A New Approach
    The need for a new approach to our society which includes a Universal Basic Income

    by Ian Ritchie

    " If we want a healthy society, we need to create a climate that generates feelings of security and well-being and where all people have real choices..."


    NEW ZEALAND SOCIETY appears at present to be characterised by high and rising levels of fear, stress. poverty and despair. Many of those not in work live in poverty and fear for their survival as their incomes fall and prices rise. Those in work are stressed and fearful. Fearful of losing their job and stressed because of the greater amount of work required of them, generally for no increase in pay.

    Too many from both groups do not cope and seek extreme solutions such as crime and suicide.

    Fear, stress, poverty and despair are not the side effects of a healthy society, they are the side effects of a sick and malfunctioning society. If we want a healthy society, we need to create a climate that generates feelings of security and well-being and where all people have real choices. From this, a stream of creativity will flow which will create the future we can all be enthusiastic about.

    A Universal Basic Income, at a level to allow meaningful participation in addition to providing for daily needs in a context of collectively funded basic services such as health and education opportunities and housing support would lead to the development of such a climate.

    It is considered feasible and a network has been formed in New Zealand to promote this approach.

    The path New Zealand is on and its side effects

    New Zealand society and its economy is currently going down the track of 'laissez faire' for the wealthy and powerful with mechanisms to support their activities but considerable controls on the activities of the 'poor' with little support for them. Coupled with this is a major curtailment of the role of the 'state' and promotion of individual rights and responsibilities. While this system is marketed as an economic system, it has major implications for the whole of society as it influences the organisational structures in our society and has a major influence on the way we relate, one to another.

    The society/economy/government model being worked towards currently is one in which each person is primarily responsible for their own circumstances and meeting their own needs; the economy looks after itself with minimal constraints; the government only sets policy (does not run programmes); the private sector generates profit and the third or social/community/voluntary sector meets un-met people needs.

    This system is designed to reduce the links between people and to produce inequities, as they are fundamental to the 'efficient' working of the 'free market'.

    While its proponents declare the opposite, dependency is also inherent in this system: dependency for income on employment; dependency of partners on their working spouse; the current, remaining support mechanisms are available on condition of not working (the unemployment trap) and the present abatement rates create the poverty trap.

    The increasing trend to user pays health and education and market rents for 'state' housing means that the level of inequity in general and in these areas specifically, will widen and become structural as opportunities decline for people on a benefit with few reserves to improve their situation or expectations. The move to individualise the provision of financial security including retirement income will further widen the gap between the wealthy and the poor.

    While the Government repeatedly declares our changed society to be an 'economic miracle', the reality is somewhat different. The point of an economic miracle must surely be that people are better off or going to be. There are few signs of this. There are plenty of signs of the opposite.

    The level of new admissions to prison for serious violent crime trebled from 1985 to 1993 and if this growth continues, it is predicted that we will need to double the prison capacity by the year 2010 (Triggs, 1995). Almost one in four of the working age population are dependent on state support (DSW 1995). One in five of all New Zealanders and one in three of all New Zealand children live below the poverty line which is defined as 60% of the median equivalent household disposable income. The incidence of poverty among Maori and Pacific Island families is two and a half times greater than these overall levels. (Stevens, Waldegrave & Frater, 1995).

    The story is similar with unemployment, for while jobs have been created, the level of unemployment is still higher than it was before the restructuring of our society began in the mid 1980's and is now rising again. Jobs are increasingly casual and short term and the Employment Contracts Act brought in in 1991 has further helped to severe the links between pay for work and the necessary income to live by removing the award structure and allowing pay rates to fall below those previously determined as appropriate for that class of work..

    The level of poverty is steadily increasing and the gap between the 'haves' and 'have nots' is being progressively widened largely through cuts in both benefits and taxes.

    More jobs are not the answer, even if they might eventuate. The private sector has never produced enough jobs for any society and is less likely to now. Profit is their goal, not jobs and manufacturing units are located where labour and environmental protection costs are low. Free trade means that these low wage rates are imported into our own country under the guise of competitiveness.

