LAST MONTH, the Swiss parliament agreed to hold a referendum on the issue of Basic Income. The proposal is for the state to provide an unconditional basic income of 2,500 Swiss Francs per month to all adults – just over €2,000. It is quite a radical proposal but certainly has merits.
Interestingly, TheJournal.ie’s poll on the topic is split quite evenly, with those against introducing it marginally ahead on 40 per cent (at the time of writing), and the rest split between those in favour and those who are unsure.
So, let’s consider what a Basic Income, or guaranteed minimum income would really look like in Ireland.
Before considering the Basic Income proposal, consider the contrast between these two small countries. In Ireland, our most recent referendum was on two government-backed propositions, driven by Enda Kenny and Alan Shatter. Both concerned changes in who governed or judged us, rather than directly changing society.
The Swiss referendum was triggered by the collection of over 100,000 signatures, organised by grass-roots activists. The proposal is not just tinkering with the social welfare system, but overhauls it completely.
Switzerland is in many ways different to Ireland; it has a population of 8 million – almost double ours – and yet it manages real, popular participation in government. For instance, last March Swiss voters backed strict controls on executive pay, and this November a referendum proposes to limit the disparity between pay in a company to 1:12 – that is, the maximum monthly pay of an executive will be the yearly pay of the lowest paid. In Ireland there is no limit to disparity of pay.
The welfare state in Europe is based on the provision of benefits only to those in need. The unemployed, disabled and retired are provided with enough to keep body and soul together, sometimes with provision for housing, heat, travel and medical care. In Ireland, the cost of social welfare is €20 billion, but remember that this figure covers child benefit, state pensions, and income supports for lower-paid or part-time workers, not just the unemployed.
Basic Income guarantees a standard amount to every citizen, regardless of need. From the highest to the lowest paid, everyone receives the same. If anyone, it’s the Swiss who will take the plunge first.
But let’s consider the hypothetical case of Ireland: the level of Basic Income can be relatively high or low, but considering that the cost of living in Switzerland is greater than in Ireland, let’s settle on €1,000 per month. There are approximately 3 million adults in the country, €1,000 per month comes to €36 billion per year. On top of that there’d be around €2 billion in child benefit. That’s an awful lot of money, but only €18 billion more than what we’re already spending.
Who will pay that extra 18 billion? Clearly, the answer is taxpayers, principally those who are already earning a good deal more than €1,000 per month. However, this is not €18 billion that disappears into thin air (unlike the repayments of the promissory notes). This is €18 billion of re-distributed money, which is spent, saved and invested in the local economy. Also, those on low or middle incomes will only see minimal changes, because the extra €1,000 a month will make up for new taxes.
What are the benefits of Basic Income? Firstly, we no longer waste any money on running departments of social welfare. The Basic Income payment is automatic like Child Benefit – there are no claims and no means-tests. Secondly, the payment removes all disincentives to work. Every euro that anyone earns benefits them; there are no poverty traps. Working part-time becomes simple and straightforward. This can create growth in the economy because it facilitates more people working, and therefore producing and consuming more goods and services. Thirdly, it would stem emigration.
Some argue that an automatic payment provides a disincentive to work, but this misses the point that you simply cannot force people to work. Ireland’s new Pathways to Work strategy on unemployment is an ‘Active Labour Market’ policy. This policy requires job-seekers to attend group meetings and interviews with case workers and to sign a ‘rights and responsibilities’ agreement with the office. It threatens sanctions of the reduction or withholding of benefits for non-compliance.
This is not only immoral but ineffective. Jobsearch Australia, the poster-child for Active Labour Market policies, found placements for 1.4 million persons over two years; but of these, only a third lasted for over 13 weeks. This is not a cure for unemployment but a revolving door between poor employment and the dole queue.
What are the drawbacks to Basic Income? Obviously, there is the issue of cost. For heavily-indebted over-mortgaged citizens, any major shift in taxation could lead to bankruptcy. Sure, most people gain, but high-income earners who lose out may suffer severe and undeserved consequences.
From another angle, Basic income is a flat payment, taking no account of relative disadvantage; those who have suffered inter-generational poverty may need more support in gaining education, training and so forth. Furthermore, the question of citizenship and immigration could be problematic if a small country implemented Basic Income ahead of its neighbours.
For now, it’s a question for the Swiss. However, an online petition to have the EU consider the solution is available at European Citizens’ Initiative for an Unconditional Basic Income. It requires a million signatures before 2014.
Tom Boland lectures in Sociology at Waterford Institute of Technology, and is co-ordinator of the Waterford Unemployment Experiences Research Collaborative.
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