Sunday 25 January 2015

Why Labour Should Adopt the Citizen's Income

I'm all for nicking good policies, and one Labour and the labour movement should half-inch is the citizen's income from the Green Party. Of course, the Greens don't own it, it has been knocking about for a good many years. But they are the only ones pushing it as a key plank of their commitments. Here is the short section from their policy website, and is likely to have similar wording for the 2015 manifesto:

EC730 A Citizen's Income sufficient to cover an individual's basic needs will be introduced, which will replace tax-free allowances and most social security benefits (see EC711). A Citizen's Income is an unconditional, non-withdrawable income payable to each individual as a right of citizenship. It will not be subject to means testing and there will be no requirement to be either working or actively seeking work.

EC731 The Citizens' Income will eliminate the unemployment and poverty traps, as well as acting as a safety net to enable people to choose their own types and patterns of work (See EC400). The Citizens' Income scheme will thus enable the welfare state to develop towards a welfare community, engaging people in personally satisfying and socially useful work.

EC732 When the Citizens' Income is introduced it is intended that nobody will be in a position that they will receive less through the scheme than they were entitled to under the previous benefits system. Children will be entitled to a reduced amount which will be payable to a parent or legal guardian. People with disabilities or special needs, and single parents will receive a supplement.

EC733 Initially, the housing benefit system will remain in place alongside the Citizens' Income and will be extended to cover contributions towards mortgage repayments (see HO602). This will subsequently be reviewed to establish how housing benefit could be incorporated into the Citizen's Income, taking into account the differences in housing costs between different parts of the country and different types of housing.
At £3,692/year for over 18s, we're hardly in the territory of a weekly lottery win for everyone. But it is not without cost. The Telegraph think it will cost between £240bn-£280bn/year. Where they get this figure from I don't know. Providing an income for everyone over 18 would cost £185bn. That includes people currently in receipt of the basic state pension. Remove the 10.4m currently drawing one knocks off just over £38bn. The Greens favour funding it from a wealth tax and savings from a largely obsolescent welfare state. Extra payments for housing, the disabled, and some form of child benefit would remain.

It's not beyond the realms of possibility. It can be done if the political will and popular support is there. Two possible objections come to mind first, however.

1. It undermines the incentive to work.
2. It would contribute toward inflation.

Let's look at some evidence.

Between January 2008 and December 2009, a coalition of mainly-German aid organisations sponsored a basic income grant pilot in Otjivero-Omitara in Namibia, a small town of about a thousand people located 100km from Windhoek. Everyone under 60 was paid 100 Namibian dollars/month and the results were interesting. While the data was skewed by family members from elsewhere migrating into the town once the pilot was underway (making it look like household income actually fell for the duration), nevertheless poverty was reduced within a year from 76% to 37% of residents. For those not homing migrants, it crashed to 16%. Within six months of its introduction, underweight children fell from 42% to 17%. School drop out rates fell from 40% to 0%, debt declined from N$1,215 to $772/per person, reported crime collapsed by 42%, and the number of adults involved in "income generating activities" increased from 44% to 55%. The pilot notes "the grant enabled recipients to increase their productive income earned, particularly through starting their own small business, including brick-making, baking of bread and dress-making. The BIG contributed to the creation of a local market by increasing households' buying power."

Very good work though five years after the pilot concluded the Namibian government have not implemented the policy. However, that's Namibia, a country dominated by a huge desert, low population, and lop-sided economic development. In effect, one might argue that the period of the BIG pilot helped round out Otjivero-Omitara's local economy. Is this of any use to wealthy, Western nations? A series of US and Canadian government pilots with Negative Income Tax delivered results that were repeated by the Namibian experience. These were slightly different in that a basic income was paid only to those who fell beneath a certain threshold - think of them as a form of today's working tax credits. The Namibian effect on schooling was presaged here: attendance and attainment up, drop out rates down. Low birth weights disappeared and, in the Canadian experience, falls in accidents, and physical and mental health problems pushed hospitalisation rated down by over eight per cent. Nor was there any evidence of recipients giving up work to live off the grant. Some secondary earners - mainly women - scaled back their work hours, and there was some evidence that if a primary earner lost their job they spent a few weeks looking for a suitable replacement (pp 9-10 here).

