18 November 2016
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A universal basic income (UBI) is a payment made to all adult
individuals that allows people to meet their basic needs. It is made without
any work or activity tests.
The idea of a universal basic income (UBI) is not new but until
recently had been pushed to the fringes of policy debate.
UBI has returned to the policy agenda as the result of concerns
about technological change. Some commentators argue that new technology will
permanently reduce the demand for labour leading to job losses, stagnant
incomes and worsening inequality.
There are a number of different UBI models. These range from more
modest schemes designed to simplify the existing social security system all the
way to utopian plans to transform society. This paper illustrates the range by
discussing a few of the many proposals made over the past century.
There are a number of common objections to UBI proposals. These
include scepticism about the idea technological change will lead to widespread
job destruction, concern about the high cost of a UBI, concern about the likely
impact of a UBI on the economy, and concern that a UBI will undermine social
solidarity and support for the social contract.
Even if there little prospect of a UBI being introduced in the
near future, debating UBI proposals helps draw out and clarify the differences
in values and vision that shape social and economic policy.
What is a basic income?
Key features of UBI schemes
How would a basic income scheme work?
What payments and programs would a
Who should receive the basic income?
Funding a UBI
Basic income is not a new idea
The State Bonus scheme—Dennis Milner
Guaranteed income—Robert Theobald
Negative income tax—Milton Friedman
The ‘capitalist road to
communism’—Philippe Van Parijs
Guaranteed income schemes—Australia
Basic income for social
Guaranteed income proposals in the
The Labor Party’s New Technology Task
Why is basic income back on the
The labour market as the primary
guarantor of welfare
The impact of technological change
The 'end of work'
Insecurity and the new ‘gig economy’
The political threat to free trade
Arguments against a basic income
Technological change will not result
in widespread job destruction
A universal basic income (UBI) is a payment made to all
adult individuals that allows people to meet their basic needs. It is made
without any work or activity tests.
The idea of a basic income is not new but in recent decades
it has been pushed to the fringes of policy debate. Since it fell off the
agenda in the late 1970s, UBI and similar schemes have been the domain of a small
network of social and environmental activists, policy analysts and academics.
However, in the last few years things have changed. Debates
over basic income proposals have moved from the fringe to mainstream newspapers
like the Wall Street Journal and The Economist and high-profile
research organisations like the Brookings Institution, the American Enterprise
Institute and McKinsey Global Institute. In Australia, the Productivity
Commission recently included a discussion of basic income in a report on
The recent interest in basic income policy has generated
more than just talk. Governments are planning trials of basic income proposals in
Finland, the Netherlands and Canada. The non-profit research arm of Silicon
Valley firm Y Combinator is funding a trial in Oakland California.
Basic income has moved into the mainstream of public debate
as a reaction to two trends. First, the global financial crisis led to a deep
and prolonged recession in many developed countries. The recession caused job
losses and unemployment as well as slowing the growth in incomes for those in
Second, influential commentators are warning that the rapid
development of new digital technologies may permanently depress the demand for
In the past this trend has mostly affected less skilled workers, and policy
analysts responded by calling for greater investment in education and training.
But now some commentators are arguing that technology is also destroying higher-skilled,
Supporters of basic income schemes argue that the new wave
of technological change may permanently sever the link between economic growth
and job growth. On this view, it will no longer be possible for governments to
deal with unemployment, insecure work and stagnant incomes by reforming the
economy to promote growth or skilling up the workforce to meet the demands of
the new economy.
The elegance and simplicity of universal basic income and similar
schemes appeals to many policy analysts. In theory these schemes remove the
policy traps and perverse incentives created by the current tangle of income
support programs with their overlapping means tests and complex eligibility
criteria. The recent surge in concern about the future of work has created an
opportunity to get the idea back on the agenda.
Despite the enthusiasm of some policy analysts and social
reformers, few policymakers regard a basic income as a realistic option. The
first problem is the enormous cost of basic income schemes. Many policymakers
also worry about the effect on work incentives and the broader economy. And,
even if they personally find the idea attractive, some worry that voters will resent
the idea of paying higher taxes to support able-bodied citizens who choose not
What is a
A universal basic income (UBI) is a payment made to all individuals
without any means test or activity test.
Proposals for UBI schemes go by a variety of names including citizens’ income
and basic income guarantee (BIG).
UBI schemes are closely related to guaranteed income and
negative income tax (NIT) schemes (these are explained below). The major
difference between a UBI and these schemes is means testing. As explained below,
this may be a less clear-cut distinction than it seems because it is possible
to design UBI and NIT schemes that have the same impact on disposable income.
features of UBI schemes
Most UBI proposals share three features:
universal—it is paid automatically to all individuals (or
all adult individuals) without a means test
unconditional—it is paid without conditions (for example,
job search requirements) and
adequate—it is set at a high enough level to protect
citizens against poverty.
These are explained in more detail below.
