Sunday, December 27, 2009

A basic income for all

Despite moderate optimism on the economic outlook, there seems, however, to be a broad agreement that unemployment will continue to increase in 2010 and beyond. Apart from a minority of those unemployed who will find a job in line with their qualifications, the mass of unemployed will be divided in three categories: those that will have to accept lower wages for living below their qualification and education level; long term unemployed who will wait years before being employed; those, mainly over 50 who will never find a job. The main reason is that the crisis will lead to major restructuring of businesses; as a result of productivity gains the number of people made redundant will increase dramatically.

In this regard, traditional policies consisting of providing temporary benefits to the unemployed appear inadequate today. It is time to replace the old scheme with a new system which could yield huge benefits for the individuals as well as for the society as a whole. The idea of a Basic Income or Guaranteed Minimum Income is now gaining support in many countries such as Germany and Brazil. In substance, it aims to decouple income and work; as there are less jobs - but not less persons with their own needs and rights, governments need to find a way to distribute resources to people without a job. In its ideal form, a Basic Income is granted independent of other income (including salaries) , with no other requirement than citizenship. A Basic Income scheme aims to provide each citizen with a sum of money that is sufficient to live on. In some cases it is proposed in the form of a citizen's dividend (transfer) or a negative income tax (a guarantee) for citizenship. According to its supporters*, it has the advantage to grant to each unemployed the freedom to find an adequate job without having to accept unfair conditions for employment . But it is also seen as a powerful means to combat poverty and avoid economic insecurity (which is the main enemy of stability and democracy!) . However, critics have pointed out the potential work disincentives created by such a program, and have cast doubts over its implementability.

In fact, the idea of a Basic Income is an old one. It was put forward for the first time by the British political writer Thomas Paine as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property"(Agrarian Justice, 1795). It was an issue for debate among left wing parties for many decades. In his book Where Do We Go From Here: Chaos or Community? (1967) Martin Luther King wrote: "I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income". In 1968, James Tobin, Paul Samuelson and John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements. In the US, a commission nominated by President Johnson published in 1969 a report which recommended to substitute all anti-poverty measures with a special program to provide to all American citizens an annual guaranteed income. It was not unconditional, as the income was dependent on economic needs. But the bill on a guaranteed income was rejected by the Senate after being approved by the Congress.

In France, there were many discussions in the 80s about the issue of a basic income on the basis of the arguments put forward by French economist and philosopher André Gorz** . He wrote:
"The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet- unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact...
"From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work...
"Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: `the micro-chip revolution'. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and service sectors. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The work ethic ceases to be viable in such a situation and workbased society is thrown into crisis..."
In the 90s, many studies from different countries and institutions (notably ILO) have found common ground for the idea of basic income. The Basic Income Earth Network (BIEN) has argued that one of the benefits of a basic income is that it has a lower overall cost than that of the current social welfare benefits. Research based on local cases show that a basic income does not lead to the formation of an idle class nor companies offered lower wages. Simulations suggest that the budgetary cost could be sustainable in view of the fact that it would replace existing social schemes (unemployment benefits, early retirement schemes, etc.) that are often inefficient and costly.

In fact, there are different models of basic income support. Pro-free market economists Friedrick Von Hayek and later Milton Friedman worked on the idea of creating a minimum income for all citizens to become “public services buyers”. All services would come from this income. From a practical point of view, this proposal would be relatively easy to implement, but in practice, it would lead to the necessity of redirecting all government resources receipts to a single and universal provider. In possession of these resources, the citizen would decide which type of education, healthcare or food he would utilize; he would analyze costs and make the best choice. The idea of universal income derives in their view from the assumption that the State is inefficient at distributing resources efficiently, leading to wastefulness and deviations.

But this view must be challenged on the grounds of equity, not only efficiency. The basic income should not be seen as a means to dismantle the Welfare State. In times of crisis, such form of income support becomes essential to ensure economic security and avoid social chaos. Of course, this will not happen overnight; we still need feasibility studies, experimentation at local level, impact assessments and political discussions. In Germany, the left wing party, Die Linke has promoted the idea of an unconditional basic income at the level of a federal work community and it is gaining support from many NGOs, including from Austria and Switzerland.

European left parties - or what remains - should make similar proposals to their own electorate- as an alternative to proposed tax cuts by right wing parties- not for mere electoral reasons, but because mass unemployment is putting our democracies in danger.

* See the paper of Ph. Von Parijs from Catholic University of Louvain (UCL)
** A.Gorz, Critique de la Raison Economique Eds Galilée 1969


  1. Dear Mr Mairate,

    First of all thank you to have talked about Hayek (and so austrian school) but also Milton Friedman. These names are rarely seen in actual litterature due to the fact that their ideas are pro free market.
    About the universal revenue, I do believe that the idea may good but I finally can't agree with it. For example, if this revenue is given because of the citizenship, how is it possible to manage two citizenships (some people may have three). If this revenue is different in all countries, we can be sure that there will be a sort of "universal revenue" concurrence which may lead to a trade of citizenships.
    This idea is good for the ones who work. this revenue is not based on the activity of people.
    If my memory is good, I think that Juan Lluis Vives i March has talked about in "De subventione pauperum sive de humanis necessitatibus" in 1526. But i might be wrong.
    It is also interesting to see left and right parties thinking about implementing such a reform and that shows that libertarian ideas may be liked by left of right because of this objectivism.


  2. Dear Jean Luc
    I can understand your concern. The idea may sound a bit provocative and utopian, but it has been defended by prominent economists.In his final book 'Full employment regained', Nobel prize James Meade states that a return to full employment can be achieved only if, among other things, workers offer their services at a low enough price, that the required wage for unskilled labour would be too low to generate a socially desirable distribution of income, and that therefore a citizen's income would be necessary.

    Maybe we should limit (to prevent disincentives to work) the provision of a basic income to the poorest, so according to actual income, not only citizenship. We may also think of a system of redistribution across countries to combat global poverty.
    It's not charity, but solidarity in the economic sense.