Is a Universal Basic Income a good idea?

It has a lot to recommend it. Who wouldn’t want to replace an intrusive, oppressive, begrudging welfare system with sufficient for all to live on. But I have some reservations:

[i] if it is put up as the answer to higher technologically-driven unemployment it runs the risk of actually institutionalising a permanently excluded underclass;

[ii] if work continues to be key, how does Universal Basic Income (UBI) fit with any kind of labour market

UBI doesn’t have to give up on ‘full employment’ but often does. One argument is that UBI is an answer to the impending collapse of employment – 35% of all UK jobs lost to technological change so that UBI ‘would enable us to fulfil our technological potential’, automating menial jobs without ‘leaving workers destitute’ according to The Canary. Evonomics think that UBI could ‘be only way we will be able to maintain demand in a post-work future’.   The argument is put inconsistently but there is no mistaking it, and this is what risks institutionalising a permanently excluded underclass. Stories about women in Indian villages and inner-city part-time employees in Britain who find a new freedom to add some work to basic income should not disguise what would happen to most of those who would be stuck on basic income and falling behind everyone else unless we explicitly reject the idea of UBI as an answer to unemployment, technological or otherwise.

My second reservation about a minimum basic income is that it could only work alongside other active interventions to address issues in the labour market.

Richard Murphy and Howard Reed offered a scheme on the CLASS site  which has the virtue of offering some provisional figures suggesting how it might work. They set minimum income using research from Loughborough University and Joseph Rowntree at £192.59 a week (£10,015pa) for a single person and £454.52 (£23,635pa) for a couple with two children. This ‘needs’ calculation is rightly linked to 60% of median earnings for working families; poverty is relative as well absolute. Housing benefit is paid on top. UBI would be paid for with £55bn from wealth taxes and a single progressive tax on all income with a basic rate of 45-50%. This sounds high but NICs are abolished and, since all are in receipt of UBI, it is quite a generous scheme in which everyone gains something.

Murphy and Reed ask ‘will there be an obligation to look for work’ for those in receipt of basic income? If UBI is unconditional the obvious answer seems to be no. But this reinforces their ‘independence’ from the labour market, that it is OK if some choose to work and others not to work. What would this mean?

If I have the figures right under their scheme a couple with 2 children and no work receive £23,635, with one earner on the minimum wage £35,935, and with one earner on the average wage £38,100. Income for the unemployed and minimum wage earner-couple almost double, and among those in work, differentials are severely compressed. The second effect is probably inevitable, certainly at the bottom end, but it would be naive to suppose taxpayers would not resent paying for this. And I suspect they won’t accept it unless two things happen. First, there is an obligation for those in receipt of minimum basic income to seek work, with exceptions for e.g., carers, which means an obligation on the State to provide work. Secondly, that action is taken to prevent employers depressing wages. Some people think UBI will enable workers to bargain from a position of strength; it is just as likely to encourage employers to reduce wages to the minimum because people will be getting UBI.  It would mean a much more active wages policy, with the close involvement of the trade unions, to prevent this.

I am not sure that full employment with active intervention to improve the quality and pay of work and a reformed universal credit/minimum income guarantee wouldn’t work better.

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