UK Labour policy to trial Universal Basic Income if elected contrary to research

Labour (UK) is promising to Introduce trials of a Universal Basic Income, but recent research concludes: There is no evidence that the project can meet its goals while being economically viable at the same time.

Golriz Ghahraman responded:

Yes! Two things:

1) There’s enough longitudinal research around the world to prove UBI works. No need for a ‘trial’. Let’s just pick the most effective version and apply it.

2) UKGreens had this policy first, but nice to see the big parties following the Green movement

The most effective version? I don’t know of anywhere that a country-wide UBI has been tried successfully.

From the Green Party Income Support Policy

Specific Policy Points

  • Work with other parties and the public to develop a proposal(s) for the introduction of a UBI and the changes needed to fund and implement it.
  • Set benefit amounts at a level sufficient for all basic needs of the individual/family.

I don’t know whether any work is being done with Labour towards introducing UBI.  I would be very surprised if the Greens are doing anything with NZ First on one.

Last week from Stuff:  Universal Basic Income is a failure, new report says

A new study on universal basic income (UBI) is challenging the central claim used to promote the scheme: that, if done right, it can help alleviate poverty.

Proponents of the basic income argue that it will help those below the poverty line pay for essentials like food, housing, and healthcare, according to the assessment by the New Economics Foundation (NEF) in the UK.

The NEF reviewed 16 real-life UBI trials to see whether a basic income can really bridge the inequality gap.

Its conclusion: There is no evidence that the project can meet its goals while being economically viable at the same time.

I wonder what Ghahraman’s “There’s enough longitudinal research around the world to prove UBI works” is based on.

Is WFF corporate welfare? Would a UBI solve it?

Working For Families has long been referred to as ‘corporate welfare’. This month payments were increased, further entrenching it as a means of supporting lower paid workers with children (and also quite well paid workers with children).

I don’t think ‘corporate welfare’ is an accurate description. Corporations are generally seen as large companies, often international companies, but WFF takes wage paying pressure off many small businesses, perhaps more so than for larger companies.

Bryce Edwards is in the Working for Families is corporate welfare club.

As of last week, the Government is pouring $370 million more this year into Working for Families (WFF), further entrenching a system which has many critics across the political spectrum.

On the political right, the criticism has always been that the scheme is creating a nation of welfare beneficiaries. After all, it’s regarded as extraordinary that families earning around $100,000 qualify for WFF payments. However, these are effectively tax credits for people with children (which is very common among the OECD nations).

It is even more problematic at the lower income end, where full-time workers not only will often pay no tax, but effectively receive additional tax credits – welfare by any other name. So, state income assistance is being given to those that are fully engaged in the workforce – which, by historical standards, seems contradictory.

The criticism from the left has often been that the very existence of WFF indicates that many working families are not able to support themselves without quite large taxpayer assistance.

It isn’t necessarily the case that working families couldn’t support themselves. Things were economically tough for many families. That’s nothing new, lower paid workers have struggled financially for centuries. WFF has made it easier for them, but has also virtually entrenched them in a system of uneven government assistance that favours them over workers who don’t support children.

The accusation is that employers of low-paid workers are effectively being subsidised by WFF.

This has parallels with other modern welfare initiatives – such as the accommodation supplement, which is a subsidy paid by the state to private landlords of those tenants on low incomes. The left blames such payments for contributing to the rapid increases in rentals, because it effectively allows landlords to increase rents for low-income tenants beyond what they can actually pay.

WFF and accommodation supplements can certainly distort markets.

Alternatives to Working for Families

What’s the alternative to welfare that subsidises the corporates? Ideally, wages simply need to increase, so that workers have enough to live on. To some extent, the new Government is pursuing this objective with its commitment to increase the minimum wage for those at the bottom – with it going up by $4.25 by 2021.

“Ideally, wages simply need to increase” – that may sound like a good ideal but it is far from simple. Artificially forcing up labour costs can force up prices, leaving those who don’t qualify for increasing assistance like WFF worse off and more financially disadvantaged.

And if small business employers who are forced to increase wages don’t qualify for Government handouts they will find things tougher – to the extent that some will reduce the number of employees through scaling down or moving more towards automation.

