What's this Basic Income thing?
Basic Income (BI) is the concept of all citizens of a country or region receiving an unconditional salary from the government. BI is not intended as a full income replacement, but rather a replacement for social programs such as welfare. While obviously beneficial for those living under or near the poverty line, BI is also beneficial to middle class families where only one parent has time to work, for self-employed individuals who may not qualify for Employment Insurance, and for seasonal workers, to name a few. The idea is that in a modern society where machines can replace many of the jobs previously performed by people, there is no longer a need to all those of working age to have a full-time job.
Don't Get Carried Away
The naysayers of BI argue that the cost of such a program would be too astronomical to even consider, and if implemented incorrectly, they're not wrong. A program of such a grand scale needs to be well thought out, and not introduced as a vote-buying measure, or knee-jerk reaction to a crisis. This article is intended to provide an outline of a method of Economically Sustainable Basic Income (ESBI), while also warning of the dangers of getting carried away.
I hope to illustrate the extraordinary benefits a program such as ESBI could have on society, and that it can be implemented safely without upending many of the aspects of life we're already used to.
The Basics of ESBI
The key point to understand about ESBI is that it's not an income replacement, but rather a guaranteed income foundation. ESBI is intended to provide sufficient income for an individual to live a minimally comfortable life, without the need to have a job or other additional income. The definition of 'minimally comfortable' will be higher than what ESBI provides for the majority of people, and so those people will still opt to work in order to increase their 'comfort'.
Paying for this program is quite simple really, but there are a few layers.
- Low income or unemployed individuals: There are already welfare and wage subsidy programs in many countries of the world; ESBI would be similar or somewhat higher than what welfare provides. Since ESBI is unconditional as long as you meet the citizenship and residence requirements of welfare, there is a significantly reduced amount of overhead required.
- Employed individuals: This is the important part. Since an employee's salary is now partly paid for by the government, employers will no longer have to pay the full amount of the salary; the employee's wage does not change from pre to post implementation. The wages that the employer is now saving are collected by the government instead through increased corporate taxes, which are then used to pay for the ESBI cheques. It's a net zero adjustment that just adjusts the flow of money.
- Retirement: Pensions and retirement savings plans would still be things, they would be like employment and be a supplement to ESBI. How does ESBI get paid for? For plans prior to ESBI implementation, the ESBI amount can simply be charged to the plan. The net money to the individual would be the same, and only some administrative and accounting changes would be needed. Plans contributed to post ESBI implementation could follow the same system as those prior, or instead could be pay ESBI dues via a tax charged to all contributions. In either case the individual does not lose their money to a new tax, as the lost amount is recovered via ESBI payments.
- Other non-working individuals: Not everyone works, and that's ok. Whether by choice for life reasons sometimes an individual chooses not to seek work. These individuals will still qualify for basic income, so we need a source of funds to pay this. Employment Insurance (EI) systems can be adjusted to cover this spending. EI will be required less due to basic income, but if EI payments are still collected automatically through payroll deductions, the funds can be diverted to non-working individuals.
- Children: Like welfare, children would not receive the benefit until they reach a specific age.
- Dependents: Like welfare, an individual caring for dependents too young to receive the benefit would receive extra money through the program. This would apply to everyone, and not just to those who are low income. This is one area which isn't clear how it will be funded. Currently many countries have dependent tax deductions, child payments, maternity leave, paternity leave, etc. All these existing benefits may be reduced or in some cases eliminated, reducing overhead and other less efficient benefit programs.
- Other categories: There are most certainly scenarios not considered by this article; as long as the general rule of net zero by altering the sources and flows of money, then those scenarios too will be economically sustainable.
Benefits of ESBI
You've made it this far in the article, and now you're wondering if going through all these changes is really worth the trouble; what are the benefits of a large-scale social program like this?
- Poverty Reduction: Easily the most obvious benefit of an ESBI program. All citizens are guaranteed an income sufficient for living, so anyone who identifies as homeless should be doing so by their own choice. There will be exceptions obviously, but a guaranteed income that is more than just a stopgap like welfare will go a long way for many individuals struggling financially.
- Leaner Government: This program replaces partially or in full a number of other public and private programs, which each come with fraud prevention teams along with distribution staff. ESBI has a simpler distribution system (easily automated online, or setup when taxes are filed), and will require a significantly smaller fraud prevention team.
- Seasonal Employment: Employers who only operate for part of the year can face struggles to find appropriate staff, and then attract that same staff back for next year. Individuals who enjoy seasonal work then face struggles affording to do said seasonal work. With ESBI the stress of saving for the off-season is removed or reduced. Many countries rely upon temporary foreign workers to provide the skilled labour needed to operate certain sectors; while this is in many ways a good thing, it's not necessarily sustainable, and as we've seen with the COVID-19 pandemic, it is risky to rely on foreign workers when a border could be closed at any time.
- Families with Children: Most anyone who has or recently had preschool age children know the pain of daycare costs. Doing the math it usually works out that after wages and daycare costs, one of the parents' full-time job is really only netting the family a few hundred dollars a month. Then there's older kids who have after school activities, weekend activities, playdates, and the extra cooking cleaning and prep that goes along with these things. I've certainly had the conversation as to whether we both should be working full time jobs, but the financial reality always hits home. With ESBI there's more options to make part-time or homemaking work. Parents who spend more time with their kids typically have better relationships with them as they grow-up, and in the majority of cases, that's a very good thing.
