Most Australians Support a Basic Income.

In December 2020, a poll commissioned by The Green Institute put the following question to a statistically valid sample of Australians:

Unconditional income support is sometimes called a Guaranteed Living Wage or a Universal Basic Income. This means that just as we can rely on basic health care and education, everyone in a society has a guaranteed minimum amount of money that they can rely on. Would you support or oppose a guaranteed living wage being introduced in Australia?

The data showed that an overwhelming majority of 58% support a universal, unconditional income support payment to all Australian citizens and permanent residents. Only 18% oppose it.

This proposal, which is authored by members of Basic Income Australia, a basic income advocacy organisation founded in Melbourne in 2017, aims to articulate a framework for the smooth introduction of such a payment and the abolition of poverty in Australia. 

The essence of our proposal is a ramped implementation which we put forward as a strategy to manage the inherent uncertainty of such a large undertaking. People may speculate about how a basic income would affect the economy, but no one knows the future. For this reason we propose a gradual shift in the balance between existing conditional welfare systems and the new universal payment, which will slowly increase and be counted as taxable income - thereby automatically phasing out existing welfare payments as it increases.

As we go, we can gather more data about the effects on taxes, spending, inflation, house prices, interest rates and other key economic indicators.

Goals

1. Abolish poverty

In total there were around 2 million adults, with around 1 million children, living in poverty in Australia at the start of 2020. This represents about 12% of the population; but 17% of children (mostly in single parent households) and 33% of pensioners (mostly renters). Most of the rest are single parents (mostly women), and a small percentage of people who are long term unemployed and disabled. Of this group, 24% of Aboriginal and Torres Strait Islander people living in cities live below the poverty line, while for those living in remote areas, the number is 54% (ACOSS_Poverty-in-Australia-Report). 

During the coronavirus emergency, as welfare payments were increased, we actually saw poverty decrease - despite the biggest economic contraction on record. That demonstrates what many have long maintained:  that poverty is not an inescapable economic reality, but rather a political choice. 

2. Avoid welfare traps

Current welfare arrangements create perverse incentives, with payments reducing as wages are earned - reducing the reward for entering the workforce. Raising welfare payments, which are currently well below the poverty line, to a liveable level would increase this effect. During the early days of the coronavirus emergency, the payment was raised above the poverty line, but this meant the income difference between those working full-time at minimum wage, and those on unemployment benefits was little more than $200 per week. This means the difference in income is only about $5 per hour worked. And that is leaving aside the probability that this difference would be erased by commuting and other costs such as work clothes and takeaway meals; having a job is expensive.

Combined with the loss of conditional payments, and, of course, the requirement to perform work, low wage work can be a pretty bad deal. 

3. Lessen inequality

By lifting incomes across the board, a basic income levels the playing field, reducing inequality and giving those at the bottom a firm foundation upon which to build their lives. One state in the US, Alaska, already has a basic income in the form of the Alaska Permanent Fund. This payment is below the poverty line but has important macroeconomic effects. Alaska is the most equal state in the Union. 

4. Change the labour market to give workers more power.

Without the gun of poverty to their heads, workers would be better positioned to bargain for better wages and conditions. Some would work fewer years, hours, or jobs. So a household with two full-time income earners may decide they only need one. Or someone working full-time may choose a part-time role. People might study longer, take a gap year to travel, or retire earlier.  All this would tighten the labour market, further empowering the position of employees relative to their bosses.

There would also be those who chose a lower paying job, in an industry or area they prefer, since their income would be supplemented by the unconditional payment. In all cases the freedom for workers to choose the terms and nature of their employment is increased.

5. Facilitate a better work-life balance

Most Australians would be happier if they could work less. A basic income would help facilitate this, both directly and indirectly, through the mechanism described in point 4. This would give people more time to spend with family, taking care of themselves through exercise, socialising, or simply enjoying themselves.

6. Increase people’s personal security and therefore their health and safety outcomes

An unconditional income stream would provide a degree of psychological and physiological security the value of which cannot be calculated. Freedom from poverty, precarity, and dependence - on a potentially abusive employer, partner or family member, would provide a fundamental degree of well-being to every member of the Australian community.

7. Promote creativity and lifelong education as well as personal and professional development

A basic income would allow people to take a temporary hit to their incomes while they transitioned from one role, industry or physical location to another. It would also allow them to pursue intellectual, creative or entrepreneurial ambitions outside the labour market. In the long-term this would benefit not just the individuals in question but Australian society as a whole. 

Indeed it is our intuition that the opportunity-cost to our nation of these dreams deferred is much greater than the financial outlay required to facilitate their pursuit.

8. Promote innovation, technological development and automation

It's often pointed out that automation makes a basic income ever more necessary, as it reduces the need for labour, making it harder for people to find jobs. But the causality runs the other way too. A basic income would allow people to say no to repetitive low paying jobs, which would incentivise the automation of those tasks. This automation would increase productivity and the supply of goods, meaning we can pay a higher basic income, which further encourages automation in a virtuous cycle that can propel us into an age of sustainable superabundance. 

Proposed Implementation 

1. Gradual introduction, initially to complement rather than replace existing  welfare payments

Rather than aiming to immediately replace existing welfare systems with a new universal payment, we advocate introducing the new payment at a less-than-poverty level, while leaving current welfare payments in place, then ramping it up to a livable amount over time, phasing out welfare as we go.

2. Counted towards total taxable income for welfare purposes.

By offsetting the UBI against welfare payments, we can facilitate the gradual reduction of these means-tested welfare payments, which will automatically decrease as the universal payment increases. 

3. No withdrawal or marketisation of public services

Education and healthcare services would remain in public hands and be expanded. The government would continue and expand its provision of housing and other market interventions designed to promote equality and reduce poverty. Basic Income would not be used as an excuse to justify cuts elsewhere.  The more that public goods and services are provided on a universal basis, the lower the Basic Income can be.  Direct provision tackles the supply side, while the Basic Income provides the money for each person to express their basic needs on the demand side. Getting people above the poverty line will require a combination.  

4. The basic income as stimulatory lever

The payment would thus join wages, taxes, government spending and interest rates as one of the major macroeconomic levers used to manage the economy. Therefore we need to adjust it and these other levers in real time based on economic conditions. The goal of this adjustment would be to raise the Fair Go payment as high as possible, without triggering undue inflationary pressures, which could undermine the underlying goal of rising living standards.

5. Managing inflationary pressures

When these inflationary pressures do arise, reducing this payment or halting its growth would be one potential response. But a better one, depending on the economic conditions at that moment, could be raising interest rates, or by applying a flat % tax on all spending, similar to the GST but across all forms of spending. This tax would not be included in the CPI, to prevent flow-on effects. The UBI would have to be increased in parallel to match the increase in the cost of basic goods and services driven by both inflation and the tax, to maintain its real value above the poverty line. Inversely, when deflationary pressures prevail - as is the long term trend - an increase to the basic income would be a better response than dramatic interest rate cuts, which can overstimulate the financial sector relative to the real economy, causing private debt bubbles, asset price spikes, and instability.

6. Managing the labour market

Once the Basic Income reaches the poverty line, it could be used as a new tool to keep the labour market in dynamic balance. As automation and virtualization cause a shift in the job market, even if new jobs emerge, many people may find difficulty in making the transition.  The Basic Income can then be increased until a new balance is achieved where most vacancies are filled within standard recruitment times and most people in paid work, and most not in paid work, are doing it by choice.  The Basic Income should be a much better tool for achieving this balance compared to ‘interest rates’, as it is directly targeted to income.