Citizen’s income – Universal basic income

A citizen’s income,  basic wage or Universal basic Income (UBI) is a concept of paying everyone in society a universal benefit – regardless of income and circumstances.

The main advantage is that ensures a minimum standard of income for everyone – without any costs and bureaucracy of means tested benefits. Also, it avoids the disincentive to work that can occur with means tested benefits.

The disadvantage is that is an expensive undertaking to pay everyone in society a universal benefit and there is a concern it may encourage some to live on benefits without contributing anything useful to society.

Citizen’s income would primarily be paid for out of general taxation, though in some models it could involve redistributing profits from publicly owned industries.

Advantages of citizen’s income

family cycling
Could a universal income, encourage more self-employment and entrepreneurship?

 

  1. Means tested benefits are becoming increasingly complex and cumbersome. There are costs – both financial and time – for people to apply and receive benefits. Efficiency savings from abolishing the bureaucracy behind means tested benefits would enable more to be spent on actual benefits.
  2. Increasingly flexible labour markets make conventional benefits more limited. Modern labour markets have seen a rise in self-employment, flexible hours and zero hour contracts. This means that people can end up receiving very low income in certain months, but not be eligible for any work related or unemployment benefits because they are not classed as unemployed or normal employment.
  3. Incentives to work. A problem with conventional means tested benefits is that it can create a disincentive to work longer hours or get a better paid job because the marginal gain in income is relatively low (high marginal tax rate). This is a form of the poverty trap. A citizen’s income ensures any extra income from work is kept and not lost through withdrawn means tested benefits.
  4. Prevents people slipping through gaps. The increasingly complex benefit system requires people to know what benefits they are entitled to and how to apply. There may be time delays in receiving benefits. Some people may become homeless because of delays in receiving benefits. A universal citizens’ income will prevent these gaps and help to reduce temporary cash flow crisis which could have adverse long-term effects.
  5. Supports people who fulfil socially beneficial tasks. A universal citizens income would offer support to mothers bring up children or people acting as care assistants.
  6. Health benefits. A universal basic income could have positive impact on reducing medical costs associated with types of poverty and homelessness, e.g. high blood pressure, type II diabetes.
  7. Supports entrepreneurship. Somebody who wishes to work on new business ideas could use a citizen’s income to support their initiative. Conventional benefits would not be given to people working on self-employment start ups. Alternatively, it may give people more time to find the most suitable long-term job – rather than rushing into the first job which comes along. This could increase the long-term efficiency of labour market.
  8. Reduces need for the governments controversial current tests and sanctions related to evidence of work-search activity.

Arguments against citizens income

  • Money for nothing. The concern about a citizens income is that people will get money without doing anything. It may encourage people to be lazy and live off benefits.
  • Disincentive to work. Some fear that if universal income is given, some will work less. Studies are mixed, but one study from Canada found that as universal credit is relatively low, the main groups who worked less were young mothers and teenagers in education.
  • Less flexible labour markets. The universal credit may mean part-time workers, such as working mothers and students don’t need to supplement income by working part-time, reducing flow of temporary part-time workers. Others argue this is not a problem as we should try to avoid a part-time, zero hour contract labour market.

Example – Citizen’s Income Trust

Under the proposals of Citizen’s Trust income, benefits should be distributed according to age.
0-24 year olds would receive £56.25 per week, 25-64 year olds would receive £71 per week and those 65 and over would receive £142.70 per week.

The citizen’s income would replace all benefits except disability and housing benefit. The total cost for 2012/13 would be £276n – close to existing annual welfare budget.

It would replace child benefit, income support, JSA, NI and state pensions. It also estimates savings of £10bn from administration of pensions and tax credits.

International examples

 

  • Finland. Finland’s government is planning to give every one of its citizens a basic income of 800 Euros (£576) tax free and abolish benefits altogether.
  • Netherlands – Utrecht and 19  other cities in the Netherlands are trialling a basic income.
  • Brazil – Bolsa Familia

Conclusion

The interesting thing about a citizen’s income is that it gains support from both the left and right. The left support its aim to create a more egalitarian society. There is support from the right who dislike the disincentives and bureaucracy of means tested benefits.

From a personal view, I like it because my lodger is on a zero hour contract – he often doesn’t have money to pay rent, but he is not eligible for any benefits. A citizen’s income would be good to provide a minimum income guarantee.

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2 thoughts on “Citizen’s income – Universal basic income

  1. “Supports people who fulfil socially beneficial tasks. A universal citizens income would offer support to mothers bring up children or people acting as care assistants.”

    Or indeed fathers. Gender-nitpicking aside, I like this point. It counters the “without contributing anything useful to society” objection.

  2. It would certainly help people like myself who are disabled and find it very difficult to get work. At the moment there are so many restrictions placed on me, and numerous unknown variables, that the prospect of being able to take on temporary or zero hours work would really be a help. It’s not just about the money though, for me it’s more about dignity, self-reliance, and the chance to contribute to society…and of course, having a place in the world, and being able to have a yesterday and tomorrow, rather than just existing in the present.

  3. What about online watching videos? It’s the most simple way to earn money having fun while watching funny videos. I do it via Earn Honey . You can also try it …

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