The Dim-Post

March 22, 2016

Labour’s UBI

Filed under: economics — danylmc @ 9:55 am

Via the Herald:

All adult New Zealanders could be given a Government handout of at least $200 a week under a new policy being considered by the Labour Party.

The co-leader of a global network promoting a “universal basic income”, British professor Guy Standing, will be a keynote speaker at a Labour conference on “the future of work” in Auckland next week.

He said yesterday that a system “where every legal resident of New Zealand should be entitled to a modest monthly basic income” would reduce inequality and give some security to people who increasingly have to earn a living from insecure casual and short-term work.

And Labour finance spokesman Grant Robertson said Labour was considering a local version of a scheme developed by economist Gareth Morgan, who proposed paying every adult a basic income of $11,000 a year ($211 a week).

“I’ve spoken to the Morgan Foundation about it. They are continuing to work on the idea,” Mr Robertson said.

“We are looking at how do we ensure income security, and one of the things we are looking at is whether or not a universal basic income could form part of that policy. It’s very early days.”

A discussion paper on the idea, due to be published by Labour today, suggests paying an $11,000 universal income to everyone aged 18 or over to replace all existing welfare benefits except for “supplementary transfers for disadvantaged groups”.

There are some good arguments to be made for a universal basic income, but if you pay every working age New Zealander about $11,000 a year then you’re looking at an additional cost of about $20 billion dollars a year. To put that into perspective, last year the healthcare system and education system combined cost $27 billion. I guess you would claw a bit of that $20 billion back by adding it onto incomes and then taxing it but that is still just a huge sum of money to try and raise. The Capital Gains Tax that Labour campaigned on in 2014 – and which Andrew Little subsequently ditched because it was so unpopular – was supposed to (eventually) raise about $3.7 billion a year. And even if you raised that kind of money, giving it away to everyone as a universal payment seems like one of the least effective ways you could spend it.

34 Comments »

  1. Why is giving it to people the least effective way to spend it? In terms of economic stimulus, giving people cash payments is one of the most effective ways to go about things because it avoids picking winners and endless middlemen clipping the ticket. If the money is to keep the economy humming and give people the ability to fund their day-to-day spending, I can’t think of a better way to do so. It’s obviously not the same as building a hospital but that’s not the purpose of UBI.

    Comment by Sam Grover — March 22, 2016 @ 10:02 am

  2. The Big Kahuna proposal was great – very thought provoking, although not without challenges (e.g. support for single parents would drop significantly, property rich cash poor pensioners would basically need to sell up and move).
    The thing that made the Big Kahuna compelling though is that he tackled both sides of the ledger, his proposal involved introducing a massive Comprehensive Capital Tax (with no exemptions) that would represent a small increase in the taxation of businesses, a completely unprecedented rise in the level of wealth/property taxation, and a flat income tax at a moderately high level. Talking about the easy bit (11k of free money for everybody!) without discussing the hard bit ($15,000 annual property tax bill for Nana’s house in Mt Eden!) just shows that Morgan is right and Labour don’t actually have the guts to try this…

    Comment by Richard29 — March 22, 2016 @ 10:09 am

  3. I see Danyl is getting his economics via kiwiblog these days.

    Comment by Sanctuary — March 22, 2016 @ 10:31 am

  4. I see Danyl is getting his economics via kiwiblog these days.

    Actually I had a long talk with Max Rashbrook about UBI a couple weeks ago.

    Comment by danylmc — March 22, 2016 @ 11:00 am

  5. Talking about Max Rashbrook, if you want to avoid the ticket clippers and those who summarise him after long talks, hes an author and journalist who has his own dialogue
    http://www.inequality.org.nz/author/max/

    Comment by dukeofurl — March 22, 2016 @ 11:47 am

  6. My understanding of any such UBI is that it would be *instead* of things like the unemployment benefit, low income supplements, etc. Just given to more people. So I think the net additional cost is considerably smaller than $11k/working age person. For those earning more than $11k presumably it effectively turns into “first $11k is tax free”. As it stands now, the tax on the first $14k of income is pretty small anyway (10.5%) so the net cost of making that tax free is also much smaller than $11k/person — more like $1.2k/person.

