Activists push for guaranteed minimum income for Canadians
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Many comments on the web are dismissive of a basic income because they simply multiply the per-person dollar figure by the total population and say that it is way too expensive. One needs to look at the current distribution of income, the existing level of welfare and subsidies, and the progressive income tax schedule to compute how much the basic income is likely to cost. The final pre-tax distribution of income will also change, but that is much more difficult to estimate.
This idea dates back to at least Thomas Paine's Agrarian Justice and is supported by many (at least 1/2 a dozen) nobel prize winning economists. A basic income is interesting to study and has many compelling features, but it is complicated enough that it is not possible to easily debate its overall merit via comments on hacker news.
In the US that would also be possible, but the level of basic income you arrive at might be bloody low. I don't know the data. At least, you'd save on bureaucracy.
Why would that be? The US has a significantly higher GDP per capita than every European country except Norway, Luxemburg, and maybe Switzerland (depending on who you ask).
If you're talking about limiting it to current social welfare expenditures, the US spends about 20% of GDP on social welfare [1], and many European countries spend close to 30%. But since our GDP per capita is so much higher it should come out fairly close per person.
[1] http://www.oecd-ilibrary.org/social-issues-migration-health/...
I love the concept of basic income. I've played with the numbers quite a bit myself. I've tried to make it work. I can't do it. Not even close for the US. I'm desperate for someone to post some basic of basic back of the napkin level math. So far no one has done it. I do not consider that a good sign.
That's right at about $10k per year to every American if we capped it at current government social spending.
So a family of 4 would get $40k a year.
You could make that 3.2 trillion go a lot further by raising taxes gradually so that when you reach say $75k you're paying as much extra taxes are you receive in Basic Income.
I'm pretty sure [1] includes state and local spending as well so this would be tricky.
[1] http://www.oecd-ilibrary.org/social-issues-migration-health/...
The point of doing it this way vs current welfare would be increased transparency / reduced bureaucracy and providing more of a sliding scale of income classes rather than welfare / non-welfare buckets. In principle the costs could be made to be nearly equivalent.
I'm curious what that 20% of social spending covers. It certainly includes health so we can't say "eliminate medicare/medicaid, but you get a yearly check for $10,000!". That's not gonna cut it. Federal+State+Local welfare spending is only 8% of total gov. spend and only ~3.1% of GDP. A long, long, long ways from being able to cut a $10k check per person.
Edit: Why on earth would anyone downvote that? It boggles the mind.
I'm sure there are plenty of things in that 20% that can't be replaced with $10k per person--things like extra equipment for poor schools. However this was just napkin math to show that it's within an order of magnitude of doable.
> "eliminate medicare/medicaid, but you get a yearly check for $10,000!".
For the vast majority of people that would be a huge net gain. The UK only spends about $3k per year on each person for health care, so I think the vast majority could get by on the insurance they could afford with $10k per person. You'd still have to account for the edge cases. This would probably work better in a country with a single payer system.
For the sake of argument, remove medicare/medicaid from the equation. That still leaves about 2.2 Trillion on other social spending. Let's subtract some other unknowns and leave it at just 1 trillion.
You can stretch that 1 trillion pretty far if you adjust it so that children don't get the full amount, and add extra graduated taxes so that households making over $45k (the national median) have a zero net benefit with only people making below the poverty line receiving the entire benefit.
I think it's very doable especially if you're willing to consider tax increases at the top. It's definitely not something outside the realm of possibility, and with demographic and labor changes in the United States over the next 50 years, I think something like a Basic Income is probable.
The UK government spends £732 billion. If we subtract £222 billion for Social Protection (we're replacing all of it with our BI), we get £510 billion required. If we add up all government income except Income Tax - Business Rates, Excise, etc - we get £481 billion.
