Universal basic income?

'Challenging but possible.'
Tim Dunlop

If you want to understand how transformative a universal basic income, or UBI, might be, it’s hard to beat the story told by Guy Standing during the lecture he gave in Melbourne in 2015. He was talking about a UBI trial he had supervised in India in 2013 on behalf of UNICEF. The trial involved giving everyone in a particular village a guaranteed income—a UBI—for a year. Although the amount of the payment was relatively small, it came with no conditions attached and was made available to every resident in the village, including children.

Standing has written extensively about the trial’s impact, which include improved health and better educational outcomes as well as evidence of people working more and even starting their own small businesses. But it was a chance conversation at the end of the trial that really made the power of a UBI hit home. Standing and a crew filming a documentary about the trial were leaving the village when they happened upon a group of young women. On a whim, Standing stopped to talk. ‘What did receiving a regular monthly payment mean to you?’ he asked one of the women. ‘Well,’ she told him, ‘It means that at the end of each month, when the men who work in the mine outside the village come into town, I can say no.’

Advocates of a UBI argue that such empowerment is at the heart of their case for a universal basic income and they are winning more and more converts to the cause. At least seven major UBI pilots or studies are under way or planned —in Finland, Kenya, the Netherlands, Ontario, Scotland, Uganda, and the United States—and the topic has become a discussion point in newspapers and public forums around the world. Although the idea has been around for a long time—trials of UBIs date back at least fifty years—there is a sense among advocates that it is no longer on the fringe of public policy debate, and that it is almost inevitable that a major developed country will soon to commit to introducing a scheme.

Many criticisms of the UBI arise from confusion over what actually counts as a basic income.

This growing interest inspired a workshop at the University of Melbourne in August, backed by the Academy of Social Sciences in Australia. Academics, political organisers, economists, writers, union and welfare representatives, students, and other interested observers were joined via teleconferencing by speakers from elsewhere in Australia, as well as from Canada. While interest in the UBI is at an all-time high, serious criticisms are emerging, so the workshop was a good opportunity to consider ways forward.

To do so, let’s begin with a definition. The Basic Income Earth Network, the most active group in the field, defines the UBI as ‘a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement,’ and that is the definition I will use here. The key points are that the payment is basic, unconditional and universal. Basic means the payment is sufficient to cover the essentials of life; in Australia, the single-person pension (currently just over $21,000 per annum) might be seen as an appropriate level. It is basic also in the sense that it provides an income floor below which no one can fall. The payment is unconditional in that no one has to fulfil any obligations in order to receive it, and even if you earn other income you’re still eligible. That makes it universal, equally available to the poorest member of society as it is to the start-up billionaire.

This definition is important because many criticisms of the UBI arise from confusion over what actually counts as a basic income. A UBI is often linked with the idea of a negative income tax, or NIT, but I see them as separate schemes. An NIT is ‘a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.’ It is tied to employment and the amount a person receives is tapers as their income from paid work kicks in. An NIT provides a floor below which people’s income can’t fall, but it’s neither universal nor unconditional.

Once we stop conflating UBI and NIT, a lot of the criticisms of a universal basic income disappear—or, at the very least, the objections can be seen as reservations about welfare in general and not intrinsic to the UBI. In other words, if we are going to shoot down UBI, let’s take aim at its heart and not convict it by false association with schemes that don’t fit the Basic Income Earth Network’s definition.

Advocates of UBI, meanwhile, seem to have been lulled into a false sense of inevitability, partly fuelled by the explosion of discussion about technology and the future of work—which I’ll come back to—and partly by the increase in the number of UBI schemes being trialled, or at least planned, around the world. As encouraging as the level of government and institutional interest may be, it tends to obscure the fact of how difficult the politics of UBI are likely to be.

Attacks from the left, attacks from the right

Without even allowing for the tremendous pushback likely to come from Australia’s conservative media—which is likely to be as vicious as it is unrelenting—you only have to look at the difficulties associated with putting a price on carbon, implementing rational water policy or pushing through the Gonski reforms to realise how far from inevitable a UBI is likely to be. Indeed, in Australia, it is difficult to imagine a UBI scheme having any chance of implementation without at least the Labor Party on board, and at this stage Labor is very definitely not on board. Recent comments by Chris Bowen and Andrew Leigh indicate a level of hostility that will be difficult to overcome.

Still, we can knock some objections to UBI on the head straight away. One of those, largely offered from critics on the right, is the claim that paying people an ongoing, no-strings-attached income will simply see them reject work and choose to ‘do nothing.’ This update of the ‘dole bludger’ argument it is probably going to be hard to shake given how impervious ‘values’ arguments tend to be to empirical evidence.

