Could a Universal Basic Income be the answer to cost of living woes?

Could a Universal Basic Income be the answer to cost of living woes?
Could a Universal Basic Income be the answer to cost of living woes?

By Madeleine Wedesweiler

See original post here.

Models for a Universal Basic Income (UBI) show that giving money to everyone in Australia would never come cheap.

But experts say the concept, which has been around since the 1800s, provides useful ideas around policies that could help ease people’s financial pain during rising inflation and cost of living pressures.

A UBI is essentially a payment from the state to each and every household with no strings attached, like a ‘dividend’ from being a ‘shareholder’ in society.

It would allow some not to work, but others would need to work and pay extensive taxes on their income.

Proponents argue such a payment would provide a society-wide safety net, protect workers from job losses from the increasing automatisation of work, and lead to greater equality.

It has widespread support – 51 per cent of Australians are in favour, according to the 2019−20 Australian Survey of Social Attitudes – but there are many challenges involved, the biggest one being finding the money to pay for it.

How would a UBI work in Australia?

Associate Professor at the Australian National University’s Centre of Social Research and Methods Ben Phillips told SBS News a model of basic income he costed was “wildly expensive”.

The model would see every adult in Australia take home $27,600 a year, roughly what the current age pension is, and wouldn’t mean an end to some payments that need to continue including childcare and family payments.

“It would increase welfare spending from about $140 billion a year at the moment to probably over $550 billion per year, if done in a full-blown way,” he said.

Associate Professor Phillips said that kind of spending is not a live policy option, and he would recommend updating the current welfare system instead.

“You’d be looking at having to pretty much double personal income tax,”

he said.

“So if your current tax rate was, say, 30 cents of the dollar, it becomes 60 cents in the dollar. You might have to increase the GST from 10 per cent to 25 per cent, on everything.”

In 2018, the then Greens leader Richard Di Natale announced a universal basic income policy for Australia, suggesting a scheme of between ‘$20,000 and $40,000 year’ would be necessary to ensure adequacy.

Greens Treasury spokesperson Nick McKim declined to comment for this article.

Co-Director of the Australian Basic Income Lab, Ben Spies-Butcher, said another model he costed was a liveable income guarantee that was centred on changing the requirements around JobSeeker requirements.

It would cost around $103.45 billion and require income taxes to be raised by 12 percentage points.

“The welfare system has a lot of surveillance and very harsh oversight, so this model said instead of having this thing that means you have to go to all these job appointments, or all these training programs, which often are pretty useless, what we should do is broaden our understanding of what a contribution to society looks like,” he said.

“So if you’re caring for people, if you’re volunteering in the community, those sorts of things also count, and we should change it, so it’s similar to the tax system.”

How have other countries trialled a UBI?

A new trial announced this month in England would see 30 recipients receive no-strings-attached payments of around $2,800 a month for two years.

Dr Spies-Butcher said there had been an explosion of UBI pilots and experiments and renewed interest in the topic during the COVID-19 pandemic.

“If the pilots and trials weren’t working, they wouldn’t still be going,”

he said.

Since September 2022, Ireland has been trialling a program of giving 2,000 artists a payment of around $525 a week so that they could focus on making music, poetry and visual arts without focusing on a day job.

It is not means tested, so participants may still be eligible for social welfare payments and will still be able to earn other money from their work.

Fellow Co-Director of the Australian Basic Income Lab, Troy Henderson, said it could bring positive spillover effects for the rest of society.

“But I’d make the broader point that if we’re talking about a UBI, we would like it to be available to everybody,” he said.

Would it solve inflation problems?

Dr Henderson said increasing any kind of social assistance could have a very important impact on people living in poverty in current circumstances.

“I think there’s some merit to the argument that we should consider a universal basic income right now in relation to the cost of living crisis, because we’ve seen even when you break down inflation, that the largest increases in prices have been in relation to staple goods, things that people need on an everyday basis. They’re not discretionary,” he said.

“So those goods are disproportionately important to people on lower incomes, including those receiving different types of social assistance payments.”

Dr Spies-Butcher said a UBI wouldn’t benefit everyone right now, but it would take pressure off some groups, including parents with young children and students, who would benefit from not working.

“The insecurity that’s associated with (the welfare system) is really debilitating,” he said.

“Economic security is not just about how high costs are, it’s about being able to rely on having income and being able to plan in order to be able to meet your needs over time and not be completely terrified and stressed out all the time about whether payments will be cut or reduced.”

Dr Spies-Butcher added it’s important to realise a UBI wouldn’t be a silver bullet for the rising cost of living but would need to be complemented by other policies on housing and healthcare.

How would a UBI impact the workforce?

One of the common arguments against a UBI is that it would be a disincentive to people working, and their productivity and the economy would decline.

Dr Spies-Butcher said there’s extremely little evidence of that.

“There’s been heaps of trials around the world, and the trials are different so that, they’re targeting different things. But pretty consistently, there’s been a very small labour market effect,” he said.

However, Associate Professor Phillips disagreed and said that because of the extraordinary taxes people would have to pay on their income, it wouldn’t overall be a good thing for employment but would benefit mental health.

What about other welfare policies?

The UBI is not in the mainstream frame of policy discussion by major parties, but it does offer insights into other ideas on modernising welfare policy.

“There’s elements of our welfare system that I think are a bit too harsh,” Associate Professor Phillips said.

“I think loosening some of those is probably a good thing would help a lot of people, particularly very disadvantaged people, and making the system a bit more generous for those who really need it. That’s where I would be going first, rather than a UBI.”

Dr Henderson said if the Labor government wants to be progressive on welfare issues, it first needs to tackle “some of the cultural norms and stereotypes we have around the deserving and undeserving poor”.

“The classic example is, you know, we have the pejorative term in Australia of the dole bludger, the person kicking back eating, you know, corn chips and, and smoking, while everyone else works hard.

“Then, if you reach retirement age the next day, you are a deserving old age pensioner.”

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