That leaves us a shortfall of £29 billion. For the sake of simplicity, I'm going to assume that reductions in crime, the increase in VAT revenue, better health, etc are going to cover that. Let's call it close enough for government work. At the end of the day, we currently borrow £84 billion anyway, so at worst I've slashed the deficit :-)
Income Tax brings in £167 billion. UK population I'm going to take at 60 million. So, as a starting point, that gives us £2,783 annually, or £54 ($80) a week. Well, that's not a bad start! Let's consider what it means for actual people. Thus far:
Who loves me:
- Right-wingers. I've eliminated (or vastly reduced) the deficit, effectively increased the income tax allowance by £2,783 and given them this amount in cash, while reducing welfare payments to lazy, single-mother immigrants. I should be head of the Conservative party.
- Most people on Job Seekers Allowance (unemployment benefit). While I've cut the amount they actually get, I've also cut out all the paperwork, visits to the job centre, taking money off them if they happen to earn something that week, etc etc. Money without the hassle.
- Low wage workers. This is a big boost above Working Tax Credit and is hassle free (you don't lose it by earning more). It also allows some degree of security in the event of losing their job.
Who hates me:
- Left-wingers. While I've helped some low paid workers, I've also slashed benefits, there's no housing support...in short I've cut welfare while giving more money to wealthy people. I should be head of the Conservative party.
- People who're claiming several benefits. People who're on sickness benefit. Basically, all the folk who've had their income reduced below a living wage.
- Pensioners. The state pension has been cut significantly (and illegally).
Ok, I think I need to balance it a bit more. I'm going to reduce the Income Tax allowance from £10,000 (current) to £6,000. This should balance out at the end. I'm going to assume this increases income tax revenue by 25% (I've no idea if this is remotely close. If anyone can be bothered finding out, please let me know). More controversially, I'm also going to increase income tax by 25%, so the basic rate is now 25% rather than 20%.
That should give me a total revenue increase of 50% from Income Tax which gives me £4,175 annually or £80 ($120) per week.
And I think I'll leave it there. We'd need to borrow (or cut spending elsewhere) to make up other shortfalls (such as pension payments), but as long as it's less than £50 billion we still come out ahead. It might be more natural to cut the payment to £70 for everyone in order to free up some cash for other payments. In the real world, you wouldn't exclusively reserve Income Tax to one specific spending area anyway, but it makes things simple enough to get a rough measure.
Thoughts?
It is not so far fetched when you consider that we already provide some welfare support and a progressive income tax schedule with a complete exemption for low incomes. Most basic incomes proposals would do away with regular social assistance (while retaining special programs for the disabled, etc.) and would do away with the exemption for low incomes, since that is compensated for by the basic income.
Some have calculated that the progressive income tax could be entirely replaced with a flat tax with basic income and be close to optimal. I am not so optimistic, but the great thing about a basic income is that it can be tested at a low level and then slowly increased to determine its actual cost.
Is there enough food in the US to feed everyone? Undoubtably yes.
Is there enough space for housing? Yes, although the spatial distribution is a problem. But if it's no longer so essential to live where the jobs are ..
So, if the scheme is targeted to that everyone can afford a minimum standard of living, and taxes are increased so that income above that sees less of an increase in standard of living, the feasibility is obvious.
The real problems are the desire to exclude "undesirables" and "non-contributors", which results in an expensive, bureaucratic, and vindictive system.
(The UK is heading in the other direction with the "bedroom tax" and other changes leading to a big rise in demand from foodbanks)
http://www.budget.senate.gov/republican/public/index.cfm/201...
"Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level. By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty."
Then its not a basic income. If it is a basic income, everyone would get it.
You could, of course, have a similar net effect to tapering off with income simply by adjusting the progressivity of the income tax system, which is what UBI proponents usually propose. Since you changing the rates of the tax system, but not the behavior of the system, doesn't add complexity or administrative overhead, but eliminating the means-testing on the benefit side does reduce complexity and administrative overhead, this is seen as a net win even though (overhead aside) the net effect to recipients is the same.
