Should progressive nations provide a citizen’s income?

Aside from climate change, the fair distribution of wealth is the most significant problem facing the world today, one that all nations across the globe need to resolve. One suggestion towards the eradication of poverty is a citizen’s income.

Should progressive nations introduce a citizen's income

Sometimes referred to as a basic income or universal basic income, a citizen’s income (CI) is a fixed payment of money unconditionally granted to all people on an individual basis. It is paid without any means testing, without any requirement to work and irrespective of any income from any other source.

Sir Thomas More first proposed the idea in his 1516 book Utopia. Although it gained wider awareness in Thomas Paine’s 1797 pamphlet, Agrarian Justice, which argued that everyone should receive an equal capital grant from the state to do with as they pleased.

It has been kicked around in the two centuries since by a far-reaching smorgasbord of important historical figures including the French Emperor, Napoleon Bonaparte who said: “Man is entitled by birthright to a share of the Earth’s produce sufficient to fill the needs of his existence” and the leader of the African-American Civil Rights Movement, Martin Luther King Jr. who wrote “I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income”.

Rarely has an idea been so widely considered across the political spectrum. From the socialist Democrat, Bernie Sanders, to free-market gurus such as Milton Friedman and right-wing Republicans like Richard Nixon, whose administration in the 1970s had a bill on CI passed in the House but which ultimately died in the Senate.

CI pilot schemes

Although still very much a fringe political movement, CI has been piloted around the world in recent decades with almost unanimous success.

In the 1970s, an experiment with CI in the Canadian town of Dauphin showed positive social and economic results with a drop in hospital admissions and a rise in teenagers going into further education.

From January 2008 to December 2009, a CI pilot project largely funded by a German Protestant church was launched in the Namibian villages of Otjievero and Omitara. Analysis revealed a significant reduction in child malnutrition, increased school attendance and a dramatic 42 percent dip in overall crime rates.

Another two CI pilot projects have been underway in Indian villages since January 2011 with similarly encouraging results. The villages reported a tripling of attendances at school boosting performance by 68 percent while new business start-ups doubled and healthcare improved.

In 2008, an independent pilot project privately funded by the non-profit organisation, ReCivitas, was launched in Quatinga Velho, Brazil. It achieved significant social effects with a positive impact on quality of life. Coordinators verified gains in nutrition, clothing, living conditions, health, and housing. Social benefits included an increase in self-esteem, improvements in social interaction, a reduction of social insecurity, and rising expectations for future prospects.

Many of these have been low-key, limited and privately funded experiments dotted sporadically around the world. Until now, the idea hasn’t been taken very seriously in Europe. But following developments in Switzerland, Finland, and the Netherlands that could be about to change.

Switzerland

In June 2016, Switzerland hosted the world’s first referendum on the introduction of CI. It proposed paying every adult legally a resident in Switzerland an unconditional sum of CHF 2,500 per month at an approximate cost of CHF 208 billion per year.

Supporters of the Yes vote danced in the streets of Zurich dressed up as robots, highlighting how increasing autonomy from technology is changing the landscape of the labour market.

Che Wagner, a leading campaigner for the group Basic Income Switzerland said: “In Switzerland over 50 percent of total work that is done is unpaid. It’s care work, it’s at home, and it’s in different communities. That work would be more valued with a basic income”.

The initiative’s co-founder, Daniel Straub, argued that the CI could lead to higher wages for low-paid, so-called dirty work. “If these jobs are really indispensable, then they have a social value and should be appreciated more”, he said. “If no one else wants to do them, they should be more highly paid”.

There was little support for CI among Swiss politicians. Not a single parliamentary party came out in favour of it. Detractors argued that the CI would encourage “a lack of initiative and personal responsibility” with young people not feeling a need to find work. This was in contrast to a survey carried out by the Demoscope Institute, which showed that the majority of Swiss residents would carry on working or still look for a job if the CI initiative was successful.

In the end, the vote tanked quite spectacularly. Results showed that nearly 77 percent opposed the plan. It was felt that the amount was far too excessive and the cost far too unrealistic. Switzerland’s federal assembly had calculated an annual funding shortfall of CHF 25 billion from its current social welfare budget had the CI been introduced.

The right-wing Swiss People’s Party (SVP) had put a key argument for the No vote forward before the referendum. They argued that CI would cause wide-scale immigration due to Switzerland’s agreement to the free movement of people with EU member states.

A spokeswoman for the SVP, Luis Stamm, told the BBC: “Theoretically if Switzerland were an island [CI] would be possible. But with open borders, it’s a total impossibility. If you would offer every individual a Swiss amount of money you would have billions of people who would try to move into Switzerland”.

This puts an interesting spin on the freedom of movement within the EU following the result of Brexit and the uncertainty surrounding Britain’s future border control policy. Can the freedom of movement exist simultaneous to a CI? It suggests that implementation of CI, with such high payments, could only work unilaterally to avoid an overwhelming immigration influx. But this would require more federalism at a time when European’s are rallying against it hardest.

