UBI “entails more bad than good”

Today’s Herald editorial says there is more bad than good with a Universal Basic Income, particularly due to high levels of taxation that would be required to fund more extensive income redistribution.

The Labour Party appears to be considering a radical new system of social welfare. It would provide everybody with a “universal basic income” from taxation regardless of a person’s wealth or ordinary income. People earning more than a moderate income would return their universal payment in tax – probably a great deal of tax.

Universal benefits are only one side of the coin. The other side is high and steeply “progressive” rates of taxation. That is another reason it appeals to the left.

One of the big bads is high taxes.

One of the insidious effects of high taxation and universal benefits is the benefits become very hard to take away from those who are paying for them. They feel they have paid for it and have a stake in the benefit system. This is appealing to the left, who call it “strengthened social cohesion”.

And once people adjust to more handouts it’s very hard to take them away (without causing major hardship) if it proves to be a failed policy.

Universal benefits and high taxation persisted until the economy was opened to international markets in the 1980s. It became necessary then to lower taxation to competitive levels and design welfare for needs. National superannuitants resisted the change, insisting they had paid for their pensions, even though all the years they were paying high tax rates, governments were running budget deficits. That was the politics of universal welfare.

Labour would be most unwise to take us back there. The economy would suffer under punitive levels of taxation, avoidance would be rife, and the benefits would be illusory.

So the Herald editorial writer/board is obviously not a fan of UBIs.

Taxing much more to enable the provision of a universal income would be very risky. If working for an income becomes more optional then it’s likely that a proportion of people would choose not to work productively. Some fans of a UBI suggest it would provide the opportunity to pursue hobbies like arts and music.

Once people establish a life style funded by the Government (other people’s taxes) it would be a problem to reverse.

And if higher personal taxes pushes some of the more productive people to leave New Zealand, as is likely, and if higher business taxes pushes more business off shore and discourages business investment in New Zealand that would also be difficult to reverse.

Regardless of how a UBI might work in other countries it would be a huge social and economic experiment for New Zealand.

Would Labour be prepared to propose that risk in policy form?

32 Comments

  1. Kevin

     /  29th March 2016

    Any form of UBI that involves raising taxes is a no-go. UBI should be about replacing our entire welfare system with something far less bureaucratic and way more simpler. There should be no need to raise taxes.

    “Some fans of a UBI suggest it would provide the opportunity to pursue hobbies like arts and music.”

    Marx said the same kind of thing about communism.

    • Oliver

       /  29th March 2016

      Raising taxes isn’t necessarily a bad thing. As long as those taxes are put to good use.

      • Kitty Catkin

         /  29th March 2016

        All right, how much you be willing to pay in extra taxes ?

        Surely even you can see that taking it away in taxes and paying it back as a UBI is pointless.

    • Kitty Catkin

       /  29th March 2016

      I bet that those people don’t want to pay for me to buy books-especially first editions-which I could do on an extra $200 a week. I don’t want to pay for their sports and music. If you can’t afford an expensive hobby, that’s your hard luck.

  2. Iceberg

     /  29th March 2016

    It’s mind boggling that they have a think tank about the “Future of Work” and the first major breakthrough is… no one has to work anymore, and everyone gets a free pony!

    They’ve just completely given up and have decided just to take the piss until the next election.

  3. Oliver

     /  29th March 2016

    “The reason the UBI has been dragged off the top shelf as a ‘reasonable’ demand by academic liberals, social democrats and union bosses is because the bosses are scared a global economic crash will spark rising worker opposition to paying for the bosses crisis and threaten the fragile hold the ruling class has over the ‘dangerous’ class – the international proletariat.”

    • Iceberg

       /  29th March 2016

      Do you have anything apart from mumbo jumbo you have stolen from the Daily Bog or The Standard?

      • Kitty Catkin

         /  29th March 2016

        Need you ask ? 😀

      • Pantsdownbrown

         /  29th March 2016

        Oliver LOVES those blogs – twisted people talking to other twisted people and getting more twisted.

        • Kitty Catkin

           /  29th March 2016

          Can you explain that, Oliver ? If so, please do.