A UBI would be paid to all adult citizens regardless of
need. It would be paid at the same rate to people with paid jobs and people
without jobs; to single and partnered people; to people with disabilities and
people without. It would be paid at the same rate regardless of a person’s
income or assets or the income and assets of other people in their household.
These features make the UBI different to social assistance
payments. In most countries, social assistance is means tested and targeted
towards particular categories of people in need. For example, in Australia
pensions are targeted towards the aged and people with disabilities with other
payments available to people who are studying, unemployed, caring for young
children and so on.
The lack of means testing makes the UBI different to guaranteed
income and negative income tax (NIT) schemes. Both guaranteed income and NIT
schemes restrict payments to those with low incomes while a UBI is paid to
everyone. However, in practice, the difference between a UBI and a scheme like
a NIT can be less clear than it appears. This is because an individual’s
disposable income depends not just on transfer payments but on transfer
payments plus taxes. As economist Milton Friedman explained:
A basic or citizen's income is not an alternative to a
negative income tax. It is simply another way to introduce a negative income
tax if it is accompanied with a positive income tax with no exemption. A basic
income of a thousand units with a 20 percent rate on earned income is
equivalent to a negative income tax with an exemption of five thousand units
and a 20 percent rate below and above five thousand units.
As Samuel Hammond of the Niskanen Center writes, a universal
transfer program like a basic income ‘cannot be analysed outside of the tax
system that pays for it’.
While everyone would receive a basic income, not everyone would end up better
off after the tax changes needed to finance it.
A UBI would not come with any behavioural conditions. Currently,
policymakers in many countries attach behavioural conditions to income support
payments. They require recipients to do such things as search for work; participate
in training or workfare;
submit to drug tests; clear any outstanding warrants; and vaccinate their children
and send them to school.
Under a UBI scheme, all adult citizens would have a legal
right to payment regardless of how they chose to live, much the same way age
pensioners have a legal right to payments without any conditions attached to
Under most proposals, a UBI would be paid at a high enough level
so that an individual could meet their basic needs without additional income.
However, this adequacy is not an essential feature of a UBI. Some proposals
envisage a scheme where universal basic income payments are topped up by
targeted income support payments and social services.
How would a
basic income scheme work?
The impact of a UBI depends on how the payment itself is
designed and also on the design of the broader policy environment in which it
is embedded. In most proposals, a UBI would be part of a package of changes.
These include changes to existing welfare payments and services and to the tax
payments and programs would a UBI replace?
In most proposals, the UBI would replace existing income
support payments for single parents, people with disabilities, students, the
unemployed, low-paid workers and the aged. It might also replace (or partly
replace) services such as welfare-to-work programs.
Some proposals go much further. For example, American libertarian
thinker Charles Murray has proposed a UBI package that eliminates scores of
government payments and programs, including income support for single parents;
child care for income support recipients; homeless assistance grants; and the
Earned Income Tax Credit. Murray’s list includes far more than programs that
assist people on low incomes: it also includes support for agriculture, grants
in-aid for airports, spending on clean coal technology, and subsidies for railways.
receive the basic income?
To say that a UBI would be paid to ‘all’ is only loosely
true. In most proposals, eligibility has some restrictions. For example, in
Murray’s proposal the UBI would include adult citizens (21 and over) but
exclude incarcerated criminals and residents who are not citizens. In contrast,
a proposal by Matt Bruenig at the American think tank Demos would extend the
UBI to children as well as adults.
Murray’s proposal also eliminates payments designed to
help low-income parents meet the costs of raising children and funding for
childcare. Every adult would receive the same amount whether or not they are
supporting children. This aspect of the scheme is designed to discourage women
from raising children independently. Murray also argues that it would also
discourage men from fathering children they do not intend to support because it
would make it easier for mothers to get them to pay child support. Murray
Police do not need to track him down or try to find him on a
day when he has cash on hand. All they need is a court order to tap the bank
account. Even teenage fathers who are not yet getting the grant need not
escape. Just write the child-support law so that their obligation accumulates
until they turn twenty-one. The state pays the child support until then, at
which time his cash grant is tapped not only for the continuing child support
but to pay back the money already spent.
In many proposals the UBI would be enough for an individual
to live on without experiencing poverty. For example, a recent proposal put to
a referendum in Switzerland sought to amend the constitution to state: ‘The
basic income shall enable the whole population to live in human dignity and
participate in public life’.
Some UBI advocates have argued for a UBI set at a much lower
rate and for allowing low-income recipients to access targeted benefits.
Advocates usually suggest this as a way to transition gradually to a more
adequate payment. For example, Belgian philosopher Philippe Van Parijs writes:
... advocates of a universal minimum income could, in the short
term, settle for a "partial" (less-than-subsistence) but strictly
individual UBI, initially pitched at, say, half the current guaranteed minimum
income for a single person. In US terms, that would be about $250 per month, or
$3,000 a year. For households whose net earnings are insufficient to reach the
socially defined subsistence level, this unconditional and individual floor
would be supplemented by means-tested benefits, differentiated according to
household size and subjected, as they are now, to some work requirements.
