By Daniel Margrain
Last year the Dutch government introduced an experimental universal basic income (UBI) system which is paid to the residents of Utrecht and 19 other Dutch municipalities. Unemployed people receive the equivalent of about £150 a week. If successful, the pilot will include payments to all citizens whether working or not. The aim is not to penalize the unemployed for finding work because they will receive their employment income in addition to the universal income payment. The Finnish government is planning to roll out the latter comprehensive model later this year.
Chris Dillow has done rough sums for the UK and comes up with £130 a week (around $200). Charles Murray had a look at it for the US and went for $10,000 a year, a remarkably similar sum. These are the sorts of amounts that could be paid within our current societies and wouldn’t act as a disincentive to employment because, as Tim Harford argues, people would want to supplement it.
Writer and blogger Tim Worstall has posited that traditional welfare schemes create a disincentive to work, because they typically cause people to lose benefits at around the same rate that their income rises (a form of welfare trap where the marginal tax rate is 100 percent). He has asserted that this particular disincentive is not a property shared by basic income as the rate of increase is positive at all incomes.
In an era when intelligent machines will soon replace human workers in all sectors of the economy, the hope is that a UBI scheme will prevent the government having to spend extra money on the vast array of related services connected to the bureaucratic elements of the state that are dependent on the unemployed for their existence.
This covers everything from unemployed benefit snoopers to the administering of homeless shelters. Then there are the knock-on affects that stem from inequality such as health, poverty and crime. Writing in the Guardian, John O’Farrell astutely points out the benefits of such a system to the UK:
“Since the decline of the unions, workers have been increasingly powerless to refuse longer hours and less money with only the food bank to fall back on if they walk away from an exploitative job. With a guaranteed state income to keep the wolf from the door, employees would be given the bargaining power to demand civilized working conditions and reasonable rates of pay….Our labyrinthine system of benefits and tax credits would disappear and all the stigma of signing on with its degrading culture of blame and humiliation for those at the bottom of the pile.”
The benefit system currently in use in the UK is punitive. Humiliation is cast on those at the bottom of the pile enabling the majority in the middle, to feel better about themselves. O’Farrell concludes:
“For all the apparent expense of the UBI, we would save the small fortune that the state currently spends mopping up the mess of social problems caused overwhelmingly by chronic poverty. Of course, there are complex reasons for increasing homelessness, for bulging prisons, for growing mental health problems – but desperate financial pressure is a major factor in all of them. Every decade sees us spending increasing billions trying to tighten the lid of the boiling cauldron. It might be so much cheaper just to turn down the temperature a bit.”
The long-term socioeconomic and health benefits related to the kind of progressive and enlightened policy adopted by the Dutch and Finns is palpable, not only to the poorest in society but it also has some benefits to those at the top. As Richard Wilkinson put it: “There seems to be some truth in John Donne’s “No man is an island.”
Rather than the punitive strategy of coercion adopted by the British and other governments by which the ‘stick’ is preferred to the ‘carrot’, the introduction of the UBI – based on economic pragmatism rather than state vindictiveness – will almost certainly result in the nurturing of talents and creativity that otherwise wouldn’t necessarily come to fruition.
It’s almost certainly no coincidence that what was arguably the peak of working class creativity in the arts occurred during the 1960s when, underpinned by a universal system of welfare provision, the class in question was at its most confident – a confidence that has been in decline from the mid 1970s onward marked by the ending of the post-war settlement between capital and labour.
Over the last 40 years, ordinary people have found it increasingly difficult to focus on doing things they really like because they tend to spend most of the productive part of their lives working at something they hate often for no other a reason than to maintain the necessities of life – namely securing a roof over their head and ensuring they have access to enough food.
Since the Callaghan government, punishment has been the overriding factor that has guided the social policy of successive UK administrations’ – both Conservative and Labour. The purpose has been to foster a lack of any sense of entitlement. This has involved the gradual removal of a social security safety net to enable the government of the day to maintain a level of social stratification in order that the demands set by unfettered capital be established.