    The new model of government and society being pursued denies the learnings and wisdom of many generations: that Government has a legitimate role in the managing of affairs of a society; that the 'market' is not able to deliver many of the basic needs of a society; and that pronounced inequalities within a society have serious, long term detrimental effects.

    The UBI alternative

    The provision of a basic level of income for all has wide appeal across the political spectrum. The concept has been around for some time, it has been well researched and well documented.

    Some say that it should be within the context of user pays for all services and that it should be set just above starvation level. To me that means that the proportion of our society below the poverty line would increase. They would be further denied access to the basics of life.

    I do not see how people in this situation can be considered to be empowered, which is the justification used for the provision of a basic income. They have few choices and have to struggle for the basics.

    The basic level of income I am interested in covers the basic needs with enough over to allow for such things as a trip to the beach and some involvement in sport and recreation so that people do not have to stay at home, unable to go out because everything costs.

    In addition to this, I consider that the basic needs of health services and educational opportunities need to be provided along with support for housing, the greatest expense for those on low incomes.

    Until recently these services were available, but the last two Governments have been systematically reducing and privatising them despite the opposition to this in large measure from the majority of the population. This has been done in the name of introducing competition and removing the 'dead hand' of government. But the effect of this has been to reduce the level of access to these services for a growing proportion of the population and this has negative effects on society as a whole.

    A healthy, educated population in good shelter is the desirable basis for any society and the benefits of this to all in that society justify to most the public or collective funding of these services from the contributions all make.

    People in this position, with a reasonable level of financial security, are in a position to have real choices, not just in theory but in practice. At this point they are getting to the place where they can be creative, and that to me is the real objective.

    While necessity may be the mother of invention, the spirit of inventiveness generally comes from a secure place where the energy is not entirely bound up by survival.

    The provision of health services, educational opportunities, housing support for the least well off and the provision of other 'public services' I call the social contract. What we receive in return for our taxes. I consider this 'social contract' needs to be reconsidered and reviewed on the basis of wide public discussion. Once we have decided what the collective components to the operation of our society will be, then we can work out how to finance them.

    The inclusion a universal basic income, the cash component of the social wage, is the key piece in the jigsaw, making the picture complete, giving the measure of security required for people to feel they have real choices.

    Rates and Funding

    We are lead to believe that we cannot afford such a package, that targeting assistance is cheaper, more efficient and effective. While the costs may be lower if only the specific programme costs are considered, the real costs are much higher when the very high costs of the side effects of poverty stress and despair and included. Targeting is neither effective nor efficient in that it creates the situations we are told it will eliminate. It creates poverty and unemployment traps. It creates dependency.

    There have been several attempts to cost a UBI but these have generally considered only the more obvious costs and these depend upon the levels set. For simplicity, I will include only New Zealand work

    In 1987, Gilchrist and Goldsmith, Waikato University, suggested $150/week for adults and $75/week for children up to the age of 15. (Estimated to be currently equivalent to more than $200 and $100/week resp). They considered that the increase to funds already allocated to the various benefits could have been met by an increase in company tax from 0.1% to 24%, which was then the average personal income tax rate.

    Rankin, at the Auckland University Economics Department, in 1992, suggested a figure of $6000/annum (20% of gross domestic product/adult), $115/week for every adult, with some qualifying for an additional $4000, $77/week. These would be funded by a flat personal tax rate of 48% and a company tax rate of 45%.

    The Aotearoa Network of Unemployed and Beneficiaries in their submission to the Prime Ministerial Task Force on Employment in 1994 suggested figures of $7650/annum for each adult, with an additional $3980 to each household with at least one dependent child, and an additional $1900 for additional children, to every adult over 60 and any adult living alone. These to be funded by a personal tax rate of 52%, company tax of 50% and the addition of taxes on assets, energy and on currency exchange transactions, perhaps at 1%.

    While the bulk of the New Zealand work has been based on income and profits tax, many like the approach of the British futurist, Robertson (1994) who suggests abolishing income, company and Goods & Services taxes and replacing them with a land-rent tax (on its unimproved value) and an energy tax. He earlier (1993) also suggested a currency exchange transactions tax.