Still not convinced? Let's take a trip to Alaska, home of the Klondike, Ice Road Truckers, and Sarah Palin. Since 1976 the state has taken a slice of oil revenues and invested the proceeds, building up a sovereign wealth fund worth around $50bn. Since 1982 the Alaska Permanent Fund Corporation has paid out a dividend to the 700,000 or so resident Alaskans of varying value.

In recent years, the value has been all over the place. I expect it will be a historic low this year, depending on the performance of its non-oil assets. While it is true prices in Alaskan shops are higher than the US heartland, this is because of import costs rather than any inflationary effects. Furthermore in November 2014 unemployment stood at 6.6% vs the national average of 5.8%. Evidence of bone idleness or the fluctuations in the oil economy? As the Department of Numbers site indicates, unemployment rates have been relatively stable since 1990.

These experiences show a citizen's income can be done, but should it be done? Of course, and as a matter of urgency: it is a simple measure that can dramatically improve the living standards of millions and, as the evidence suggests, have very beneficial knock-ons in terms of education, health, crime, and community cohesion. That's why the Greens and increasing numbers of Labour people endorse it. From a labour movement point of view, there's another compelling reason.

For 35 years business has had the whip hand over the global economy. Capital freeboots its way across the planet subject to few checks, and playing one region off against another. David Harvey made the compelling case in his A Brief History of Neoliberalism that capital in its neoliberal phase is decadent and regressive. Profits have not come from the expansion of the productive forces, as Marxists would put it, but rather by an 'accumulation by dispossession'. The forced enclosures of land, the selling off of publicly-owned assets, the export and deletion of jobs, the introduction of markets into public services, and the erosion of progressive income tax regimes has redistributed wealth from the poor to the rich. It's a global power grab that's only been possible because labour movements have been defeated in far too many countries far too many times.

From a British perspective, this has meant that many millions of people are not covered by trade union protections and are subject to overwork, pitiful pay rises, job insecurity. And that's the full-time workers. As the government talks up the economic recovery and trumpets jobs growth, a simple look at the figures shows that 24 out of every 40 new jobs are full-time, yet in 2008 the F/T rate stood at 64%. And today? 62%. We have a job market increasingly bent toward part-time working in which many people can't make ends meet. With unemployment high and competition fierce for what full-time jobs there are, its bent far too much toward the purveyors of temporary working and zero hour contracts. A citizen's income would change all this. If people entering the job market know they have a regular weekly payment providing a little bit more security, the market incentivises good employers. No longer will workers have to cling to a low paid job with an awful boss. A basic income will keep the wolf from the door, changing entirely the balance between employers and employees, and offering new political opportunities our movement can capitalise on.

This is the other reason why I support the basic citizen's income. It's a bold step toward securing the interests of our people and changing society permanently for the better. We need to take it up, turn it into party policy, and win it.


Anonymous said...

I presume it will allow savings in administration as it appears to be less bureaucratic than the current system?

Phil said...

Indeed, that bureaucracy will be largely obsolete. I imagine the savings would contribute to the basic income. Quite how much I cannot say, this is just a very rough exploration of the real and political benefits it would bring.

Unknown said...

Great idea. For a real-world story on the myths and misunderstandings surrounding Universal Basic Income, check out Federico Pistono's presentation on pilot project conducted in India between 2011-2013 and also this article on the same project . Thought-provoking stuff!

Anonymous said...

Absolute sense, whether Green or Red, the party that has an interest in the people will get my vote.

Boffy said...

Simple answer is no we should not adopt it, and not just because Natalie bennett was all over the place trying to explain it or justify it, along with most of their other policies last week on the Sunday Politics.

Its not the same as a Minimum Wage, which requires that employers have to pay a minimum amount to buy labour-power. In fact, its the opposite. It would encourage bad, inefficient employers to pay low wages, and to take account of the fact that the state - that is other workers from their taxes - would be making up a large part of what they should be paying as wages.