Nonetheless, it is important to note that UBI trials show, remarkably consistently, that fears of people opting out of work are unfounded. Participants in a UNICEF-run UBI trial in India in 2013, for instance, actually worked more. As Guy Standing writes:

There was a shift from casual wage labour to more own-account (self-employed) farming and business activity, with less distress-driven out-migration. Women gained more than men [and there] was an unanticipated reduction in bonded labour. This has huge positive implications for local development and equity.

Other trials around the world have borne out these results.

The weakest criticisms from the left invoke the mere fact that UBI is supported by some on the right as sufficient reason to reject it. The rhetorical value of saying, as some do, ‘Do you really want to support something that is supported by the likes of Milton Friedman?’ is real, but it is also misleading. The form of UBI favoured by the likes of Milton Friedman is not really a UBI at all; it is a negative income tax.

The other weak argument from the left involves what amounts to a rejection of universality. As Labor’s shadow treasurer Chris Bowen has said, ‘A universal basic income would be just that, universal. Providing payments to millionaires, at a considerable cost to the taxpayer.’ Again, this has some rhetorical force, but a rejection of universality as a political principle is a dangerous route for anyone on the left to take. After all, the left doesn’t reject the universality of Medicare or public education, and so rejecting it for UBI is, at best, inconsistent. Universality helps cement the support of the wealthy even if, as is the case with Medicare, they buy cover in private markets. And it’s important to remember that the wealthy will in the end be net contributors to a UBI scheme via their taxes.

The idea of UBI as a one-stop solution to welfare design needs to be challenged.

The more compelling argument for the rejection of universality has to do with how targeted welfare payments work. Australia’s system is highly targeted, and Bowen sees this as a point of pride. ‘Overall, Australia has a relatively low level of spending on cash benefits,’ the welfare economist and workshop participant Peter Whiteford has written, ‘but [it] concentrates these benefits on low income groups more than any other rich country.’ This targeting helps keep overall tax rates down, but for low earners the combination of income tax and benefit withdrawal rates also tends to create poverty traps.

The more compelling objections to UBI from the left go to the heart of the structural challenge a UBI poses to an economy. First, there are legitimate concerns that it would be funded by discontinuing other services—everything from healthcare to pensions—forcing citizens to buy them in private markets. Second, the cash payment, in and of itself, could encourage a shift away from collective solutions and help entrench an individualist approach to welfare provisions. Responsibility for any shortcomings could then be blamed, more than ever, on individuals rather the structural obstacles they often have to deal with.

Such concerns are why the idea of UBI as a one-stop solution to welfare design needs to be challenged. Indeed, the very strong feeling of the workshop was that any attempt to sell UBI as a silver-bullet solution is dangerous over-reach. At the workshop, Frances Flanagan, a researcher with United Voice, suggested that a UBI ‘can’t bear too much weight as a single policy fix,’ and this view was echoed through much of the discussion.

Academic researcher Andrew Scott, for instance, stressed that UBI is not ‘a panacea independent of other policies, especially in regard to housing and childcare.’ Political economists Troy Henderson and Ben Spies-Butcher argued that housing affordability would need to be tackled in conjunction with any move towards a UBI; otherwise, they said, a significant portion of any UBI payment would be lost to rent. Flanagan pointed out that two-thirds of care providers in Australia are in the private sector and that therefore a UBI would simply amount to a transfer of funds to such firms.

These are legitimate concerns, but they turn on the actual design of the UBI. As long as other service provisions remain in place, the UBI really would become an income floor below which people could not fall, and the benefits its brings would not therefore be undermined by having to use it to purchase services formerly provided as part of the overall welfare net. What’s more, having to buy such services in private markets is a problem with the design of the current welfare system, not a prospective shortcoming of a UBI as such.

Despite concerns that UBI might simply entrench those problems, many workshop participants emphasised the possibility of UBI actually challenging and undermining the structures that sustain them. Eva Cox from the University of Technology Sydney saw the UBI as a way of recognising ‘work outside the market, as we contribute to society in a multiplicity of ways.’ A UBI recognises and rewards the work of the informal economy, largely done by women. It also pushes back against the market power of employers by giving employees an alternative source of income, allowing them to say no to jobs offered on a take-it-or-leave basis.

A number of workshop participants also noted that the universal and unconditional nature of UBI would allow us to ‘bust through’ the punitive restrictions associated with many forms of welfare. Universality helps alleviate the stigma associated with being on welfare—because everyone receives the payment—while unconditionality diminishes the power of government to monitor and punish recipients. As Peter Whiteford noted, the real benefits in bureaucratic simplification that arise from implementing a UBI would tend to accrue to welfare recipients themselves, those who actually bear the financial and psychological costs of meeting the increasingly draconian levels of compliance for welfare payments.