    I suspect it would make the biggest in-hand difference to those who are in and out of work regularly (seasonal workers, causal labour, people with injuries that flare up during full time work). And hopefully reduce the bureaucracy associated with some of those combinations, to offset some of the cost. Eg, those on seasonal/casual work could perhaps elect to just keep being paid the UBI amount from Random Government Department, and their employer could deduct/remit the UBI amount from their wages and send it to Random Government Department along with any PAYE in the rest — for basically zero paperwork compared to unemployment benefit, declaring income, etc.

    Ewen

    Comment by Ewen McNeill — March 22, 2016 @ 11:48 am

  7. The UBI is a dog because it involves handing out money to wasters.

    A key principle of the UBI is that a young, able bodied person can get paid enough money to live on, in exchange for doing nothing whatsoever. They don’t have to work, look for work, study, volunteer, bring up children or anything else useful. All they have to do is sit round scratching their arse and collect their benefit each month.

    Various versions of the UBI have been proposed, each with different properties, but all of them have this feature in common.

    For this reason the UBI is a fundamentally bad idea and the electorate will never swallow it.

    A.

    Comment by Antoine — March 22, 2016 @ 12:37 pm

  8. Ewan “and their employer could deduct/remit the UBI amount from their wages and send it to Random Government Department along with any PAYE in the rest”
    Eh? Surely it would be paid exactly like National Super, but (depending on which version of UBI you read about) without tax. So there’s no need to bother your employer about it. With a flat tax, there wouldn’t even be “secondary” rates of tax to bamboozle and trip folk up.
    One of the appeals of UBI to a right-winger like me is: simplicity, (the promise of) ending the welfare trap, fairness, and, simplicity. I can only imagine how much easier National Super is to administer than the Unemployment Benefit. We all know superannuitants who are contributing to the economy and to the tax-take, by continuing to work. We are constantly told that the employers of the future will need to rely more on the mature employee, and it seems to be starting to happen (as opposed to the youngsters wet-dream of the Gen-Yers being given the jobs because of, you know, their rights).

    Comment by Clunking Fist — March 22, 2016 @ 1:30 pm

  9. A key principle of the UBI is that a young, able bodied person can get paid enough money to live on, in exchange for doing nothing whatsoever. They don’t have to work, look for work, study, volunteer, bring up children or anything else useful. All they have to do is sit round scratching their arse and collect their benefit each month.

    Back in the 1950s when the welfare system was a lot more generous people could, in theory, do this, but didn’t because they preferred to have jobs, families etc. There’s no reason to think human nature has changed fundamentally since then.

    Comment by danylmc — March 22, 2016 @ 1:42 pm

  10. “7.The UBI is a dog because it involves handing out money to wasters.”
    As opposed to the current style of making the wasters jump through some hoops before doling out the dosh? Or having WINZ staff intimidated into giving benefits to those who probably shouldn’t receive them? Or taking the money away from the wasters so that they turn to crime?

    The dole is so effing complicated (if I understand correctly) that it is said to stop some folk considering causal or part-time work.

    We’ve been told for some decades (I certainly remember it scaring me shitless as a student) that we will need to “retrain” several times in our lives. Having a UBI while retraining will be a benefit (no pun…).

    We are constantly trying to put a value on the work done by volunteers. Whilst the UBI won’t assign a value, at least it will be underpinning the work done in the third sector.

    Comment by Clunking Fist — March 22, 2016 @ 1:47 pm

  11. “and the electorate will never swallow it.”
    If the $ costs and savings are set-out in a clear manner, if the goals are set out clearly, perhaps they will. After all, we all seriously considered CGT as thinking adults.
    Of course, a higher top rate of tax may help kill it. But perhaps a flat tax (and CGT) may help sell it? Maybe even a GST increase? (A UBI is partially justifiable, in my opinion, as a foil to the effect of GST on the lower incomed.)

    Comment by Clunking Fist — March 22, 2016 @ 1:53 pm

  12. if it’s as low as $200 per week, the UBI would actually leave unemployed people worse-off than they are now. I doubt Labour would actually set it that low.
    It would be paid for through higher taxes on income, so people on high incomes would have to pay more than $200 per week extra in tax to cover it, meaning that in net they wouldn’t be getting money out of it. The people who would benefit are people who are currently working and earning low incomes – some of them would be significantly better off than they are now. Because of this, it would solve the problem of people trying to go from a benefit to work finding they are no better off. It would also be much cheaper to administer than the current mess of complex ways the government redistributes money.