- Self-Employment: Individuals who run their own businesses often have a tough time qualifying for other social programs like employment insurance, and maternity or paternity leave. ESBI treats these hard-working individuals the same as everyone else, and provides them the security they need for whatever comes their way.
- Students and Recent Graduates: The job market for young adults can be one of the most challenging of all. Limited skills and experience reduce the number of job opportunities, and fierce competition from a dozen others in the same boat as them make finding work tough. Add to that for recent graduates no longer having the option to fall back on their student load, and you're just making things worse for a demographic that is already struggling to make it on their own. ESBI gives students and graduates the helping hand they need to find their path in life. They can spend more time finding the right opportunity, or take an internship or other learning opportunity to improve their employability.
- Startups: Small business is the backbone of modern economy and all those businesses had to start somewhere. Whether it be tech, service, food, or whatnot, all businesses big and small started from someone with an idea. In the beginning money is usually tight even if energy and innovation isn't. ESBI provides a cushion for startups that might not have made it otherwise, or even have started in the first place. Having ESBI will increase innovation in all sectors, further spurring the local economies of regions with ESBI programs.
Like all new things, ESBI is not without risks. As mentioned at the beginning of this article, mis-implementation is the biggest risk facing all Basic Income proposals. ESBI seeks to minimize those risks by limiting the scale of the economic change required for implementation. What other factors should be considered.
- Missing Net Zero: As much planning and forecasting as possible needs to be done to get this program as close to net zero as possible. If all funds can't be recouped through the methods outlined above, then new sources will need to be found. It's quite possible that new or increased revenue and/or decreased costs will cover much of the unknown, but if a new (an potentially unpopular) tax is required to cover costs, as much forewarning as possible is essential.
- Reduced Workforce: Ensuring that ESBI doesn't create a labour vacuum is critical. If all of a sudden low or middle income workers (ESBI is unlikely to affect high income individuals) feel it's just not worth working anymore, the impacts to the economy could be wide-ranging. Wages may need to be increased to lure back workers, or there may be more part-time staff that pre-ESBI; projections will be critical in order to anticipate and mitigate these types of impacts.
So let's say the ball gets rolling, and ESBI get planned for implementation in your area; how do you best ensure the smoothest possible rollout? Obviously addressing the risks above is priority number one after the logistics of the program itself, but there are other factors that need to be considered.
- Mis-Information: All new ideas, right or wrong, will have naysayers. Comprehensive, quality, and persistently available information will need to be available, and actively distributed. Public opinion matters with large-scale programs such as ESBI, and misleading, untrue, or a simple lack of information can be the death of a program like this.
- Cultural Acceptance: In western culture and even more so in others, there is an idea that if you don't work you are lazy and a burden to society. This idea has already begun to wane slightly as more and more people begin to accept that what is normal for you, is not necessarily normal for everyone else. This waning will have to increase significantly as it will soon become completely possible for a person to never work a day in their life. It may be hard for some people to understand that this person is not a drain on society, and contributes in many ways unique to them. Some may be full-time parents, others choose to contribute their efforts at no cost, more may pursue arts and/or science, and some may just opt for a simple life. It will be critical to prepare society to accept people who make this choice, and to not shun or otherwise abuse them.
- Rollout: All at once, a bit at a time, or test, study, consider, and plan? There are a lot of approaches to implementing a new program like ESBI. Some will advise caution, while others will push for a charge forward. It is the opinion of this writer than it should be implemented all at once, and on a short time-frame once logistics are worked out. Rip the bandage off otherwise the idea will fizzle, political will will waver, and/or naysayers will gain more and more traction. Big social programs have been rolled out all over the world at one-time or another. Look at the ones that have rolled out vs the ones that were studied for years, and tell me which ones you've heard of. That doesn't mean ESBI should be rolled out without due diligence, just make a decision go or no go, and stick with it.
Risks of Society Not Implementing Any Form of Basic Income
Think that the tried and true programs of today can get us by? Think that if something's not broke you don't fix it? Do you wait until your gasoline engine seizes before you get an oil change? Do you wait for your hot water tank to burst and flood your house, or do you replace it when it's old? Society for the most part functions just fine as things are, but to not consider that times are changing would be naive beyond belief. Already there many people concerned about machines taking their jobs. At writing the fossil fuel industry faces significant reduction in most countries, and outright extinction in others; how long coal will last as a common energy source is likely now measured in years instead of decades or never. The point here that I'm trying to make is that there are dangerous of not implementing ESBI, and here's a few:
- Mass Unemployment: It's a simple truth that computers and machines can everyday do more and more of the jobs previous done by humans. Not only can they do the jobs, but they can do them faster and better than people, for less money. Inevitably more and more people will be replaced by machines, and there simply may not be jobs for these people to transition to. The big difference between now and the past when machines have upended civilization, is that at time of writing we don't as a society need the extra labour for survival. Why not support these displaced individuals instead of leaving them adrift in an uncertain world; turn an unfortunate future into one of hope and excitement for possibilities.
- Unfathomable Government Deficits and Debt: As we've seen with COVID-19 worldwide at time of writing, government spending to prevent citizen suffering has reached levels previously considered impossible. While this spending is with the best of intentions and is quite probably a wise course of action long-term, ESBI would have significantly reduced the amount of required spending to prop up those affected. If non-essential businesses close but all citizens are already guaranteed the basic income needed to survive, then additional government intervention would be much reduced.
Basic Income is a wild idea, or maybe it's not. What is wild is to create a program that can't sustain itself. ESBI hopefully can give life to an idea that can prevent the need to give help, without disrupting too much many of the systems we are used to.