Some Thoughts about Basic or Citizenship Income Gerry Rodgers

The idea that all citizens should receive an income, adequate to cover their basic living costs, without conditions, is not new. But it has in practice been a marginal, utopian idea without much political impact. In the past few years, however, it has received increasing attention. In a referendum on the subject in Switzerland it gathered a respectable although minority vote. One of the candidates for the French Socialist Party’s 2017 presidential nomination made it a central issue of his campaign. Green parties often favour the idea. There are a few local experiments under way.

Advocates of the idea see it as a way to realize the right of all citizens to the wherewithal of a decent life, a way to give people the freedom for creative and personal use of their time free of the obligation to work, a means to compensate for an increasingly jobless economy, an instrument to eliminate poverty without having to address the overall pattern of inequality of income and wealth. Libertarians see it as a way to reduce the presence of the state, and to free capitalists of minimum wages and other labour market regulation; egalitarians see it as a route to gender equality and to eliminating the extremes of class differentiation. Existing social security systems, it is argued, are far from universal and need a heavy bureaucratic mechanism to establish and supervise entitlements; a basic income can replace existing systems at much lower cost.

There are many arguments here, and different proponents often have different concepts of what basic income really means. But despite its attractions there are some serious problems.

A fundamental difficulty is that this is a strategy for distribution without a strategy for production. Existing social security systems are intended to complement the labour market, not to replace it. They are built on the assumption that citizens should earn a living from labour, as long as employment is available. Without this assumption, and without the need to work, it is necessary to ask where the basic income is going to come from – whether the level of economic activity will be sufficient to sustain this transfer of income. This is one reason why Tony Atkinson, for example, favoured a “participation” income rather than a citizen income, one that is conditional on participation in productive work or other socially endorsed activity, at least within the prime ages. There is a moral issue here – whether rights and obligations should be considered together – as well as a practical one, for our societies and economies are still based on the principle that we engage in work.

This is in some sense the mirror image of the argument that basic income is needed because people are increasingly being excluded from the labour market by technological change. That argument can be contested, of course, because it has resurfaced at regular intervals since the industrial revolution, and has always been seen off by a rise in economic demand. But suppose we take it at its face value. If production is to be maintained with declining employment, we need investment in capital-intensive manufacturing and capital-labour substitution in services. This will only occur, in a capitalist economy, if this investment generates sufficient profit. These production activities will also need some highly skilled workers, who will have to be well paid to attract them into the labour force. This suggests the prospect of a society with three classes: capitalist or capital owners, living off the returns from their investment; a class of skilled and well paid workers in various occupations; and those who live on their basic income, perhaps combined with occasional low paid work. That may or may not be better than what we have at the moment, but it doesn’t seem particularly desirable. It also raises additional questions about how the economic model will work – for example, what will happen to existing low skill employment?

In fact, regardless of whether or not growth is jobless, it is not at all clear what would happen to the labour market. The outcome would surely be quite different in Switzerland and Swaziland, and would depend on the level the basic income is set. Yet it is in the labour market that solutions must be found. There is a risk that a basic income could distract effort from extending worker protection and providing effective employment security, which require action in the production system and in the design of labour market regulation.

Implicit in basic income is the idea that this is a transfer of cash, so that individuals and households will spend their basic incomes in the market on the basis of their own preferences.  But even in high income economies, the market does not always work well. There are at least four major areas where distributing cash may not suffice: education, health, housing and food. For education and health it is widely accepted that a public system is needed, and that it needs to be financed by the state. So that could not be part of basic income. But housing too is very poorly served by the market. High and low rents in the same market, the need for administrative controls, rapacious landlords, shortages of supply, differences in entitlements between owners and renters, there are many reasons why housing is a nightmare for many people. This calls for state intervention in the housing market rather than just a basic allowance for housing costs. This is less true of food, for which the market works better in high income countries. But in low income settings market imperfections are manifold: food markets are subject to erratic swings in supplies and prices, sellers can exploit extreme need, markets for some goods are captured by particular groups. In these countries public food distribution systems and subsidies are often needed. The more general point is that basic income has to be considered alongside the broader provisioning of public goods.

Another problem lies in the word basic. It assumes that there is some sort of line that can be drawn, “enough”, meeting some physical and social targets. But we all aspire to more. That might seem secondary, but this was the rock on which the “basic needs” development strategy of the 1970s foundered. The less developed countries at the time saw basic needs as limiting them, a way of preserving existing inequalities. They wanted more. Likewise, if basic income is not to be seen as limiting, it needs to be set high. But then the question of cost becomes significant. If the basic income is set low and replaces all existing social security transfers the net cost would probably be manageable, provided that the transfer is recovered from higher income groups through progressive income taxation. Most OECD countries already spend between 10 and 20 per cent of GDP on social security and social protection. But a basic income beyond the bare minimum could rapidly become an intolerable charge on the state.

One practical issue is that the right to basic income is necessarily linked to citizenship or residence. But in an unequal world, what is basic in one country is high in another. Would migrants and refugees have access to a basic income? There is likely to be popular resistance. But if not, and more generally if there are other classes of people who are excluded for one reason or another, this becomes an additional source of inequality and marginalization.

The case for a basic income is much easier to make for groups outside the main working ages: children, and perhaps young people in full time education and training; and older people. And in fact, there are already policies of this type in place in different countries – family allowances for children (sometimes conditional on school enrolment), minimum pensions. It would be better for basic income policies to aim at improving income guarantees for these groups. For children, the problem is of course that the allowance is paid to the parents (but that is also true of a wider basic income). There is a case for designing the allowance in such a way that it has to be devoted to the needs of children, which may call for specific policies for food, education, housing and clothing.

The notion of a basic income does nothing to deal with the distribution of wealth. In some ways, the idea of basic wealth is more attractive than basic income. A large proportion of individuals have no significant wealth, and this is a major source of insecurity. It has been suggested that all citizens should be given – at birth, or adulthood – a share in national wealth, financed by a tax on wealth or inheritance. This could be done in a way that protects the wealth from frivolous dispersion, and could help individuals overcome personal difficulties during their lives and invest in developing their capabilities. It would also have less impact on the labour market. But that is another story.

The idea of a universal basic income is appealing, but it is not obvious that this will give a better result than improvements to existing social security systems. And surely if a big push is needed, it should be focused on ensuring access for all to productive employment which provides decent incomes. This is where the need for fresh thinking and new methods is greatest.