The experimentation on the acceptance of a universal base income (UBI) in Switzerland was comprehensively defeated back in June 2016 with a referendum where 77% opposed the plan, with only 23% backing it.
The plan proposed that everyone would receive a monthly income of 2,500 Swiss francs (£1,755; $2,555) for adults and also SFr625 for each child. The UBI is designed to replace existing welfare payments with an income that covers more than the essential living costs, allowing people to choose not to work. There are a range of examples and arguments for an against the approach (here, here) Part of the UBI discussion focuses around the premise that robots/automation will soon be taking our jobs (South Park pun intended). In the absence of job opportunities and the debates centred around inequality, the UBI is proposed as a way of restructuring society. John Quiggin is currently working on a book chapter on this issue and notes that the minimum salary needed to encourage people to stay in the work force must be well above the UBI. There also need to be a job guarantee, I'll leave this out of this discussion. I have spent a long time working on the unintended consequences of policy, so while I like the idea of the UBI, thought needs to focus on its design to prevent incentives creating unintended consequences. I'm not covering the things associated with paying criminals, etc that are out there already. Ignoring the other arguments associated with the satisfaction and social interaction people gain from employment (so potentially the wage may not need to be that much greater than the UBI), most of the arguments pertaining to UBI are general focused around a single closed economy. I find this a bit limiting but we can start there. First using the 2015-16 household expenditure from the ABS (here) 62% of expenditure is allocated to housing, food, transportation of capital. I'm concerned that the UBI may create a wealth transfer to the owners of capital (i.e. people who own rental properties). With a constrained housing market, those supplying rental accommodation are likely to increase the price of renting. Inflation then places upward pressure on the UBI. Second, with wages needing to be above the UBI, the minimum wage rises rapidly. Yes fundamentally the impact of increased minimum wages on jobs is zero (I found this reference by reading Brad DeLong's site). However, this is a special case. Australian is a relatively open economy and the signing of Free Trade Agreements (another point of argument one day) has allowed firms to move manufacturing offshore, and a higher wage may speed up this process. In this situation, Australian imports increase, basic macro tells us that the exchange rate should fall, a lower exchange rate and reliance on imports subsequently reduces the purchasing power of the individual. In this case inflationary pressure is applied to the UBI but there is no guarantee that any capital will flow back to create jobs in Australia. Third, the combination of existing and future FTA's and future FTA's could change labour mobility. How the policy deals with that will be interesting. It may help fill the future gaps that will emerge in the health services industry as the population ages. Alternatively, increases in income may have positive impacts on consumption. In this case the desire to support the local industry may counter some of the above problems. While extra time may be dedicated to healthier lifestyle choices improving welfare. However, perhaps worryingly is the recent US tax reform and the immediate response by governments around the world. Basically its a race to the bottom for corporate tax in a desire to relocate headquarters. The limits of this approach can be found in 'Last Week Tonight's' segment on economic development incentives Presently I can't see the UBI getting a lot of traction with any governments as they actively remove their revenue stream (No trickle down economics does not work). The notion of future job opportunities in the face of a changing work environment will continue to pose a issue, good thing the Governments continues to fund education to allow the future generation expand their opportunities (oh that's right). |
AuthorDavid Adamson Archives
February 2019
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