I've never understood why one has to pay for the bare essentials, while piles of other things, like health care, transportation, parks, police, fire, etc. are highly/wholly subsidized through general taxes.
We already provide health care at no charge in most nations with reasonable efficiency, leaving one less reason for people to put up with crummy employers and removing the bureaucracy of proving that you need something that you, well, need. I like the idea of extending that path.
When the government has a monopoly on providing a service, they face no competition, which reduces their incentive to provide a quality service. Some services however, such as roads, are seen as natural monopolies, meaning even if privately owned they would still be a monopoly. In such cases people look more favourably upon government ownership as a government monopoly is seen as superior to a private monopoly.
I'm sure if you do a survey, the private organizations come out ahead, but people will recognize and give good ratings to a nicer looking building with prettier people running it, even if the results are poor, as long as they aren't drastically poor.
But yes, for many things, giving people cash would be better than directly providing the service. Monopolies, price takers, perfect competition (and I think one other) are well identified in economics, but regulators still allow harmful monopolies left-and-right, while intervening in highly-competitive markets for seemingly no reason.
Regarding private schools, I'm not sure; I imagine it's hard to study as there aren't many people of high socioeconomic status attending the 'worse' public schools, and not many poor people attending expensive private schools. There might be some data from countries like Sweden, where the government introduced a voucher system allowing parents to send their children to whatever kind of school they wanted and still get government support.
Regarding public hospitals here, they do have awful outcomes in terms of waiting time compared to private hospitals. For instance, waiting over a year for a procedure that could be arranged in a few weeks at a private hospital. I'm not sure about other outcomes.
Big experiments have a tendency to fail catastrophically...
No, your other comment just mentioned the dole, which is NOT the same thing at all. Other countries have the dole, in fact, every country listed above in the comment that states they don't have guaranteed basic income, all have wide spread social protections including welfare (and often, quite a bit more wide spread than Australia, whether you see that as a good or a bad thing is up to you).
Sometimes definitions vary from place to place, for instance in Australia you have to vote, it isn't a right you choose to exorcize like the world right is used elsewhere, it is a government mandated obligation, well similarly, in other places, welfare is not considered unconditional income, because well, it isn't. There are barriers to qualification and there are certainly strings attached (some places like the UK, the ASBO system coupled with the welfare system is used like a carrot on a stick with a donkey).
TLDR: This is not about welfare, that exists even in 3rd world countries (although not always to the same degree) it is about unconditional basic income.
In what way is it not?
The money goes into your bank account, you can spend it on beer and smokes if you want to.
No, its not, even per the official-source article you cited in your other post describing it [1]. In addition to "earning enough money" (income test), you must:
1) Also meet an "assets test", and 2) Be "looking for paid work", and 3) Be "prepared to meet the activity test while you are looking for work".
And that's just the short version: the linked "Eligibility Requirements" page [2] has a longer list.
[1] http://www.humanservices.gov.au/customer/services/centrelink...
[2] http://www.humanservices.gov.au/customer/enablers/centrelink...
Yep. If you have lots of assets, you don't get this money. I'll bet any Guaranteed basic income would work the same - i.e. you don't want to pay it to people that have a $300k house.
>2) Be "looking for paid work"
You fill in a form every 2 weeks that takes 5 minutes.
> 3) Be "prepared to meet the activity test while you are looking for work".
Again, it takes 5 minutes every two weeks.
It's hilarious to see so many people debate Minimum Basic Income as financially not viable or that it would destroy the economy because nobody would be motivated to work. Here I am pointing out that Australia already essentially has it, and those two problems are not real. And here you are nit-picking the fine details. Look at the big picture here. It works, Australia has it.
An unconditional basic income would, by definition have neither an assets nor an income test.
A guaranteed minimum income would only actually be a guaranteed minimum income if it had an income test, but not asset test.
> You fill in a form every 2 weeks that takes 5 minutes.