Matt Bruenig supports an approach where the UBI works
alongside existing programs. He argues that a UBI should not replace all other
income support payments. Instead the UBI and targeted payments for disability,
unemployment and childbirth would be designed to work together.
Bruenig also suggests that UBI payments should vary by age.
He proposes small payments for children. Young adults (18–24) would start out
on a relatively high payment. This would provide them with support while they
were in education, training or entry level jobs. But after 24, the payment
would steadily decrease until the person reaches 64. At 65 the payment would
increase. The elderly would receive the highest level of payment. Bruenig
I do this because we know earnings increase over the
lifecycle, and so this would help smooth that out and reduce inequality. I also
think it might help to encourage labor mobility somewhat more than paying an
equal amount across all ages.
It is not possible to create a UBI without substantial
changes to existing government programs or to the tax system. The effect of the
UBI depends on the entire package. As Samuel Hammond writes:
Taxes and transfers are two sides of the same coin. You might
as well call taxes negative transfers, so to propose a lump sum transfer like
UBI without an explicit discussion of how it’s financed only tells half the
There are two major sources of funds for a UBI: savings from
cuts to other programs and increases in taxation. Libertarians like Charles
Murray and Matt Zwolinski propose using a UBI as a replacement for the welfare
state. They argue most or all of the funding could come from abolishing
The Economist estimates the United States could pay each person $6,300 a
year if it cashed out all non-health transfer payments (the figure is $6,100
However, The Economist suggests that it is unlikely any political leader
would be prepared to deny the full range of existing benefits that go to groups
such as age pensioners.
Basic income advocates who want to combine a UBI with
existing programs have suggested a number of ways to increase tax revenue. For
example, in Challenge magazine, Luke Whitington (a member of the NSW
Labor Left) suggests ‘a broad based progressive land tax’ and taxes on
American writer Scott Santens makes a number of suggestions including a carbon
tax, a financial transaction tax and a new top income-tax bracket.
Matt Bruenig and Elizabeth Stoker Bruenig suggest cuts to tax expenditures that
benefit high-income earners and cuts to the defence budget.
Most proposals for funding a UBI rely on
back-of-the-envelope calculations rather than detailed costings. Advocates are
usually trying to show that it is possible to pay for a UBI while leaving the
details for later. Some—like Sam Altman (president of startup accelerating firm
Y Combinator)—suggest that that the funding problem will be much easier to
solve in the future:
... technological improvements should generate an abundance of
resources. Although basic income seems fiscally challenging today, in a world
where technology replaces existing jobs and basic income becomes necessary,
technological improvements should generate an abundance of resources and the
cost of living should fall dramatically.
Critics are sceptical about whether there is any practical
way to fund a UBI set at a level people could live on. For example, Canadian
economist Kevin Milligan says: ‘UBI gets all this attention and popularity, but
I haven’t seen one model that’s even on the planet of financial feasibility.
These things are utopian’.
income is not a new idea
The idea of a UBI is not new. Detailed proposals were being
discussed well before modern income support systems were created in Australia,
the United Kingdom or the United States. These proposals took a number of
forms. Some were designed as part of the social security system. They were
promoted as a simple and effective way to protect individuals and families
against risks such as unemployment, sickness and disability. These include
Dennis Milner’s State Bonus scheme and Milton Friedman’s negative income tax.
Other schemes were promoted as a response to job destruction
due to technological change. They were designed to enable citizens to pursue worthwhile
lives outside the labour market. Robert Theobald’s proposal was designed for a
future with far fewer jobs. In Australia, the Labor Party’s Barry Jones
promoted similar ideas.
The third group of schemes are part broader of projects of
social transformation. These schemes are openly utopian and envisage a society
where people’s relationships with each other are no longer dominated by the
market. Philippe Van Parijs’ proposal is of this type.
These schemes are discussed in detail below.
The State Bonus
As the First World War was coming to an end in 1918 social
reformer and Quaker, Dennis Milner began promoting his State Bonus scheme.
Together with his wife Mabel and colleague Bertram Pickard, Milner argued that
the British Government should provide every individual with a ‘State Bonus’—an
unconditional weekly allowance.
Milner argued that existing social arrangements were under
increasing pressure. Researchers like Charles Booth and Joseph Rowntree had
documented the extent of poverty and deprivation in England, and socialist
thinkers like Karl Marx, Edward Bellamy, and the Fabians had outlined plans for
... the cumulative effect of so many tendencies all in one
direction with pomp and wealth ever before the eyes of the poor (particularly
since the advent of motors), has resulted in a wave of unrest stopping further
increases in productivity, and threatening worse things.
