Universal Basic Income on ABC radio

The ABC broadcast a panel discussion on the Universal Basic Income on the Big Ideas program on Monday, June 26. I was a panelist along with Dominique Lamb, from the National Retailers Association, Rachel Watson, from the Wesley Mission and Queensland Shelter, Professor Gregory Marston, Head, Social Science, Queensland University, and Professor John Quiggin, economist, University of Queensland.

I was the only one opposed to the idea.

The Universal Basic Income is the idea that all those of taxpaying age should receive an identical amount of money irrespective of whether they are earning or not. This would replace the aged and the disability pensions, unemployment benefits etc. It would need to be set at the highest of those benefits to be politically saleable, and as the single aged pension is currently $21,015.80 per annum, that means it would have to be at least that figure.

This amounts to roughly $380 bn, and would mean total Australian tax would have to rise to 41.1% of GDP to pay for it.

The broadcast canvasses the issues pretty well. The arguments for a UBI come from both left and right. The positives include:

  • simplifying the social welfare system and making it more effecient
  • removing the poverty trap where means-tested welfare recipients can lose almost as much in tax and welfare benefits as they gain when they transition to the workforce
  • making it easier for people to leave the workforce and involve themselves in altruistic work, like charities, or raising families
  • providing support for people setting-up small businesses
  • a more mobile workforce, as people will find it easier to quit an unrewarding job and go looking for another
  • giving people more self-respect as they will have certainty in their access to a living wage, no matter what their circumstances

The negatives include:

  • moral hazard – this is a plan to pay “sit-down” money to everyone, which will encourage a large number of people to drop-out, and put the burden of meeting our costs on a smaller cohort
  • a tax rate two-thirds higher than we currently have
  • tax churn as money is paid out to high earners, who then have to reimburse it

In my view the negatives outweigh the positives by a huge margin. We know from history, and current circumstances, where the entitlement mentality leads. There are also inherent weaknesses in the idea which tend to lead you back to our current means-tested system of welfare benefits for those who are in real need. For example, a family of four could have a tax free income of $80,000 pa without working. This hardly seems sustainable. So the UBI might need to be at different rates for families and couples than for individuals. But then it might still be basic, but hardly universal – whoops.

In conversation with some of the other panelists after the discussion it was obvious that the two professors at least, and perhaps Rachel Watson, actually saw this proposal as a way to redistribute income – socialism by another name.

Listen and be forearmed and forewarned.