The Dutch and Finnish models, intended to be correctives to the lack of universal provision, is in principle similar to that adopted by the Green Party as outlined in their previous General Election Manifesto. The rationale underpinning the introduction of a system of UBI is that it would not only end the kinds of state bureaucracy and inefficiencies described, but would also be cheaper to administer and hence save the tax payer money. Third, it would boost local economies because poor people would have greater income at their disposal with which to spend on goods and services.
Reduction in inequality
But arguably the greatest benefit is that such a policy would lead to a reduction in inequality whose affects, as Richard Wilkinson has shown, are divisive, harmful and socially corrosive. Research indicates that the world’s richest 1 percent of people own the same amount of wealth as the rest. As Oxfam shows this kind of extreme wealth confers political power that can be used to influence rules and systems in favour of an elite at the expense of everyone else.
However, the more equitable and egalitarian the society, the greater the control people have over their lives. More equal and fair societies provide the conditions by which a system of equality of opportunity can be put into place. Workers, as participants in a scheme of cooperation that contribute toward national income, would then have a claim to a fair share of what they have helped to produce.
Richard Wilkinson shows that a correlation exists between income inequality within countries (not between them) and social gradients in terms of a multitude of indicators. These include health, life expectancy, literacy/numeracy, infant mortality rates, homicide rates, proportion of the population in prison, teenage birthrates, levels of trust, obesity, mental illness – which in standard diagnostic classification includes drug and alcohol addiction – and social mobility.
What the data shows is that in the more equal countries – Japan, Finland, Norway, Sweden – the top 20 percent are about three and a half to four times as rich as the bottom 20 percent. But on the more unequal end – U.K., Portugal, USA, Singapore – the differences are twice as big. On that measure, the UK is twice as unequal as some of the other successful market democracies.
According to research measured by the Gini coefficient, which is widely regarded as the best measurement of income inequality, Holland is the fourth most equal society within the EU while the UK is ranked way down at twenty-one. What impacts on society does this level of inequality point to?
Wilkinson collected internationally comparable data on problems with social gradients – the kind of problems that are more common at the bottom of the social ladder of the kind outlined above – and weighted them equally by putting them all in one index. The data shows an extraordinarily close correlation between inequality and the kinds of social problems described. The same correlation equally applies to children who also perform worse in the more unequal societies.
Data, in its totality
What the data in its totality indicates, is that the average well-being of our societies is not dependent any longer on national income and economic growth. Wilkinson elaborates further:
“That’s very important in poorer countries, but not in the rich developed world. But the differences between us and where we are in relation to each other now matter very much. I’m going to show you some of the separate bits of our index. Here, for instance, is trust. It’s simply the proportion of the population who agree most people can be trusted. It comes from the World Values Survey. You see, at the more unequal end, it’s about 15 percent of the population who feel they can trust others. But in the more equal societies, it rises to 60 or 65 percent. And if you look at measures of involvement in community life or social capital, very similar relationships closely related to inequality.”
In terms of mental illness:
“WHO put together figures using the same diagnostic interviews on random samples of the population to allow us to compare rates of mental illness in each society. This is the percent of the population with any mental illness in the preceding year. And it goes from about eight percent up to three times that — whole societies with three times the level of mental illness of others. And again, closely related to inequality.”
The overriding factor that emerges from Wilkinson’s research into inequality are it’s psycho-social effects and how this relates to the kinds of values inherent to a capitalist system in which society is driven by consumerism and competition that leads to status insecurity. The potential for the onset of chronic stress and depression from social sources in turn:
“affect the immune system, the cardiovascular system. Or for instance, the reason why violence becomes more common in more unequal societies is because people are sensitive to being looked down on….I should say that to deal with this we’ve got to…constrain income, the bonus culture incomes at the top. I think we must make our bosses accountable to their employees in any way we can. I think the take-home message though is that we can improve the real quality of human life by reducing the differences in incomes between us.”
With regards to social mobility, Wilkinson states bluntly that “if Americans want to live the American dream, they should go to Denmark.”
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