In that respect, its the same as the existing in work benefits, which should also be scrapped for that reason, and replaced by a much higher minimum wage of around £20,000 a year - we should set it as an annual amount no matter for how long labour is employed to discourage employers taking on labour on a temporary, or part-time basis.

We should also favour a much higher level of Unemployment Benefit, and Sickness Benefit, but I would prefer a system in which the Trades Unions act as a monopoly supplier of labour to employers - like Owen proposed with the GFTU - and in the meantime the unions, with an expanded worker owned co-operative sector, would be able to organise training, or employment for the unemployed and disabled in return for those benefits in the service of the labour movement, and workers communities.

Its also an approach that can be developed on a European basis, as part of developing an internationalist approach based upon forging a European wide workers movement, rather than looking to the capitalist state on a nationalistic basis to provide the solutions we need to provide ourselves.

Phil said...

Thanks for the response Boffy, I plan on writing something proper about it because it deserves a proper response.

David Timoney said...

It is wrong to assume that a citizens' basic income is necessarily egalitarian. It is a mechanism that can be implemented in either an progressive or regressive fashion.

The key to understanding the political slant of a CBI is how it handles economic growth and uprating - i.e. the distribution of productivity gains. The neoliberal era has been marked by the majority of gains accruing to capital, after the dominance of wages in the 1945-75 period. If the majority of gains were now to go to the CBI (bearing in mind this benefits all workers as well as the unemployed), then it is distributive and works to lessen inequality.

You'll notice that the Greens are quiet on how uprating would occur, talking merely of the CBI being "sufficient to cover an individual's basic needs", which leaves a lot to interpretation by people with little personal experience of benefits or low wages. Given that benefits have usually been held below growth rates in real terms since the 80s, it is not a given that a CBI would knock capital off its perch. It could even work to increase capital's share of future gains.

For example, the Greens propose abolishing the personal allowance and folding NI into income tax. This could be progressive if starting rates of tax are low, say 5%, but all their policy manifesto explicitly states is that they'll introduce top rates higher than 40%. Just as increases in the personal allowance have been used to benefit the better off, so a CBI could be used to shift the tax burden down rather than up.

Finally, it is worth putting this into historical context. The earlier interest in basic income, notably under Nixon in the US, sprang not from altruism but a fear of growing unemployment and the expansion of the welfare state (Johnson's "great society"). Similarly, the current vogue owes much to fears of secular stagnation and structural unemployment, allied to opportunism in respect of "shrinking the state".

DFTM said...

I am sympathetic to Boffy's response, however I would point out that the Greens also plan some tax changes which would not simply make this a transfer of money from one section of the working class to another.

Incidentally, even if it were you could argue it would be a good reform. I was reading a report about the Scandinavian countries which pointed out that the gap between those at the very top and everyone else was very similar to all other nations but their model of social democracy was achieved through taxation and welfare.

Now if you are going to argue for reformist policies, such as increase in the minimum wage, then aren't the Scandinavian nations a bit of a benchmark? So why can't that sort of redistribution be a valid reform?

Ed said...

Boffy - Have minimum wage too. You numpty :-)

Neil Harding said...

This idea that employers will lower pay with a UBI depends on their power over their employees staying the same. But a UBI enables employees to be more choosy because there are no sanctions for refusing a job.

Anonymous said...

I'm perplexed as to why a UBI would encourage employers to pay low wages as Boffy claims. I can see many employers being forced to increase what they pay because the job is not attractive enough to persuade people into taking low hourly rates.

Boffy said...


Say a UBI is set at £5,000, every employer will deduct £5,000 from the wages they would otherwise have paid - maybe not straight away, but that would be the case over time. As Marx says, wages are merely the phenomenal form of the value of labour-power, and so it doesn't ultimately make any difference how the revenue required for the reproduction of that labour-power is provided, i.e. whether it coems all directly as wages, or part as the social wage, or part as a UBI.

In the end competition amongst workers, together with the fact that capital will only employ labour-power if it produces the average profit for it, will ensure that the total income, however comprised, of workers will not exceed that limit. At times workers total income will move above it, and more often will drop below it.