  4. The MSM must have nothing much to talk about today, just a few days after Brussels? Fall back topic, UBI and its most unfortunate recent association with Labour, because Labour dared to discuss it publicly and foolishly talked figures early which began to look like policy. Big ho hum … :-/ Rightie terror reactions, as above …. ZZZZZzzzzzzzzzzzzzzzzzzzzz 😀

    UBI being discussed on RNZ right now … The problem is the math. How to make it work financially? “A great thing for an opposition to investigate” as National did when they were in opposition except not in the public domain, as Roger Douglas tried to implement (in modified form) to ‘bankrupt’ the public sector as part of his privatise everything agenda …

    [Hooten & ‘Thingey’ on RNZ just now]. Both very positive about having the discussion. There is an “evident failure of free market capitalism … now entering the second generation who will be worse off than their parents, despite higher education and qualifications” (paraphrased)

    What can one say about UBI?
    1) The idea has been around for hundreds of years and appears in almost every economic and political ideology [this is a really good read]
    http://www.basicincome.org/news/2013/02/opinion-the-one-minute-case-for-a-basic-income/
    2) Basic Income NZ (BINZ) – “about 300 years ago people began to live in industrial societies. Since about 30 – 50 years ago we have [increasingly] lived in a service society. Theoretically, the last economic stage of society is a leisure society …”
    3) There are strong basic income movements in dozens of countries and plans to introduce or trial it in several, including Brazil and Finland, plus a referendum on UBI in Switzerland.
    4) It is time to prepare for a society in which we simply do not need everyone to work. UBI provides a living for people and maintains their ability to consume. [The argument nobody will work or produce anything to consume is puerile 😦 and UBI trials disprove it]
    5) Many experts believe that people in this century will not be able to stay one step ahead of automation through education and the occasional skills upgrade …
    6) UBI is expected to replace all welfare payments except possibly those for people with special needs …
    7) Studies done at University of London indicate “when people stop working out of fear they become more productive”
    8) Major benefits for women … the true end to unpaid domestic servitude for some … opportunity galore for others …
    9) UBI is one way to reduce inequality, it promotes positive choices in life and work, maintains consumer spending power … and so much more –
    http://www.basicincomenz.org/

    There are 3 models of how it might work financially on BINZ website, this link has access to the various parts of the Perce Harpham model, a flat tax rate [probably] and an affordable wealth tax levied on property (not just ‘land’) … he covers other models too … and includes a spreadsheet to do UBI calculations … [math is not my strong point, nor are the fine details of tax systems] … keep your minds open along with your hearts 🙂
    http://perce.harpham.co.nz/

    • Pantsdownbrown

       /  29th March 2016

      There is so much wrong in your 9 items there PZ that I won’t bother pulling you up on each one as I have already discussed ad-nauseum before.

    • Kitty Catkin

       /  29th March 2016

      Domestic servitude for women ? What about the men who have to work in often dull and dangerous jobs to allow women to stay at home ? I can’t believe that housework is worse than coalminining or being a linesman. If women are in servitude, why are their masters going to work to keep them in clothes, food and a roof over their heads if nothing else ? Servitude can mean slavery, but it is an odd slavemaster who works to keep his slaves rather than the other way around.

      • Pantsdownbrown

         /  29th March 2016

        I can just see people marching in the street saying they should get a higher UBI then their partner/flatmate (whatever) because they have to do all the household chores, shopping etc whilst their partner/flatmate does nothing (but they still get the same value UBI).

  5. Alan Wilkinson

     /  29th March 2016

    As I’ve noted, it’s a barmy idea that can only increase the welfare costs as all the existing payments will necessarily and inevitably continue in full and a whole bunch of new beneficiaries will be created and supported. Bonkers.

    • Oliver

       /  29th March 2016

      What do you just all the people who will loose their jobs over the next decade, do? Nz post just laid of 5000 worker’s. Somethings got to give.

      • They’re cutting 500 jobs over the next three months. Not five thousand.

        • The numbers are not so important as the trend among trends; a) the removal, minimization and replacement of human labour & b) how to support people if they are out of work temporarily or permanently because of this, through no fault of their own?

