Connect with us

Hi, what are you looking for?

Persepctives

PERSPECTIVES: Free-market think tank floats “Universal Basic Income” for all

A RIGHT-wing think tank has said that Government ministers should implement a “Universal Income” policy for all.

The Adam Smith Institute claims that there is evidence for a “basic income” and calls on governments across the globe to experiment with the idea.

The radical plan involves ditching means-tested benefits in favour of a de-facto flat-rate payment to all citizens.

The think tank says that the current welfare system is “ill-suited” to adapt to challenges presented by “automation and globalisation.”

Advertisement. Scroll to continue reading.

“Most people agree that the system is broken, though solutions differ. The Universal Credit is a fundamentally good idea that is failing because of the difficulty of implementing successful piecemeal reforms to a system as complicated as benefits in the UK, and will ultimately probably not succeed in the way its architects intend because it doesn’t go far enough. Other aspects of the government’s welfare policies, like the work programme, are completely wrong-headed – telling other people how to live their lives is a bad idea because the government is extremely ignorant. That ignorance doesn’t change just because the person being told what to do is on benefits.” – Adam Smith Institute, 2018

Sam Bowman of the ASI said: “it’s about improving the capitalism we already have.”

The idea is ‘blasphemy to conventional, liberal, “free-market” economists’. writes Sam, but he argues that it’s not: “we here at the Adam Smith Institute have proposed something along these lines for a couple of years, and Milton Friedman proposed a similar Negative Income Tax way back in 1962.”

66% of British adults own a smartphone (also known as “the sum of all human knowledge, in your pocket”); wages are up by over 62% in real terms since 1986; and that doesn’t even mention the enormous global reduction in poverty in the age of neoliberalism.

I’m a capitalist, neoliberal advocate of a basic income, or something like it. I don’t think it’s perfect, I don’t think it will solve every problem. I just think it would be an improvement, for three main reasons:

Advertisement. Scroll to continue reading.

1. It addresses in-work poverty well.
2. It reduces complexity in the welfare system.
3. It facilitates other reforms that would raise overall living standards.

1. It addresses in-work poverty. Our existing welfare system is designed for a world where finding a job would be enough to give most people a tolerable standard of living. But in-work poverty is an increasing problem, particularly as good jobs for poorly educated workers become unviable, and the welfare system that we have at the moment isn’t well built for that.

This is where the robots come in. I’ve heard it said that automation of the economy is a lot like going to Australia – it’s great when you get there, but it can be a difficult journey. As robots replace them we probably will think of new things for people who used to work in law firms, factories, call centres and hospitals to do, but it might take some time.

Automation and globalization will both raise overall living standards, and in the case of globalization it will make very poor people in the developing world a lot better off, but we cannot guarantee that the jobs people get instead will be as good as their old ones. Working tax credits already begin to tackle this issue, but a basic income would reorient the whole system towards helping people who don’t have enough money, irrespective of why that is.

2. It reduces complexity in the welfare system. Our existing welfare system has built up a large amount of unnecessary complexity that could be streamlined. Like much public policy welfare is ‘path dependent’ – no two country’s welfare systems are the same, even if their welfare problems are. Much of the complexity in the welfare system has built up over time and exists only because of loss aversion: once we’ve started giving winter fuel payments to pensioners it’s quite difficult to stop.

Advertisement. Scroll to continue reading.

Many but not all of these benefits are fundamentally about giving money to people who do not have enough of it. Housing benefit, the pension credit, jobseeker’s allowance, income support and tax credits all do this. But the case for a basic income does not need to stand or fall on whether we could replace all benefits with it. Some people inherently need more money to live decent lives, like the disabled, infirm and elderly. Reducing complexity is valuable but not the only, or indeed the main, appeal of the basic income.

3. It facilitates other reforms that would raise overall living standards. Many other policies that would increase total wealth are not very progressive, distributionally speaking. Tax systems are better when they do not tax things like investment and when they don’t exempt certain things from consumption taxes (like VAT), but doing these things ends up making lower earners pay more tax than we would like. One objection to immigration is that even though it makes natives richer overall, it has a small, temporary negative hit to the poorest natives. An easy way to correct that would be to redistribute the overall wealth gain to those poor natives so that they too are made better off in the short run as well as the long run.

Some pernicious government policies are ones that attempt ‘off-balance-sheet’ redistribution. The minimum wage, for example, is hoped to be a redistribution from consumers and shareholders to low-paid workers – profits fall and prices rise to pay for their new, higher wages. The problems with it are that it has other unintended consequences, like causing unemployment for some workers, and that higher prices may hurt the poor as well. There’s no free lunch here – it would be more effective to tax people and then redistribute it directly to poorer workers. A basic income could replace policies like this.


Idea: The Adam Smith Institute
Other Credits: Sam Bowman Blog Post

Advertisement. Scroll to continue reading.

MUST SEE!..