Wednesday, July 09, 2008

Individual Basic Income

Believe it or not, I was once a member of the Green Party. One of their policies is to introduce an Individual Basic Income or Citizen's Income. I may not be the environmentalist that I once was, but I have recently been thinking that the Individual Basic Income (IBI) idea is quite a good one.

An IBI is a sum of money that would be paid by the government to every citizen, be they man, woman or child unconditionally. This would not depend on being unemployed or employed, willing to work or unwilling to work, or whether one has an high or a low income from employment. The sum of money might vary in amount with regard to age (a child being paid less than an adult, an elderly person would be paid more than somebody of working age), but otherwise there would be no other variation in amount.

At first this idea might seem left-wing, after all it guarantees state provision for all. However, it is very similar to the Negative Tax idea that was advocated by some free market economists, most notably Milton Friedman (hardly a Left-winger). An IBI scheme would work best when combined with a flat rate of tax, thus allowing individuals to potentially earn without penalty. The variable rate tax schemes that are common today tend to penalize people for earning. Of course, this would mean people on low incomes would pay more tax, but this would be compensated by the fixed IBI payement they would receive.

The main advantage of the IBI is that it avoids the benefits trap that conventional forms of social security tend to generate. Hence, people receiving uneployment benefits can sometimes earn more money than if they took up employment and if they find a job, they are penalised by losing their dole money. Conventional welfare therefore has the effect of disincentivizing people from taking up work. Thus, the IBI idea has the real potential to bring together both Left and Right as it addresses the differing concerns of Right-wing and Left-wing people. For those on the Left it provides support for the poor and for those on the Right, the IBI would create more efficency and eliminate bureaucracy.

The main argument against an IBI would be that potentially many people could decide not to work and just live off their IBI payment. They could, though they would hardly make a decent living and so they would lose out. Of course, under conventional social security schemes, there are many people who choose to live off benefits. Thus, conventional social security requires an army of bureaucrats to police those receiving welfare to ensure they are looking for work. There are also many people under conventional social security who cheat the state by receiving benefits while working. Therefore the state has to spend huge amounts of money on combatting fraud, often with very little money being recovered. Under the IBI system, there would be no need for people to cheat the system as everybody would be receiving the payment and there would be no need for millions to be spent on paying government employees to bully those on welfare.

There would also be other advantages. People could take time off work in order to study or to re-train and learn other skills. Our economy would benefit from the flexbility this would create in the labour market. Mothers would be able to afford to take time off work to spend time with their children or being homemakers without suffering significant financial loss.

The real beauty of the IBI idea is the simplicity of it. While it has potential problems, I think the advantages it would entail makes it very worthy of consideration.

For more information on Individual Basic Income:

About Basic Income


Jonathan Hunt said...

try again:

This fellow conservative happens to agree with you, Matthew.

Why is it that, when my new situation falls into place fully (mid august), with all the benefits we get (some of course due to disability) that we are BETTER OFF than when I was working full time?

And now we are BETTER OFF I can get all sorts of discounts on things I could never get before (a half price week at New Word ALive 2 for example?)

What incentive is there for people to work with our current system?

Celestial Fundie said...

I am glad you agree.

An Individual Basic Income would resolve many of the inadequacies inherent in social security.

Jim said...

Matthew, how is this different from the communist model? When we start viewing government as the provider of our needs we are on the path to socialism.

The goverments job is to protect the rights and freedoms of the individual, not feed them.

We have let the govt. do the ministry of the Church.

Celestial Fundie said...

"Matthew, how is this different from the communist model?"

Did you not read the post properly?

The difference from Communism is that one can get a job that earns a six figure salary.

"When we start viewing government as the provider of our needs we are on the path to socialism."

Suppose a father of five children loses his job and the family will be homeless in a month.

Doo you not think the government should provide them with any assitance at all?