Of course, this will cost the Government itself, as it will have to lift the wages of many of its own employees receiving the minimum wage. Yet overall, the increase in the minimum wage is going to lead to a saving for the Government, as the wage increases will result in a reduction in tax credit payments made through WFF – because, generally, the more an individual earns, the less they receive in WFF payments.

Only partially offset. This should have been factored into the amount of increase and the costings.

All these years later, it’s become much clearer as to who benefits from the scheme. John Key famously called it “communism by stealth” when he was Leader of the Opposition, and then adopted the policy for himself. But in 2018, perhaps it can finally be more credibly labelled as “corporate welfare by stealth”.

Calling it ‘corporate welfare’ makes it sound like a subsidy for rich big business owners, promoting a ‘them versus us’ division, but it probably affects smaller and less well off employers more.

If costs for corporations get too high they can just down scale, or they can afford to automate, or they move production off shore, or they just shut up in New Zealand and move their business to lower waged countries.

Small business owners have their livelihoods at stake, especially if the don’t qualify for family subsidies.

Nonetheless, we clearly need to a have a debate about whether a family whose income is derived from wages and salary should be able to pay its own way without other tax payers subsidising them.

That is an ideal that we keep moving further away from as worker benefits keep increasing.

This was debated on Reddit – Bryce Edwards: Working for Families is corporate welfare – a subsidy scheme for employers who can’t, or won’t, pay adequate wages – where a solution was proposed.

“Yep both working for families and the accommodation supplement are corporate and landlord welfare. The only problem is how do you replace it without fucking everything up?”

“The only way to replace it is if employers paid them better. If they did that, we wouldn’t be in this situation. The only way forward is for the government to make sure they get the money but tax business owners accordingly.”

Higher taxes for business owners is far from simple, and will probably impact most on small and medium business owners – and their employees.

The reason they exist (were implemented in the first place) is because of a wealth inequality gap. People on the lower end of that gap were getting pushed in to shittier and shittier conditions by people at the higher end of the gap (not in a malicious way, but just the nature of economics.). And so subsidies for those people in need were introduced.

I agree with the article that they amount to corporate welfare but we can’t get rid of them until we tackle overall wealth inequality. Tackling that would be a mix of things I think; capital gains tax or other disincentive for amassing property.

My own personal pie-in-the-sky law would be regarding the pay difference between the lowest and highest paid individual in a company, maybe a max of 10-15 times the lowest yearly wages for the CEO or something.

Artificial rules on high end remuneration may be liked in theory as a rich prick limitation, but I don’t think that is a practical solution.

A Universal Basic Income is often suggestedf, as it is here.

Remove all current welfare programs and replace them with a decent UBI ?

  • Those who don’t want to work don’t have to (or look for it), but would likely need to live in the provinces due to housing costs.

  • No need for a bunch of welfare requirements, therefore no need for a welfare department or ministry.

Remove GST (and possibly income tax?) and replace with a non-refundable universal transaction tax, implemented through the EFTPOS / banking system.

  • Removing the refund system should make highly processed goods more expensive; basic products (think fruit and vegetables) should be cheaper due to less processing.

  • Effectively produces a tax on (all) house sales / purchases.

  • Captures companies (Apple, Facebook, Google, etc) off-shoring income as avoidance, by taxing both the product sale and the subsequent off-shoring transaction.

  • Taxes consumption rather than production.

  • Possibly less administrative than GST.

That’s a bunch of ideas that would be quite a radical change if implemented, but there are no costs, nor any consideration of flow on effects.

‘Those who don’t want to work don’t have to (or look for it)’ is one of the more contentious suggestions. I and I suspect many others would live to have the choice of a reasonable ‘income’ – level of Government welfare – for no work. It risks hugely increasing the cost of welfare, and severely impacting on overall production.

The size of a UBI would have to be at least as much as National Super so older people weren’t disadvantaged, and at least as much as current non-worker and worker subsidies and welfare. It would have to top everyone up to the best paid beneficiaries, and this sounds very costly.

For example, WFF is already very expensive now. If a UBI was going to be universal then people who don’t support children would have to be paid as much as those who support children – greatly widening and boosting welfare.

Or, if this was avoided by having children also qualify for a UBI, this would also greatly increase the cost to the Government (that is, to taxpayers if there are any left).

