Little promises ‘debate’ on UBI

Andrew Little has confirmed that Labour are considering a Universal Basic Income as a part of their Future of Work considerations – “We are keen to have that debate about whether the time has arrived for us to have a system that is seamless, easy to pass through, [with a] guaranteed basic income and [where] you can move in and out of work on a regular basis.”

So it’s far from being policy (at this stage publicly anyway) but being considered as an option.

Stuff: Labour leader Andrew Little promises debate on universal basic income

The Labour Party is considering a universal basic income as part of its Future of Work project.

Leader Andrew Little confirmed his party was exploring the concept during a visit to Trevor Mallard’s Hutt South electorate last week.

Little said significant changes to the way New Zealanders worked were unavoidable.

“The possibility of higher structural unemployment is actually what’s driving us,” he said.

Pure universal basic income (UBI) systems, in theory, would give adults a regular income from the government regardless of their income or assets.

They would replace other forms of welfare, such as pensions, benefits and student allowances.

Although only trialled on small scale overseas, the idea is that a UBI would be set at a level which people could subsist on, but not at a high enough level to serve as a significant disincentive to work.

Little said a UBI would be discussed at Labour’s Future of Work conference at the end of March.

Discussion and debate on a UBI is certainly worthwhile. It’s an interesting concept, but the obvious drawback is the cost. New Zealand has major issues financing universal superannuation now. If that level of income was guaranteed to everyone – and it’s hard to see Labour being able to reduce national super – the economics could be prohibitive.

“We expect that in the future world of work there will be at least a portion of the workforce that will rapidly move in and out of work,” he said.

Little said advances in technology and changes in personal preferences would affect how people chose to work.

“They’re going to move rapidly in and out of multiple jobs over a period of time but there could be some weeks where they get little or no income.

That happens already to an increasing extent, work availability and changing requirements have been changing significantly for several decades, since the 1980s.

“But they need a basis on which they can go through the down periods as well as enjoy the up periods.”

Little said a UBI would make navigating such a work pattern “much easier”

Yes, but being able to afford it won’t be easy at all.

“The question is whether you have an income support system that means every time you stop work you have to go through the palaver of stand-down periods, more bureaucracy, more form filling at the same time as you’re trying to get into your next job.”

If higher state incomes were guaranteed to people moving in and out of work – in theory a good idea – then more may choose to stay out of work for longer because they can.

It would have to mean that those in work would have to be taxed much higher.

It’s unlikely Labour would go into next year’s election with a UBI as a definite policy. It would be such a massive change I think it would have to be a second term project.

There’s been debate already on this, at The Standard: Labour considering Unconditional Basic Income where there was a very mixed response.

Wayne Mapp challenged them with some reality on what it would cost:

BI may have superficial appeal, but the economics kill it.

To replace benefits and super it has to be really high, at least $15,000 per person. That, as a number of posts already indicate, would cost around $70 billion, or about 80% of existing govt expenditure. A UBI at this level involves a dramatic increase in overall govt spending by at least $30 billion, around 50% above existing levels, with a consequent effect on taxation levels. Labour is never going to be that radical. And in my view neither should they be. But no doubt that will be a reason why it might appeal to the Greens.

At more modest levels of say $5,000, you still require the full benefit system, albeit that benefits can all be trimmed by $5,000. But then what really is the point? The people most likely to benefit will be students, but wouldn’t a universal student allowance be easier.

Anyway I guess Labour will have its debate, they will raise false hopes, then dash them by saying unfortunately it just cannot be done.

Colonial Viper responded:

Not sure why you think that the NZ economy can’t support every NZer to a basic level of living, say $250pw.

You do realise that the government gets most of that additional spend back via taxes, duties and levies over time, right? The money spent into the community doesn’t just go *POOF* and disappear – it comes back in as GST, charges on petrol and booze, PAYE as more people are hired, etc.

The current living alone super rate is significantly higher than that at $374.53 going down to $288.10 for one partner of a couple.

https://www.sorted.org.nz/#/guides/this-years-nz-super-rates

Vto:

Think of it this way… NZ is a wealthy country. There is enough wealth and income to ensure everybody has enough to live on.

NZ is entirely wealthy enough to provide a UBI for everyone ….

Colonial Viper:

Everyone I know who earns $30K to $50K pa will vote for a $200pw UBI.

After all that $200pw extra represents a fucking big pay rise on top of their weekly wages.

Except that it will have to be financed from somewhere – much higher PAYE, and or much higher GST or other taxes.

Alwyn does some calculations:

Just for the discussion what would that cost?

Suppose we replace all benefits and student allowances. That currently costs about $24 billion/year.

