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Thursday, December 28, 2017

Scotland to try universal basic income

A cartoon by John Darkow

I talked about the universal basic income here.  To recap, UBI is a monthly payment by the state to everyone, aimed at replacing the dole (unemployment benefit), family income support, the old age pension, and disability pensions.  Typically, all income earned outside the UBI is then subject to tax, with the minimum rate set at 25%-33.3%.  This means that anyone whose income is less than 4 times (at 25%) or 3 times (at 33.3%) the level of the UBI is better off.  This low "clawback" rate sharply reduces the disincentives implicit in existing unemployment benefit schemes, where the "clawback" rate is often 50% or more and can exceed 100%.  It also greatly simplifies the rules needed to access welfare, and eliminates the need for a large bureaucracy to administer the rules. 

Both left and right like it, for different reasons.   Like the universal aged pension it should be a powerful tool for reducing and alleviating poverty.  But it will also reduce disincentives to work, and will probably cost about the same as all existing anti-poverty schemes combined, especially if you can reduce or eliminate the huge bureaucracy needed to administer them. 

Universal basic income is, according to its many and various supporters, an idea whose time has come. The deceptively simple notion of offering every citizen a regular payment without means testing or requiring them to work for it has backers as disparate as Mark Zuckerberg, Stephen Hawking, Caroline Lucas and Richard Branson. Ed Miliband chose the concept to launch his ideas podcast Reasons to be Cheerful in the autumn.

But it is in Scotland that four councils face the task of turning basic income from a utopian fantasy to contemporary reality as they build the first pilot schemes in the UK, with the support of a £250,000 grant announced by the Scottish government last month and the explicit support of Nicola Sturgeon.

The concept of a universal basic income revolves around the idea of offering every individual, regardless of their existing benefit entitlement or earned income, a non-conditional flat-rate payment, with any income earned above that taxed progressively. The intention is to replace the welfare safety net with a platform on which people can build their lives, whether they choose to earn, learn, care or set up a business.

[Read more here]

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