While in theory a UBI sounds very fair I think it would be far too costly, both in the expense of it to Government and as a disincentive to work and production.

The more the Government hands out money the harder it gets to change the system without a revolutionary overhaul that would be either result in many people being worse off, or it would be be unsustainably expensive. Or both.

We have an increasingly complex and expensive welfare system, which get’s increasingly difficult to fix.

And there is no sign of any interest in making major changes. The current Labour led government is having a tax review but that is so limited – there are many things it can’t change – that it is likely to little more than tinker a bit more.

We look like being stuck with WFF and accommodation supplements and National Super and other forms of widespread welfare.

Time to review our welfare system?

It is very difficult in practice to operate an affordable welfare system that helps those in genuine need adequately without being demeaning, but discourages abuse and free loaders who want a funded lifestyle, and is fair to those who work and pay taxes.

There are obvious problems with our current system, some highlighted by Metiria Turei. Can it be ‘fixed’ with a few tweaks? Or is a major revamp needed?

Budget adviser Michael Barnett at Stuff:  Punitive welfare system is failing those in need

The welfare reforms of the 1930s and 1940s helped to establish the kind of society where the benefits of economic growth were more equitably distributed. However, subsequent welfare measures have been introduced ad hoc and today we have a mish-mash of policy that is inefficient in its delivery and favours some sectors of society at the expense of others.

There is a drastic need to review and reform how welfare is delivered in the 21st century. It is time to acknowledge the loss of traditional manufacturing jobs overseas, the expansion of a low-wage economy and a growing reliance on the unpaid voluntary sector to provide essential social services.

The time is ripe for the provision of a social dividend through the introduction of a Universal Basic Income for all in society. This would lead to a simplification in the delivery of welfare and recognise the contribution of all, both potential and real, toward a fair and equitable society.

Simplification would help, but getting the balance right would be challenging.

A major problem with a Universal Basic Income is the level it would have to be at to provide adequately for those in real need, but that doesn’t encourage non-productive lifestyles as a choice, and doesn’t bankrupt the country.

A welfare system needs to be ‘fair and equitable’ to those in genuine need, but it also needs to be fair and equitable to those who work and pay taxes.


Swiss UBI vote: 23.1% in favour

Results of the referendum in Switzerland for a Universal basic Income:

  • No 76.9%
  • Yes 23.1%
  • 0 of 23 Cantons in favour Basic income plan clearly rejected by Swiss voters

Switzerland has become the first country in the world to hold a nationwide vote on introducing an unconditional basic income. Despite a spectacular pro campaign, there was no hope of it winning a majority.

Only some communes or urban districts in cantons Zurich, Bern, Geneva as well as Vaud and Jura came out in favour. 

“The campaigners failed to present a convincing funding scheme for their proposal. But they managed to launch a broad debate about an unconditional basic income,” says senior political scientist Claude Longchamp.

The promoters – a group of humanists, artists and entrepreneurs – have admitted defeat but they have pledged to continue their campaign.

“There is a genuine interest in the issue as numerous public discussions have shown,” says Oswald Sigg of the initiative committee.

It’s an idea that’s certainly worth publicly discussing, but it looks like it could be a good idea in theory but too many problems in practice.



More UBI discussion

Labour have succeeded with one thing – getting some discussion going on a Universal Basic Income.

Gareth Morgan has been promoting his interest at the Morgan Foundation blog:

Scott Yorke (I think still an active Labour supporter) posted The terrifying cost of Labour’s UBI at Imperator Fish.

This has been reposted at The Standard – Imperator Fish: The terrifying cost of Labour’s UBI – where there is a good comment thread with a lot of discussion on numbers.

And Rob Salmond continues his spat with Matthew Hooton on behalf of Labour with a post at Public Address – Eleventy billion dollars!

In this morning’s National Business Review (paywalled), Matthew Hooton estimates Labour’s Universal Basic Income Policy could cost up to $86 billion.

This is the latest in a series of escalatingly absurdist claims about the UBI, starting with David Farrar’s $38 billion, John Key’s $76 billion, and Stephen Joyce’s 80% tax rates.

By next week, I expect Cam Slater to estimate the UBI costs $240 billion, New Zealand’s entire GDP.

