Universal Basic Income is Basic Security

Professor Daniel Nettle of Newcastle University has a really excellent article on a Universal Basic Income (UBI) here.

In it he outlines in original and coherent fashion just how good UBI would be from the outset, when I had reluctantly concluded – till now – that we might only get there via starting off with a job guarantee.

I’m even prepared to call it UBI, when I usually prefer to call it Universal Basic Capital, because I think most right leaning people find it more difficult to argue with capital.

Basically Daniel Nettle suggests it is all about security and wellbeing – of the individual and of society in general. So really, what’s not to like?

One of the quotes at the beginning of the article is by Martin Luther King: “A host of positive psychological changes inevitably will result from widespread economic security”.

What is particularly impressive is that he manages to cost it in traditional tax and spend terms – which, just this once, for me, actually matters! Not because that is how the monetary system works, but because the normal response to the Universal Basic Income is that it would be inflationary and that once you started paying it it would be continually negated by the unremitting march of an inflationary spiral – exactly because everyone was getting it…. He convinces on the basis that it can provide for everyone, but that current personal tax allowances, since the coalition, now relatively high, will come down so that everyone earning half way reasonable pay is likely to pay a bit more tax, but this will be ‘refunded’ (as it were) at all and, particularly, lower levels by the UBI received.

Twin spectres stalk the land…..These are the spectres of inequality and insecurity. Insecurity, in this context, means not being able to be sure that one will be able to meet one’s basic needs at some point in the future, either because cost may go up, or income may fluctuate. Insecurity is psychologically damaging: most typologies put security as one of the most basic human emotional needs. Insecurity dampens entrepreneurial activity: one of the big reasons that people don’t follow up their innovative ideas is that these are by definition risky, and they worry about keeping bread on the table whilst they try them out.

That is why all the studies have suggested that the secure ‘welfare’ societies of Scandinavia have higher rates of entrepreneurship than the deregulated entrepreneurial delights of the US or UK. It is not deregulation, which of course promotes insecurity both of supplier and consumer, but actual security that promotes trial and experiment. Indeed only those who have their own personal security – generally through inherited wealth – could have had the emotional tendency to prefer deregulation or even proposed such an idea.

He continues:

Big ideas come along every few decades. The last one was about forty years ago: neoliberalism, the idea that market competition between private-sector corporations would deliver the social outcomes we all wanted, as long as government got out of the way as far as possible. Interestingly, neoliberalism was not such an obviously good idea that politicians of all stripes ‘just got it’. It took several decades of carefully orchestrated deliberate communication and advocacy, which was not at all successful at first, to eventually make it seem, across the political spectrum, that the idea was so commonsensical as to be obvious. …. Our current politicians propose to deal with symptoms piecemeal—a minimum-wage increase here, a price cap there, rent-control in the other place….That big, bold idea just might be the Universal Basic Income.

I certainly agree. And he goes on to summarise the disastrous – and expensive to administer – Universal Credit System. The idea that people who have fallen on hard times can wait five or six weeks or even longer for payment is for the birds. The idea that this will force them into work is likewise.

Even when applicants are in work he points out that the marginal tax rate is 80% – what sort of incentive is that?

If we can’t make it make intuitive sense, it will be confined forever to the world of policy nerds.

Hurray for that.

If I might take issue with the resource limitation narrative, I entirely agree with the “resource should be shared out somehow.”

When proposals are made to move a resource from the domain of the communally shared or equality- matched to the priced, there is outcry: witness the response that greets proposals for road tolls in places where use of the roads is currently free; or to charge money at the gates of the town park. The case for the UBI is the case for moving part—no means all—of our money the other way, out of conditionality and into the domain of the equality-matched. Getting your head around it involves framing your understanding of our current economic situation in such a way as to trigger the appropriate equality-matching intuitions.

The article continues in a mode I’m not terribly keen on, although I do accept that there is far too much resource spent on administration :

UBI advocates argue for retaining some extra provision for the disabled, and also retaining, for the time being, means-tested benefits to pay housing rental in some cases (the cost of housing is so high in parts of the UK that many people would become homeless if this disappeared overnight). But certainly, we might hope to eliminate up to £100 billion, or 2/3, of the non-pensions welfare bill, including a very large part of the administrative cost. So we are already half-way there. …my tax bill going up by around £4000, offset by £4000 coming separately into my bank account as UBI.

As he suggests, broadly fiscally neutral:.

….There will be positive knock-on effects: people will be able to move to more productive and enjoyable jobs, or start entrepreneurial activities; people have no financial disincentives to take casual work or increase their hours; the expensive negative psychological consequences of insecurity (anxiety, depression, addiction, maybe even crime) will improve. Thus, what you end up with will be a net saving for the government, not a net cost. The initial scheme discussed above, and other proposals like it, are not immediately very redistributive…. The answer has to do with security. I see UBI not so much as an immediate solution to inequality (you would have to set it very high to have a big direct effect on the inequality figures), but as a prophylactic against insecurity.

There is a large difference between the knowledge that £80 a week will always come into my bank account, this week, next month, and for the rest of my life; and the knowledge that, if things go badly for me, I can do a complex application process, be subjected to a humiliating and lengthy bureaucratic examination, following which, after a delay of up to six weeks during which I will receive nothing, about £80 per week may or may not start to appear in my bank account, and could be withdrawn at any moment if I am ten minutes late for an interview, or am deemed not be sick enough or not be trying hard enough to look for work.

He points out that actually we all benefit from common state expenditure ( which will, I think be largely common territory on PP).

First, the UBI is only ever going to be basic, and people want more than basic out of life.

I wonder if this is the best argument in favour?

If people’s life ambitions were limited to gaining some modest level of income of £5000 or £10000 per annum a year and then stopping, then frankly, the behaviour of the vast majority of people in Western societies for the last century would be completely incomprehensible. Lottery winners almost universally continue to work, though often not in their previous jobs.

This is straightforward gold plated understanding: UBI might be either left wing or right wing – but isn’t that one of its great advantages?

 

Comments

  1. George S Gordon -

    Very interesting, and good points made, especially the one beginning –

    “There is a large difference between the knowledge that £80 a week will always come into my bank account, this week, next month, and for the rest of my life; and the knowledge that, if things go badly for me, I can do a complex application process etc”.

    For me, that’s one of the most persuasive points.

    However, I don’t think any of this mitigates against using a Job Guarantee as a buffer stock policy. After all, choosing and maintaining a level of unemployment is still immoral (given that many really want to work, and benefit socially and otherwise from work), and is also macro-economically inefficient. I think this remains true even if you give the UBI to all those who would be unemployed.

    Why not have a JG+UBI (+ other specialised benefits)?

  2. Peter May -

    It may not mitigate against a JG as a countercyclical policy. But I used to think that the JG came first them we might get UBI now I’m more convinced it is the other way round – and then you get to the stage where you wonder why do you need a JG if a UBI is enough to live on? We are really then at the stage where perhaps we say a UBI is just enough to live on but you have a JG if you want to be a bit more prosperous.
    It is difficult to fathom particularly as I feel there should also be more basic free services than health
    http://www.progressivepulse.org/economics/whos-for-universal-basic-services

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