The Economist explains

Universal basic incomes

Why plans to give money to everyone are gaining ground

By R.A. | LONDON

ON JUNE 5th the Swiss overwhelmingly voted to reject an initiative that would have amended the constitution and required the government to take steps towards implementing a universal basic income—an unconditional cash payment given to all citizens. Supporters had favoured an income of SFr2,500 ($2,500) per month. Yet the universal basic income seems to be having a moment. The idea has the backing of people from wildly different parts of the ideological spectrum: like Charles Murray, a libertarian-minded scholar at the right-leaning American Enterprise Institute, and Andy Stern, an American labour leader. The tech world is interested too; Y Combinator, a tech accelerator, is commissioning research on the policy. How would they work and why are people so interested in them?

The idea behind a basic income for all is actually quite old. Thomas Paine reasoned in an essay published in 1797 that—in exchange for a social consensus in favour of private property rights—governments ought to pay everyone £15 per year. Politicians flirted with the notion off and on through the industrial revolution but generally built welfare states along different lines: as programmes of insurance for those who, because of age or bad luck, found themselves without work. Over the past decade, however, interest in basic incomes has grown alongside worries that the wages earned by workers are not rising quickly enough to boost living standards (or not rising at all, in some cases). Growth in pay has been disappointing for workers in many countries since 2000 or so, and the share of total income earned by workers (as opposed to owners of firms or land) has declined. Some basic-income supporters worry that powerful new technologies, like machine intelligence, will make life still harder for workers in future.

Setting up a basic income would be no easy matter. To pay every adult and child an income of about $10,000 per year, a country as rich as America would need to raise the share of GDP collected in tax by nearly 10 percentage points and cannibalise most non-health social-spending programmes. More generous programmes would require bigger tax increases still. There would be benefits. Poorer workers (and people who work for no income, like stay-at-home mums) would get a big boost to their incomes. Many people might use the payment to invest time and money in education or training. Entrepreneurship would become less risky. A more robust safety net would give workers more bargaining power with employers, and force firms to work harder to retain workers (and to make productivity-boosting investments). Yet there would also be big downsides. Many people might choose not to work at all; social tensions might rise. The availability of a basic income would almost certainly harden attitudes towards immigration.

INTERACTIVE: Our universal basic income calculator for OECD countries

The Swiss government, which issues an official opinion before such votes, was firmly opposed to the measure. It worried that a basic income would be ruinously expensive and morally corrosive, leaving the country with unsustainable public finances and a society of unmotivated loafers. Nevertheless, other countries are taking steps in a similar direction; both Finland and the Netherlands are planning basic-income experiments of their own. But while a universal basic income might well be a key part of the welfare state several decades down the road, it will take much more evidence that robots are stealing jobs, and more hardship for workers, to convince people in most countries to embrace such a radical step.

Dig deeper:
Governments do not need to adopt a universal basic income to improve life for workers (June 2016)
If work ceases to provide a good living to most workers, radical reform of the welfare state is inevitable (June 2016)

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