The amount of time spent is not the issue. The fact is that you have to be looking for work, prove that you are looking for work, and not turn down work. Its essentially an program to protect against involuntary unemployment, not either a basic income or a guaranteed minimum income. Its essentially a guaranteed employment program with some other conditions.
> Here I am pointing out that Australia already essentially has it,
Australia has neither a guaranteed minimum income nor an unconditional basic income. It has a fairly generous means/asset/behavior-tested welfare program, which is not the same thing at all.
Its a pretty standard example of the kinds of conditional welfare programs in opposition to which UBI is offered.
UBI is neither: 1) means-tested: because this creates perverse incentives against work (reduces the marginal value of outside income) and increases administrative costs (because you need to take information on means, verify it, and determine benefits based on it, all of which changes over time.), nor 2) conditioned on participation requirements (for much the same administrative reasons as apply to means-testing).
Famously Friedman's answer to what would be better than minimum wage was a negative income tax bracket, and Nixon, of all people, almost implemented it.
At first glance it seems to me that this would have one of the same problems as the current system, which a guaranteed basic income is intended to solve - a high effective marginal tax rate at low (or no) income levels. (Unless the payment actually is positively proportional to earnings, in which case it has the obvious problem that it provides less benefit to those who need it most.)
Either way, I'm not clear on how this would be superior to a fixed guaranteed income with adjustments to the current tax rates such that the middle class end up with approximately the same after-tax total income.
"Negative income taxes can implement a basic income or supplement a guaranteed minimum income system.
In a negative income tax system, people earning a certain income level would owe no taxes; those earning more than that would pay a proportion of their income above that level; and those below that level would receive a payment of a proportion of their shortfall, which is the amount their income falls below that level."
For example, if you take a basic income system with a $20k guaranteed minimum income - if you tried to recreate that with a negative tax bracket and a threshold of $20k, you would need to pay 100% of the shortfall. And even then, you would effectively have a 100% marginal tax rate; until you make $20k there is no financial incentive to work at all.
Instead, to get the equivalent of a $20k GBI, you would need to do something like, set a $40k threshold, with a negative tax of 50% of your shortfall. So at 0 income you get $20k. (And at 10k income you get 15k in negative tax, for a total of 25k, etc.) Of course, your marginal tax in that example is still very high at 50%. To make the marginal tax rate low, which is desirable at low income levels, you would either need to set a very high threshold, or more likely, have multiple negative tax brackets at different rates.
What I still fail to see is how this is "better" than a standard guaranteed income. It just seems like people will find it much more confusing than providing a fixed amount to everyone and having positive tax brackets as we do already (albeit different ones).
Taxes = -10 + 0.3 * BTI
So after tax income becomes:
ATI = 10 + 0.7 * BTI
(You can put on progressive taxes there, but I tried to simplify)
I'm quite sceptical about BI because I haven't seen any analysis that would answer the question who exactly would get richer / poorer and how much. Unemployed people get money from the government in Canada – will they get more or less after implementation of BI? What about teachers, software developers, bus drivers, lawyers, etc?
AFAIK, the main claimed benefits of BI are:
– The system would be simpler and cheaper. True, but only negligably.
– It removes disincentives to work. I'm not convinced about this, you could argue the opposite is true actually.
GMI means that you will get enough money to bring your income up to X (in this case $20k.)
BI means that every citizen gets Y dollars per year unconditionally.
GMI is only a net benefit if you make less than X. BI is more complicated because you have to decide at what income level should the BI be income neutral, i.e., how much do you have to make before the BI you're receiving and the extra income taxes you're paying are equal.
> I haven't seen any analysis that would answer the question who exactly would get richer / poorer and how much.
The reason you haven't heard this is because it's completely up to the implementation details.
If for example the government decided that for people making $50k a year the BI should be income neutral, then it would be a net benefit for all people under $50k and a net detriment for everyone over that.
>What about teachers, software developers, bus drivers, lawyers, etc?
In this hypothetical scenario some teachers, software developers, bus drivers, and lawyers would benefit, and some wouldn't.