    Any costings will be affected by the period over which such a scheme might be introduced. Some of the British work concludes that a preparatory period of 3 years followed by a transition period of 10 years will be needed. These time spans change the costings dramatically. The British also favour a 'revenue neutral' approach and have demonstrated that this is possible.

    There are many options, particularly when we look at the whole of the social contract and the benefits that will accrue from reducing the level of poverty and violence in our society.

    The Benefits

    There are many benefits from such a system but the major ones that stand out are that everyone will have a measure of financial security in a context that is supportive and encouraging.

    Too many people express their creativity outside their normal daily life, whether it is paid or unpaid work. Such a supportive environment will allow people to be creative in the main areas of their lives. People in all stages and walks of life will have real options which they are supported into taking up.

    This applies particularly to women in the same way that the Domestic Purposes Benefit did for solo parents. It has equivalent benefits for the overworked.

    Leisure, recreation, learning, creating, caring and community work become an option for many more people.

    Where to from here?

    The realisation that the widening divisions in our society are not sustainable is growing. Even the Americans are now "beginning to be alarmed at developments in their famed 'flexible' labour market, and worried that inequality and under-employment may menace not merely the economy, but beyond it the good society and even the American dream." (Hutton, 1996) The path New Zealand is on is taking us rapidly towards a similar position.

    The previous support system is no longer appropriate to the needs of our society either now, or into the future. A new, fundamental approach is needed to address a broad range of issues in a realistic way. As Rifkin (1995) urges "What is so desperately needed is a national debate, in every country, on how best to distribute the vast productivity gains ... of labour saving technology."

    An unconditional income source for all as part of a revised social contract is an essential component of this new approach. Several proposals indicate it is economically feasible and in New Zealand, some steps have already been taken which would facilitate its introduction.

    Rankin’s (1996) work indicates that the money going into the tax cuts recently approved by Parliament in New Zealand, could have taken us a good step towards this.

    We have formed a network, Universal Basic Income for New Zealand, (UBINZ), we publish newsletters, are about to have our first national conference and are setting up a site on the Internet where we can be more in touch with each other.

    I have read many academics say that UBI is an idea whose time has come. It will have come when we hear that view expressed across the country. We are working to help that happen.

    References

    Aotearoa Network of Unemployed and Beneficiaries. (1994). 'Universal Basic Income' in 'Employment: Issues and Solutions'. Submission to the Prime Ministerial Task Force on Employment.

    DSW. (1995). 'From Welfare to Well-being'. 2nd Edition.

    Gilchrist, L & Goldsmith, M. (1987). 'Is a Universal Grant Feasible in New Zealand'. A Submission to the Royal Commission on Social Policy.

    Hutton, W. (1996). 'Shock that threatens downtown America'. The Guardian Weekly, Jan 24.

    Rankin, K. (1992). 'Escaping the Poverty Trap: A Proposal for a Basic Income'. Political Review, April

    Rankin, K. (1996). 'Tax Cuts that Count'. N Z Public Service Association Journal, Nov.

    Rifkin, J. (1995). The End of Work: the Decline of the Global Labour Force and the Dawn of the Post-Market Era. Torcher Putman, New York

    Robertson, J. (1993). 'Five Ways to end Recession'. Resurgence, 158, 4 - 6.

    Robertson, J. (1994). Benefits and Taxes: a Radical Strategy: A Discussion Paper. The New Economics Foundation, London.

    Stephens, R., Waldegrave, C & Frater, P. (1995). 'Measuring Poverty in New Zealand'. Social Policy Journal N Z.

    Triggs, S. (1995). 'A New Model to Forecast Prison Musters'. N Z Criminal Justice. Quarterly, (11).


    Presented to the
    Third National Conference on Unemployment
    QUT, Caseldine Campus, Brisbane, 13 - 15 June 1996

    Ian Ritchie, UBINZ
    C/- Private Bag 11 042
    Palmerston North
    NEW ZEALAND
    ian.ritchie@psa.union.org.nz

    ABOUT IAN RITCHIE



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