributional effects would need to be justified, or a different kind of scheme would need to be selected. Hirsch does not study in detail the redistributional effects of Citizen’s Income schemes that retain means-tested benefits, where those means-tested benefits are recalculated by taking into account households’ Citizen’s Incomes as existing income. This would require the kind of microsimulation work contained in the Institute for Social and Economic Research working paper (Torry, 2015). The low levels of gains and losses generated by such modelling of the alternative schemes in that working paper suggest that redistributional effects would be far less significant than for schemes that abolish means-tested benefits. Clearly further research is needed in this area.

In relation to those same alternative schemes, and to his discussion of housing costs on p.13, Hirsch might have mentioned that the schemes researched in the 2015 Institute for Social and Economic Research working paper are clear that housing costs support would be left as it is under the current system. A further issue that Hirsch might have discussed is that the ISER paper employed the Euromod modelling software and Family Resource Survey data to generate entirely robust costings and results on gains and losses. As he recognises on p.26, his own paper does not calculate precise tax rates and income outcomes. It would have been able to do so if his suggestions had been modelled using Euromod.

This review cannot do proper justice to the detail contained in Hirsch’s well-researched and well-ordered paper, but we hope that it will encourage our readers to read his paper for themselves, to study his arguments, and to ponder his conclusions. Any future study of the feasibility of a Citizen’s Income, and of particular Citizen’s Income schemes, could do a lot worse than set out from the arguments of this paper.

Hirsch has already done the Citizen’s Income debate a significant service, and we hope to see further such analysis and argument in the future. What would be particularly useful would be to have a side-by-side evaluation of the current benefits system and of a Citizen’s Income scheme (both with and without accompanying means-tested benefits), treating the two systems as competitors on a level playing field, and evaluating them according to a set of clear criteria. As Hirsch says,

the present system suffers from strong negative perceptions and a consequent lack of political support, which has helped the implementation of recent cuts in the real value of benefit levels without obvious political fallout. If a citizen’s income or any other reform could command public confidence, this would help strengthen the underpinning of a system which ensures that nobody in the UK lacks a basic level of income. (pp.4-5)

A Basic Income Women Action Group Statement

by Guest Contributor | May 14, 2015 | Opinion

April 28, 2015

A Basic Income Women Action Group

Statement Prepared by

Liane Gale, Ann Withorn and Kristine Osbakken

Inspired by conversations and presentations at the 2015 North American Basic Income Guarantee Congress in NYC

1. The broad goal of the group is to connect women within the Basic Income movement, and also to connect with women of other economic/social/environmental justice activist groups, where people are mindful of the dignity of all people and the planet. We are committed to exposing the problems within current economic, political and social systems, to questioning these systems from a women’s point of view and to arguing for Basic Income as a vital avenue towards systemic change. Group members are also committed to contributing to a healthy community, connecting and interacting with each other based on solidarity and compassion.

2. Support for a Women Action Group within the Basic Income movement draws from both historical and contemporary sources. Martin Luther King wrote in 1967: “I am now convinced that the simplest approach will prove to be the most revolutionary. The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed annual income”. The history of the U.S. Welfare Rights movement also reminds us that poor women and their allies recognized a “Guaranteed Adequate Income” as their welfare plan, particularly to eliminate sexism from welfare, with National Welfare Rights Organization leader Johnnie Tillmon affirming in 1972 “the right to a living wage for women’s work, [is] the right to life itself”. And today, activist men from across the world have joined the call. Here is globalist Nafeez Ahmed: “If we want to save the planet, patriarchy must die. That means recognizing and taking responsibility for the fact that patriarchy is integral to the structures of power we take for granted, across East and West. There’s no time to waste. If misogyny wins, the planet dies.”

3. Action Items.  We propose several general avenues for how a Women Action Group can come together as part of the full Basic Income movement. We seek further discussions and refinement regarding these proposals from all sections of the movement.

The Basic Income Women Action Group will:

• Connect with women already active in the Basic Income movement, both nationally and internationally, for the sake of building stronger networks and solidarity;
• Promote the staging of forums in venues that will examine Basic Income through a gender lens — and introduce this perspective within all public discussions of Basic Income;
• Serve as a nexus for informing people about the existing literature and activist resources on Basic Income and women;
• Support the writing of open letters asking international, national, state and local organizations and movements to discuss and endorse Basic Income, especially in regard to its immense potential to positively affect all women and their families;
• Support initiatives that promote gender parity within Basic Income organizations such as NABIG and BIEN, especially in regard to events that are the “public face” of our movement.
• Support pro-Basic Income policy campaigns. When possible, we would also like to offer coordinated support for women candidates and those leaders, who are working toward a Basic Income at any political level.

We seek suggestions and reactions from all, but also specifically encourage comments and ideas from those who are already connected with the Basic Income movement.

Feel free to join or to contact any of us in the Basic Income Women Action Group:

Liane Gale, liane.gale@gmail.com (Roseville, MN));

Ann Withorn, withorn.ann@gmail.com (Boston, MA);

Kristine Osbakken, krissosbakken@gmail.com (Duluth, MN).

US Budget under BIG

by Roland Duchatelet | Apr 27, 2015 | Opinion

Introduction.

This budget assumes public finance all levels combined, and no change in overall tax income, which is currently 4131 billion $.

Today, no more than 8% of the population is required to produce all agricultural products, industrial products and buildings required. That is why the state needs to distribute purchasing power to 100% of the population. Jobs in the service sector will be triggered by the purchasing power (the current doctrine is that we should create jobs to generate purchasing power, but that is an instable system).

This increased efficiency has created a societal system with can create welfare and therefore has a huge common, “social”, capital. Every citizen should get a dividend from that capital. We call it the social dividend or “Basic Income Grant”; an income which we don’t need to work for, just like rich people live from their heritage. All citizens get this social dividend. Some part in cash, some part in kind. The amount in cash depends on their age (see table in the budget).

The amount in kind is given in education vouchers, healthcare vouchers and “coaching” vouchers. Citizens choose their education, healthcare and coaching service provider who gets money from the “social dividend in kind” fund, provided by the state budget.

Both education and healthcare will see drastic changes in the coming years, due to the advent of the Internet. With the number of internet service providers like Spectrum (check out Spectrum internet pricing here), Xfinity, and similar others providing affordable internet plans, users can have access to information of any kind at their fingertips. The country will witness an unprecedented increase in education and healthcare – entrepreneurs.

Every citizen will have the right to be “coached”, which will help all citizens to address problems and opportunities in their lives. This coaching system will hugely reduce criminality and improve productivity.

Since working people will get a social dividend of 500 $ per month, somebody earning 1500 $ net now would have the same total income if he/she gets a net salary of 1000 $ net. In practice, the pay check will mention BIG: 500 $ and Work income: 1000 $ instead of 1500 $ work income now. That is why the in the budget figures, the cost for public servants, but also workers in education and healthcare seems low: a part of their salary is paid, so to speak, by the BIG.

Other public expenses:

Within the BIG, a value of 1152 billion $ is paid in kind, in the form of vouchers. These vouchers go to service providers who get cash for it from the government budget. The service providers use this money to pay the extra salary over the BIG to nearly 25 million people employed by those service providers in education, health care and coaching. The demand side of these services is completely subsidised. The offer side is market driven while the government needs to define the rules.