The employers paying Minimum Wage may not be able to reduce what they pay below the Minimum Wage, but here all the UBI will do is basically replace the In-Work benefits paid to workers on such low wages.

The fact remains that those benefits paid to workers on these lower wages will represent nothing more than a transfer out of taxes from better paid workers. It is nothing more than better paid workers subsidising small capitalists, who pay low wages. Moreover, even if a portion of that transfer came from bigger more profitable capitalists, it would be reactionary, because it would mean protecting the less mature, more backward forms of capital at the expense of the more advanced, more mature forms of capital.

As Marx demonstrated, it is impossible to make any meaningful difference to the distributional relations between labour and capital, by such reformist means. That can only be done by changing the productive relations, which determine those distributional relations.

That means expanding the extent of worker owned property at the expense of capitalist property in all its forms (private capital, socialised capital, or state capital). To the extent reforms are advanced such as a Minimum Wage, or for example, Marx's support for the Ten Hour Day, it is only to the extent, as marx set out that they enable the workers to advance their position independently to organise, to educate themselves, and thereby to develop these alternative forms of property and society at the expense of capital.

Anonymous said...

1. It undermines the incentive to work.

It incentivises work, because it abolishes the benefits trap. Anyone doing any form of paid work will always be better off than someone subsisting on UBI.

It also frees the entrepreneurial spirit in every citizen

2. It would contribute toward inflation.

If giving every adult £200 a week would contribute to inflation, what would happen if everyone "worked hard and got on" and earned an extra £200 a week?

Would that also be eaten up in inflation?

If so "working hard and getting on is just as pointless as giving everyone an unconditional basic income.

Unknown said...

One would not guess from Boffy's response that, since Marx's time, there has developed a massive welfare system in all developed capitalist countries designed precisely to modify, or mollify, the unfettered operation of the labour market. The costs of old age and child rearing are already extensively socialised. Surplus was effectively transferred from capital to labour over the middle portion of the twentieth century for all that Boffy claims this was impossible. On the whole this has not led simply to a concomitant fall in wages. The question is how this system can be developed in a way that increases power for our class.

The universal neoliberal response is not to cut back this system but to turn it to use as a weapon of class discipline by increasing means testing and conditionality. Unconditional basic income is a response to that attack. Yes its usefulness depends on the parameters adopted, David Timoney, as does any transfer system. Yes distributional effects occur within the working class(and across a lifetime I might add; redistribution within the working class is a neccesity, not a problem) as well between classes which is why welfare and tax policies always have to be considered together. Yes, while UBI further restricts the operation of the capitalist labour market, it does not remotely resolve questions of the ownership of the means of production and therefore still requires revolutionary change. All these factors apply to any proposal whatsoever for a welfare system and carry no weight when considering UBI compared to other systems.

The crux however is not distributional effects but power relations. Neoliberal welfare is being used to discipline and disempower our class. Proposals for TU control of benefits and employment, like Boffy's, merely redistribute power to a new bureaucratic caste. The point of UBI (and why the 'U' - unconditional - is essential) is to establish a right to some income, even if limited, outside of all power relations. It is a demand whose force, completely unanswered by its critics, derives from the experience of capitalist welfare, and whose effect is a transfer of power to our class.

Jamie said...

The key to this is that it replaces the tax allowance, and for all those earning over a certain amount, the rest will be clawed back in tax. So for them the cost is nil. It might not be evenly distributed between them, however; that is a question along a left/right axis. For those on unemployment benefits the cost is nil - except for those who currently fall foul of IDS and are deemed 'undeserving'. They would be winners, as would those on low incomes, especially part timers, neither of whom get the full tax allowance at present. It is difficult to know how many would voluntarily switch to fewer hours, so the real cost is guesswork. The Telegraph's £280bn assumes that everyone suddenly stops working (and even then is way over).

Boffy said...

"It incentivises work, because it abolishes the benefits trap. Anyone doing any form of paid work will always be better off than someone subsisting on UBI."