Like Milner, Pickard argued that, without reform, class
conflict and industrial unrest would get worse. But rather than argue for the
immediate nationalisation of industry or the overthrow of parliamentary
democracy, he pushed for a ‘reasonable revolution’ within the boundaries of the
existing democratic and market-based system.
Both Milner and Pickard saw the State Bonus as a middle way between ineffective
reforms such as the minimum wage and the revolution that had taken place in
The Milners proposed an allowance ‘which would be just
sufficient to maintain life and liberty if all else failed’.
The allowance would be universal and unconditional. It would be paid to all
British subjects living in Britain permanently with mothers receiving payments
on behalf of children. There would be no work test.
The Milners argued that pushing people into work by threatening them with
starvation only led to inefficient workers.
The Milners argued that the bonus should be funded by
contributions from wages, salaries and other income. The intention was not to
redistribute money between the classes but to provide individuals with security
Milner argued that the State Bonus was a better way to
maintain security than minimum wages. Under his scheme, wages would be left to
... it is an axiom assumed throughout this treatise that, so
long as the country continues to believe in competitive industry It should be
the business of those engaged in every industry to settle their own terms, unhampered
by interference from the State. This is not possible now, because the State
holds itself responsible (on behalf of the community) for the maintenance of a
decent standard of living through wages. It is therefore claimed that if this
is a true function of the community, then the community should take over this
maintenance qua maintenance and not attempt to foist on employers the
responsibility of paying ‘human’ wages irrespective of the earning capacity of
Milner formed a ‘State Bonus League’ and tried to persuade
the British Labour Party to adopt his proposal.
But according to Canadian academic John Finlay, the idea ‘was so out of touch
with contemporary Labour thinking that it could be shuffled away with little
In the early 1960s, American futurist Robert Theobald
predicted that computers would become increasingly fast and powerful. With
computers and other technology increasingly able to take over routine tasks,
workers would find themselves displaced by machines. Both blue-collar and middle-income
white-collar workers would be affected. In a 1967 interview, Theobald argued
... we must face up to the fact that we cannot afford to
preserve our present socioeconomic system, which requires every man to be able
to find a job at a time when the computer can take over toil, can take over all
the structured tasks, that is the tasks for which the decision-making rules can
be set out in advance. And therefore we have to break the present link between
jobs and income. The necessary first step in this direction is a guaranteed
Theobald argued that free market institutions were no longer
be able to generate enough jobs for everyone who needed an income. In an effort
to drive up production and create jobs, governments responded by interfering in
the market (for example, through schemes directed at farmers).
But according to Theobald, this led to ‘a whirling dervish economy dependent on
According to Theobald, ‘[t]he only method of preserving both
freemen and free markets is to recognize the need to divorce the productive
function from the distributive function’.
He argued that a guaranteed income would increase individual freedom by
allowing individuals to pursue careers in areas such as arts and crafts where
markets would not sustain enough paid employment. And by providing support to
people outside the market, governments would no longer need to manipulate the
market to artificially drive up production.
As well as removing the need for market intervention through
interest rate, tax and tariff manipulations, the guaranteed income would
replace welfare programs such as unemployment insurance, housing subsidies and
income tax—Milton Friedman
In 1962 economist Milton Friedman proposed a negative income
tax (NIT) as simpler way to protect individuals against poverty:
We now have an exemption of $600 per person under the federal
income tax (plus a minimum 10 per cent flat deduction). If an individual
receives $100 taxable income, ie, an income of $100 in excess of the exemption
and deductions, he pays a tax. Under the proposal, if his taxable income minus
$100, ie, $100 less than the exemption plus deductions, he would pay a negative
tax, ie, receive a subsidy. If the rate of subsidy were, say, 50 per cent, he
would receive $50. If he had no income at all, and for simplicity, no
deductions, and the rate were constant, he would receive $300.
For an individual with no income, the NIT is like an income support
payment. As with most income support payments, the amount the person receives
reduces as they earn additional income. At a certain level of income they reach
the break-even point and pay nothing, after that point they start paying tax.
The NIT integrates the income support system into the tax system.
Friedman argued that the NIT should replace current welfare
programs—both cash payments and services. He argued that the scheme would have
a number of advantages over current arrangements:
1. It would help the poor in the most direct way possible.
2. It would treat them as responsible individuals, not as incompetent wards of
3. It would give them an incentive to help themselves.
4. It would cost less than present programs yet help the poor more.
5. It would eliminate almost entirely the cumbrous welfare bureaucracy running
the present programs.
6. It could not be used as a political slush fund, as so many current
programs—notably in the ‘war on poverty’—can be and have been used.
The NIT was an example of what Daniel Moynihan called the
According to Moynihan, the dominant approach among American liberals during the
1960s was a ‘services strategy’. Instead of giving cash to people on low
incomes and allowing them to decide how to spend it, the services strategy
channelled money into services such as education and training. As Moynihan put
With astonishing consistency, middle-class
professionals—whatever their racial or ethnic backgrounds—when asked to devise
ways of improving the condition of lower-class groups would come up with
schemes of which the first effect would be to improve the condition of the
middle-class professionals, and the second effect might or might not be that of
improving the condition of the poor.