    Comment by Can of Worms, Opened — March 22, 2016 @ 1:53 pm

  13. > The people who would benefit are people who are currently working and earning low incomes

    Nah, the people who would benefit are people who aren’t working and don’t want to.

    A.

    Comment by Antoine — March 22, 2016 @ 1:59 pm

  14. > Back in the 1950s when the welfare system was a lot more generous people could, in theory, do this, but didn’t because they preferred to have jobs, families etc. There’s no reason to think human nature has changed fundamentally since then.

    We now have weed, cheap vodka, internet and Playstation, these are fundamental changes to the human condition.

    A.

    Comment by Antoine — March 22, 2016 @ 2:01 pm

  15. “Back in the 1950s when the welfare system was a lot more generous………..”

    Eh?

    Comment by Tinakori — March 22, 2016 @ 2:02 pm

  16. >> “Back in the 1950s when the welfare system was a lot more generous………..”

    > Eh?

    Was waiting for someone to call Danyl on this (decided not to do it myself since I, like Danyl, wasn’t around in the 50s)

    A.

    Comment by Antoine — March 22, 2016 @ 2:04 pm

  17. We now have weed, cheap vodka, internet and Playstation, these are fundamental changes to the human condition.

    “Jazz cigarettes” (or whatever other name you want to call mind-altering substances) and cheap alcohol have been a staple of human culture for at least 4000 years. The internet and playstation of today was television, public executions, chariot racing, or philosophy in the past. Nothing has changed and you’re being a dick.

    Comment by Phil — March 22, 2016 @ 2:19 pm

  18. OK, it was a semi frivolous remark.

    I still maintain the basic principle of ‘money for nothing’ is a deal breaker. OK as Green party policy but no good for a Labour party that actually wants to get elected.

    A.

    Comment by Antoine — March 22, 2016 @ 2:21 pm

  19. So Danyl, your argument in comment nine is because we didn’t have long-term welfare dependency in the 1950s when the current welfare system was newer, we should ignore the current long-term welfare dependency problems because they won’t apply to a new system.

    Interesting argument, and probably looks sound if you never leave the magical Kingdom of Te Aro.

    Comment by Robert Singers — March 22, 2016 @ 2:27 pm

  20. http://www.teara.govt.nz/en/family-welfare/page-4

    Comment by danylmc — March 22, 2016 @ 3:11 pm

  21. A key principle of the UBI is that a young, able bodied person can get paid enough money to live on, in exchange for doing nothing whatsoever.

    Guess what – plenty of able bodied 65 year olds do exactly this and no-one seems to give a shit.

    Comment by Gregor W — March 22, 2016 @ 3:18 pm

  22. @Gregor

    There are plenty of people worried about the massive unfunded liability that is NZ Super.

    Comment by Phil — March 22, 2016 @ 5:50 pm

  23. Easy answer to that tired argument “Why should I get it when I’m rich?”:
    “You get it taxed off the top, and given back at the bottom as the UBI – simple.”
    (They never seem to complain about getting free money via tax cuts; and no they didn’t ‘earn’ those interest/dividend/property-value-increase payments.)

    Comment by roy — March 22, 2016 @ 7:58 pm

  24. Phil – I meant as a political narrative, not as reality.

    Comment by Gregor W — March 22, 2016 @ 8:42 pm

  25. A key principle of the UBI is that a young, able bodied person can get paid enough money to live on, in exchange for doing nothing whatsoever.

    I’m not sure where you get your information from but if you can live on $200 a week, you should buy a Lotto ticket.

