LivingPlanet: WANT HYPERWAGES? DEMAND A UNIVERSAL BASIC INCOME

Thursday, March 16, 2006

WANT HYPERWAGES? DEMAND A UNIVERSAL BASIC INCOME

What’s wrong with a free lunch?

Nothing’s wrong according to Belgian economics professor Philippe Van Parijs in his 2001 book with the same title. Van Parijs or VP is one of the leading proponents of the Universal Basic Income (UBI) or Basic Income Guarantee (BIG). Never heard of it? Don’t be ashamed; I haven’t till recently. The UBI is an income a government pays, at a uniform amount and in regular intervals, to each adult permanent resident, regardless of his/her economic status and whether s/he is willing to work or not (Van Parijs 2001:5). It is guaranteed because the government is required to pay each permanent resident this amount. It is basic because the amount is “something on which a person can safely count, a material foundation on which a life can firmly rest” (Van Parijs 2001:5-6). As defined, it can either fall short or exceed the amount needed to fulfill the “basic needs”. Why is a UBI desirable? VP lists the following main points below.

It is just. Social justice is equivalent to real freedom for all. Freedom is normally equated with enforceable property rights and personal liberties. What should be added to this is the means or resources to use these personal liberties. VP calls this the distribution of opportunity, which should be designed in such a way that those with the least opportunities be given real opportunities. Providing a UBI is one way.

It promotes real jobs and sustainable economic growth. VP notes that Europe and America’s economic difficulties are different in that in the former there is limited poverty and high unemployment, while in the latter, it has low unemployment and widespread poverty. Technology advances have been eliminating jobs. It would take massive economic growth to stabilize employment levels. However, this would severely impact the environment and labor benefits. What to do? The UBI, according to VP, subsidizes the employee. It allows the employee to accept a job at lower pay or not to work at all. It also allows him/her to bargain harder with the employer, take a break, re-train, become an entrepreneur or self-employed, or do social work. On the employer’s side they have the option to offer a lower wage for non-critical positions and to offer more to their important employees. It is a win-win solution.

It is gender sensitive. Women have taken a disproportionate amount of the household “caring” functions. They have also been discriminated in the workplace in terms of pay and career advancement. A UBI gives them more financial independence to take care of the household and family, or from an abusive husband and more bargaining power from a discriminatory company.

It is environment-friendly. Environmentalists, according to VP, face an obstinate foe in “productivism, the obsessive pursuit of economic growth” (Van Parijs 2001:20-21), which generates pollution, consumerism, and uses up scarce natural resources. Accelerated economic growth is justified on the grounds of reducing unemployment. VP notes that working class organizations have bought into this argument. The UBI addresses unemployment without promoting “productivism” and undermines this broad argument. It forces business and industry to rethink their business programs. For environmentalists, the UBI provides them with the volunteer manpower who can now afford to work on environmental programs.

What are the objections?

It costs too much. Not really if a wide range of existing welfare benefits are abolished, tax collection becomes more efficient, tax exemptions minimized, economic rents are collected (from natural resource exploitation and use of government land), and the government cuts back on pork barrel expenses. Note that the UBI does not necessarily need to meet the individual’s “basic needs”. That is the goal, but it isn’t required.

It distorts labor supply. This is a non-issue according to VP. The goal should be sustainable economic growth not an “overworked, hyperactive society” (Van Parijs 2001:23). A productive adult does not necessarily have to be earning a living. They could be taking care of their children, elderly relatives, or volunteering. All these improve human capital and reduce costs on peace and order, prisons (better socialized youth), hospitalization (healthier families and elderly relatives), and other social service expenses that could be handled by less-stressed families.

It is unethical and immoral to get something without working for it. This is the reciprocity issue and is the basis for Clinton’s workfare welfare reform. VP likens this to the Malibu surfer who would spend his/her time on the beach and not work. Again, the response would be so what? The other response is that the reciprocity issue takes a dim view of human nature and discounts the human drive to be a productive and useful member of society. Really, how long and how often can you surf in Malibu without getting bored, injured, or even sun-burned? The third is, the UBI is not really enough for one to live a life of luxury. It is only a basic income.

