Monthly Archives: March 2018

Universal basic income would enhance freedom and cut poverty

In the Financial Times, Dr Guy Standing, SOAS University of London, replies to Ian Goldin, who gave five reasons for dismissing basic income.

In his recent book, summarising 30 years of research, all five are considered. He explains:

First, he says universal basic income (BI) is unaffordable. Many advocates do not use “universal”. What they mean is that all legal residents (and legal migrants after a qualifying period) should qualify. Most believe the BI should be clawed back from the rich in tax. This is administratively easier, more equitable and efficient than targeting by means-testing. The latter has high exclusion and inclusion errors, low take-up and poverty traps, inducing bureaucrats to use intrusive behaviour tests. Mr Goldin claims that a BI is “unaffordable and leads to ballooning deficits”, adding it would be paid by “reallocation of resources from other areas such as health and education”. You cannot have it both ways. Anyhow, BI could be paid by cutting regressive subsidies, including the 1,156 tax reliefs that cost the exchequer £400bn a year.

“Second, he claims it would “lead to higher inequality and poverty”, adding “it typically aims to replace existing unemployment and other benefits”. The latter is untrue. What most advocates want is replacement of means tests, with supplements to BI for those with extra costs of living or lower expected earnings. As for the claim, all pilots/schemes have shown reduced poverty and inequality. In Alaska, when the Permanent Fund was established from which BI was to be made, the poverty rate and Gini were the highest in all US states. Twenty years later, they were the lowest. In India, pilots in nine villages resulted in reduced poverty/inequality, by comparison with beforehand and with other villages. One cannot presume a BI would raise poverty or inequality.

“Third, Mr Goldin claims a BI would “undermine social cohesion” by “rewarding people for staying at home”. All polls show that more than 90 per cent would continue to work if they had a BI. Unlike means-tested benefits, a BI would overcome the poverty trap, whereby many face marginal tax rates of 80 per cent in taking low-wage jobs.

“Mr Goldin’s fourth point is similar to the third, claiming a BI undermines incentives to participate”.

“His fifth point is that BI “offers a panacea to corporations and political leaders, postponing a discussion about the future of jobs”. Why? Most of us want to improve our lives. A BI as anchor of a new distribution system is justifiable for six reasons. It is a matter of social justice, would enhance freedom, produce basic security, cut poverty, promote political stability at a time of rising discontent, and, as India’s government recognised in a parliamentary report, even in a low-income country, a BI is affordable”.

 

 

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Slating Basic Income: a starting point for a WM New Economics discussion?

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Ian Goldin, Professor of Globalisation and Development at the University of Oxford, a former World Bank vice president, gives five reasons in his FT article why UBI is ‘a red herring’.

Extracts:

First, UBI is financially irresponsible. Universal means everyone gets it. Even in the richest societies, if UBI was set at a level to provide a modest but decent standard of living it would be unaffordable and lead to ballooning deficits. To close the UBI budget black hole, much higher taxes or reallocation of resources from other areas such as health and education would be needed.

Second, UBI will lead to higher inequality and poverty. It typically aims to replace existing unemployment and other benefits with a simple universal grant. As the OECD has shown, by reallocating welfare payments from targeted transfers (such as unemployment, disability or housing benefits) to a generalised transfer to everyone, the amount that goes to the most deserving is lower. Billionaires get a little more.

Third, UBI will undermine social cohesion. Individuals gain not only income, but meaning, status, skills, networks and friendships through work. Delinking income and work, while rewarding people for staying at home, causes social decay. Crime, drugs, dysfunctional families and other socially destructive outcomes are more likely in places with high unemployment, as is evident in the drug pandemic in the US.

Fourth, UBI undermines incentives to participate. Stronger safety nets are vital. No decent society should tolerate dire poverty or starvation. But for those who are able, help should be designed to get individuals and families to participate; to help people overcome unemployment and find work, retrain, move cities. Wherever possible, safety nets should be a lifeline towards meaningful work and participation in society, not a guarantee of a lifetime of dependence.

Fifth, UBI offers a panacea to corporate and political leaders, postponing an urgent discussion about the future of jobs.

The demographic pressures in rich countries, and the deep challenge artificial intelligence poses to development prospects in poor ones, adds to the need for this conversation.

There must be more part-time work, shorter weeks, and rewards for home work, creative industries and social and individual care.

Forget about UBI; to reverse rising inequality and social dislocation we need to radically change the way we think about income and work

 

 

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