WHAT’S BETTER: WELFARE, A JOB GUARANTEE, OR A UNIVERSAL BASIC INCOME?
This is the first in a series that explores the pros and cons of a Universal Basic Income (UBI). It examines the need for a UBI and compares it with Welfare and a Job Guarantee.
The second explores how a UBI can be funded without increasing taxes or debt, or taking money from other programs, or causing excessive inflation.
The third proposes a way to implement a UBI with very little risk
Why a UBI is Needed
Once, it was our birthright to live off the land.
Since the invention of property rights, money, and the system of paid work; ‘living off the land’ is no longer possible for most people in the developed world. While this system has delivered huge benefits for the majority (including the computer you are reading this on), a substantial minority have been left behind.
As Scott Santens has identified, this is because:
Humans have become the only species that requires money to survive.
WELFARE has been designed to meet this requirement by providing money for people who are ‘out of work’.
Unfortunately, it comes with two traps:
The ‘welfare trap’ arises because it is perfectly rational for people to choose to take a benefit over low-paid work. The higher the benefit, the bigger the trap. Which makes it perfectly rational for governments to keep benefits below the poverty line, to force people to take on available jobs.
The ‘poverty trap’ occurs for those people who cannot do paid work, mostly single women with kids, many disabled and aged, as well as those between jobs, all of whom lack savings and family support. Unable to do paid work, they are consigned to subsisting below the poverty line — until they can escape, as most do: the young grow up and find their own way, the disabled age and the aged die, while their unpaid carers and those between jobs find new work… only to be replaced by a new cohort.
Welfare could be increased — if we could easily identify who can and who cannot do paid work, and only pay it to those who cannot. In practice, this becomes onerous, subjecting people to intrusive questioning of their bona fides, with front-line staff forced to make imperfect judgements as personal circumstances continually change. As a result, many people fall through the safety net. Usually, our most vulnerable who find it difficult to navigate the bureaucracy.
Plainly, this is a system problem that requires a system solution.
No nation has solved it, though some do a better job than others.
A Job Guarantee is another method of tackling the problem. It aims to ensure that everyone who wants a job has one, by ramping up ‘public service’ jobs when the private labour market is weak. Releasing the labour when the market picks up.
It avoids the need for people to prove entitlement and is aimed at providing both money and meaning for people who can work: around 50% of the population at any time, plus their dependents.
However, it comes with several drawbacks:
- Most significantly, it can do nothing for the 12–14% of the population who are forced into poverty because they cannot work.
In Australia, this is over 3.2 million people, mostly single women with kids, the old and incapacitated and their unpaid carers, and some who are ‘between jobs’. All of whom lack savings and family support. It includes 17% of all children.
This is an indictment of the system, given we have the resources to supply the basic needs of everyone one of our 26 million citizens and permanent residents.
- Nor can it do anything for the people who work without pay to maintain our homes, care for our children, sick, aged and disabled, and who maintain our social networks — mostly women.
- While work can be meaningful, it can also be soul destroying. Having to perform menial work under a Job Guarantee simply to have enough to survive is hardly uplifting.
- A Job Guarantee requires a permanent organization structure to manage the scheme in each local area. This can be costly and inefficient if the principal aim is to act as a foil for the job market. When employment is at capacity, the Job Guarantee organization would sit idle.
- More importantly, if the work being done under a Job Guarantee is both meaningful and necessary (say to provide aged or disability care), imagine how distraught it would leave people reliant on the services of the Job Guarantee worker, if the worker is pulled away when the private market needs them.
- Providing ‘jobs’ could easily become a ‘cash cow’ for contract companies whose sole purpose is to maximise profits rather than deliver quality goods and services through the deployment of Job Guarantee workers on socially useful tasks. (Just as employment organizations are now set up to ‘tick and flick’ job seekers to maximise income).
If the work is socially valuable, it should be publicly funded and simply form part of the job market, with pay rates set to attract the required workers.
A Job Guarantee may help to balance the labour market. It cannot eliminate systemic poverty or compensate unpaid work in the home.
A Universal Basic Income (UBI) can both eliminate systemic poverty and balance the labour market — without the need for a massive bureaucracy to manage it.
A UBI is an unconditional payment to every permanent resident at or above the poverty line (currently around $500/week).
The approach developed by Basic Income Australia offers a way to implement a UBI without altering the current welfare or tax system, or increasing taxes or debt, or taking money from other programs, or causing excessive inflation. It can be implemented with very little risk by starting at just $10/week and increasing slowly (say, over five years) to the poverty line — giving the supply chain time to adapt to the new patterns of demand. How this can be achieved is the subject of the next article.
This solves the ‘poverty trap’ by ensuring everyone has sufficient money to survive. Effectively restoring our birthright.
By paying the money to everyone, unconditionally, it also allows everyone who can work to earn extra, without losing their UBI. It provides a floor to stand on, not a ceiling to achievement — eliminating the ‘welfare trap’.
Pilots from around the world have demonstrated that when people have enough money to survive, most are highly motivated to better themselves and their family. This includes providing better family care and undertaking more education, as well as taking on paid work when they can.
Once the UBI reaches the poverty line, it can also be used to keep the labour market in dynamic balance. This can be achieved because each person has a different propensity to take on paid work, depending on their age, commitments, needs, and other income.
As automation and virtualization result in a fall in demand for workers, the UBI can be increased.
As it is raised, individuals will make their own choice to stop looking for work, or to drop out of paid work, to live on the UBI and any other passive income they may have. Once the rate at which jobs are being filled begins to push out beyond ‘standard’ recruitment times, this would signal the need to hold the UBI rate until the market is re-balanced.
It would never be perfect, but it should facilitate the transition to a ‘new normal’ over time.
Unlike Welfare and a Job Guarantee, a UBI can eliminate systemic poverty and keep the labour market in dynamic balance with very little bureaucracy. It can also provide some compensation for in-home work, as well as provide a real wage increase for low-paid workers — without cost to employers.
The next in the series discusses how we can fund a UBI without changing our tax or welfare systems, or increasing taxes or debt, or taking money from other programs, or causing excessive inflation.