I agree, which means that the idea that it would stop people taking on low paid work is false. By incentivising work, it thereby increases the supply of labour-power relative to the demand, and thereby acts to push down the current market level of wages.

"It also frees the entrepreneurial spirit in every citizen."

Is one of the clearest expressions of the petit-bourgeois ideology that stands behind Green politics. What it really means is that the Liberal-Tory policy of encouraging people who can't get a proper job, to become self-employed window-cleaners and gardeners, scratching a living by working all hours of the day, if and when they can actually find such work, is given a boost. It means that low paying, low value output is subsidised at the expense of high value output, and so Britain's chronic low productivity problem caused by such an economic policy going back to Thatcher is made even worse.

"If giving every adult £200 a week would contribute to inflation, what would happen if everyone "worked hard and got on" and earned an extra £200 a week?"

Giving everyone £200 a week would only contribute to inflation of the money was additionally printed to pay for it. Otherwise, the money is taken in taxes from other workers.

Inflation only arises if more money tokens are put into circulation relative to the amount of value of commodities thrown into circulation as an equivalent, i.e. as Marx points out money is the universal equivalent form of value.

If you print money to give to people to spend, who do not produce additional value of an equivalent amount, that is inflationary. That is, in fact, how firms would reduce wages to compensate for the BNI, rather than immediately cutting nominal wages.

If, however, workers do more work as you propose, this means that additional value is created, and thrown into circulation. Its equivalent in money is paid to workers as wages, capital as interest and profits, to landlords as rent, and to the state in taxes. Either more money tokens must be printed to accommodate this additional requirement, or else the velocity of circulation of money tokens must increase, so that a given quantity of currency acts to facilitate a greater value of transactions.

This in fact, is the true nature of the situation in Greece. It doesn't need more money as people keep wittering on about, it needs more capital. More money can be provided in Greece at any time, by the Greek Central Bank creating it in electronic form, by simply establishing a deposit in the account of the Government, which the government can then use to make further electronic payments.

If Greece converted everything to electronic transactions, they could continue to use the Euro, to denominate prices for ever more, without ever needing to actually print additional notes and coins. The problem is not the production of more money, of this nature, the production of more real value in the economy, and the potential for that value to self-expand.

Boffy said...


The welfare system was not created by capital to "mollify" the working of the wage system in the interests of workers! Why would a capitalist state do that? It was created to meet the interests of capital, which is why such systems were created by Bismark in germany, and why the Chinese Stalinists are looking to create such systems in China today.

In the 1930's when workers most needed Dole, it was cut. Now that workers are living long enough to draw a bit of measly state pension, they are told, sorry you will have to work longer. All the data shows there has been no redistribution from Capital to labour, if anything inequality has grown wider!

Alan Freeman some time ago analysed the tax contributions made by workers after WWII until more or less recent times, and found that in no single year, did the benefits they obtain from the social wage exceed what they had paid in.

The capitalist state could withdraw or cut a UBI to meet its needs, whenever it required just as it cuts pensions, dole and other benefits, meanwhile illusions in the class neutral nature of the state would have been sown, discouraging them from organising to develop real solutions.

I didn't propose TU control of benefits, I proposed worker owned and controlled social insurance funds. That is precisely in order to encourage the development of workers democracy in its administration, which is a means of that being carried through into a struggle against bureaucratism in the labour movement in general.

There is always a danger that such a development could lead to the rise of a new bureaucracy, as happened within the TU's, but the point about worker owned and controlled property, is that on a daily basis it mitigates against that, because it directly requires workers to make on the spot decisions, and to actively participation in decision making, in a way that is not required with Trades Unions.

But, that applies to Socialism too. There is always the potential for a socialist society based upon worker owned property, and workers democracy to develop such a bureaucracy, as Michels and others suggested, but your alternative seems to be to avoid that danger by simply accepting the continued control by the capitalist bureaucrats and the capitalist state!

David Timoney said...

Re Richard Atkinson's comment: "The point of UBI (and why the 'U' - unconditional - is essential) is to establish a right to some income, even if limited, outside of all power relations".

But if this right exists outside of all power relations, how is it enforced? Indeed, how would it ever come into existence, other than as a patronising "grant" from capital via the state?

