The welfare state has started to bough under the pressure a bit in recent years.On the other hand due to increased technological development and automation, the quantity of jobs is shrinking, particularly in some sectors. This has led some to consider what the alternatives might be to this.
Anthony Painter, RSA Director of Policy and Strategy argues that one of the ideas that could work is a Universal Basic Income. As he puts it:
“A system of Universal Basic Income is the best alternative to help people improve their own lives over time – it provides better security to support people’s need to work, learn, set up a business or care for their family.”
The idea of the basic income model that the RSA is suggesting is that it will be progressive in terms of tax. It is outlined that this model will provide support for all, including low income people that currently get benefits. This group, it is argued, will be encouraged to become more creative.
The underlying challenge is that there are some major dilemmas facing governments across the globe today. Technology and automation have led to a situation where people have to swap jobs or retrain with greater frequency. People have to have a range of different skills to be able to succeed. However, at the same time as this, the populations of the developed world are rapidly aging, and there is an increased need for people to be carers as well. Many more people than ever before care for friends, family members or neighbours, and this is set to increase. Unfortunately, the system of benefits and pensions in place does not support these situations, and it is felt that it prevents a solution from being found.
The Universal Basic Income idea is proposed to have a straightforward framework within which there is a basic level of payments that everyone gets. It is suggested that people will get these regardless of their age or employment situation. This would remove signing on, as well as tax credits, sanctions and all of the current declarations. It is also explained that working on the side would be encouraged rather than frowned on or stopped. The model has been grounded in the idea of the Citizen’s Income Trust model. The benefits are considered to overall counter balance and outweigh the costs that could be incurred in the short term.
The proposal is thought to be affordable, realistic and possible to deliver. It suggests providing a basic income of £3,692 for all individuals aged 25 to 65. For pensioners there should be £7,420. Children would also get a basic income between the ages of 0 to 4. For the first child this would be £4,290 and for the second and beyond £3,387. In addition, it is suggested that individuals should have their entitlement fall beginning at £75,00 with complete withdrawal at £100,000.
If at first glance the idea may seem nonsensical, there are a great many advantages to such an approach. For example, it is believed that the model would serve to redistribute wealth from high earners to those with children. It would also avoid the situation where low earning workers have marginal tax rates of over 70 percent as their benefit are withdrawn.
It will also lead to encouragement of supplementing this income, without risking losing it, making people more likely to be economically active. Importantly it would also get rid of the maze of benefits, credits and complex declarations that currently need to occur. The model is considered suitable to be relevant for the current century, given the changes that are taking place in the modern world.
Interestingly, the model has already been tried in other parts of the world with some considerable degree of success. It has been found to lend a hand to grow entrepreneurship as well as enhance wellbeing of those taking part. There have been a number of tests of the model in US and Canadian states and cities. An interesting case is Alaska. In the mid seventies, Jay Hammond, the Republican governor of the state of Alaska proposed to set up a fund to ensure that the wealth generated by the oil mining in Prudhoe Bay would benefit all the population of Alaska. In order to get the Alaskan population interested in its growth and continuity, Governor Hammond conceived of the annual payment of a dividend to all residents. This transformed itself into a genuine universal basic income. Since 1982, that everyone who has been officially resident in Alaska for at least six months receives a uniform dividend every year. In 2008, the size of the annual dividends of the oil fund enabled payments of $2069 per person, and last year $1,884.
Alaska is today one of the most equalitarian states of the US. Additionally, a big pilot took place in Finland to see if this approach could be successful.
Overall it is argued that when this model is put in place along with social housing rental budgets, it is good for national, regional and local implementation. It would be quite a change to transform to this approach and would take forward-thinking people to deliver it. Time will tell if the idea is embraced or not.
Founder Dinis Guarda
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