$400/week gives a number of roughly $94 billion/year or an increase of about $70 billion/year. That is about equal to all current core Government revenue, most of which is taxes. $400/week is about the National Super for a single person living alone or about a third more that a married person rate.

It is quite generous. I very much doubt that that is the figure Mr Little has in mind. After all Labour at the last election claimed we couldn’t afford the current National Super costing about $12 billion pre-tax this year.

Thus we would have to double taxes collected each year. Double the income tax rates and double GST. A good chunk of the UBI would thus be immediately reclaimed.

Taxes currently provide about $66 billion. Mainly Income tax and GST.

To get the extra $70 billion you would need as much again. That could be done most easily by doubling GST and income tax rates. In that regard, yes I am suggesting they would need to double to come anywhere near balancing the books.

Colonial Viper has suggests another way of financing it – creating money.

If we insist on funding a UBI through taxation and borrowing rather than by issuing new money, then it is predictable that the UBI will be set at low poverty levels.

To have a decent UBI we have to realise that the Crown can issue money to fund its needs.

Bob challenged that:

Are you serious? That is short term thinking at its worst!
Sure, that is no problem at the moment while inflation is low, but if we set up a UBI based on forever creating money to pay for it that is a sure fire way to end up with hyperinflation!

Colonial Viper:

That’s a silly statement as a UBI will help NZers become more creative, productive and competitive. In that environment, hyperinflation cannot occur.

Paradise By Alexei Talimonov

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49 Comments

  1. Iceberg

     /  15th March 2016

    Who knew that the more we give people for free the more “creative, productive and competitive” they will become?

    It works super well with children so why not adults?

    Reply
  2. Kevin

     /  15th March 2016

    Apart from cost problems there is also the issue of political interference. For example in order for it to be truly universal, prisoners would be entitled to it. That means a pedophile rapist who has been in prison for 15 or so years would get a nice pay cheque when they get released. Sure, you could make it that prisoners don’t get it but if the government can make exceptions for prisoners then it can make exceptions for others and other situations.

    So even if it is implemented there is a good chance that it will end up going the same way as ACC, which was originally a universal guaranteed “income” scheme, although in this case compensation for injury.

    Reply
  3. Oliver

     /  15th March 2016

    We could fund UBI by taxing capital gains. There’s 70 billion right their.

    Reply
    • A million dollars tax on every house sale?

      Reply
      • Oliver

         /  15th March 2016

        Not just houses all investments.

        Reply
        • Kitty Catkin

           /  15th March 2016

          That would just be playing musical money, Oliver.

          I like my idea of adding the million that Pete has worked out would be necessary to the asking price of every house, the million to be handed straight to IRD. Problem solved.

          Reply
      • Dougal

         /  15th March 2016

        Winston Churchill:

        “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

        Some of us see taxation as the only answer when more money is needed for social engineering projects.

        Reply
        • Oliver

           /  15th March 2016

          Yeah Dougal get rid of taxes and then see what happens. Another well thought out idea of yours.

          Reply
      • Kitty Catkin

         /  15th March 2016

        Actually, Pete, all that need happen is for everyone to add a million to the house price-QED.

        Reply
    • Alan Wilkinson

       /  15th March 2016

      The same relation to reality as most of your claims Oliver – none whatever.

      Couldn’t Oliver have his own thread, PG, to avoid him messing nonsense everywhere else?

      Reply
    • Iceberg

       /  15th March 2016

      *there

      Maybe practice in linked up writing first?

      Reply
      • Kitty Catkin

         /  15th March 2016

        I thought that someone raised the issue of older prisoners and super, but I can’t find it. From what I gather on Google, they don’t while they’re inside-their partners are counted as single.

        Reply
  4. alloytoo

     /  15th March 2016

    It would appear that CV has studied at the Bob Mugabe school of economics (other Alumni include Russel Norman).

    Reply
    • Iceberg

       /  15th March 2016

      If we confiscate farms and give them to the unemployed, then all those farmers will be freed up to become more creative, productive and competitive.

      Reply
    • Kitty Catkin

       /  15th March 2016

      Alloytoo, if one can print money in Monopoly when the bank runs out-just write it on any old piece of paper and it’s valid-why can’t governments do this, too ? Or anyone else ? There’s a house that I really like in my town, and it’s for sale, but as I’d never raise enough from mine to pay for it, I would be able to write the difference on a piece of paper and buy the lovely house with this. I don’t know why they don’t make me Finance Minister-well, I do, really, it’s professional jealousy.

