Universal Basic Income
Why not a universal wage rather than benefits?
from The Jobs Letter No.76 / 14 April 1998
AT THE UBI-NZ NATIONAL Conference, Waikato anthropologist Michael Goldsmith
expressed abhorrence of the system when he told of a particular domestic purposes beneficiary's
dealings with Social Welfare. When this beneficiary needed an emergency loan, the department gave
it only after a lecture and on condition that she never asked for one again.
The department often made mistakes in paying the woman, then claimed back its overpayments.
It allocated her a "customer services officer" who left her telephone on voice-mail for days at
a time, ignoring urgent messages. All these things were "not aberrations of the system but
expressions of its innermost logic," said Goldsmith.
They follow from the principle that welfare is only for those who can prove that they have
tried and failed to provide for themselves. The natural result is that beneficiaries are treated by
officials with contempt.
"Everyone would have enough income to take their full part in democracy and in society
And the extraordinary thing is that all this is actually feasible....it's actually just a reformulation of the current system."
Moreover, the system can actually make people worse off if they get low paid, part-time work.
Out of every extra dollar they earn, almost 90c is clawed back through reduced benefit plus tax.
After paying for transport and clothing they end up poorer than on the benefit.
- In complete contrast, if the state paid everyone a basic wage then there would be no need
to pry into the way people live their lives, or to claw back the basic wage. The wage could be
paid through the tax system as a "negative income tax" in the same automatic way that income tax
is paid now.
If everyone knew that they would get a minimum of, say, $200 a week for each adult plus $100
a week for each child from the tax system, whether they worked or not, then:
-- Everyone would control their own lives. No one would be controlled by Social Welfare.
-- People who become unemployed would be better off by doing even low-paid, part-time
paid work, because they would still get the basic living wage
-- People who want to work only part-time, so they can spend time with their children or
with aged parents, could afford to do so.
-- Workers could afford to pick and choose their jobs, so the workers' bargaining power
against employers would be strengthened; wages and working conditions would have to improve in
the jobs that people don't want to do.
-- Workers would be in a better position to demand more say in the work they do, and to
refuse to work altogether for companies that exploit others or damage the environment.
-- Everyone would have enough income to take their full part in democracy and in society
And the extraordinary thing is that all this is actually feasible. As Auckland economist
Keith Rankin points out, it's actually just a reformulation of the current system.
- We already have a minimum `living' wage, which is the dole plus family support. For
a single person aged 25 or over, it's currently $146 a week; for a couple with children it's $259
plus $47 a week for the first child and $32 for each extra child.
People receiving benefits can earn up to $80 a week without affecting their benefits.
Above $80 a week, they lose 70c off their benefits for every extra $1 earned, as well as paying
tax of 15 per cent up to $182 a week and then, from this July, 19.5 per cent. This means they lose
a total of 89.5c out of every extra $1 earned above $182 a week.
Families with children also have family support reduced by 18c or 30c for every extra $1
earned above $385 a week, so if their pay goes beyond this they can actually end up with less money
in the hand.
- The basic income system would avoid these savage clawbacks by letting everyone keep their
basic living wage, and then merely taxing extra income at a standard tax rate.
The standard tax rate would have to be higher than the 19.5 per cent that will apply to
most people after July; Keith Rankin uses an example of 33.3 per cent. But this would still be much
less than the current effective tax rate on low income people of 89.5 per cent or more.
In effect, a basic living wage for everyone would be just a fairer version of the current system.
We would do well to plan future changes with this end in view.
Source _ The New Zealand Herald 1 April 1998 "Why not Universal wage rather than benefits?" by Simon Collins.
Simon Collins is the editor of Wellington's City