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Universal basic income – could it actually work?

Predictably, my column last week brought on a storm of responses. I wrote then that we might soon all be considering universal basic income (UBI) a possible response to a changing world. We might think it appropriate to give every person in the country an income to cover essential needs – without linking that income to work or performance or contribution. Everyone would get it, simply for being a citizen of the country. You would not then have to work just to survive.

There were many who found this idea inherently objectionable. A first set of responses centred on the acceptability of the principle. UBI would need to be paid from somewhere, after all; is it right to allow some people to live off the sweat of others?

Reading and listening to these responses, I wondered which world those arguing this way imagine they live in. Where is this place where everyone works only for themselves, and no one supports anyone else? Pretty much every society taxes productive people to create some form of safety net for the most needy. Most earners support many non-earners. We are all in the business of helping others get by, through our taxes, our relationships, or our sense of philanthropy.

UBI in that respect is nothing new: we have always tried to protect those left behind. It is part of our compassionate nature.

The difference that UBI brings is that it simplifies the process completely. Rather than choose who should get that handout, we give it to everyone. The same sum of money, regardless of need. The complexity of means-tested benefits and targeted interventions is removed at a stroke. Every person gets that basic amount; every person chooses how to spend it.

One way to think about it: under UBI every citizen gets the same small sum for being a shareholder of the nation; and can earn much more by choosing to be a worker as well.

A second set of objections were about affordability. People did their calculations and worked out that giving every citizen a basic sum every month added up to a very large number indeed. Where on earth would this come from?

The flaw in this thinking is to assume UBI is an additional cost to the economy. Actually, it would be intended to replace large chunks of government spending. Most existing welfare and poverty eradication programmes would be redundant because UBI would give those below the poverty line enough to take them above it. Government could then focus its resources on the things government should actually do, rather than engaging in wasteful and wrong-headed activities. One way to calculate how much UBI to give would be to simply take the total spent on social assistance, welfare and poverty relief, and turn that into an amount per adult. Anything above that amount would need additional funding.

And don’t forget that we humans have been capable of spending untold billions on wars, bailouts and corrupt projects…

As you think about the costs, don’t forget to factor in the benefits. Experiments around UBI have been taking place all over the globe, and they show some interesting results. These include: a fall in crime; decline in health costs; increased entrepreneurship; better examination results; higher saving rates; and better child-rearing and care-giving.

In tomorrow’s heavily technology-centred world, the key benefit may come from allowing companies the freedom to automate without increasing social unrest. A time is coming when all drudge work – routine, repetitive, non-cognitive – is going to be done by machines. What will happen to all the workers displaced, and the lost purchasing power? There will be a long period of transition when ill-prepared workers are simply thrown on the scrap-heap. UBI is one possible safety net, and it will be funded in part by the productivity gains made. It could reduce the friction in this necessary transition as we move towards new ideas of work and productivity.

UBI is no done deal, don’t get me wrong. Many difficult questions remain: the effect on willingness to work; or on patterns of immigration, for example. Many vested interests will fight it tooth and nail: those who benefit from the current inefficient mess; as well as those who just can’t imagine a different way of doing things.

You can be for or against UBI – that’s your prerogative. But I suspect you will definitely have to think about it and argue about it in the years to come. I expect it to loom large in the politics, economics and business thinking of the next generation.

(Sunday Nation, 6 November 2016)

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