What all this suggests is that the definition of UBI, along with the form it would actually take, need to be specified clearly in any debate. Coming from those on the left who happily support the universality of other welfare programs, the concerns about universality—’millionaires will get it too’—are unconvincing. And claims from the right that a basic income will make people lazy are contradicted by the facts. The UBI’s interaction with other welfare programs will depend on how it is defined and designed in the first place, and are not necessarily intrinsic to UBI itself.

From here to there

Let’s now step past these weaker objections and look at what are likely to be the biggest problems: paying for and implementing a UBI. This was something that was grappled with quite comprehensively at the workshop, and I want to outline one model of UBI that was presented there as well as another model that wasn’t discussed but is part of the broader worldwide discussion of UBI.

The biggest objection to implementing a UBI—from either the left or the right—centres on concerns about the cost. Usefully, a number of workshop participants provided detailed modelling of how UBI might be paid for. Economist John Quiggin calculated the cost at between 5 and 10 per cent of GDP, rejecting outright the claims by Labor MP Andrew Leigh that the cost would reach 23 per cent of GDP. He argued the introduction should be gradual, noting that ‘UBI is not a short-term policy option but a vision to be realised over coming decades.’

According to Quiggin, a UBI would need to be large before it could be useful. Although a UBI of $6000 a year would cost as much as the existing welfare budget, that relatively small amount would not enable anyone to live independently. So, rather than beginning with a payment that is universal and unconditional, he argued that Australia could start with ‘an income-contingent guaranteed minimum income implemented with a combination of a clawback rate, and a marginal tax rate equal to 40 per cent over the relevant range, and a 40 per cent marginal tax rate on incomes above that level.’

Henderson and Ben Spies-Butcher came at the problem from another angle. Their approach involved a stepped implementation of UBI involving two initial stages. The first was a redesign of Australia’s pension system to make it genuinely universal (by removing means testing). The second stage involved introducing a new youth allowance, a youth basic income or YBI. Once the redesigned pension and YBI are in place, the path to full universal basic income is achieved by gradually increasing the number of people entitled to each of these other benefits. Essentially, over time, the two payments are extended to more people and, if you like, they meet in the middle, leaving us with a fully functioning UBI.

The logic of this methodology is not simply about finding an economic model (which they spelt out in some detail) but also about finding a way of building support from as large a political base as possible. ‘Creating universal payments for younger and older Australians creates a framework for a transition to a full basic income,’ said Spies-Butcher. ‘It becomes economically feasible for governments to make incremental extensions, say lowering the pension age to sixty or increasing the YBI to thirty, and it creates real constituencies of voters who can see the benefits of the scheme and mobilise behind expansion.’

An alternative funding model has been offered by former Greek finance minister Yanis Varoufakis. He proposes what he calls a Universal Basic Dividend. Under this scheme, companies floated on the stock exchange would be obliged to earmark a certain number of shares as commonly owned (in effect, transferring those shares to government ownership) and the government would distribute the dividends generated by those shares to citizens in the form of an unconditional, universal payment. Some jurisdictions already run schemes like this, the obvious one being the Alaska Permanent Fund, which distributes state oil revenues. Varoufakis’s dividend scheme would extend this idea to all industries. The justification for this sort of wealth sharing relies on an understanding of the ‘common wealth,’ and it is worth investigating what that means in the context of the UBI debate.

Resetting the debate

One of the key reasons for the increasing interest in UBI is that people are concerned about the prospect of many jobs being lost to new forms of automation and artificial intelligence. I think it would be useful if UBI advocates stopped relying on concerns about technological unemployment as the primary justification for supporting it. Although my inclination is to say that, yes, there are likely to be significant job losses because of automation, getting too bogged down in the argument about whether or not robots will take jobs can be misleading.

In my book, Why the Future is Workless, I suggest that instead of arguing about the various future-of-work studies and their methodologies, we should embrace the possibility of less work that arises from the new technologies and rethink our understanding of work more generally. There are compelling social and psychological reasons for making paid work less central to our lives, and the rise of the machines may be the key to embracing such a future.

Support for a UBI is better predicated on the idea that all wealth in a society is socially generated, arising less from individual effort alone than from individual effort in the context of knowledge and infrastructure that owe their existence to the existence of society itself. No single person or corporation is successful without access to our common physical infrastructure, education, healthcare, legal and judicial system—systems and institutions that have developed over generations and that have been paid for by citizens in general. Everyone also shares in ‘the commons,’ the physical world of natural assets without which none of us could thrive or prosper.