Salmond goes on the critique Hooton’s numbers, then concludes:

Instead, all these insane figures are part of a deliberate, coordinated strategy of scaremongering, coming from many of the usual Dirty Politics suspects, aimed at shutting down an important policy debate just as it’s getting started.

But I think the media and the public are smarter than this crowd give them credit for. They can see this con-job a mile off.

So the Labour strategy seems to be to create a fuss and complain about all the discussion they have generated.

Hooton makes this point in response:

Labour still has quite a few MPs in parliament. I would have thought if Labour wants a public discussion on a UBI those MPs should be getting involved, rather than putting a staffer up on Public Address to rebut a column in the NBR. But far be it for me to give Labour political advice.

Labour seem to have an aversion to sensible advice.

Hooton defends and explains some of his numbers.

Just a few brief(ish) points.

1) For those with a subscription or working for someone who has one (and I think students at some universities), the actual column is here:

2) The column makes clear at the outset this is an idea not policy. The word policy appears only once, and in the sentence: “It’s difficult to think of a policy proposal with more going for it.” I don’t know why Rob claims I said it was Labour Party policy. The column also makes clear I support a UBI in principle and I outline the key policy benefits, especially around EMTRs, administrative savings and reducing indignity for beneficiaries. I mention the huge amount of work that Lockwood Smith did in opposition in the 2000s trying to make something like a UBI work. (In fact, and I don’t mention this, I first encouraged him to do so when he became National revenue spokesman after the 2005 election).

3) The $86 billion gross cost assumes:
(i) a UBI is indeed “universal” in that:
(ii) everyone gets it from aged 18 until they die;
(iii) there is a top up for children under 18 as with the current Jobseekers’ Allowance and Working for Families;
(iv) it is enough to survive on, and
(v) there are no financial losers among existing beneficiaries.

4) Rob acknowledges I discussed the potential $25 billion saving if the full $86 billion model was implemented. He seems to have missed the bit when I said tax changes would be needed to bridge whatever difference remains, specifically “higher income and company taxes, new taxes on carbon and capital gains, and a tougher IRD.” Is there anyone who thinks a UBI can be implemented without those things?

5) I criticise Andrew Little’s “little helpers” for calling people liars for trying to put some numbers around a UBI. Labour has called for a discussion and public debate on its idea.

6) It is perfectly OK for Labour (or its paid proxies) to say that the $86 billion gross cost is too high. But then they need to say which of the assumptions in 3 above should be relaxed. If they won’t relax any of those assumptions, then $86 billion gross is a fair estimate of what the policy would cost.

7) If a party wants to have a public debate on a major policy idea, that is great, but how can people debate an idea if they are told they are liars for considering the fiscal side? For example, if a UBI of the type I describe in 3 above could be implemented at a cost requiring tax increases of only $10 billion I would be all for it. Who wouldn’t be? But how can anyone even begin to consider the matter without some parameters, including fiscal parameters? To initiate a discussion without providing some information on the fiscal implications is entirely disingenuous. It would be like National saying “we’re thinking of $100 a week tax cuts for everyone”, refusing to give further information and then calling people liars if they tried to work out what that might cost.

Let the discussion continue – thanks to Labour initiating the UBI debate, but no thanks to how they have conducted themselves in discussions.

UBI “deserves consideration”

Today’s Dominion editorial says that a Universal Basic Income merits “a close look”.

Labour’s ‘universal basic income’ idea deserves consideration

Labour is flirting with a “universal basic income” – a radical and intriguing idea that is having a moment in several countries around the world.

There are plenty of questions about such a policy, but it merits a close look.

I agree it merits a close look, but that doesn’t mean a look should lead to a policy.

On the other hand, Labour is only “considering a limited trial of a universal basic income-type system in a town or region”. (Count the qualifiers there).

How long would they run a trial for to see if it’s going to work successfully?

A minimum income would recognise the value of domestic work: parents at home would, along with everyone else, receive the payday. It might also encourage innovation by giving entrepreneurs a small safety net while they try a new venture.

Which could result in more risk taking and more failures.

All of that adds up to something, but it isn’t enough to be convincing yet. The questions around a universal income are serious. The fiscal cost is one. The political hurdles are another – a reduction in the pension, say, would be hard to justify as well as electoral dynamite.