Friedman was adamant that a NIT should replace existing
welfare payments and services and was critical of schemes proposed during the
1970s that added NIT-like payments to the existing system. He suggested that
part of the problem was resistance from people who had a vested interest in
keeping the existing programs. By the end of the 1970s, Friedman described his
proposal as ‘a fine dream’ that had ‘no chance whatsoever of being enacted at
road to communism’—Philippe Van Parijs
Some UBI proposals are unashamedly utopian. For example, Robert
van der Veen and Philippe Van Parijs envisage a UBI as part of a much broader
project of social transformation that ends with full communism and the
abolition of alienated wage labour.
In a 1986 paper, van der Veen and Van Parijs proposed that a basic income could
be a step along ‘a capitalist road to communism.’ According to van Parijs and
van der Veen, communism:
... is defined by the distribution principle “From each
according to his abilities, to each according to his needs” - which implies at
least that the social product is distributed in such a way (1) that everyone's
basic needs are adequately met, and (2) that each individual's share is
entirely independent of his or her (freely provided) labor contribution.
Full communism is achieved when people’s contribution to
production has no influence at all over the distribution. In this kind of
society people freely choose the kind of work they do based on how
intrinsically rewarding it is, rather than on how much it pays. In this way alienation
According to this view, a UBI helps move society towards
full communism by pushing up the price of intrinsically unrewarding work while
making it possible for people to take low-paid work that they find rewarding.
As American writer Peter Frase explains:
If you extrapolate this trend forward, you reach a situation
where all wage labor is gradually eliminated. Undesirable work is fully
automated, as employers feel increasing pressure to automate because labor is
no longer too cheap. Meanwhile, the wage for desirable work eventually falls to
zero, because people are both willing to do it for free, and able to do so due
to the existence of a basic income to supply their essential needs.
... The long-run trajectory, therefore, is one in which people
come to depend less and less on the basic income, because the things they want
and need do not have to be purchased for money. Some things can be produced
costlessly and automatically, as 3-D printing and digital copying technologies
evolve into something like Star Trek’s replicator. Other things have become the
product of voluntary cooperative activity, rather than waged work. It therefore
comes to pass that the tax base for the basic income is undermined—but rather
than a crisis, as in the hands of basic income critics, this becomes the path
In Australia, the debate over UBI and NIT schemes paralleled
that in other English-speaking countries.
In the 1920s, Milner’s State Bonus proposal was discussed in
the Australian press and raised by a Labor backbencher, William Maloney, in the
Then, during the 1940s broadcaster Lloyd Thomas, advocated an ambitious basic
income scheme. However his proposal attracted little attention outside of
As academic John Tomlinson notes, the 1970s were a high
point for guaranteed income proposals with the Whitlam Labor Government
seriously considering schemes designed to simplify the income support system
and integrate it with the tax system.
In the late 1970s and early 1980s, a few Labor Party
thinkers such as Barry Jones advocated for a guaranteed income scheme as a
response to job destruction due to technological change. However, the Hawke
Labor Government did not pursue the idea after it won office in 1983.
income for social security—Lloyd Thomas
In 1942 Lloyd Thomas, a prominent Western Australian radio
commentator, published a pamphlet arguing for an unconditional basic income.
This was before Australia had set up a comprehensive income support system.
Before the end of the Second World War, the Australian
Government provided pensions for the aged and people with disabilities. However
there were no national schemes for groups such as the unemployed or widows.
Thomas’ scheme was designed to replace the existing pensions and expand support
to all adult Australians without a means test:
The plan for a basic income is simply this: That the
Government pay to every adult citizen a weekly basic income of 25/- per week.
This should be paid as an inalienable right and withheld only in the case of
imprisonment for more than seven days, or whilst the citizen in incarcerated in
a government institution—hospital, inebriate home or mental hospital.
The payment of this basic income should continue from the
date of attaining the 21st birthday until death, and regardless of
the position, wealth or property of the recipient, subject to the provision
that if there was evidence that the income so paid was being dissipated—such as
by convictions for drunkenness—a magistrate should be empowered to order that
it be paid in kind instead of in cash.
Under the scheme, married women would receive the basic
income as individuals. He proposed that the basic income would replace existing
pensions but not child endowment and argued that it would eliminate the need
for public and private charities.
The proposal attracted attention within Western Australia,
but was not picked up by any political party.
One member of the Western Australian Legislative Assembly, Charles North,
raised the proposal in parliament and called for an enquiry.
But according to Thomas, nothing further happened.
income proposals in the 1970s
Basic income schemes were back on the agenda in Australia in
the early 1970s. This was in response to a public debate on poverty that began
in the United States during the 1960s. Ahead of an election in late 1972, the
McMahon Coalition Government had reluctantly commissioned an inquiry into
The inquiry was chaired by researcher Ronald Henderson.