Lewis et.al (2005:2) also noted that “tough love” policies, e.g. workfare, while supposedly providing more incentive to work, have, in the neo-liberal era, encouraged employers to pay less than living wages. Further, they advise value-neutral economists to note that many Americans have made the value judgment that workers should earn living wages and employers not paying living wages are morally reprehensible. Hence, value-neutral economists should take this value judgment into account in their assessments and policy recommendations, e.g. how to achieve living wages. This view has been supported by recent philosophical literature, while psychological research and evolutionary game theory lend support to altruistic motives and action, as well as cooperative behavior, and refutes the fear that individuals will free ride (not work) with a UBI (Lewis et.al 2005:2-3).

Lastly, the reciprocity issue is fallacious because everyone who became successful did so because of a combination of one or the other of the following: family line, ties, and resources, government support (tax breaks, public education, incentives, etc.), help from friends or relatives, pure luck, utilization of natural resources or public land/resources. No one really is self-made. Hence, the UBI ensures that everyone gets a fair chance.

The idea and concept of the UBI is not new or radical. In the United States it has been proposed in one form or another as early as 1796 when Thomas Paine proposed his version in Agrarian Justice (Lewis et.al 2005). Personalities from the left and right have supported a UBI like John Kenneth Galbraith, Milton Friedman, Richard Nixon (the watered down “Family Assistance Plan”), George McGovern (the “demogrant” proposal), Martin Luther King, Huey Long, and Bertrand Russell, among others. James Tobin wrote the first academic article in 1967. Nobel winner Frederick Hayek mentioned it in 1944. They all saw it as a scientific and simplified solution to poverty, a logical alternative to the welfare state, and a key tool for promoting human liberty.

In 1982, Alaska and the United States for that matter, was the first to institute a UBI in the form the Alaska Permanent Fund (APF). Throughout the years, the APF has provided each resident of Alaska annual dividends ranging from a low of $331 in 1984 to a high of $1964 in 2000. By an amendment of the constitution of Alaska, “At least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments." Thus, the APF market value currently stands at around $34Billion invested in stocks, bonds, real estate, and CDs. Alaska residents favor the APF dividend and it has worked to reduce poverty in the state. See http://www.apfc.org/index.cfm.

Brazil passed the “Citizens Basic Income” legislation in 2004 paving the way for gradual implementation of the UBI (IPA 2005). Senator Eduardo Matarrazo Suplicy, a key ally of Brazilian president Luis Inacio Lula da Silva, has pushed for a UBI since 1991 when he authored legislation for the negative income tax wherein each citizen would receive an income supplement of between 30-50% of the difference between his/her wage and $150. Brazil also experimented with the UBI in the education and health sectors, Bolsa-Escola and Bolsa-Alimentacao programs respectively (Suplicy 2001:249). With the new legislation, Suplicy estimates that 11.4 million families or 46 million citizens, representing one-fourth of Brazil’s population of 182 million will be enrolled in the UBI program in 2006.

Portugal has a 1997 law ensuring UBI or BIG. It is being implemented for the poorest of the poor with a “social contract provision”, e.g. work eventually to become finanically independent. Initial reports show conditional success; since the implementation is only partial (da Costa 2002).

The UBI is feasible in the G8 countries and there are many versions of this. Belgium, UK, and the Netherlands have tax codes that closely reflect BIG. Libertarians, capitalists, and leftists support UBI. Neo-liberals and many leftists do oppose UBI, basically on the reciprocity issue and incentive not to work fear.

What can be more radical than the UBI? Why haven’t the progressives in the Philippines pushed for this? Is it feasible in the Philippines? Why aren’t our politicians exploring UBI? With UBI, the hyperwage theory has another roadmap to implementation. Isn't it time for a Philippine chapter to promote UBI/BIG?

References:

Clark, Charles M.A.

2002 The Basic Income Guarantee: Ensuring Progress and Prosperity in the 21^st Century. The Lifey Press, Dublin, Ireland.

Groot, L.F.M.

2004 Basic Income, Unemployment, and Compensatory Justice. Kluwer Academic Publishers, Dordrecht, The Netherlands.

Van Parijs, Philippe

2001 t’s Wrong with a Free Lunch? Beacon Press, Boston.

Widerquist, Karl; Michael Anthony Lewis, and Steven Pressman

2005 The Ethics and Economics of the Basic Income Guarantee. Ashgate Publishing Ltd., England.

Useful links:

Basic Income Earth Network: http://www.etes.ucl.ac.be/BIEN/Index.html

The U.S. Basic Income Guarantee Network: http://www.usbig.net/