      Reply
  5. rayinnz

     /  15th March 2016

    “Give a child and a pig every thing they want, you end up with a good pig and a poor adult”

    Reply
  6. Kevin

     /  15th March 2016

    I support a UBI subject to the following:

    1. The legislation is entrenched meaning that it will take a 75% majority to change it in any way.
    2. It’s set at a level that is not prohibitive. This means that in all likelihood those who are on welfare now will be worse off under it.
    3. It’s universal meaning you get it no matter how money you earn or what you’re situation is. This means even prisoners and multi-millionaires will be entitled to it. It also means you don’t get any extra.
    4. It completely replaces the current welfare system. This means every WINZ office will be shut down and ideally replaced with a Carls Jnr or Nandos or something equally as delicious.

    Reply
    • jamie

       /  15th March 2016

      Agree with all of that except (2) which would render the concept fairly useless. Which I suspect is what you were trying to do anyway.

      If you’re serious, then you’re simply talking about making the poorest even poorer and the richest even richer, quite literally.

      Also there are better uses for the sites than Nandos and Carls Jnr.

      Reply
      • Alan Wilkinson

         /  15th March 2016

        Let’s all vote for free money. The downside of course is that when it comes it is not worth anything.

        As the Russians used to say, “We pretend to work and the Government pretends to pay us.” They weren’t joking.

        Reply
        • jamie

           /  15th March 2016

          It’s not free, it’s the same money.

          Machines just aren’t very good at spending it.

          Reply
          • Alan Wilkinson

             /  15th March 2016

            They are not very good at making it either.

            Reply
            • Kitty Catkin

               /  15th March 2016

              Oh, Alan, that’s not right ! My simple little printer could make it easily.

            • Alan Wilkinson

               /  15th March 2016

              Yes, exactly, Kitty. It can print the paper but it can’t make the value.

            • Kitty Catkin

               /  15th March 2016

              I seem to remember that some governments were seriously considering printing extra money when the last crash happened, but surely it wouldn’t achieve anything-it’d be like when you write money on pieces of paper in Monopoly.

              Am I right in thinking that if the NZ government did this and the minimum wage became $1,000,000 a week, that the $1,000,000 would have the buying power of the minimum wage now ? I know that this is an over-simplification, but it’s not going to happen so there’s no point in being too fussy about details.

            • jamie

               /  15th March 2016

              Not just “considering” it, kitty. They put it into practice.

              https://en.wikipedia.org/wiki/Quantitative_easing#After_2007

            • jamie

               /  15th March 2016

              Not sure what you mean by that Alan. Did the industrial revolution completely pass you by?

            • Alan Wilkinson

               /  15th March 2016

              By no means, jamie. But implementing a UBI doesn’t suddenly endow machines with the ability to make more value at no cost.

            • jamie

               /  15th March 2016

              I was thinking more about the consequence of taking people out of their value-creating jobs and replacing them with machines.

              The same value is still being created, hence “it’s the same money.”

              If we intend to continue mechanising our society then we need solutions for the problem of what to do with all that excess value.

              Machines can’t spend it. People still need a living.

            • Alan Wilkinson

               /  15th March 2016

              Why do you think mechanisation will cause a problem of excess value that hasn’t existed to date? It has already revolutionised our lives yet there are still jobs and work for people. Machines don’t get paid, so the savings get passed on to consumers.

            • jamie

               /  15th March 2016

              What makes you say it hasn’t existed to date?

            • Pete Kane

               /  15th March 2016

              It’s the same ‘money’ as you may or not know? But check with your brother?

            • Alan Wilkinson

               /  15th March 2016

              Not if you’ve been printing it which is the only way you can vote for free money.

            • jamie

               /  15th March 2016

              It’s all “printed”. It’s the same money.

            • Alan Wilkinson

               /  15th March 2016

              Not when you’ve printed enough to hand out free money.

            • jamie

               /  15th March 2016

              It’s not free though. It’s the same money.

            • Alan Wilkinson

               /  15th March 2016

              So where do you think it came from, jamie, if everyone gets it?

            • Pete Kane

               /  15th March 2016

              No one is talking ;free money ( Alan .as if any really concept ha ever existed, except of course for my 20 grand Am Ex bill., and it”s invented credit %), Mind you – the number of our great ‘post war’ country bank tellers that ended up either running it (or making a fortune from it, by stating a govt. sponsored company is astounding.

  7. Pantsdownbrown

     /  15th March 2016

    I think we should sit back and take in what the greatest philosopher of modern times has to say on the matter : https://garethsworld.com/blog/tax-and-welfare/even-in-finland-universal-basic-income-is-too-good-to-be-true/

    I’m personally undecided – it needs more closer scrutiny before I can commit either way.

