SOCIAL IMPACT

SOCIETY & UNIVERSAL BASIC INCOME

INTRODUCTION

Universal Basic Income (‘UBI’) is an income distribution system in which everyone, no matter what their economic situation, is paid a monthly income that is sufficient for their basic needs – with no strings attached.

In 1969, Richard Nixon was persuaded by 1,200 economists (including John Kenneth Galbraith and Paul Samuelson) of the value of a basic income plan. They wrote: “The country will not have met its responsibility until everyone in the nation is assured an income no less than the officially recognized definition of poverty.” Nixon’s 1970 Bill passed in the House, but failed in the Senate, after Nixon was persuaded to drop his support by the libertarian Martin Anderson.

Several countries (including Canada, USA, Finland, Switzerland and India) are considering implementing some form of UBI, although it has yet to get past the pilot project stage. The general approach is to regard UBI as a replacement for the hodgepodge group of welfare support systems. No-one is considering a true UBI, as the payments are only considered to be made to those in need. There is a lot of controversy relating to the absence of control over the recipients, even though several studies have shown that most recipients would use the money for basic needs while looking for a job, or upgrading skills or education.

While a UBI would eliminate most poverty by definition, its value to society would be far greater if it is seen as a wealth distribution system, reducing the increasing gap between the wealthy (the so-called 1%) and the rest of the world. That gap is caused, not so much by the greed of the wealthy (although there is much of that), but by the reducing value of human labour. In effect, the gap comes from entrepreneurs, who are investing and creating economic value while building their wealth, and workers, who are seeing their economic value deteriorate.

The current trend towards paid-joblessness is creating a need for governments to make a major change in taxation. If fewer people are being paid to work, governments are going to have to find a replacement for their loss of revenue from income taxes. And then there is also the question of how to get money into the hands of people in order to maintain the economic cycle:

Let’s briefly and simplistically review the current economic cycle (with approximate government revenue % for Canada, BC province):

  • People work at jobs, provided by businesses (and government) for which they are paid wages.
  • Government takes a portion of those wages in taxes. (50, 17%)
  • The remainder of the wages are used to buy goods and services (and ideally to save);
  • Government adds consumption taxes to those sales. (5, 7%)
  • Businesses take the revenue from those sales, deduct their costs, and pay a portion of the profit to government. (15, 6%)
  • Businesses use the remaining profit and investment from people’s savings to expand, providing more jobs for people.

The cycle collapses if there are no wages because no-one is working!

UBI is one way to put money in the hands of the people. Then the question for government is how to find a source of that money. One viable option would be to increase consumption taxes (also known as sales taxes), charged on the sale of a product or service to a consumer (or end user). To replace current income taxes, a consumption tax would average around 35%, but would best be achieved with a layered structure. For example, basic necessities would incur a low tax rate, other goods and services would incur a modest tax rate, while luxury goods would be highly taxed. In effect, a significant source of government revenue would come from the wealthy’s purchases, and the desired transfer of wealth would be achieved.

Another viable taxation source is a VAT (Value Added Tax) in which a tax is paid on the increased value of all products or services, like a consumption tax but including the sale of raw material or products or services used in the creation of a finished product. This is a far more complex approach, which would be loved by the civil servants required to police it. 

None of this negates the opportunity for entrepreneurial activity, which would provide economic growth, in addition to independent existence for some people, and paid jobs for others. (Think of the encouragement for starting up a new business or service if you already have sufficient income for your basic needs, and you can get staff without needing to pay them until the business can afford it!)

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REVIEW THESE INFORMATIVE ARTICLES - AND READ THOSE THAT INTEREST YOU

India's 2nd smallest state is committed to implementing full UBI by 2022 (UBI - 2019-02 - BasicIncome.org)

The party governing Sikkim, the 2nd smallest state in India with a population of 610,000, has written full UBI into its manifesto for the 2019 Assembly elections, and aims to have it implemented by 2022. Sikkim has a 98% literacy rate, and poverty below 8%. Financing sources may include surplus energy generation revenue, redirecting costs from welfare programs, and tourism.

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Finnish UBI experiment showed increased happiness, but no effect on job seeking (UBI - 2019-02 - Technology.org)

Preliminary results have been published of a Finnish UBI experiment, conducted between 2017 and 2018, whereby 2,000 people (aged 25-58) on unemployment benefits were guaranteed enough income for reasonable living, irrespective of other earnings. Questionnaire results, using 5,000 controls, showed improved health, level of trust in government, and future outlook on life – and no change in job seeking.