    Comment by Ross — March 22, 2016 @ 9:29 pm

  26. You don’t want to believe everything you read in Te Ara, Danyl. According to my parents the child benefit was very small, of most use in providing part of the deposit for a home because it could be capitalised and received in a lump sum. And the comparison in Te Ara with what an old age pensioner received relative to a family of four is misleading to us because what pensioners received in those days was not very much at all. That’s the reason the war generation of Robert Muldoon came up with the much more generous national superannuation scheme as they were reaching retirement age. Welfare really only operated at the very margin in the late 40s, 50s and 60s because high demand for meat and wool combined with our import substitution policies generated only frictional unemployment and not very much of that, reducing the need for much formal welfare. That was the real welfare state not what we think of as the formal apparatus of the welfare state today which is both more comprehensive and more generous. When the UK entered the EU in 1967 the resulting slump in demand for what we produced demolished the economic underpinning for import substitution and we began the painful process of moving to an economic policy that allowed the economy to respond flexibly to changes in demand for what we produce.

    Comment by Tinakori — March 22, 2016 @ 9:32 pm

  27. Back in the 1950s when the welfare system was a lot more generous people could, in theory, do this, but didn’t because they preferred to have jobs, families etc.
    Antoine’s punitive phobia of the arse-scratchingly indigent used to be all the go when it came to paying unemployment benefits. Only in the 1970s did the concept of paying the dole to the able-bodied actively seeking work become the norm. In the low-unemployment late 1960s a single male approaching the Labour Department to look for work would usually be sent to live in rural barracks-style accomodation to grub tussock before they’d receive the dole. As males were assumed to be the default breadwinners back then, married men were rarely compelled to live in work camps.

    Comment by Joe W — March 22, 2016 @ 10:49 pm

  28. @Ross

    If it doesn’t pay enough to live on, then it doesn’t let you get rid of the existing benefits, doesn’t create any transactional savings and ain;t a UBI. I agree with @12 above that the level of a UBI would be set considerably higher (in real terms).

    Comment by Antoine — March 22, 2016 @ 11:00 pm

  29. PS Getting your economic policy from the cat killer is also electoral poison

    Comment by Antoine — March 22, 2016 @ 11:20 pm

  30. I think it ‘sounds’ like ‘vote for me and I will give you money’. Another way of saying it is ‘I am proposing to buy your vote’.

    Well buying votes has worked for National via tax-breaks for ‘the rich’ once they manage to call over the heads of others to their ‘core’ electorate.

    So although one might argue that it would be rejected by ‘the electorate’ UBI only requires to be well-received by a small percentage of the electorate for it to yield enough votes to allow the Labour party to yield just enough influence in Parliament to later shit-can it as ‘impractical’ once it has done its job – which, IMO is to to gull the naive into voting for them.

    Or even ‘persuade’ people who ‘wouldn’t normally vote’ to get out of bed on election day and vote for Labour.

    But if the Green Party were to come out and endorse it too …. Why, it would yield a landslide victory for a Labour/Green alliance, and certainly get passed into law within twelve months of what would constitute an historic victory against the machine for ‘ordinary people’ everywhere.

    Cue slick marketing campaign…

    Comment by leeharmanclark — March 23, 2016 @ 7:27 am

  31. Or you can get your figures here: http://briefingpapers.co.nz/2016/03/universal-basic-income-and-income-tax-reform/
    Needn’t cost that much at all.

    Comment by MeToo — March 23, 2016 @ 7:28 am

  32. MeToo.
    Awesome: it’s “tax reform”!

    Comment by Clunking Fist — March 23, 2016 @ 1:40 pm

  33. Danyl, dont swallow John Keys nonsense. This is about restructuring the tax and welfare system, its not an added cost, its changing transfer arrangements. It lowers EMTRs (leading to more employment) and simplifies the welfare system.

    Remember Roger Douglas would have implemented a UBI if he had had another few months of absolute power.

    Comment by swan — March 24, 2016 @ 8:40 am

  34. We’d just call it “quantitative easing” and give the cash to everyone instead of just the banks.

    I’ve always wondered why banks to crashed the financial system get access to make-believe play money but it’s taboo for the rest of us. Instead, we get flat wages, zero-hour contracts and degraded working conditions.

    Wait a minute. I think it makes sense. If you shovel mountains of cash at the elites….but everyone else has to scrabble for a little…..then the perceived value of money IS sustained…..and the banksters have the key to an unmilited supply of “just print it”.

    Comment by Steve Withers — April 12, 2016 @ 9:38 pm


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