Universal allowance/Basic income.
A universal allowance is a benefit that is paid to all New Zealander's - retirees, low income earners, high income earners, invalids, unemployed, students, solo parents, and replaces existing benefits (unemployment benefit, DPB*, pension, sickness benefit, working for families, student allowance).
There are no requirements, all New Zealand citizens (18 and up*) are entitled to receive it.
The rate would be about the same as the existing unemployment benefit (around $200-250/wk pp).
When people work, the money they earn, is earned on top of the universal allowance. The tax rate is hiked to cover the benefit paid to everyone.
Gareth Morgan advocates such a system, with a flat tax afterward.
http://www.bigkahuna.org.nz/universal-basic-income.aspx
Addressing the immediate objections:
- How do we afford this?
We increase income tax, which doesn't affect workers, because they're now getting an extra basic income. For example, if currently you are a worker earning $500/wk being taxed 20%, so your take home is $400.
In this system, a worker might earn $200 basic income, and $500 a week taxed at 60%, so their take home pay is the same.
Assuming that everybody who currently is working, still works, then theoretically it's possible to implement this system without any change to the basic tax burden/benefits of people. (That's a drastic simplification, but the idea is the same).
- People will just stop working and live on the benefit, if they're not subject to having to look for a job.
No they won't. People are still better off working. Some people might. For example, they might use it as an opportunity to try a business venture, or become an artist, knowing that they won't starve if it fails. Other people, are already gaming the benefit/sickness benefit system.
Advantages of such a system:
Reduce the cost of administering social welfare. Because beneficiaries are no longer subject to eligibility criteria, the bureaucracy associated with administering WINZ is drastically reduced. The payment becomes an automatic thing through IRD.
Reduce the hypocrisy of social welfare. Social welfare currently is riddled with incentivising dishonesty. For example people finding sympathetic doctors to sign sickness certificates, or lying about having a partner as to maximise their benefit.
Allow workers freedom of movement. Workers can take a chance moving someone where to look for work, knowing that they won't starve.
Allow economic innovation. Entrepreneurs can try their hand at business, knowing they won't starve if it fails.
Pensions:
This would reduce pensions to current unemployment benefit levels. I think this is reasonable.
*DPB: This is a bug bear of this system. Personally, I'm in favour of removing the DPB. I think the DPB allows people to have children in irresponsible circumstances, by making being a parent being a full time paying job, that one can't be fired from.
The (hard) system I propose, individual adults are still entitled to basic income. Children are not entitled to an income, until they are 18. Perhaps working for families can still exist, to help lower wage earners. To look after a child, parents need to either have a job, or pay for it out of their basic income. This shifts the responsibility for having a child on the parent, and hopefully disuades them from having children if they can't afford it. If people are struggling looking after children on basic income, they can get support from their family and community and charity.
Ofcourse, DPB shouldn't be cut off straight away, it should be phased out.
I'm aware that this is quite hard position, so if you think the idea otherwise have merits, then let me know what you think on this point.
Other issues to discuss:
The tax burden. Gareth Morgan advocates a flat tax on top of the basic income, but I think that's a bit unfair on lower wage earners. I still advocate a progressive tax system. Unless you had another scheme like a subsidised house buying scheme to help lower wage earners.
Colin Davies Thu 31 Jul 2014 7:58AM
@davidjohnston
I remember reading when Gareth Morgans first talked abt UBI, (unsure when). But had read up on it a lot earlier in respect to Brunei and somewhere else. So I'm not current with the modern thinking now.
You really need to look at the whole economy and have 1 big change to get things right.
For example kill all normal WINZ type weekly payouts.
As the UBI will cover this.
Restructure Income tax so it cuts in hard after a UBI figure.
eg UBI x 2
So people are not penalized for working up to that figure.
People earning 3 times the UBI the tax would cut out there UBI income. So only above that are taxpayers real income tax contributors.
Introduce other taxes, Capital Gains, Transaction, Estate, Speculation etc.
