Universal Basic Income: Aligning the Left and Right
WORDS BY JORDAN COOK
One of the greatest challenges to alleviating poverty in developed countries such as Australia is the idea that giving people money, with no strings attached, acts as a disincentive for them to work. Fortunately, this idea does not reflect reality. It is fortunate because it presents us with an opportunity to lift all Australians above the poverty line through providing everyone with a universal basic income.
While this is a topic typically associated with the political left, the fiscal benefits of such a scheme to the national budget has convinced leaders across the spectrum that it is actually the cheapest way to address poverty. The Republican President Richard Nixon came within a bee’s dick of passing a basic income bill which guaranteed an unconditional income for all poor families. A family of four would receive US$1,600 a year, equivalent to roughly US$11,000 in 2018. An adviser to Nixon convinced him that the political cost of a failure of such a program would be too great, and that the bill needed to be framed in a way that emphasised the need for recipients to obtain employment. A condition on the payment had implicitly been introduced. The bill did not pass Congress.
The great majority of research, including that which underpinned Nixon’s bill, contradicts the notion that free money acts as a disincentive to work. The introduction of a basic income to test groups is not correlated with reduced hours of work, except for the youth, where almost all reduced work hours are filled with obtaining further education. It is indeed the implementation of further and further tests, and an ever-larger bureaucracy surrounding who ‘deserves’ welfare that creates a cycle of dependence and what one would call the ‘lazy poor’. If it is a condition on the assistance that one must prove their disadvantage, it stymies their ability to move beyond their situation of disadvantage. If the same person was guaranteed an income that keeps them above the poverty line, regardless of whether their situation improves, this is no adverse consequence of moving out of a situation of welfare dependence. Unconditional, no-questions-asked assistance does not create laziness or dependence. Making people feel as though they are poor because they are lazy does.
Additionally, universality means that the top tax bracket gets the same basic income provision as the poorest. This is not to get everyone onside with the scheme, but to indicate that in such a wealthy society as ours, living above the poverty line must be a right and not something that one must justify. To rid the welfare system of its stigma of laziness, guilt and unfairness we must disassociate a basic income with ‘need’ and being ‘deserving’ and treat it for what it should be – a right.
It was not necessarily that Nixon felt there should be a judgement-free welfare system that he was a key proponent of the idea, it was its economic appeal. Universal basic income will pay for itself (and then some) in three key ways. Firstly, existing welfare expenditure is replaced with the basic income. Secondly, the savings from dismantling the vast bureaucracy dedicated to administering the welfare requirements, processing the proof and conducting the tests is channelled in to the basic income. If we stop here and implement some back of envelope calculations, these two steps would generate enough cash to provide every Australian over 18 years of age with a basic income of $8,396 a year (welfare expenditure and administration cost divided by Australian adult population).
But the real saving is found in terms of cutting back on the services used to deal with issues created by poverty. Reduced policing costs, reduced court and legal fees, and reduced social work costs are among a few examples. A study conducted in London took 13 chronically homeless people and unconditionally, with no strings attached gave them a living wage of £3,000 and access to a social worker.
The combined cost of the program per person per year was £3,846 (including the wages of the social workers). But the majority of these homeless people either had a roof over their head or had applied for housing and had only spent on average only £800 after a year. They developed extraordinarily thrifty spending habits. The savings from no longer having to police their behaviour, or shift them in and out of the legal system tallied $26,923 per person per year i.e. it cost seven-times less to get the homeless off the street by providing them unconditional basic income than it does to monitor their behaviour. A universal basic income would save the government money.
By merely changing our minds, and shifting away from a conception of the lazy poor, we can implement a small-government policy with the power to eradicate poverty.