I have blogged previously about the need for Basic Income (see Notes, below).
One important point is that the nexus connecting work and pay is loosening in the more developed countries. Already, computers, automation and modern business streamlining have led to the situation whereby, apart from actual unemployment, there is huge underemployment. In the UK, we see, in big picture terms, that the poorer half of the workforce is still being paid less in real terms (the latest statistics suggest about 7% less) than was paid in 2007 for equivalent work.
Now, there is a headlong rush into greater automation and, crucially, to Artificial Intelligence [AI].
Working Tax Credits as Government Subsidy to Poor-Paying Employers
Even before the financial upheaval of 2007-2008, it is clear that the “market”, as “hidden hand” mechanism, delivering adequate pay for required work, was not working properly or as old-thinking economic theory suggested that it should. Employers were unwilling or in some cases unable to offer pay high enough for employees to subsist on, let alone live decently on.
The answer of the Blair-Brown governments was to offer employees “working tax credits”, i.e. a form of “welfare”/”social security” for those in employment, the purpose of which was (and at time of writing still is) to top-up inadequate pay to a determined level. A more limited measure, Family Credit, claimable only by families, was in operation from 1986-1999.
The most obvious drawback of Working Tax Credit [WTC], i.e. that it in effect subsidizes poor and poor-paying employers out of general taxation, was either not foreseen by self-styled financial genius Gordon Brown, or was ignored by him and/or Tony Blair. Adding insult to injury was and is the fact that some of the worst-paying employing companies are also those most adept at avoiding tax liability: transnational enterprises such as Amazon in particular.
In other words, an employee is forced (by circumstances) to work for pay which is not enough for that employee to live on, even at a very basic level. That pay is then topped-up to a minimum subsistence level by Working Tax Credit, which is paid for not directly by the exploitative employer but by government, and so by general taxation. Low-paid employees pay little or no income tax now, but still pay so-called National Insurance, which is today just another or extra income tax in all but name. Put simply, the low-paid worker is paying out for his or her own Working Tax Credit, at least to some extent.
The poor-paying employer has no incentive to pay decently, because the government will stump up enough to keep the employee in place.
Real-terms pay now, for very many people, is inferior to what was paid in the 1980s and 1970s. Conditions of employment are also worse in reality (though that aspect is not part of this blog post).
At present, 5 million people in the UK receive WTC, while another 2 million are entitled to receive it but, for whatever reason, do not apply for it.
Other Government Top-Ups to Pay
In addition to basic Working Tax Credit, people in low-paying jobs and who have children can get extra money via WTC , as can disabled workers.
Persons who are disabled or unwell (including employed persons) can receive Disability Living Allowance, which is not means-tested.
Persons who have children are also entitled to Child Benefit, regardless of capital or income (up to £50,000-£60,000, tapering).
Persons of the age(s) specified can receive State Pension regardless of whether they work or not; moreover, whether or not they have ever worked.
Limited Elements of Basic Income Already Embedded in the Existing System
- State Pension, paid whatever the individual’s capital or income, and whether or not the individual is working (employed or self-employed) or not and (if you include Pension Guarantee Credit), payable regardless of how much the pensioner has paid in via National Insurance;
- Child Benefit, paid regardless of income (under £50,000 p.a.);
- Disability Living Allowance (and its successor, “Personal Independence Payment” or PIP), paid regardless of capital or income to qualifying persons (and this is not the place in which to examine why politicians and Department of Work and Pensions [DWP] civil servants often choose vulgar names for State benefits and programmes: cf. “Jobseeker’s Allowance” etc).