Now : note all the UBI better off people are your consumers. This should mean increased consumption, needing increased production, requiring a larger workforce. Meaning more people earning more.
However a danger exists if this is done wrong of a bubble bursting. So the expansion needs to be controlled to be just at a steady rate.
The best tool we would have in NZ for this is our GST.
In the normal UBI world the GST is just recirculating through the system.
example -> The govt collects the GST the Govt uses it to pay part of the UBI, The UBI users spend their UBI. The UBI goes into the GST component.
Now similar to how the Reserve Bank uses the OCR to control inflation, The Govt uses GST to control growth, Also the Govt uses talk to control the growth.
As the new economy matures the GST can be removed, possibly completely.
Under this system middleclass and above I believe will be in pretty much the same situation. However the beneficiaries and working poor will be much better off.
David Brown Tue 5 Aug 2014 5:20PM
Why give those who don't want to work more reasons not to? I don't want to pay for someone who thinks they are entitled to live a life without having to support themselves. Its just not right. Make them grow up
Colin England Wed 6 Aug 2014 1:59AM
I'm in favour of a UBI but it should be about $400 per week for adults. Less for children - which means that we should also have a universal child allowance. This higher amount ensures that no one is living in poverty as well as giving them enough money to be entrepreneurial.
The authors take on the DPB is, essentially, sociopathic and so I don't support that at all. That said, a higher UBI with a universal child allowance would replace the DPB anyway.
David Brown, Very few people refuse to work and most of those who do are in the upper echelons of society (they 'work' to get financial returns while doing very little of any real value). The only reason why we have unemployment is because, over the last thirty years, we've structured our society to have unemployment so as to force wages down. For many years NZ had 0% unemployment and we could do it again.
David Johnston Wed 6 Aug 2014 2:39AM
@colinengland That's an insane amount. $250 a week is perfectly survivable, for a single person, I don't know how think otherwise.
Re: DPB, this is a huge can of worms, so I'd rather take it into another thread.
Colin England Wed 6 Aug 2014 3:01AM
Not really. I'm not looking at enough to subsist upon after all but enough to go out and be entrepreneurial. Basically, enough to go out and do something rather than be forced to sit at home and have all your ideas come to nothing.
BTW, the ~$250 per week available through the UB + the housing allowance is 20% below subsistence level. Prior to Ruth Richardson's cutting benefits back in 1991 MOAB they had been calculated as being enough to live on and engage in the community. Now they're almost not enough to live on and participating in the community is pretty much non-existent.
Phil Caton Wed 13 Aug 2014 7:37AM
I support the concept of UBI and have compiled some of the online references to UBI on this blog -
Musings about Universal Basic Income
Gareth Morgan's book 'The Big Kahuna' is a good introduction to UBI, but I don't fully agree with his ideas about property / land tax to fund the initiative.
UBI should replace all current benefits - ie the MSD, WINZ and ACC functions are no longer required.
If additional income is required to meet the extra burden of physical and / or mental incapacity, then this is achieved through the health budget.
As all citizens are entitled to UBI, the income starts at birth with the early years' income being administered by the child's caregiver(s).
William Asiata Thu 14 Aug 2014 6:13AM
A societally inclusive UBI would play a part to facilitate the fulfilment of and bring security to all manner of basic human rights. E.g. The right to achieve individual and communal self-realisation. The right to live in a prosperous environment. The right to reproduce. The right to engage in trade, pursue entrepreneurial ventures, and establish businesses. Etc.
Devan Subramaniam Thu 14 Aug 2014 9:49AM
The concept has merit.
Phil Caton Sun 17 Aug 2014 8:21PM
I was pleased to hear Annette Sykes (Internet / Mana) make reference to UBI at the Wellington Internet Mana Party roadshow - as something that Mana would seriously look at;
also Laila Harre made passing reference to granting a 'living allowance' at the Naenae roadshow yesterday (Sunday).
I didn't ask what she meant by that.
David Johnston · Thu 31 Jul 2014 6:46AM
@colindavies What would need to change?