>It removes disincentives to work. I'm not convinced about this, you could argue the opposite is true actually.
This is only true for BI, not GMI. GMI adds a huge disincentive to work for less than (or close to) whatever the guaranteed minimum is set at.
I would say you're naive of the costs if you think the system change would only be negligibly beneficial. There's the distribution costs, the evaluation costs, then there's the investigators to make sure people aren't scamming the system. For every system. You've got disability, welfare, unemployment and pension investigators to make sure everyone is getting what they're supposed to and to make sure no ones scamming the system. You can't scam basic income.
It removes disincentives to work, in that without welfare systems there's no disadvantage to work, and there's no advantage to trying to scam the system.
It does also do the contrary. It incentivized people not to work, at least for shitty employers. You can't be an assholr to a minimum wage employee when they can leave and still afford rent and food.
It also provides income for people to start up businesses (this has been shown in BI trials currently ongoing in India), which when we have high unemployment rates amongst youths I can only see this as beneficial.
What's better for society, an 18 year old doing busy work making coffee for people too lazy to make their own or do you want them writing apps, starting lawn care companies, etc.
http://igps.victoria.ac.nz/WelfareWorkingGroup/Downloads/Wor...
If you've got a partner, or dependent(s), you'll get more. Likely if you're living on this, you also qualify for Rent Assistance, which means more money.
You also get paid like this while going to University.
Australia has been doing this for decades (my Goole-fu fails me for the exact number of years), and it appears to be perfectly financially viable.
Read more about Australia's policy at [2]
[1] http://www.humanservices.gov.au/customer/services/centrelink...
[2] http://en.wikipedia.org/wiki/Unemployment_benefits#Australia
So let's say you earn $5k/year, you'll get the dole to top you up to $12k/year.
So you get a guaranteed income.
For all intents and purposes, there is no difference.
The difference is this. It isn't completely different, just different in this one way, UNCONDITIONAL. Your dole is anything but. Unconditional income gives options that the dole does not. It gives extra safety the dole does not.
Here[1] are a couple reasons people are supporting these movements from an Anglo perspective, I assume you have more or less the same type of welfare and obviously we have shared culture, so perhaps some of these apply to Australia and how this differs from what we have now.
The dole in Australia is only conditional on one thing - how much money you earn. If you already earn more than the basic income, you don't get the dole, which is the definition of a basic income.
If you earn less than the basic income (~12k/yr) you do get it, to top you up to that amount.
It's cash deposited into your bank account, you can spend it on whatever you want.
Every article I can find about the Australian dole references other exclusion and participation requirements like a "mutual obligation requirement" that has various ways that it can be satisfied, one of which is "Work for the Dole", and indicates that if those requirements are not met, you don't get anything. [1]
> If you already earn more than the basic income, you don't get the dole, which is the definition of a basic income.
No, the definition of an unconditional basic income is that you get it -- with no direct reduction based on other income or wealth [2] -- no matter what your income level is, and without other participation requirements besides membership in the served population (usually defined by legal residency within the jurisdiction, but possibly by citizenship instead.)
[1] including the ones you cited upthread, but also, e.g., http://www.theguardian.com/world/2014/may/13/young-australia... and http://en.wikipedia.org/wiki/Work_for_the_Dole
[2] this does not exclude the potential for a reduced effect through operation of, e.g., a progressive tax system, however.
Sorry, you're right, it's called Guaranteed Minimum Income which is what the original linked article is talking about.
However, 20k is a bit too high. You don't want to discourage people from working altogether. After considerable thought, I think the equivalent of a part-time job at minimum wage makes the most sense.
20k is basically poverty, you are not going to remove any desires at that level.
> I think the equivalent of a part-time job at minimum wage makes the most sense.
The idea is to make sure that when all else fails, you can still cover the necessities of life, things like eating and a place to sleep. Part-time minimum wage doesn't come close to that.
Then who do you think is going to do the part-time minimum-wage jobs?
