Basic Income: an idea whose time has finally come?

As far back as 1516, Thomas More first suggested a guaranteed income as a way to reduce theft. In 1797, enlightenment thinker Thomas Paine proposed a set of radical reforms in his seminal pamphlet on Agrarian Justice.Among these proposals was the idea of a universal basic income that would be paid to everyone, unconditionally. In the intervening 220 years, polemicists and policymakers have toyed with the idea, without it ever really catching on.

What has changed?

Firstly, it is increasingly clear that our economic model is leaving more and more people behind. The polarisation in income and opportunities between those with advanced education and skills and those without grows ever greater. Over the longer term, increased automation could render defunct a whole new set of jobs – from factory workers and bus drivers to accountants and bank tellers. But, our tax and welfare system has not been updated or rethought for the 21st century. It is riddled with poverty traps and perverse incentives.

Secondly, there is increasing political momentum behind the idea. Most recently, Benoît Hamon, newly-selected Presidential candidate for France’s Parti Socialiste ­has made it a key plank of his election platform. The idea has been gaining traction in Ireland too. Fianna Fáil pledged ahead of the 2016 general election to introduce a basic income equivalent to the basic social welfare rate. The Green Party were on board even earlier, including proposals for a move towards a basic income in their pre-budget submission back in 2013.

As a matter of practical public policy, the basic income idea is still very much at the laboratory stage. The right approach is to pilot the idea in a limited geographic area, or with a particular cohort of the population, as is now being done in Utrecht, in the Netherlands, and with 10,000 randomly selected people in Finland. That way, you can see if and how it works, and how best to design the system to ensure it improves the lives of the greatest number of people possible. It also helps identify the main challenges for transitioning to the new system before it is rolled out across the country.

So, how would it work?

Building on the organisation’s earlier 2013 work, Eamon Murphy and Sean Ward published a paper with Social Justice Ireland in December 2016 exploring how it might work, and how much it might cost:

–       Payment rates ranged from EUR 31.05 pocket money for under 18s to EUR 240.30 for the over 80s.

–       Residency requirements would be the same as for existing welfare payments, but there would be no means-test or work requirement.

–       The payment would be tax free, with all other income taxed at a flat rate of 40%.

–       All tax reliefs and credits, as well as most other welfare payments would be abolished.

–       All other income tax, including the USC and employee PRSI, would be abolished while employers’ PRSI would increase from 10.75% to 13.5%.

Under this proposal, the basic income would pay for itself, while most low to middle income households would be better off. The lowest income earners would get a top up. All earners would see their effective tax rate fall. Even higher earners would face a lower marginal tax rate of 40%, rather than over 50% at present. The authors argue that this model of universal basic income would be easier to administer than the current system, end poverty traps and eliminate welfare fraud, among other benefits.

Anyone who has seen Ken Loach’s I, Daniel Blake, winner of the 2016 Palm d’Or at the Cannes festival, will certainly see the appeal of such a shift in how we think about welfare. A universal and unconditional basic income can help restore dignity, integrity and equality to both the welfare system and the workplace. It may not be a silver bullet for our creaking economic, but it is certainly an idea worthy of careful consideration.

Why not make Kilkenny Ireland’s first city with a citizens’ income, or road-test the idea with everyone born in Ireland in January 2000?

PS: I do not live in Kilkenny and was not born in January 2000. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s