          UBI goes further of course, recognising that “work” is not limited to paid employment of the productive and ‘efficient’ kind, and such work will remain anyhow. Ambitious people will still strive for their goals, undertake their projects and earn accordingly.

          The idea everyone will give up what they’re doing for a minimum wage level income or worse is simply ludicrous.

          • Pantsdownbrown

             /  29th March 2016

            PZ: “The idea everyone will give up what they’re doing for a minimum wage level income or worse is simply ludicrous”

            Now you are being silly PZ – you don’t need EVERYBODY to give up work but it will definitely discourage people on a lower wage from working who will be not much better off then on a UBI, it will discourage middle-income tax earners from being more productive as they incur heavier taxes for doing so (i.e. it won’t be worth the effort as the rewards for doing so will be slim), and higher income earners will be encouraged to take their taxable earnings overseas.

            PZ: “Ambitious people will still strive for their goals, undertake their projects and earn accordingly”.

            Yes – they will – but in another country which doesn’t have a UBI.

            • @ PDB – If you read the Perce Harpham links about models of how to pay for it – which I don’t expect you will – UBI must be accompanied by widespread tax reform. One of the very fundamental ideas is to reduce or remove marginal tax rates and possibly have a generally lower flat tax rate for everyone … One of the links (which I don’t have time to find now) estimates that 70% of people will be better off, that’s all people.

              Anyhow, as Shane says on the other topic about UBI, it is mainly about having the discussion, and you clearly don’t want to so I won’t bother discussing it with you.

              My 9 points were drawn from BINZ website, I just want people to think about it. I’m not even convinced UBI per se is necessarily the best way (a la the Guardian article I posted) … What I agree with is this, “It is time to prepare for a society in which we simply do not need everyone to work [in the old-fashioned paid employment sense, “the highest ambition of humanity” (Morgan/Guthrie)]

            • Pantsdownbrown

               /  29th March 2016

              PZ: “One of the links (which I don’t have time to find now) estimates that 70% of people will be better off, that’s all people”.

              Some time back I was initially interested in the idea of a UBI but the more I looked into it the more I realised it has no basis in reality – the one estimate you read that said 70% of people would be better off is wrong or they are lying.

              Some on the far right like the idea because you need to get rid of all welfare and people would be encouraged to work still as the state only gives people not working a UBI (which is nowhere near what they might get today with welfare payments & definitely not enough to live on for a long period).

              Some on the far left like the idea because it gives everybody ‘free’ money and gives (what they see as) more legitimacy to raising taxes on workers/ land owners etc to pay for it out of some ‘social’ requirement of earners supporting other peoples right to not do paid employment.

              The problem is neither side want to do the ‘bad’ stuff that a proper UBI requires and in this country at least it would be political suicide to axe all benefits, pay non-workers and superannuants less, and raise income taxes to skyrocketing levels (and increase GST).

              Simplifying/ streamlining our tax system and welfare system has always had merit and should be our main priority – not this UBI sideshow.

            • PDB – Essentially I agree IF what you say is the case. I’m not convinced of that yet.

              Here’s my first attempt (nota bene) at rewriting the justification for having the discussion –

              “It is time to acknowledge we already live in a society in which we simply do not need everyone to work (in the paid employment sense), in which not everyone has ever actually worked in this sense, and in which everyone working in this sense is probably undesirable”

        • Kitty Catkin

           /  29th March 2016

          Oliie’s only 4500 out, Pete, be fair. That’s only a 90% error. Or is it 95% ? Anyway, it’s a bagatelle.

      • Alan Wilkinson

         /  29th March 2016

        NZ creates and destroys about 100,000 jobs every 3 months, Oliver. Fig 3.1: http://m.stats.govt.nz/~/media/Statistics/browse-categories/income-work/employment-unemployment/leed/research-reports/annual-measures-of-job-creation-and-destruction-innz.pdf

        The 500 will be part of those but don’t expect that context from our useless MSM journalists.