WillORNG said...

Here's an interesting piece suggesting that combining the two would protect them from reactionary reduction and down grading over time.

It's well worth reading the earlier articles and indeed Heteconomist provides some interesting synthesis of modern Marxism and Modern Monetary Theory, aka real world alternative economics.

BCFG said...

Boffy, as usual, wants his cake and eat it.

Boffy can propose reformist policies, support New Labour, call on the minimum wage to be increased and this is all fine and dandy. But when others propose fighting to protect the welfare state he comes out with lines such as,

“The welfare system was not created by capital to "mollify" the working of the wage system in the interests of workers! Why would a capitalist state do that? “

The same could be said of the minimum wage that he proposes is the alternative!

But a capitalist state will provide concessions if under pressure from below. The reason they will provide concessions is because they have one overriding priority, keep the show on the road as Joan Robinson once famously said! So when we ask why a capitalist state would do something that strengthened the hand of the working class the answer is to protect them from agitation from below. The weakness of the Labour movement is one reason they are now reducing the welfare system.

The highest form that social democracy has reached in the West has been based on a welfare system, not a minimum wage system. The libertarians are constantly telling us the problems of a Welfare state, which are often real problems it has to be admitted; the point is that these problems are manageable and what they offer as an alternative is far far worse!

Making comments such as ‘feeding the entrepreneurial spirit’ could be viewed as ‘petit-bourgeois’, especially by someone who lives in a dogmatic straightjacket like Boffy, on the other hand it could be viewed as a clever appropriation of the enemy’s language, a tactic in the battle so to speak.

“Alan Freeman some time ago analysed the tax contributions made by workers after WWII until more or less recent times, and found that in no single year, did the benefits they obtain from the social wage exceed what they had paid in.”

But that isn’t the story of state but the story of capitalism itself, whether viewed through the state or through the private sector. I know Boffy has argued in the past that the private sector schemes are superior to the NHS because they provide better value for money via competition etc. But the lesson from Marx is that capitalism is a system of expropriation period!

Unknown said...

Yes, the DWP's functions could essentially be reduced to nothing more than standing orders at the treasury's bank. Their functions regarding disability assessments are little more than a duplication of the GP's evaluation.

Becca Kirkpatrick said...

Thanks Phil for this and your follow up Basic Income piece, drawn to my attention by Ravi. I'm a trade unionist who has been massively inspired by recent discussions on Basic Income. I've started a group on Facebook for UK trade unionists who want to discuss/debate and organise for Basic Income.
I have already shared both of your blog posts in there and they've been well-received. I wonder if you would be up for joining the group yourself? Your input would be valued.

Unknown said...

Well said and tis what I have personally believed for a while now, however, since I don't see this happening in my lifetime, I have started an anarchist food project whereby we donate food to a local soup kitchen under the rallying cry of 'food is free'. It's only a first step, but it occurred to me that we British are only too happy to feed dogs, cats, foxes, hedgehogs etc etc but baulk at feeding our fellow man or woman (I think most of us would feed someone else's kids I hope ) and call them scrounges when we do. So I and others like me have decided that food should be free for anyone and everyone who needs it. Imagine if we were to use our fertile land to grow food for the globe and just give it to them!?! Perhaps all these economic migrants might stay where they are if they did not have to struggle for the basics and an added incentive is that healthy populations who have enough food then buy luxury goods from us and enjoy leisure services and other technologies .
I think that people would still work because some people enjoy it for its own sake anyway, but also the basic citizens wage would cover the necessities of life and would not buy you a car for example, so the incentive would still be there to work, if anything it would have added value, as you would be working for that car or holiday or whatever instead of working to pay for heat so you don't die in winter.

Unknown said...

That's What already happens, believe me, if you have ever had to claim any benefit.

Unknown said...

That is the whole point, the state pays people various benefits as it is, the thing that would be removed is the stigma and sense of dishonour which the state currently employs in its dealings with very often deserving recipients.

Alex ken said...

The tax is based on the gross assets of an estate. That isn't limited to just cash, stocks, and investments.

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