8 Dec 2013 etbe   » (Master)

A Basic Income for Australia

There has been a lot of discussion recently about the concept of a Basic Income (Wikipedia), largely due to the efforts to change the Swiss constitution to provide a Basic Income [1]. The concept of a Basic Income is that residents get a fixed payment without having to be sick, disabled, looking for work, or eligible for other forms of social security.

A Basic Income wouldn’t replace all other forms of social security, one of the most obvious examples is that sick people will often need money for medical care in additional to living expenses. Also I believe that it shouldn’t be means tested in any way. I think that one of the problems with current payment schemes is that there are complex eligibility criteria which require effort for the applicant and for government agencies to prevent accidental or fraudulent over-payment. The tax rates could be raised slightly to make it revenue neutral.

Newstart

In Australia the main form of social security for unemployed people at the moment is called “Newstart” [2]. Currently Newstart payments range from a maximum of $501 per fortnight for a single person ($13,026 per annum), to a maximum of $699.90 per fortnight for someone who is a carer.

The Newstart payments start to decrease if the recipient earns more than $62 per fortnight. The minimum wage in Australia is $16.37 per hour for permanent work or $20.30 for casual work [3]. So if someone works for more than 3 hours at a casual rate (and I can’t imagine 4 hours a fortnight being anything other than casual) then their Newstart payments will decrease. The payment decreases are fairly significant, for every dollar that is earned about 50 cents will be deducted from the payments. That’s a great incentive to either avoid opportunities to do part-time work or to do cash-only work that’s outside the tax system.

The most obvious way of implementing a Basic Income would be to replace Newstart. Then anyone who is in that situation would be free to just not get a job – which would be OK IMHO as people who don’t want to work probably wouldn’t do a good job if the government forced them to get a job. People who are unemployed who want to work could work as much as they want and scale up according to what their employer asks and how much money they need.

Currently the full-time minimum wage is $622.20 per week (I’m not sure exactly how they get that from $16.37). That’s almost 2.5* the Newstart allowance for a single person (but less than twice the Newstart allowance for a carer). While Newstart (and the other forms of social security) don’t provide a great income, it seems that the difference between Newstart and the minimum wage isn’t that great – particularly when you consider that working involves some expenses for travel etc. There doesn’t seem to be a great financial incentive for someone to leave Newstart and get a minimum wage job.

People Who Want Social Security

Some people think it’s great to get government payments while others find it embarrassing to need such payments and won’t necessarily apply if they are eligible. I think that the current system of forcing people to apply for social security is a way of discouraging people who find themselves unexpectedly in a difficult situation but doesn’t discourage people who are happy not to work. This seems to effectively reduce the incidence of payments to the people who most tax-payers would regard as the most worthy recipients.

Economics

Charles Stross wrote about some ideas related to this [4]. He suggests that as the workforce participation has been steadily reducing due to technology we should move to a social model that isn’t based around working to live but working to buy luxuries that aren’t covered by the Basic Income.

One of the many economic changes related to a Basic Income is that the minimum wage could be smaller than it might otherwise be. For example if the minimum wage was decreased by the same amount that the Basic Income provided then the minimum income would remain the same while employers would pay less, this would affect the viability of certain types of contract work web sites if they were subject to minimum wage laws (currently they just ignore the minimum wage laws by paying based on job completion instead of hours worked). I don’t think that the minimum wage should decrease that much though, currently employers are able to run viable businesses with the minimum wage laws and I don’t think that a Basic Income should be used as a way of helping corporations avoid paying their employees.

If we had a Basic Income then there’s many ways that it could be used to stabilise the economy. If people could pay their rent even if they lost their job then a down-turn in one area of the economy wouldn’t immediately affect other areas. Also if rent payments were deducted automatically from an account used to receive the Basic Income then landlords would be more likely to rent to poor people as they could be guaranteed to receive rent payments (it would be easy to have a contractual agreement for rent to take priority and have bank computers enforce that).

The Implementation Problem

I don’t think that my idea would have any significant negative effects. It wouldn’t decrease government revenues if tax was adjusted accordingly. It wouldn’t make people stop working as people who don’t want to work already avoid it. It would help people who are out of work to get work by reducing the barriers to entry in terms of paperwork and of unreasonable cuts to Newstart making it bad value to take part time work.

I think that the big problem with implementing it is people who want to prevent poor people from having opportunities. They want to reduce social security and minimum wages even though such changes will in the long run only give less tax revenue and greater expense in law enforcement. It seems rather ironic that such hostility often comes from people at the low end of the middle class whos jobs are most likely to be at risk from new technology.

As on-going technological development reduces the number of workers that are required to keep things running we need to have some form of payment to the people who aren’t doing enough work to survive. A decent Basic Income is a much better option than giving Newstart payments and forcing a significant portion of the population into a degrading search for jobs that don’t exist. As that’s the inevitable future I think we should make political changes to deal with it sooner rather than later. However a Basic Income might be implemented now it’s surely going to be a lot better than what might happen if we wait until the majority of the population are unemployed before doing something about it.

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Syndicated 2013-12-08 12:17:36 from etbe - Russell Coker

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