Looked at this way, UBI would be an inheritance rather than a handout, a recognition of our common membership of a polity. As US senator Elizabeth Warren once put it:

You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory—and hire someone to protect against this—because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless—keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

Once we acknowledge the existence of this ‘common wealth,’ we lay the foundation for a system of universal basic income that is less a payment due to a hardship—such as unemployment—than it is a fair share of the wealth we have all helped generate as members of society. Similarly, as Eva Cox argued at the workshop, a UBI is a way of recognising the contribution of the informal economy—the household and the community—to our national wealth. Without it, the formal economy of paid work would simply not be possible.

In advancing this ‘common wealth’ argument, I would very specifically include not just the usual elements—clean air, water, land, minerals, infrastructure—but the ownership of personal data as well. Given the primacy of data to the functioning of many of our biggest tech companies, and its absolute centrality to future wealth creation, it is vital that we who generate the data—via our use of everything from online platforms, to store loyalty cards, to our smartphones—are compensated for our provision of this data and the free labour we provide in creating it. If, as many suggest, data is the new oil—the key commodity essential to the operation of the economy and the ongoing creation of wealth—then it should be subject to a similar royalty payment applied to other such commodities, so that our common ownership of it is fully recognised. UBI is a practical way of recognising that data belongs to everyone.

Shifting the culture

Whatever the pros and cons of UBI, there is no doubt that business-as-usual politics is being rejected by citizens throughout the world. The desire to challenge the status quo is manifesting in different ways in different countries, from both the left and the right. The push for UBI needs to be understood in this context, as a policy response to the uncertainties in developed countries arising from the casualisation of work, the diminishing power of unions to equalise the share of wealth going to profits rather than wages, the consequent increasing inequality in developing nations, and the growing intrusion of government—via ‘mutual obligations’—into the lives of citizens, particularly those dependent in one way or another on welfare.

As a political project, UBI offers a big-picture solution that appeals to people tired of technocratic solutions that have been shown to have failed and a democratic politics, seen as increasingly in thrall to the big end of town, that is unable to confront challenges that are both local and global. The universality of UBI reinvigorates the idea—perhaps even enforces it—that we are all in this together, that you cannot buy your way out of your social obligations.

By placing the UBI debate in this political space of generalised dissatisfaction, proponents need to be careful not to get too bogged down in the minutiae of costings and implementation (as important as they will ultimately be) and thus reduce it to yet another technocratic debate. It should be enough to show that a UBI is doable; as John Quiggin puts it, ‘challenging but possible.’ The concept’s growing popularity should be embraced and used as a mechanism for demanding change. Grassroots support is likely to dissipate if the debate — like the republic referendum — descends into a technical argument about ‘models.’

The risk the left runs in rejecting a scheme of universal basic income in any shape or form, I think, is that it leaves the field open for the right to occupy unchallenged. For the truth is that a scheme like a negative income tax—or some other variant of UBI—has considerable appeal to ‘small government’ conservatives; if it is combined with an appeal to lower taxes, there is always the risk the idea will take hold among those with influence in conservative policy circles and ultimately finds its way to implementation.

Beyond this, it is also very difficult to see how the left can reject outright a scheme that puts a floor under the lifetime income of citizens in general. Indeed, the ACTU’s current push for a living wage is motivated by similar concerns, but a UBI offers the benefits of that idea in a more streamlined and efficient manner and makes it available to more people. Because UBI is paid without imposing conditions, a lot of bureaucratic intrusion into people’s lives simply disappears, and I don’t think we should underestimate the difference this can make to lives of ordinary people. In short, it is an odd sort of leftism that rejects a UBI outright.

Simply arguing people out of their opposition to UBI is unlikely to be an effective political strategy, though. The more likely path to acceptance will be one that was articulated at the workshop by Tim Hollo, national director of the Green Institute. ‘Big progressive change rarely, if ever, happens by winning arguments, or convincing opponents to switch sides,’ he said. ‘Big change happens when we successfully shift the cultural context and, by doing so, turn an idea from inconceivable to inevitable.’

This is precisely what has happened with the issue of gay marriage, and UBI can learn a lot from that process of activism, including to note how long the journey from inconceivable to inevitable has taken. As Gandhi once said (or maybe he didn’t, though the point still holds): ‘First they ignore you, then they laugh at you, then they fight you, then you win.’ As far as UBI is concerned, critics have certainly stopped ignoring it, and they have mostly stopped laughing at it. Which means the fight is now there to be won.

Tim Dunlop is an author, writer and academic. His latest book is Why the Future Is Workless (New South Books), which examines the changing nature work as more and more jobs are automated. This article was originally published by Inside Story and is reproduced with the kind permission of the author.