So with such a crushing defeat, the “Marxist utopian” fantasy is now dead in the water, right? Far from it. The Netherlands and Finland have both announced pilot projects that will take place in 2017. Unlike the Swiss initiative, Finland’s experiment has the political support of the general public and the government, which is a coalition of conservatives, liberals, and right-wing populists.

Finland

The Finnish government has commissioned Kela (the Finnish Social Insurance Institution) to study a CI concept, calculate its costs and run a pilot for the project in 2017.

The framing of Finland’s CI-model is markedly different to that of the Swiss initiative, with the Finnish government scaling back from a full basic income. The proposed CI payment of €800 per month is considerably less than the average Finnish income of €2,700.

According to Kela, close to 69 percent of the Finnish population support the proposal, which is due to be submitted in November 2016 when the government will make its final decision. The estimated cost, if the plan is fully implemented, is estimated by Bloomberg to be approximately €46.7 billion per year.

CI is being introduced in an attempt to simplify the social security system and replace all other benefit payments. At present, the Finnish government’s social security spend is approximately 31 percent of GDP and it is believed that the CI model proposed by Kela could successfully reduce that figure.

Another potential benefit is the attempt to drive down unemployment. In Finland, it currently stands at 10 percent, which is a 15-year high. CI would allow this demographic to take on low-paid jobs without any personal cost.

Paradoxically, the current system can discourage the unemployed from re-entering the jobs market because of the poverty trap. This occurs when a person discovers that their overall household income has dropped because they sacrificed their welfare benefit to accept low-paid or part-time work.

Whether or not CI would incentivise the unemployed back into work or encourage the employed to quit their jobs could be addressed by a pilot scheme, and the answer to that conundrum could come from Utrecht.

The Netherlands

The Dutch city of Utrecht is planning to pilot CI solely for welfare recipients next year with a particular focus on tackling the poverty trap. More than 250 unemployed residents of the city will be given a monthly sum of €960 to live on. Economist Loek Groot, a professor at the University of Utrecht, will monitor the two-year experiment to analyse what effect it has on employment.

According to Rutger Bregman, the author of Utopia for Realists: The Case for a Universal Basic Income, the initiative also hopes to target “revolving door clients” – people forced into jobs by the system that they repeatedly walk out of.

It is hoped that given some room, these individuals might seek more stable, long-term employment that suits them rather than being forced to accept demeaning jobs that they have no interest in or passion for.

While the Netherlands and Finland are taking active measures to experiment with a CI, it isn’t going unnoticed elsewhere.

Britain

In Britain there is no immediate plan from the government to pilot CI – the current administration has other fish to fry just at the minute – but support for the idea continues to gain momentum.

The Citizen’s Income Trust, an organisation that promotes debate on the concept of a universal income for Britain, proposes a radical reform of the national welfare system, with annual spend on benefits distributed equally among all citizens.

Using figures from the 2012-2013 financial year, the cost of their scheme, entitling each citizen to receive a sum of £3,692 per annum, is estimated to be around £276 billion per year. This is just £1 billion more than the annual welfare budget for that year, making it close to neutral cost.

Last January, Caroline Lucas, the Green Party’s only MP in the House of Commons, called on the Government to commission research into the idea of paying all citizens a flat, unconditional income. She told the Independent: “The basic income offers genuine social security to everyone and sweeps away most of the bureaucracy of the current welfare system”.

She has also previously said: “This is an urgently needed policy. With increased job insecurity, the idea of everyone working nine to five is out-dated. The current system is not fit for purpose”.

The Scottish National Party and the Green Party of England and Wales already officially endorse CI in Britain and the Labour Party is now considering it also.

During a recent talk at the London School of Economics, shadow chancellor, John McDonnell, said that the Labour Party is considering CI as part of its new economic policy.

This was supported by current Labour Leader, Jeremy Corbyn, who told the Huffington Post: “I’m instinctively looking at it along with John. We have to think radically about how we bring about a more just and more equal society in Britain. What we are doing is heading in absolutely the wrong direction with a growing wealth inequality and an opportunity inequality for communities, as well as poorer families. It’s got to change”.

Last month, a poll found that two-thirds of the British public support a universal basic income.

Why do we need CI now?

The Financial Times recently reported on research predicting that 114,000 jobs in the British legal sector would be replaced by automation over the next 20 years while a third of jobs in retail are forecast to go by 2025.

Technology could impact areas we always thought were going to be the preserve of humans, basic social interaction like call-centre work and non-routine tasks such as driving a car.

Google and Apple are currently developing self-driving cars and Amazon is piloting drones for deliveries. The number of jobs in the US alone related to traditional trucking is a staggering 8.7 million and it is assumed that transport networks like railways will soon move towards automation.

This sobering sense of future changes to paid work is only the tip of the iceberg in how technological advancement is going to completely rewrite the labour market landscape. Governments need to come up with a realistic contingency plan for how they’re going to adapt to these changes. While robots might decimate jobs, they’re not necessarily going to affect the wealth of nations meaning that CI is an obvious fix.

The advantages of CI

The global financial crisis forced governments to look at their national deficits and attempt to get them under control. Many believed that the best way to achieve this was to implement long-term, nationwide austerity measures. What then could be more politically toxic than the state handing over something for nothing at a cost of hundreds of billions of pounds, on the back of it working so hard to cut back and trim down?