Early in 1973 Bill Hayden, the Minister for Social Security
in the newly elected Whitlam Government, announced:
The New Labour [sic] Government hopes to completely scrap the
present confusing system of pension and Social Security benefits and replace it
with a more simply administered and easily understood system of guaranteed
According to Hayden, the existing system was unnecessarily
complicated: there were conflicting means tests for different payments,
anomalies and ‘a perplexing range of benefits which have developed in a
The Whitlam Government was faced with a number of
proposals for a guaranteed income scheme based around the NIT idea. They were
focussed on replacing the existing income support system with a much simpler
system where payments were based on need. One proposal came from a think tank
within the bureaucracy, the Priorities Review Staff (PRS), while another came
from the Henderson poverty inquiry.
While these proposals had a strong focus on reducing
financial disincentives to work, they did not include a discussion of work or
activity tests. The PRS report argued that ‘freedom to choose between various
life styles could reduce the sense of despair felt by many poor people’.
This aspect of the schemes attracted criticism from the authors of the
Government’s review of taxation—The Asprey Review. Their report argued that
‘such schemes seem likely to have consequences for incentives to work and save
which make it impossible to consider them seriously’.
The Government struggled to decide on a model for the new
scheme. In May 1975, Hayden told a seminar on guaranteed minimum income that
‘to be frank we have not yet found a simple solution that satisfactorily
improves on schemes that currently exist’.
Party’s New Technology Task Force
After losing office in November 1975, the Labor Party
grappled with the issue of technological change and its impact on employment.
In 1979 the party’s national conference set up a taskforce to look at the
The taskforce argued that new technology would enable
society to produce more with less. Output and consumption would rise, but the
demand for labour would fall, particularly for less skilled workers. The
taskforce’s report argued that this was not necessarily a bad thing:
... we should abandon the masochistic doctrine of work for
work’s sake. There is nothing inherently life-enhancing in performing boring
and exhausting work year after year unless you actively prefer to do so.
... We ought to welcome loosening, if not breaking the chains
that bind people to work.
The report acknowledged that there may be a growth in jobs
in areas such as child care, aged care and hospitality but observed that these
tended to be unskilled, part-time and held by women. The report referred to
this as ‘servile’ employment and noted that it tended to be non-unionised.
The taskforce argued that governments should respond to
technological change by supporting people to take up options outside the formal
A courageous policy on technological change and employment,
taking an optimistic long view would include the following elements:
1. Initiating a national debate into the relevance of the traditional
2. Redefining 'work' (to include domestic work, study, 'Do it
yourself', and adding their imputed value to the national accounts).
3. Introducing Guaranteed Income (along lines of the
4. Introducing a National Superannuation Scheme (but more
generous than the Hancock Report) and provide for maximum benefits after a 35
year working lifetime, which might reduce thereafter. (This would be a
psychological inducement to leaving work early: in any case people who stayed
on at work would aggregate more than early retirees).
In his book Sleepers, wake!, Labor’s Barry Jones
argued that ‘the most human way to handle labour-force problems would be to
assist those who want to get out of work to do so without trauma, and to provide
income support, while encouraging those who want to get into work to do so’.
Jones advocated moving to a guaranteed minimum income scheme. However he noted
that once Labor was returned to office in 1983, it did not pursue the idea.
basic income back on the agenda?
There is no one rationale for moving to a UBI. For some
environmentalists, a UBI is part of a transition to a low-carbon, steady state
economy where ‘population growth, technological change and economic growth are
all reduced to a more sustainable level’.
For libertarians like Charles Murray, a UBI is part of a plan to permanently
reduce the scope of government by abolishing the welfare state. 
And for radical thinkers like Van Parijs, it is a step along a path that
ultimately leads to utopia.
Much of the interest in negative income tax and minimum
income guarantee schemes during the 1970s was focused on the benefits of
simplifying the income support system. For example, the Whitlam Government’s
Priorities Review Staff (PRS) argued for a minimum income guarantee with a proportional
tax. According to the PRS such a scheme would ensure that people received
assistance based on need (rather than membership of a particular category).
While these and other reasons help explain why advocates
have continued to push to get UBI on the public agenda, they do not explain why
journalists and policy analysts have recently started to devote more attention
to the idea.
Much of the recent surge in interest in UBI is a response to
concerns about job losses as a result of technological change. Among some
thinkers this has led to a loss of confidence in the labour market’s ability to
provide enough secure, well-paid jobs to protect everyone from poverty. There
is also a fear that the benefits of economic growth no longer flow to the
community as a whole but rather are going almost exclusively to those at the
top of the income distribution.