        • Part serious and part Devil’s Advocate Alan, a statistical number has very limited value in the discussion. What is the motivation behind the “creation and destruction” of these 100,000 jobs? What are the actual outcomes? I wonder it this information is available. (I don’t have the data to download the pdf … will search online though)

          When Ranfurly Veteran’s Home – where my Dad lives – moved from old to new premises all the jobs were technically “destroyed” in order for the staff to be “re-employed” on new contracts at lower pay with lesser conditions. I don’t know how many staff but let’s say for arguments sake 100 jobs enter each of the job statistics “destroyed” and “created”? 200 job stats. Me no like!

          How many jobs created and destroyed each year are 3 month trails I wonder? How many of these are employers making use of the 3 month trial to save money somehow? This may be a very large number?

          And what, for instance, of people sacked from full-time employment and re-employed as ‘contractors’ with, once again, a view to saving the employer money?

          How many of the jobs created were people ‘circulating’ on and off to arrive back on at lower wages or salary? Or an older worker removed to be replaced by a much cheaper younger worker?

          I don’t know yet. We may never know? I will try to find out.

          But it is POSSIBLE the very figures you have quoted are evidence in favour of UBI or some other comprehensive action rather than against it …

          • It might be 30 day trials, I’m not sure …? Whatever the “easy hire, easy fire” provision is?

            • Pantsdownbrown

               /  29th March 2016

              PZ: It might be 30 day trials, I’m not sure …? Whatever the “easy hire, easy fire” provision is?

              You have the economic savvy of Andrew Little PZ – the 90 day trial has been one of the most effective pieces of legislation allowing employers to take a chance on staff, especially those with bad work history, criminal history etc that wouldn’t have got a chance of employment without it.

              “The study, undertaken by the Department of Labour, shows that more employers had used 90 Day Trial Periods (60 per cent) and 40 per cent of employers who hired someone on a trial period would not have taken that person on without it”.

              The fact the employment courts are not inundated with issues from the legislation shows that it is working well.

              “Almost two thirds (63%) of small businesses (6-19 employees) and 16 per cent of micro businesses (1-5 employees) have employed a new staff member on a 90-day trial in the last year. Meanwhile, just 13 per cent of small businesses and 5 per cent of micro businesses have dismissed a staff member within their trial period over the 12 months to August 2015” 2015 MYOB business monitor survey.

              The fact Labour are still committed to getting rid of it at the request of their union masters suggest what a sham their ‘future of work’ is.

            • @ PDB – Thanks – I’ve freely acknowledged by economics shortcomings many times – what are your qualifications in the discipline? (Some call it a pseudo-science). Those are exactly the sorts of figures I was asking about. Mine was an enquiry by supposition or example (or perhaps provocation) but not assumption, full of “mights”, “I wonders?” and question marks.

              I’m glad the 90 day trial is working.

              Your figures possibly also speak of the better than expected nature of the potential employees? (eg not deadbeat druggies and lazy unemployables after all?)

              I had no idea removal of the 90 day trial was Labour policy.

              I will also need to hear the other side of the story …

            • Pantsdownbrown

               /  29th March 2016

              To be fair it depends on who Little is talking to now he is leader and needs to be business friendly as well as union friendly:

              http://www.stuff.co.nz/business/opinion-analysis/70408120/andrew-little-playing-both-sides-on-90day-work-trials

              Who knows where they stand now??

          • Alan Wilkinson

             /  29th March 2016

            The numbers are calculated from IRD payroll data so will not show straight turnover as per your 3 month trial hypothesis but only fluctuations in total staffing.

            The statistics certainly put the NZ Post numbers in context as several orders of magnitude smaller than the normal rate of turnover for many years past. In that regard they are not of limited value at all.

      • Kitty Catkin

         /  29th March 2016

        Nobody writes and posts mail in order to keep post office workers in work. I don’t. I use the postal service when I have to, not out of generosity. Why would I spend money to send a letter when I can send an email ? If Oliver’s willing to spend money to keep a postie in work, then good for him. But I bet that he’s not.

  6. Of course the Herald will struggle with anything that doesn’t involve overinflated crime statistics or house prices ( also over inflated )