This is the overarching obstacle facing CI proponents. How do you convince tens of millions of people to support a radical economic idea that would have a seismic effect on existing fiscal policy? Many of the benefits are speculative until they can be put into practice, but theoretically, the arguments supporting CI are:

  • Anyone currently receiving unemployment benefit that receives CI instead and begins to work will do much better. They will keep far more of their earnings, this provides an incentive to work and eliminates the poverty trap. Experiments with CI in India and Brazil have demonstrated that financial stability and increased access to childcare and transport incentivised unemployed people into working.
  • It enables people to choose their own type and pattern of work, removing the humiliation of being forced into jobs they don’t want. With the insurance of a guaranteed income, people are also free to retrain as they wish in order to drive their career towards a path they find more satisfying or suited to their talents.
  • It provides flexibility for carers and parents to find part-time work that fits around their personal schedule. Additionally, it provides full-time workers who have other commitments to reduce their hours of work without sacrificing their income. At a macroeconomic level, this creates an improved distribution of jobs and job creation.
  • It rewards work that is currently unpaid such as community, charity, domestic and care work. We all contribute towards society in some aspect or another and sharing out the wealth produced by it reduces growing inequality.
  • It would save a small fortune on mopping up social problems caused by chronic poverty. The Harrah Cherokee Casino Resort’s basic income shows significant declines in behavioural problems, crime, substance abuse and psychiatric problems. A reduction in homelessness and crime would mean the state spending less money on social services and the police.
  • It will simplify the welfare state, eliminate means testing and significantly slash bureaucracy. For example, Lisa Westerveld, a Green councillor in the Netherlands, advised that the municipality of Nijmegen receives £88 million from the government for welfare spending but £15 million of that is wasted on administrative costs alone. The current system is also complex which means that it is more prone to administrative errors that can lead to households not having enough to live on. This too would be eliminated.
  • Without the need to prove eligibility for CI, benefit fraud would be all but abolished overnight and the administrative cost to identify benefit fraud gone.
  • It provides entrepreneurs and artists with a modicum of financial security giving them the breathing space to invent and create. Steve Jobs built the world’s most valuable company from his garage; Mark Zuckerberg changed global social interaction from his dormitory.
  • It would lift people out of poverty and give them a guaranteed financial safety net, decreasing the dependency on exploitative moneylenders such as Wonga.
  • It would remove the degrading requirement for the unemployed to sign on, giving people more confidence, inspiration, self-belief and self-worth.
  • It would give financial independence to people able to exit abusive domestic relationships, particularly important for women who suffer disproportionately.
  • It would improve public health removing some of the burden and cost on the NHS.
  • It ensures that no one is left behind. At present, means-tested anti-poverty schemes exclude people who aren’t aware of them, don’t know how to apply for them or aren’t aware that they are eligible for them.
  • Governments needing to fund any shortfall in the cost of CI might be more motivated to claw back tax by reforming taxation laws unilaterally. This will help to fight against evasion and avoidance, which caused scandals like the Panama Papers and LuxLeaks.

Many of the obvious challenges of CI, such as how it would be funded or how it might discourage people from working, have already been touched upon, but there is still a host of other questions that need answering.

For example, how would the state prevent private landlords taking advantage by forcing rents up? How can the state mitigate against citizens seeking to borrow from creditors on the strength of their CI payments and inadvertently planting the seeds for a new credit crunch?

Until there is a comprehensive risk assessment to identify and resolve these issues, implementation of CI will remain a long way off. But the more support that CI can attract, the more likely it will be that these challenges are addressed swiftly.

Who supports CI?

The Basic Income Earth Network (BIEN) is a network of academics and activists that organises an international congress on CI once every two years. The 16th congress was held in Seoul, South Korea last month.

In Asia, CI is backed by the New Party Nippon in Japan alongside The Socialist Party of South Korea.

In Europe, the Finnish Prime Minister, Juha Sipilä, his government and the Finnish political party Left Alliance back it. Vivant, a small liberal political party in Belgium, and the Bulgarian Union for Direct Democracy are also supporters.

The Pirate Party in each of the following countries also officially endorses CI: Australia, Britain, Canada, Czech Republic, Germany, Hungary, Iceland, and Norway. Green parties in Britain, Canada, Czech Republic, Finland, Ireland, Japan, Norway and the United States also back it.

A recent poll by Dalia Research found that 64 percent of people across EU member states said they would vote for a CI initiative.

Eradicating poverty is an investment. An investment in people to contribute, build, develop and work towards a more productive and innovative society.

While CI might seem like a fantasy to some people, history teaches us that radical, far-flung goals have a habit of becoming reality. There was a time when the idea of abolishing slavery seemed impossible, when equal rights for men and women seemed like nonsense, when democracy was a pipedream. But these things happened. They came true because humans are progressive by nature and with a little patience they will, overall, seize upon sensible ideas that propel their species forward. That is why CI will happen. The welfare state underpinned the 20th century, CI can define the 21st.

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