The UBI would have to be set lower than current Super levels, which wouldn’t be universal, or Super would need to be lowered, which would have serious implications for many retired people, or the UBI would have to be set the same as Super, which would be horrendously expensive (that is, taxes would have to rise a lot).

Labour deserves some credit for starting a useful debate. But if it wants it to go any further, the party needs to get beyond the “dole for everyone” caricature and prove that the serious critics have it wrong – that there’s a feasible way to really make it happen.

That’s going to be a significant challenge for Labour.

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?

How and why of UBI

Comments on the  Public Address/Polity post Home-spun non-truths look at ways of paying for a Universal basic Income and why it could be a good idea.

Daniel Carr:

Treasury has a page that describes a simple method for modelling raising revenue through income tax. It takes into account reduced GST revenue and wages from changes to the income tax rate. Obviously there’s more to a UBI then that, but it’s a good start if you’re thinking about how feasable it would be.

I’ve made a spreadsheet that implements it. Feel free to see what you can come up with.

It’s set for a $11,000 Adult UBI and $4000 child UBI that completely replaces jobseekers, dbp, student allowance, invalids benefits and offsets student loans by 50% (i.e. living expenses), but leaves pensioners no worse off. I get a net cost of $26,763 billion.

It can be done with the following tax rates on the current brackets plus a new ‘above $150000’ bracket. It results in net income increase for people on and below the median income from wages and salaries. Negative transfers kick in just above that:

His suggested tax rates:

  • up to $14000: 35% (currently 10.5%)
  • up to $48000: 38% (currently 17.5%)
  • up to $70000: 46% (currently 30%)
  • up to $150000: 56% (currently 33%)
  • above $150000: 66% (currently 33%)

He doesn’t say whether his suggestions includes the ACC Earner Premium which is currently 1.45% (it drops to 1.39% from 1 April 2016).

Remember also that we pay 15% Goods and Services Tax out of our taxed income.

Brent Jackson pointed out:

Those tax brackets are never going to work if the corporate rate stays at 30%

It’s not a corporate tax, it’s a tax on all business profits so affects many small and medium sized businesses as well as large corporations.

If the business tax rate is significantly different from personal tax rates it can create many unintended consequences. And if the business tax rate is raised too much it results in reduced business activity, more movement of businesses offshore, and more avoidance and evasion of tax. We already have a substantial cash economy that evades tax.

Adam H on why:

Finland of course…

Actually there’s a really good tax reason to do this. It’s effectively a tax free allowance: you slice it off the bottom and add it on the top. One effect is that people join the system who otherwise might not.

It’s fundamentally a simplification mechanism, and flattens out all (yes, all) the terrible marginal tax rates that arise in the current mess. It’s a bit like introducing a flat tax… so why do some groups rail against it?

Because flat taxes are better for those who earn more and not as good for those who earn less. A UBI would balance that to an extent.

Slicing off the bottom and adding to the top moves more of the tax burden to middle to higher earners. Many lower earners may little or no income tax already due to Working for Families.

I guess it’s partly because it eliminates the ability to moralise and penalise lifestyles. How could we target specific voter groups if you can’t differentiate…?

Ben Wilson:

I think it’s actually entirely about that. Because everyone can see given even one second, that it is possible to rejig all the taxation so that it’s a cost neutral change.

A cost neutral change? Perhaps overall, but if more people get benefits (which is what a UBI is under a different name) then someone else has to pay for it, unless the Government increases borrowing or increases the money supply, neither of which are sustainable.

The change in attitudes towards people who are in poor circumstances, as no longer “beneficiaries” but rather “people on the smallest possible income”. Their choice to work is not then nobbled by the brutal removal of any assistance, and the prospect of a stand-down if the work they get is precarious (as it usually is for people in such circumstances). Indeed, any paid work they choose to do is their business, they just have to pay their taxes like everyone else.

What about the change in attitude of (some) people who now regard an ‘income’ as a right that requires no effort to earn?

Rob Stowell:

I love the idea of a UBI. I love the way, for example, it could change society and the way we thing about work. If no-one wants to clean toilets, no-one HAS to. So toilet-cleaning might get you a good wage.

Or no one will want to clean toilets.

Other jobs might decline in value – because they offer personal satisfaction at a rate that amply compensates. Art might be everywhere. Music might be free.

That may not work so well if everyone chooses to be an artist or a musician.

