A Universal Basic Income That Underpins Well-being

A Universal Basic Income aims to lift well-being and reduce crime and domestic abuse by eliminating systemic poverty, and by helping to keep the Labour Market in Dynamic Balance, as automation, virtualization and AI eliminate traditional jobs at an increasing rate.

Why is it Needed?
Once, every human lived off the land. Since the advent of money, property rights and paid work, everyone needs money to survive.

However, only around 50–55%% of the population at any time can do paid work. The rest are too young, sick or injured, disabled, or aged, or have to care for dependents without pay, or they are between jobs. This is an ever-changing group.

Despite the turnover in people, and decades of growth, the percentage in poverty has remained around 12–14% of the population. This indicates it is a system problem.

The problem is that if welfare is too high, it’s rational to take the benefit in lieu of a low-paid job. This forces the government to keep benefits below the poverty line to compel those who can work, to take the available jobs. This has the unfortunate side-effect of forcing some 3.2 million Australians into poverty, including 17% of all children: those who cannot do paid work, and who have no savings or family support.

How Does a UBI Solve the Problem?
A UBI solves this system problem by providing a floor, below which no one can fall. It consists of a weekly payment (at or above the poverty line) made to all adult residents — without conditions.

It ensures everyone has the cash they require to signal their basic needs to the market. Without this money, their needs go unmet, and business misses out on the sales of food, clothing and other necessities. It’s good for no one.

What’s the Proof That it Works?
Hundreds of pilots from around the world over the last 50 years show that when people have sufficient money to survive, they spend both their time and their money wisely. They also show that a Basic Income is no disincentive to work. When they can, people on a Basic Income take on paid work, as well as education, to better themselves and their family.

What is Basic Income Australia’s Specific Proposal?
Basic Income Australia has devised a unique approach to a UBI.

It would not require any change in taxes. Instead, it would be paid out of new money, created by the Central Bank, with its own tax regime and recoveries to limit its inflationary impact.

Everyone would continue to get a pay slip from their current employer showing their current tax.

A second pay slip would show the UBI, less UBI tax — based on the income you earn.

Above a certain level (currently set at $1,550 per week), the UBI would be taxed at 100%. Below the cutoff, it would be taxed at 33.3% of earned income.

To be clear, while the tax is calculated based on earned income, it is not paid out of earned income. It simply reduces the gross UBI payment by the amount calculated.

This ensures that the NET benefit goes to those who need it most. Its purpose is to underpin, not to enrich.

By adjusting the UBI weekly based on reported earnings, it means that in any week that you lose income, the UBI would be in your bank, without deductions… no delay, no need to apply, no need to justify entitlement. Then, when you start earning again, the recoveries would recommence.

Income reporting would be the same as for normal tax, and would be done via the group tax system, the GST system, or a specific app for people who are self-employed. This would entail minimal additional administration.

As well, the UBI would be set off against any welfare, saving both the benefit and the administration cost. It would also save the huge amount of time and effort that people have to put in to adhere to the current welfare conditions. This effort is not costed, but would amount to many hundreds of millions of hours a year that could be saved with the UBI.

In addition to these recoveries, there will be other offsets that reduce the net inflow of new money to a level that is not inflationary. These include extra tax collected on the additional income generated as the UBI is spent, as well as outflows into the financial and international economies, along with savings on health and lower crime, together with technology productivity improvements. We estimate the net impact would equate to around 2.5% of GDP… sufficient to fuel economic growth.

Implementation
It would also be phased in over 5–6 years (starting perhaps as low as $10/week) to allow the supply chain time to adapt without causing shortages that drive inflation.

A separate Authority would be set up with its own charter to determine the amount of the UBI and to administer its payment and recoveries; to ensure everyone was covered, including homeless people who would need their own bank card (or ideally government provided phone and plan) to access payments.

A UBI is the Epitome of Democracy and Efficiency
The money would not represent government spending. It would be ‘citizen spending’.

A UBI is the epitome of democracy and economic efficiency as it ensures everyone has an equal vote in how the market should meet their basic needs, with the least amount of administration.

A UBI is not a Silver Bullet
Even so, while a Basic Income is necessary, it is not sufficient. We still need the government to provide/regulate health, housing and other public services, as well as perhaps a Job Guarantee for those who can work.

A UBI Can Also Help to Balance the Labour Market
Though its primary aim is to eliminate systemic poverty, once implemented, it can also be used to help balance the Labour Market.

As people lose work to automation, virtualization and AI, the rate can be raised above the poverty line. As it rises, some people will choose to cut back their hours or drop out of paid work altogether. At some point, most jobs will be filled in reasonable time, while those who want paid work will have a job, with the rest doing other things with their life (as they choose)... bringing the Labour Market back into dynamic balance.

It will never be perfect, but it should have a more direct and immediate effect, than trying to use interest rates to boost borrowing and spending to boost demand to boost production to boost employment.

A UBI Will Help to Heal Our Divisions
Overall, a UBI offers a way to reduce fear, hate and mental anguish in a world that is increasingly fracturing. It promises a more cohesive and resilient society by relieving the financial stress that is at the heart of much of our distress.