Some commentators worry that job losses and stagnant wages
could undermine support for free trade and free markets. They propose a UBI—not
just as a way of dealing with poverty—but as a way of protecting free market
institutions and global free trade. By providing vulnerable individuals with
support outside the market, they hope to head off populist policies such as
support for domestic manufacturing through tariffs and subsidies.
market as the primary guarantor of welfare
In most developed countries, the welfare system is designed
around the labour market. The ideal is that every working age household will be
supported primarily by income from paid work. Policymakers accept that issues
such as disability, sickness, single parenthood and unemployment mean that the
ideal will never be fully realised, but regard these as problems to be managed
rather than reasons to abandon the ideal.
Policymakers who embrace this ideal will attempt to solve
problems such as poverty and social exclusion by moving jobless individuals
into the labour market rather than by expanding the income support system. So
from this perspective, the first problem is creating jobs through economic
growth and the second is to ensure everyone is able to participate in
Regardless of whether the economy is growing or is in
recession, one of the central debates has been over how to move disadvantaged
individuals into jobs. The question has been whether increasingly demanding job
search requirements and tougher income support penalties are enough, or whether
individuals need better access to education, training, case management and
The framework assumes that most working-age individuals will
be able to find full-time, full-year work. While some individuals may combine
part-time or intermittent work with income support, the expectation is that
reliance on income support payments will be temporary. Payments for
non-disabled adults are designed to support people through temporary spells of
joblessness, not to redistribute lifetime income from people with high earning
ability to people with low earning ability.
Governments have also made employers part of the broader
system of welfare by legislating for benefits such as minimum wages. According
to Australian public policy academic Francis Castles:
Although not conventionally categorised in such a way, the
margin between what employers would pay workers exclusively on the basis of
market considerations and what they are constrained to pay them as a
consequence of prescriptions by the state (in Australia, through arbitrated
wage awards) may be regarded as an occupational welfare benefit.
In most developed countries, labour is not just another
commodity with prices governed by supply and demand. Because employment is
meant to be the primary guarantor of welfare, governments have regulated the
relationship to make it more welfare-like. Employers may be obliged to provide
workers with sick and holiday leave; and to contribute to insurance that
protects workers against injury, disability, and unemployment.
of technological change
If the existing welfare system depends on near full
employment to function, what happens if labour markets no longer provide enough
jobs for everyone?
In 2013, Oxford University researchers, Carl Frey and
Michael Osborne, estimated that around 47 per cent of US employment was at high
risk of computerisation.
An Australian study published by the Committee for Economic Development of
Australia (CEDA) found a similar result—around 40 per cent of jobs in Australia
are at high risk of being computerised or automated in the next 10 to 15 years.
Many experts are sceptical about the idea that technological
change will result in mass job losses. They have responded to these findings in
two ways. First they have disputed the size of the effect, pointing out that
other studies have come up with much smaller numbers.
And second they have pointed out that while technological change has destroyed
jobs in the past, new jobs have emerged to take their place.
However, a number of influential commentators argue that the
latest round of technological change will be different. They argue that
technological change will have three effects. It will result in a shift:
from full employment to mass joblessness—automation will
destroy entire occupations and result in a permanent increase in unemployment
from high pay to low pay—new jobs will emerge but they
will pay less than the jobs they replace
from secure work to insecure work—instead of creating new
full-time permanent jobs with benefits like sick pay, holiday pay and
protection from unfair dismissal, the new ‘gig economy’ will turn many
employees into freelancers and independent contractors.
Some UBI advocates see these changes as an opportunity
rather than a threat. They argue that by increasing productivity, technological
change will lead to an age of abundance where ‘growing the pie’ is no longer
the central problem and a UBI is easily affordable. For the techno-optimists the
major problems will be those John Maynard Keynes raised in his 1930 essay, ‘Economic
possibilities for our grandchildren’—how to adapt our morals and mindset to a
life of abundant leisure.
The ‘end of
Futurists have long predicted that automation will eliminate
the need for human labour in many industries and destroy jobs.
But now, in response to rapid new developments in information technology, these
kinds of predictions are becoming increasingly common. Commentators, like futurist
Martin Ford (author of Rise of the robots: technology and the threat of a
jobless future) and former union leader Andy Stern (author of Raising
the floor: how a universal basic income can renew our economy and rebuild the American
dream), have attracted media attention with claims that technological
change really could bring an end to full employment this time.
Writing in the Atlantic, journalist Derek Thompson
acknowledges that these kinds of claims have been made before but argues that
recent trends, such as the decline in prime-age male employment, mean we should
take the prospect of the ‘end of work’ seriously. He writes:
What does the ‘end of work’ mean, exactly? It does not mean
the imminence of total unemployment, nor is the United States remotely likely
to face, say, 30 or 50 percent unemployment within the next decade. Rather,
technology could exert a slow but continual downward pressure on the value and
availability of work—that is, on wages and on the share of prime-age workers
with full-time jobs. Eventually, by degrees, that could create a new normal,
where the expectation that work will be a central feature of adult life
dissipates for a significant portion of society.