    Reply
  8. Okay, well, fairly typical discussion so far, somewhat “reductionist”, fearful and paranoid, with the usual denigration of ‘the average Kiwi’, general public or every single beneficiary …

    “They” are children, right? Or pigs? Not “me” though, I’m a grown up Hooman Bean.

    Little, after all, is only talking about discussing it. Having a debate? Isn’t that what we do here? But of course, mention the name Andrew Little around here … so predictable …

    Personally I believe there are certainly ways of collecting more income tax simply by being more equitable and participatory, rather than necessarily increasing it. The “wealth tax” question is another thing entirely, warranting considerable discussion, as perhaps Little is ‘generically’ acknowledging and suggesting?

    Personally I don’t believe it will effect people’s innate desire to work and reach their potential, especially if our education system encourages this, as do most families. UBI might even encourage achievement … “creative, productive and competitive” … which I see people are having a good old “put the boot into” above? A bit less competitive mightn’t do any harm though?

    A UBI wouldn’t have made any difference to my “ambitious young self” when I had one …

    @ Kevin – you’ve largely taken the “transumption” route into the question IMHO.

    1) I agree 75% or similar should be the majority for a universal benefit like UBI or Super.

    2) Setting it at a level where “those who are on welfare now will be worse off under it” simply means you are not introducing a UBI at all, but some kind of punitive rearrangement of social welfare to “get at” people you dislike. You might call it something else please?

    3) Why would we pay it to prisoners when, as I understand it, they aren’t paid welfare now? I don’t know if a senior prisoner collects Super? I suspect not. Fixation on the word “universal” adds nothing much to the discussion. UBI is “well fair” rather than “welfare” but restrictions like being in prison should and must still apply, in the sense that UBI involves participation in society and the rule of law, surely?

    4) It may completely replace the current social welfare system someday. Considering the change in direction, scope and ‘ethos’ though, a significant transition period might be warranted? As might the use of current WINZ offices and personnel as ‘instruments’ of positive transition, eg assisting those who do not want to engage in paid employment – “the highest ambition of humanity – the very definition of self-fulfilment” (Morgan/Guthrie) – to find and express their “sense of community” in volunteer or self-sufficiency or whatever activity (also known as ‘work’). UBI isn’t going to happen overnight. No-one sensibly considering it is suggesting this.

    BINZ (Basic Income NZ) – perhaps a slightly unfortunate acronym? – suggests phasing-in UBI by implimentation to specific age groups over time.

    Quite aside from GST and ancillary taxes, if UBI was subject to something like the Super Surtax, many and perhaps most people would simply pay it back after enjoying their tax free portion of income, which I recall Gareth Morgan suggested be $25,000. He also suggested a flat 25% tax rate would pay for everything – perhaps along with some form of wealth tax? – provided everyone simply paid all their tax liability.

    http://www.basicincomenz.org/ [disclosure – I am a paid-up member of BINZ]

    Reply
    • Alan Wilkinson

       /  15th March 2016

      If you are going to rearrange the tax/welfare system you have a duty to say who will get more and who will get less and then justify that.

      I’m waiting to hear.

      Reply
      • So much for discussion Alan. What’s this, a roadblock? Oh well, let’s all wait around then.
        Where’s the Lollipop Man?

        While I’m waiting I’ll discuss whatever I damn well like with myself and anyone else who wants to. Don’t mind just talking to myself though …

        I don’t understand why some people find even the idea of UBI so challenging? Aside from its ancient foundations in Georgist (and other) economic theory as Citizens’ Dividend or Social Dividend, it seems to me to be quite analogously simple –

        Imagine NZ is a country made up of 100 farms. There’s no money, just a government who interferes as little as possible. Each year some the 100 farmers have a big glut of crops and mostly store them away – though some trade for others excess including with medium sized and lesser producers – while some farmers crops fail or they don’t produce enough and they starve.

        The government intervenes by taking a small amount of produce off all 90 successful farmers and giving a barely subsistence allocation back to the 10 ‘failures’ on a targeted basis.

        Richer (producing) farmers kick up a fuss about this. “Why should I pay for these failures? They’ve stopped farming at all, most of them, and just bludge off the handouts” etc etc …

        So Hundred Farms Land is at this juncture … One suggestion is: Okay, the government will take some more produce off every successful farmer and then give every single farmer – success, moderate, subsistence and failure – an allocation equal to “slightly better than subsistence” level? This is one possible equitable way to deal with the ‘problem’, which is ultimately “feeding the entire population”.

        Some of the failures might do something else with their time other than farming …?

