Thursday, September 5, 2013

Universal Basic Income. UBI.


The concept of UBI has a long history in New Zealand.

Of course, we already have a UBI for those over 65.  Which has been extremely successful at eliminating poverty amongst the elderly, at a very moderate cost by international standards.

“In fact super has been so effective in removing poverty amongst the elderly it should be extended to everyone in the form of a guaranteed minimum income. There is no excuse for having people with inadequate food and housing in a country which is capable of supplying an excess of both internally”.

It has been a policy plank of various minor political parties, such as Social Credit.

Currently, the Greens have discussed a UBI as part of welfare and economic policy development.
Many organisations, and individuals both left and right wing, have discussed  the idea. Including the darling of the extreme right, Roger Douglas.

Recently Gareth Morgan has been an advocate. He puts the case rather well.
Paying universal transfers acknowledges that every individual has the same unconditional right – to a basic income sufficient for them to live in dignity. The Unconditional Basic Income (UBI) provides this.
With this basic protection in place people are then free to add to that income through paid work if they choose. Equally, they can live on the UBI and pursue other activities – doing the unpaid work of caring for children or others in their community for example, or studying full time, or pursuing new business ventures. The UBI offers the prospect of ensuring everyone has the means to live while giving them the freedom to live their lives as they choose.”  

However David Preston from the MSD exemplifies what seems to be the main concern and almost the only real objection to a UBI.  People may chose to go surfing instead of working. Horrors!
The vision, of 80 year old pensioners surfing, this engenders,  caused me a great deal of mirth.

In fact the only real experiment with a universal basic income. ,showed that the overwhelming majority, even with guaranteed income, chose to do something constructive.  Work, study or raising children. In the 70′s in New Zealand, with a much more generous unemployment benefit than we have now, almost everyone still chose to work.

The biggest advantage of a UBI, of course, is the almost total elimination of poverty, with all the savings in the accompanying economic and social costs. There is also the not inconsiderable savings in administration of welfare, simplified tax systems and the hit or miss nature of targeted welfare. Because it is universal, there is less incentive for the wealthy to try and destroy it, to cut taxes.

The main objection, apart from the horror of some people that recipients may simply go surfing, A horror they do not seem to extend to the inheritors of unearned extreme wealth, is cost!

It is not, however, a given, that the overall cost of a UBI would be more than that of a fair targeted welfare system.
Of course those same people  throw up their hands object to the cost of current welfare. They cannot understand why the poor are not made to live in cardboard boxes and starve quietly as they do in their ideal economies, just so those on high incomes can pay a few dollars less taxes.

Universal superannuation in New Zealand has been considerably cheaper and more effective than targeted schemes elsewhere.
Don’t see why a UBI should not pay for itself in the savings in administration, the decreased costs of poverty and the extra tax take from extra income within the economy. Flat taxes over the UBI rate, are possible, which should cheer up the right wing.
The removal of abatement rates for working and the removal of the penalty of extreme poverty for business failure, for those not already millionaires, can only help more people into work, study and entrepreneurship. For others, it frees them up for socially useful unpaid work, such as sport coaching, teaching and the myriads of other unpaid and unrecognized work which makes for a functional society.

Lastly. In an era where resources are running out, being able to survive without having to find ever more creative ways of using up resources, and ripping off your fellow citizens, is an essential step towards a steady state sustainable society.

Also published in  The Standard


  1. Interested in your article. I am not sure about the flat tax though. I would have thought a progressive tax would make the scheme more economically viable in that the govt can give a UBI to everyone but recycle the UBI from very high earners who don't actually need it via taxes. You could do the same with universally free education and healthcare. I know Gareth Morgan disagrees but having read his argument I sense that it is more ideological than economic. He is not a fan of income tax, preferring asset based taxes.

    1. Sorry to take so long to get back. Have been working overseas.

      I agree about progressive taxes, but I also see Gareth's point about holders of appreciating wealth who do not have to pay taxes on it. Which means the tax burden falls mostly on PAYE payers, at present.