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A UBI pilot for poor, black, single mothers in Mississippi (UBI - 2018-12 - BasicIncome.org)

This cash transfer project, financed by the Economic Security Project, will give, no strings attached, US$1,000/month for 12 months to 16 low-income single black mothers, randomly selected from a list of black female adults with children who are considered to live in poverty in the Jackson area. Some of the potential beneficiaries have helped design the initiative. The package will include optional leadership training, psychological counseling, and community service.

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Stanford lab explores experiments in UBI (UBI - 2018-12 - ScienceBlog)

Stanford Basic Income Lab at the McCoy Family Center for Ethics in Society aims to educate policymakers and the public about the latest research on what happens when people receive unconditional cash on a regular basis.

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A village in Switzerland may be starting a basic income experiment (UBI - 2018-11 - Basic Income News)

The Village of the Future Test organization has approval for a one-year basic income test from over 62% of the 1,300 villagers of Rheinau. Funding of 4.4 million euros is being raised. The money will be distributed according to age (up to 18, 18-22, 2225 and 25+) with adults receiving about US$2,500/month (less earned income).

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The problem with basic income pilots is politics (UBI - 2018-09 - BIEN)

In an op-ed article, the author argues that, because UBI pilots target only people in need of financial assistance, UBI is seen as an improved welfare system and is opposed by most demgraphics; whereas, if the recipients come from a broader background, UBI would receive more support.

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UBI program to give $1,000/month to black mothers in Jackson, Mississippi (UBI - 2018-09 - Fast Company)

A new year-long basic income pilot launching in December in Jackson, Mississippi, aims to address the wealth disparities around race, gender, and motherhood by equipping black mothers with $1,000 a month. The pilot will launch with 15 women, eventually scaling to at least 100 families.

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Why UBI costs far less than you think (UBI - 2018-08 - Big Think)

Multiplying the UBI payment by the number of recipients is the gross cost of the program. To get the real (net)cost, you need to subtract the savings (like reduced bureaucracy, not mentioned in the article) and the income used to pay it (like income or wealth taxes). In effect, UBI is a wealth re-distribution program.

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UBI has a different meaning for different people (UBI - 2018-06 - MIT Technology Review)

Ontario (Canada) is funding a 3-year UBI trial involving about 4,000 people who receive monthly stipends to boost their income to at least 75% of the poverty line. Any additional income only reduces the stipend by 50%. To Lindsay (a town NE of Toronto) participants, this provides different benefits, such as: Affording fresh produce; Supporting a small business; Staffing a not-for-profit museum; Augmenting a disability pension; Reducing a student loan.

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UBI: The need for it and the benefits of it (UBI - 2018-05 - Medium.com)

This interesting, lengthy article discusses why UBI is essential, the job losses that started in 1990, the many individuals and social benefits of UBI, and how its impact could resolve many societal problems. The weakest area is dealing with how UBI can be afforded.

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Finland's basic income pilot was never a test of UBI (Society - 2018-04 - FastCompany)

Finland’s basic income pilot has not been renewed but was never more than a variant of their significant support for the unemployed. Y Combinator Research in Oakland is planning to give a no-strings-attached stipend to research the effects of UBI on everything from voter participation to mental health to spending habits. It’s limitation is that it plans to use private money. Alaska’s Divident Fund tests the required infrastructure for government distribution of a UBI.

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UBI has become part of California’s Democratic Party platform (UBI - 2018-03 - Recode)

UBI has become part of California’s Democratic Party platform, signaling that the idea is beginning to enter the political mainstream. At the same time, Silicon Valley leaders are putting their weight behind UBI by funding major projects, including a program in Oakland that gave people $1,500 a month for a year, and a project in Stockton for working individuals.

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Indian government advisor suggests some parts of India may introduce UBI (UBI - 2018-03 - BIEN)

India’s Chief Economic Advisor, Arvind Subramanian, recently told reporters that he would “bet” that one or two Indian states would be implementing universal basic income (UBI) by 2020.

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Inside Ontario’s big, bold Basic Income experiment (UBI - 2018-02 - FastCompany)

Ontario’s basic income experiment will see up to 4,000 residents of 3 metro areas receive guaranteed monthly stipends. Single recipients get up to $16,989 per year; Couples up to $24,027y. If people choose to work, they are taxed at 50% for anything over $200. The stipends are roughly 75% of Canada’s official poverty line, which is about 50% of median incomes. Early results are positive.

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An argument against UBI (UBI - 2018-02 - City Journal)

A review of current activity in support of UBI, and a description of what is regarded as its “fatal flaw” – creating a disincentive to work, and multiple generations of work-resistant personalities. (NOTE: See Nick Arden’s blog which argues in favour of UBI, noting that UBI is essentially a wealth distribution system, which will additionally eliminate poverty, and that will require a new definition of ‘work’.)

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