I’ve heard similar elsewhere – a UBI enables people to choose to do what they like without having to worry about earning money.

With Labour’s proposed free tertiary education it is likely to increase hobby degrees – and the cost to the state to pay for the privilege.

This will reduce productivity and could be disastrous for the economy.

Tax policy would have to shift markedly, though. Already wealthy folks know there are many ways to minimise your tax. If we put up income and corporate rates, the ridiculousness of having no CGT will jump out. Because it’s such a simple way to avoid tax altogether, with higher income tax no-one will declare money they can shove into a capital asset. It’s already glaringly obvious this is happening.

If tax policy is changed markedly it will be a big gamble that benefits will outweigh unintended consequences. If it’s too expensive to do business competitively in New Zealand it is likely to increase the already substantial overseas based business interests here, like in Australia and China.

Tony j rickets:

Jenny just showed me a Listener piece about lousy pay for skilled responsible truck drivers leading to a shortage of truck drivers – this could really improve how we think about the value of labour.

It could. But if more people choose a non-employed lifestyle and jobs like truck driving and cleaning have to pay much more to attract sufficient labour then costs will go up. Put that alongside taxes going up and it will be harder to do do business, and the cost of goods and services will go up.

Marc C:

The way it has been presented, often only quoted as being about $ 211 a week per person, it will hardly thrill the majority on benefits, as if that is all they would get, it is definitely not enough to pay basic living costs. It would not even cover the rent for a room in many flats in Auckland.

But there are different models of an UBI, and those that are on benefits for health and disability, and for needing to care for a child or disabled person, they will surely need a good top-up to cover their actual needs.

It will not completely do away with a kind of “welfare system”, it can save a lot of administrative costs though, and if linked to taxation, it would work quite well, I think, provided the necessary changes to tax rates will be done.

A UBI matching the current level of National Super would be a lot more expensive than discussed above. If it is set less than Super we will have a multi-tiered system that could cause problems – are old people valued more than young people?

If Working for Families is retained, and accommodation allowances and health assistance and other targeted assistance we move further from a basic income and would just have a base income with a lot of bits on top of it. Not universal.

Labour has initiated a tricky and complex topic. It’s not just a UBI that needs to be considered, it’s inextricably linked to our whole welfare and tax systems as well as how we do business and how all that might impact on the economy.

If the result is more than a bit of tweaking the outcome will be very hard to predict. It would be a massive experiment with a huge amount at stake.


UBI at $211 a week?

Grant Robertson and Labour are talking up the idea of a Universal Basic Income. I agree with them that it’s a discussion worth having, but it’s going to be difficult coming up with an affordable policy.

NZ Herald: Labour considers ‘universal basic income’ policy

All adult New Zealanders could be given a Government handout of at least $200 a week under a new policy being considered by the Labour Party.

The co-leader of a global network promoting a “universal basic income”, British professor Guy Standing, will be a keynote speaker at a Labour conference on “the future of work” in Auckland next week.

He said yesterday that a system “where every legal resident of New Zealand should be entitled to a modest monthly basic income” would reduce inequality and give some security to people who increasingly have to earn a living from insecure casual and short-term work.

And Labour finance spokesman Grant Robertson said Labour was considering a local version of a scheme developed by economist Gareth Morgan, who proposed paying every adult a basic income of $11,000 a year ($211 a week).

“I’ve spoken to the Morgan Foundation about it. They are continuing to work on the idea,” Mr Robertson said.

“We are looking at how do we ensure income security, and one of the things we are looking at is whether or not a universal basic income could form part of that policy. It’s very early days.”

Robertson was questioned about the level of payment on Twitter and he made it clear it was only a suggestion from Morgan and was nowhere near Labour policy, yet.

They are talking about it being a universal payment from age 18 but that would have to exclude superannuants.  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.

It would be an increase for youth on Jobseeker Support, which is 156.51, but substantially less than other rates that go up to $244.54.

They can hardly cut Super and Jobseeker rates to a universal basic income level.

A lot of people currently not on benefits would presumably get it, for example non-working partners of people who are working.

There’s a lot of discussing to do on this if it is to become policy for next year’s election.

More Labour information: Towards a shared prosperity

Future of Work Conference — Towards a shared prosperity here.


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.


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