Advantages of Basic Income
- Simplicity. A Basic Income would mean that most of the existing DWP structure could be dispensed with: the vast edifice of “Jobcentres” (office buildings), filled with DWP staff engaged in adminstration, and the snooping upon, monitoring, “assessing” of claimants etc. The absurdity of it is that many claimants are only getting about £75 a week anyway. The present Kafka-esque set-up really should be and can be junked. Probably 90% of the present 85,000 DWP employees can be made redundant. The financial savings from that, decommissioning of buildings, running costs etc would be in the tens of billions annually; the untold billions paid by the State to useless and dishonest private contractors, such as ATOS and Capita, would also be saved;
- Security of Citizens. It has been shown in overseas pilot studies (eg recently in Finland) that having a Basic Income, even if small, gives people a sense of security only available until now to those with an inherited private income. Yes, some people will decide to loaf all day, maybe even drink all day, but others will do paid work, start small businesses, improve their cultural level, volunteer locally or far away etc. The idle and/or useless are like that under the present system anyway and are costing the State money even now, both directly and indirectly (eg via the costs of policing, NHS, prisons etc);
Doubts Often Expressed about Basic Income
- “People will not want to work if they get money for nothing”: well, most wealthy inheritors of capital, most of those living off trust incomes etc do seem to want to work in some way, or to set up businesses, or at least to write, paint, or other similar activity. Don’t disparage writing or other artistic activity. After all, Harry Potter, which snowballed into a huge industry employing, altogether, many thousands and even tens of thousands, came out of the mind of one lady, a single mother on State benefits; J.K. Rowling herself has said that, under the punitive present benefits regime, she would have been messed around so much that it would have been impossible for her to sit in cafes with her baby writing Harry Potter. True, some people will simply loaf. They do that under the present system. Don’t think that there are no costs to the State and society now (even if actual benefits are cut off): police costs, court and legal costs, NHS costs, too;
- “The cost to the taxpayer”: the cost of Basic Income would be little more than the present “welfare” (social security) system, once you take into account the huge savings on DWP and HMRC bureaucracy, savings by not using useless/dishonest outsourcing organizations, the economic benefit of people spending more, stimulating the economy, setting up new small businesses;
- “People getting Basic Income money that they do not even need”: firstly, what people “need” is, beyond the basic level, something subjective. Apart from that, there is no problem with clawing back monies paid to those above a certain income. All that need happen is that a maximum level of income (all income) for recipients be set. All persons above that income level to be taxed or super-taxed to the same level as Basic Income received. The level might be a total (including Basic Income) of £30,000, assuming Basic Income of perhaps £15,000 per year. In that case, the person would be taxed the £15,000, leaving £15,000. Yes, there would be apparent unfairness at lower income levels, whereby it might be questioned why work, when you could simply receive the (in the example given) £15,000 and not work. However, even then the recipient does gain, via extra security in case of job loss or illness; alternatively, the threshold could be set higher, say at £50,000 p.a.
Variations on the Basic Income Theme
Instead of money alone, Basic Income could include benefits paid to certain persons, such as free housing for persons receiving less than a certain income. The danger here is in the complexity and cost, as under the existing system, as well as monies wasted going to landlords charging excessive rents. It may be that the way forward is to add to the existing (in the UK) more or less “free” (at point of use) health service, free education at primary and secondary level etc. Examples:
- free public transport, whether local or regional;
- free car insurance;
- free domestic utilities;
- free NHS or similar;
- free education.
Basic Income as Necessity
It is clear that, in the UK, relatively few people at present are purely living off what they can earn by work or by investments and/or trust income. 7 million are eligible for Working Tax Credits, millions more are children, retired people, disabled and not working, unemployed etc. For many, working for pay does not cover the basic necessities of life, let alone provide a decent human existence. The State already recognizes these facts.
The explosion in artificial intelligence and robotics will turn the screw. For example, there are at present 356,300 taxi drivers and private hire drivers in the UK. The technology already exists to replace them. It is unlikely that more than a small percentage will still be doing such work in, say, 2030. That’s just one group affected. Groups as diverse as farmers, lawyers, surgeons, pilots, security guards will all be made, as groups, largely redundant.
Basic Income is not just the right thing, but the necessary thing.
Update, 11 March 2019
People generally are now waking up to both the desirability and the practical possibility of Basic Income: