What is the Unconditionnal Basic income?

Term:

The unconditional basic income (UBI) is a monthly payment by a public agency, to each individual, of a sum of money high enough to cover basic needs and enable participation in social life, as a monthly, lifelong rent. It is the concretization of a basic human right.

The idea has been long supported by many personalities, coming from all political backgrounds, all faiths and nationalities. It has a number of nicknames: universal allowance, subsistence income, citizen's income, universal income, guaranteed social income, universal dividend of life, etc.

Basic Income is not a social benefit and should not be confused with measures such as minimum wage, unemployment insurance, welfare or other conditionally granted benefit. The basic income is automatic, unconditional and inalienable. It affects everyone, rich or poor. He is assigned to each individual from birth to death. The amount is enough to guarantee everyone a decent life – whatever happens. It can be combined with other income (coming from work or not).

So the basic income is:

  • paid to individuals, not to families
  • combined with other incomes
  • granted whether one is working or not
  • high enough to meet basic needs and join social life.

A basic income would streamline social justice and economic efficiency. It's the most liberal solidarity principle one can get, as it ensures individual existence and social cohesion, without the rigidity of interventionism and no oppressing bureaucracy. Several variants are debated about its implementation. Supporters of basic income are not confined on one side of the political spectrum: it finds instead support and resistances on both sides of the Parliament.

Decoupling professional activity and income, a necessity

Neither employment nor capital income, or current social benefits can now pretend to ensure the existence of everyone as defined in Article 25 of the Universal Declaration of Human Rights.

Being unconditional, a basic income breaks the chain between the coverage of basic needs and the execution of a paid work . This partial decoupling between employment and income is required, as traditional stable jobs are disappearing. Unemployment and job insecurity are largely the result of a dynamic rationalization, and automation made a return to full employment an obsolete goal- at least under the conditions we have known for 50 years after the Second World War. The flexibility of modern business organizations currently leads to a growing instability of paid jobs. In Switzerland, because of the strong competitiveness, the unemployment rate remains relatively low and the importance of precarious jobs is currently relatively low. Nevertheless, it would be unrealistic to consider Switzerland as an island cut off from the rest of the world.

Once we have a basic income, won't we all leave our job?

In most cases, the enjoyment of basic income does not encourage people to leave their jobs, especially because the amount is not enough to cover all the expences.

Recall that the amount of the proposed UBI is CHF 2'500/month only; the minimum wage demanded by the unions is CHF 4'000; the median salary is CHF 6'000. -

On the other hand, many useful and necessary works, which contribute to the production of wealth, are not paid - family, volunteer associations etc

Far from being an encouragement to idleness, the basic income will allow everyone (according to each one's abilities and willingness) to engage in all those serene, free and responsible activities, essential to the public interest, that traditional jobs are not intended to take. The amount of this workload is still relevant and it is a huge task. It is more necessary than ever for everyone to work, first to take care of himself, his parents, his children and his family, then to contribute to all the common goods now freely accessible (knowledge, arts, culture, software, etc..) and finally to invent and implement at all levels new means to leave a lively planet to future generations.

A basic income also gives change for people today receiving welfare schemes (or an invalidity allowance) and subjected to a means test. The basic income is combined with work wage, which therefore keeps all its financial attractiveness. A return to profitable employment is not adversely affected by the risk of losing any social benefit.

How high will this income be?

A basic income will change the nature of the labor market. For the first time in the economic and social history, the direct wages paid by the employer doesn't need to cover the basic necessities of life, since such needs are now covered by the basic income. For the same reason, by providing the job seeker a suffisent material base, the basic income gives him/her contractual freedom and finally makes the labor's market the character of a true market. It is primarily in the area of negotiated low wages that basic income strengthens the position of job seekers, who now have the option of refusing an insufficient offer (and the result will be a revaluation of these jobs). From a company's perspective, the introduction of an unconditional basic income does not bring changes: depending on the model selected for funding, the payroll will be roughly the same (in this case, the contribution to the body of the UBI will be charged directly and solely on wages) or, if the company is taxed, the relative decrease in payroll in the strict sense (net wages) will be offset by the contribution of the company to finance the basic income. But whatever the case, the amount of the total income of the employee does not change (except in the above mentioned case). Finally, to some extent, the new contract freedom legitimizes the employer and allows it to better adapt his/her personal needs in the course of his business.

The ethical value of work

It would be wrong to limit the value of the work to its market value, as is happening now increasingly. After the disappearance of repetitive and boring work in a rigid environment, it is now the constant pressure, stress and constant threats of restructuring that often tend to destroy the human sense and creative work. Instead, the income base restores the ethical value of work, as vis-à-vis society as yourself.

Moreover, laziness is not registered in the human genome, which is not a reaction against forced labor. In giving freedom to the workers to refuse work, we begin to empower. We dropped the pretense of necessity. Without freedom there is no real work ethic.

A fundamental right

Basic Income is not a support, it's a human right. That is why it is given to everyone, regardless of anyone's peculiar needs.

Unlike current social assistance, basic income is not stigmatizing, as it is for all. It acknowledges the value of our social participation and helps getting over the idea of paid work as a standard, a standard by which those without a job are less valuable than the others. A basic income would therefore remove the pressure that weighs both on unemployed, "assisted" people and all those who might one day become.

How to finance it

Aside from its hard-to estimate "dynamic effects", the Unconditional Basic Income is economically speaking a zero-sum game: the added value of the country does not change one franc, its distribution changes instead considerably. Now part of the wealth created goes to the entire resident population as an UBI, before any distribution between wages and return on invested capital.

For the employee, the total income does not usually change significantly; it's just a combination now of a direct wage and UBI. Also, the costs do not change for the company: on one hand, they pay less in direct labor costs; on the other hand, they pay an amount roughly equivalent to the body of UBI. The question that remains to discuss concerns the means through which operation should be implemented.

If we take, for example a UBI of 2,500 swiss franc/month for an adult and 625 swiss franc/month for a child, the total financial volume would hover around 200 billion per year, a third of gross domestic product (wealth created in a year in the country: in 2012 about 600 billion francs). But as we shall see below, only a small part of this sum is new to be found, as much is simply reassigned to finance UBI without changing the overall amount for the State.

There are three distinct funding sources, the first two representing only a resource transfer, while the last is still to find:

The primary source of funding is the transfer from the insurance costs and benefits, allowances and other current subsidies that UBI will make useless. According to the approaches, the amount of the transfer is around $ 62 billion. The second source of funding, which is estimated at some 128 billion, is the transfer of the share of labor income as UBI replaces . This amount will be funded by the companies and is roughly equal to the share of wages they won't pay workers, who will now receive it in the form of UBI. The third source of financing is the difference between the total cost of UBI and the funding already available (the total transfers mentioned above) or 208 billions - (62 + 128) billion = $ 18 billion. This amount approximates the actual effort of UBI, that is to say, the real increase in income for part of the population.

Being such basic equation somehow simplified, we must realize that all various financing channels are interdependent. Whatever the specific mechanism will be chosen, funding will be based on a new principle of distribution of the value created by economic activity. This value is no longer divided into two but into three parts: wages, profits and UBI.

The funding will require an adaptation of the tax system for which several channels are now already under discussion. In our book, Financing UBI (french/german), three solutions are proposed: The salary compensation (direct debit from salary), only the VAT (which may be partially transferred to the price), and finally VAT with a redesign of the federal direct tax (FDT) to correct the gradual decrease of the indirect effect of income tax. A fourth track would be to take the share of the UBI directly on companies' "net value" (NPV), that is to say, after amorting investments, paying VAT and any import taxes. This last solution would have no impact on prices. Most likely, a mixed solution between these different possibilities will be eventually chosen.

To wrap up, whatever the case, we won't have to fund the entire volume of UBI, because it's essentially the same money, just spent otherwise. For most employees, the total income does not change significantly, as it now consists of a combination of direct wage and UBI. Only those whose total income increases because of UBI (who exercise little or no profit activities, as well as families) may rise extra costs. We can locate these around 30 billion per year. Finally, the operating costs for companies should be essentially the same.

Too much State?

According to the final choice, financing of basic income can either pass via a compulsory levy on the creation of economic value or rather rely on direct and indirect taxation. But whatever the case, we must distinguish the financing of basic income from financing the State in general. Even if one uses the tax in the case of basic income, the tax burden does not benefit anyway the government or any interventionist policy. It's just money that goes from private to private economy through the satisfaction of basic needs of the public economy. The state only plays a fiduciary role, while individual freedom, as it already operates within the framework of a market economy, remains intact. Instead, by extending the contractual freedom of workers on a labor market that would finally be worthy of its name, basic income is clearly in the direction of individual freedom.

On the other hand, a basic income will certainly reduce the weight and cost of social bureaucracy while reassigning to social work its full dimension of support and assistance. Finally, from a political point of view, by reducing the influence of the State on citizens' private lives, especially those with modest means, a basic income will contribute to the development of democracy and individual freedom.

 

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