        I know, chronically simplistic. Oh well … its boring here at the road block … Here’s someone sensible to read …

        http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11575609

        Reply
        • Alan Wilkinson

           /  15th March 2016

          That’s your longest non-answer for some time, PZ. Comes back to my original summation of UBI as a solution looking for a problem.

          Reply
          • @ Alan – It doesn’t come back to that at all, not for me. Your “summation” is merely an assertion, which I note you don’t back up with any references, and so is mine an assertion, or perhaps a question: Social Welfare is a problem in search of a solution and UBI may constitute that solution? (and I’ve provided references each time) Or perhaps just the next, better solution?

            There’s a problem all right, best described as an equality or equity problem. Not absolute equality, of course, so don’t go down that blind alley. The general issue of “inequality”.

            The problem with social welfare is it’s largely “negative compensation for lack” whereas UBI is “positive affirmative assistance of abundance”? The former a debt paradigm, the latter a credit one? E4E lack or abundance … requital or stipend … punishment or reward? Welfare or Well Fair?

            You’ve got a pithy skill with the two-liners, I’ll give you that, but you don’t dictate the discussion any more than Oliver does.

            Reply
            • Alan Wilkinson

               /  15th March 2016

              How is the UBI supposed to solve your perceived equity problem when the present extensive redistributive tax and welfare systems don’t?

              Negative compensation vs positive affirmation doesn’t cut it as an answer.

            • @ Alan – poor use of language on my part. Equality is an ‘issue’ rather than a problem. The word ‘problem’ implies something absolute to be “solved”, just as you have interpreted it. I understand “equality” and “inequality” to be a rather imperfect descriptions of a complex continuum of inter-related matters.

              UBI is a better and more equitable way of ameliorating inequality, which appears to be the best that can be done about it, since, as we all tend to agree, absolute equality doesn’t exist. I don’t expect inequality to be anything better than ameliorated somewhat.

              The other thing UBI does, to some extent, is remove the absolutism of “paid employment” from this assumed continuum of human activity. Paid work no longer remains our single pinnacle of achievement. One might choose to be a voluntary community worker, self-sufficient commune dweller or spouse-supported (or not) stay-home parent instead? Or whatever?

              I suspect the expansion of creative activities, which are very often businesses as well, would be huge?

              Where’s the bad?

              Even if a tiny portion of the population want to loaf around doing nothing – as appears to be the case now regardless – and there’s a labour shortage, we can allow more immigration which has got to be good for our economy, right?

              I do think you underestimate the psychological and ‘psychic’ consequences for individuals, communities and the nation of having a “positive social income” starting point – I am valued – rather than a “negative social compensation” ethos – I am barely tolerated.

              I suspect a change in this fundamental paradigm will have a very beneficial effect on society …

              Regarding the economics of it, I may have to leave such evaluation to Mefrostate, yourself and others. It’s not my forte. I know what I think the goal should be though, like with Super – not “how do we alter it to make it pay?” but instead “how do we make it pay without altering it?” …

              thoughts for the discussion …

            • Alan Wilkinson

               /  15th March 2016

              We obviously speak different languages. Yours is aspirational and mine is simply objective – what changes? I am not going to get an answer so I have nothing to add.

            • @ Alan – “simply objective”. I can never take your claims of absolute objectivity seriously. I always think “utter garbage”!

              Likewise, me neither, nothing to add really, because I just said, “not my forte”, plus I’ve already included several possible “changes” in my comments above, e.g. –

              1) A fully enforced, or better still ‘ethically agreed’ fair tax system. No-one gets away without paying their full flat or progressive tax liability. (How it should be anyway?)

              2) [Possibly] some form of wealth tax, as little as possible; perhaps a version of the Georgists Land Value Tax (LVT)
              Yes, I guess I would have to find this out of my UBI if I had no other income.

              3) A universal tax free or ‘income-tax free’ income level to accompany UBI.

              4) A liveable UBI level, not high enough to discourage work but enough to encourage consumption. The articles I’ve read suggest around $400?

              I do not know how this would effect your own income, for obvious reasons. The economics are also not my forte. Care to estimate? Gareth Morgan’s estimates made it look preclusive, especially for superannuitants, which I think has rather badly coloured the debate?

              Why would people do this? Let’s say, for arguments sake, if taxation increases by 5% or 10%?

              For everyone’s benefit? For the benefit of the whole entire society?

            • Alan Wilkinson

               /  15th March 2016

              You seem to have the notion you can increase tax and give it back without changing anything. Aint gunna happen.

            • I find your ‘logic’ impossible to follow Alan. Nor can you reduce tax and give back less without changing anything, surely?

              You can’t really do anything without changing something? I guess I see UBI as a potentially positive change worth investigating …

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