Are we ready for a universal income?
03 June, 2016
Last week the country debated our government giving away money to homeless people willing to relocate from Auckland to other regions.
Imagine the vigorous debate we'd have if our government followed the Swiss or Finnish governments' example of giving money away to the entire population.
Switzerland is considering giving every adult citizen a guaranteed income of 2,500 Swiss francs ($3,780) a month, no questions asked. Next year Finland will run a pilot programme scrapping all welfare benefits and paying everyone 800 Euros ($1,300) tax-free per month instead.
The universal income plans of Switzerland and Finland differ slightly but the logic is the same. Proponents say their country's welfare systems are complex, expensive to run, and discourage people from working because welfare payments are too good.
The other argument is that even those working need a top-up because a lot of full-time jobs in the modern economy don't pay a living wage — and many of those jobs will likely disappear with advances in technology. The introduction of a basic income would give the entire population greater security and may encourage more people to seek or continue in work.
The Finnish coalition government is finalising a proposal to introduce universal monthly payments to all adult Finns, regardless of income, wealth or employment status. An opinion poll undertaken in September last year found 69 per cent of voters agreed with the plan.
Switzerland is holding a national referendum on a basic income this week. The plan involves those in work having their pay topped up to the basic income and those out of work receiving the full amount. Opinion polls suggest the proposal is supported by just 40 per cent of voters.
While there are many forms of government welfare around the world, universal payouts are rare. Since 1982, the Alaskan government has paid a "dividend" of $1,100 per year to all residents; not exactly enough to live on or change a life.
In the 1940s, economist Milton Friedman introduced a version of universal income called negative income tax. The idea was if you had no income from any other source, you'd receive a defined benefit from the government. As your income from other sources increased, your benefit would decline but it would decline slower than your income increased.
In 1968, US president-elect Richard Nixon ran a series of negative tax experiments across the county supporting a group of low-income households, especially those headed by single women. At the same time, a similar experiment began in Canada, labelled the 'mincome' experiment, as in minimum income.
None of the experiments were completed and no final reports written. However, recently an economist tracked down and analysed the Canadian data.
She found hospitalisation rates for the 'mincome' recipients had fallen by 8.5 per cent relative to the control group. High school completion rates had increased, with boys in low-income families in particular spending two years longer in school. Despite receiving an income top-up, adults with full-time jobs didn't reduce the number of hours worked.
The idea of a guaranteed income theoretically appeals to both sides of the political spectrum. Those with socialist leanings will like the idea of a permanent financial safety net. Those on the right might like the idea of shrinking the welfare state by replacing a bunch of costly and complex entitlements with one tidy cheque.
Theory aside though, universal income seems like one of those good ideas that can never be agreed on.