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Unconditional Basic Income - Rethinking the Labour Market

    Unconditional Basic Income (UBI) is a long-standing national social policy idea. Founded upon man’s right to live in freedom and dignity and his rights to individual choice and social protection, it makes a case for modern liberal egalitarianism. Defined as ‘an income paid by a political community to all its members on an individual basis without means test or work requirement’, UBI empowers the individual to provide for his/her existential needs by supplying purchasing power through monthly tax-free transactions. Every citizen is entitled to claim this on a life-long basis and remains free to gain more money through additional work, or to not work at all. The concept promises a simplification in tax and social security systems, better working conditions, rewarding of non-profit activities, reduction of inequalities in economic and social terms, positive effects on education, family planning and psychological well-being and even reductions in crime rates. It is uncertainties about UBI consequences for the labour market – a key driver of economic productivity and dynamism – that spur doubts.

    Regarding productivity, the most pressing concern put forth by UBI critics is the ‘laziness argument’, questioning whether people receiving free cash transfers will still have an incentive to work. In this context, UBI has been presented as one of the biggest threats to market economics relying on wage labour for activity and wealth. But research finds that the realities of UBI can be desirable for the national economy. Many have proposed that people would continue to work as it provides a sense of self-fulfilment and structures daily life. German polls have shown that only 8% of people would give up their job if faced with a considerable increase in unemployment benefits. Equally, transferable research results from the developing world demonstrated that cash transfer programs do not discourage work, but rather have the capacity to raise long-term living standards, as households use transfers to invest in ‘income generating activities’. Instead of dropping out of the economically active society, people will intentionally enhance productivity. According to a World Bank study, this is because cash injections encourage self-employment and ‘raise long-term earning potential’, which makes such programmes a ‘most effective tool for putting people to work and boosting incomes’.

    When it comes to dynamism, a national economy might even profit from a bit of laziness in the form of a minimal UBI-induced reduction of labour. The labour market in its present form is subject to many shortcomings, whose most powerful indicator – unemployment – is assumed to increase further due to modern artificial intelligence and the ageing of Western and Asian societies. In the context of digitalisation, commentators even speak about the ‘disappearance of work itself’. It has been proposed that the welfare state should adapt to these developments as wage labour cannot be the basis of public finances anymore. Otherwise, mass unemployment, entailing severe deflationary pressures, could deeply depress our economies. UBI is supposed to address this problem, as people are likely to reduce their working hours, giving way to more jobs for those excluded from the market. Liberal thinking further assumes that UBI will enhance economic dynamism as people have more freedom to pursue economically efficient rather than just high-yielding activities addressing their social concerns. Beyond this, UBI schemes have been identified as a massive fiscal stimuli promoting growth through enhanced consumption. Those outlooks are certainly appealing in view of the West’s looming secular stagnation.

    In spite of these arguments, major uncertainties remain. The ageing of societies might offset productivity gains as many people are expected to drop out of the labour market irrespective of UBI. 37% of the remaining working population might change their job when offered stability in personal finances and work for pleasure rather than income. Here, critics point towards low-pay jobs of essential relevance to society that nobody would voluntarily take on, proposing that our society is in need of individualised financial pressure. It is also unclear how this system would work in an open economy, concerns particularly relating to migration dynamics. At last, there are legal hurdles attached to weaving this model into national and EU regulations. Nevertheless, there is no quantitative evidence speaking against UBI. Official bodies in Finland, Canada’s Ontario, the Netherlands have therefore decided to carry out small-scale experiments to produce more substantial data. Britain’s Green Party has pushed for a similar ‘Citizen’s Income’ in the 2015 General Elections and encouraged the Government to commission research into this idea. Those initiatives will give us a sounder understanding of the economic realities of UBI and fears concerning labour market restructuration should soon turn into hopes: Not only has extensive research already testified to men’s proactive responses to direct cash transfer programmes, but it has also been proposed that our changing labour market can structurally profit from a healthy bit of laziness as it renews dynamism. 

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    Comments

    chester Clarke - About 719 days ago

    this is a fantastic idea providing the UK draws up a practical and firm immigration and asylum policy so that only needed skilled migrants enter the UK to our benefit. also there must be provisions put in place to ensure that after a set reasonably extended period such as 3 months the receiver of the UI must be in education, employment or self employed in a minimum of part time hours, regardless of financial income. furthermore UI should not be included in taxable income

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    Flavio Zanchi - About 719 days ago

    First, the popular idea of "laziness" does not come into the picture. Laziness is but a lack of incentive to work and can be offset by any number of reasons.
    Laziness is not a "sin" or a "vice," but a state of balance between desires and resources.
    Second, the current welfare structure already tips many beneficiaries towards permanent unemployment, whenever the wages of a full-time job are expected to be less than the composite benefits received.
    Third, the idea of UBI, or Negative Income Tax, has been proposed by, among other illustrious thinkers, that guru of all Conservatives, Milton Friedman. His point is that, a social safety net being essential to any productive community, UBI is the cheapest and most efficient way to achieve it. On top of that, it fosters job mobility, work flexibility and a multi-skilled workforce.
    UBI also follows the psychological principles described by Abraham Maslow, in his "hierarchy of needs". Creativity and productivity come when basic needs are secured. Necessity is not the "mother of all inventions," but the driver of short-term solutions and violence. Inventions are driven by self-actualisation and long term planning.
    Last, governments everywhere - especially those of a Socialist persuasion - hate it. It spells the end of trade unions, welfare bureaucracy, patronage and populism. It takes away power from incompetent politicians and gives it to competent administrators.
    By all means, bring it on!

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