No one. They can just get more money for doing nothing.
Obviously, employers will start paying a lot more for part-time menial jobs, or go out of business. All of a sudden, Canadians will be asking "Why did everything get so expensive?" and "Why can't teens find jobs these days?"
1) Stay unemployed and live off 20k/yr. 2) Work a min wage job and live off 40k/yr.
Many people will choose option 2.
If "Basic Income" is implemented the way I understand it, the income from a part-time minimum wage job would stack on top of it (minus some amount of tax).
The idea isn't that you make more by not working. The idea is that you can live (not very comfortably) without working, and that every bit of work you do marginally improves your income and therefore your comfort level. This makes part-time minimum-wage jobs a reasonable target for people who want slightly more amenities than they can afford at the basic income level.
Based on the comments here, I don't think this proposal is for basic income. Rather, if you already make more than 20K, you don't get anything.
Your milage may vary. Living in rural Canada, I calculated my expenditures to be under $20,000 last year. I don't feel I'm living in poverty at all (I have a developer's income if I want/need to spend more). My only concern is that $20K would not leave much room to save for the future, but if the income is guaranteed for the rest of your life, perhaps that is less of a concern?
I think $15k would be a better figure, as it wouldn't let you live so comfortably and therefore there would still be an incentive to go out and work.
McDonalds and Walmart would probably go out of business, but that's not necessarily a bad thing. We would be left with higher end restaurants where people are paid a good salary to work somewhere that they enjoy.
Though, when people aren't having to work dead-end jobs to survive, maybe they could take time to prepare food properly and cheaply instead of buying "convenient" $5 burgers?
I think it's impossible to know for sure whether basic income would be financially viable unless you actually implement it.
If you're a couple, double that, $2k/mo will get you a wonderful place to stay. It'll be difficult to build a savings, or to have a few children, but it'll go a long way, and I think it'll highly discourage people from working after graduating.
Now, I don't think everyone needs to work in our society, but that's another can of worms.
If this was per adult in the UK then I'd be getting a substantial income boost over what I'm earning at present.
21 and over: £6.31
18 to 20: £5.03
Under 18: £3.72
Apprentice*: £2.68
6.31 * 40 * 52 = £13,124.80 per year - for over 20s.
5.03 * 40 * 52 = £10,462.40 per year - for 18 to 20 year olds.
3.72 * 40 * 52 = £7,737.60 per year - for under 18 year olds.
Thanks for caring enough to give that information though.
Employers needing employees will have to come up with something better than "come to work or starve" as an incentive. HNers should be familiar with a large number of methods.
Canada has 34,880,000 people in it, so a CAD 20,000 basic income would cost CAD 697,600,000,000.
According to http://www.fin.gc.ca/afr-rfa/2013/report-rapport-eng.asp#a3, Canada's total government revenue (at the federal level) was CAD 256,600,000,000.
So Canada would have to raise taxes by 170% to provide this basic income, and raise them again if they want to provide any of the services they do today. (National Defense, Healthcare, etc.)
That population number dwindles when all these people are taken into account.
Remember Canada has the youngest population in the G8 and could be the best candidate for this type of experiment.
If it's per person then 20K is WAY too much. A family with 3 kids making 100K per year?
If they actually did that watch the birth rate in Canada skyrocket.
Something seems off here.
Welfare is intended to provide necessities. A family with seven kids clearly has more needs, and thus needs more money.
Minimum income, on the other hand, is intended to provide a minimum income. A baseline you can rely on, no matter what kind of situation you find your life in.
Each approach has strengths and weaknesses. It would appear that you favour a welfare system, and that is fine. I'm not sure why we would want to shoehorn minimum income back into welfare though? Why not just stick with welfare if it better fits the needs of society?
The power comes from: a) Removing the bureaucracy of having both a progressive tax system (you make more, you pay more) and a redundant means tested benefits system (you make more, you get less) b) Having security of the basic needs of life, regardless of what happens.