Ford argues that it is not just low-skilled jobs that will
be displaced by automation; he maintains that new technologies, such as those
associated with big data and predictive analytics, threaten to eliminate
high-skill white-collar jobs as well. Ford envisages a future where a team of
knowledge workers now collecting and analysing data for multiple levels of
management will be replaced by ‘a single manager and a powerful algorithm’.
Basic income is one response to the idea that the labour
market can no longer function as the primary guarantor of welfare. As
Australian writer Tim Dunlop writes:
In a world where technology is likely to drive either job
losses, or at the very least, a rise in precarious employment, the idea that
people should have to rely on having a job in order to participate in society
in a decent way is an increasingly obscene idea. To maintain our current work
ethic—one that equates having a job with human decency and moral rectitude—is
not only anachronistic but cruel.
In countries like Australia, the US and the UK, income
support systems are designed around the assumption that the only people of
working age who need to remain on income support long term are those with
severe disabilities. If everyone is capable of achieving independence through
paid work, then it follows that long-term dependence is a choice. This
assumption justifies policies that are designed to deter people from claiming
and remaining on income support. American political scientist Lawrence Mead has
been more explicit about the rationale for deterrence than most commentators.
After arguing that work is readily available, he suggests that:
Society must give up at least some of its fear of ‘blaming
the victims’ if it is to help them more effectively. In part the choice it
faces is whether to stigmatize the least cooperative of the disadvantaged in
order to integrate the rest.
If jobs are no longer freely available and many working
age people have no choice but to rely on income support, then harsh,
stigmatising policies may be seen as unfairly punitive.
US President Obama’s Chief Economist, Jason Furman, is
sceptical of claims that technology will lead to mass joblessness. However he
is concerned that it could lead to further increases in inequality:
My worry is not that this time could be different when it
comes to AI [artificial intelligence], but that this time could be the same as
what we have experienced over the past several decades. The traditional
argument that we do not need to worry about the robots taking our jobs still
leaves us with the worry that the only reason we will still have our jobs is
because we are willing to do them for lower wages.
Furman argues that technological change is disproportionately
affecting less-skilled workers. His solution is to improve education and
training and strengthen the existing welfare system. But UBI advocates like
Andy Stern are not convinced these policies will do enough to solve the
... if I’m right about the continuing dearth of jobs, we won’t
be able to stop income inequality by simply tinkering with existing policies.
We’ll need a bold, alternative solution like UBI.
Richard Reeves at the Brookings Institution agrees. He
argues that policies aimed at improving the way the labour market works may no
longer be enough:
The labor market continues to work pretty well as an economic
institution, matching labor to capital, for production. But it is no longer
working so well as a social institution for distribution. Structural changes in
the economy, in particular skills-biased technological change, mean that the wages
of less-productive workers are dropping. At the same time, the share of
national income going to labor rather than capital is dropping.
This decoupling of the economic and social functions of the
labor market poses a stark policy challenge. Well-intentioned attempts to
improve the social performance of the labor market–through higher minimum
wages, profit-sharing schemes, training and education–may not be enough; a
series of sticking leaky band-aids over a growing gaping wound.
This is why the idea of a universal basic income (UBI) is
capturing the imagination and attention of policy intellectuals, across the
globe and across the political spectrum. If the labor market is no longer going
to cut it in terms of distribution, it might be time for more radical
and the new ‘gig economy’
As well as increasing joblessness and slowing wages growth, reduced
demand for labour could also encourage businesses to look for cheaper, and more
flexible ways to buy work. One option is the new ‘gig economy’. Digital
technology has enabled new kinds of outsourcing through platforms such as Uber,
Freelancer and Airtasker where workers are hired on a task-by-task basis. Workers
who depend on this gig economy not only have to deal with financial insecurity,
but also the lack of workplace entitlements such as paid leave, minimum wages
and protection from unfair dismissal.
Researchers have noted that income support systems designed
around permanent employment may not do a good job at protecting workers in the
new gig economy. In a recent research paper on digital disruption, the
Productivity Commission notes:
The nature of the Australian social welfare system, with
access to unemployment benefits and Medicare, helps to mitigate the impact on
workers of short-term and periodic employment. But there are still rigidities
in the system, reflecting its design for a labour market where workers were
usually in full-time, or permanent part-time, employment. The means testing of
income support can result in high effective marginal tax rates, and while
aiming to assist in smoothing income, payment adjusts can occur with a lag, and
the problem of needing to seek return of overpayments could be exacerbated.
These features of the income support system could reduce the incentives to seek
work opportunities that deliver a highly variable income. Changes to the social
safety net may be needed to manage the outcomes of intermittent employment, and
to allow people to access what employment they can through the ‘gig’ economy.
Some countries are trialling a universal basic income as part of their income
Because UBI payments are unaffected by changes in income,
supporters argue that a UBI avoids creating poverty traps.
According to researchers Max Harris and Sebastiaan Bierema,
a ‘UBI could represent a form of compromise between flexibility and security’.
In a paper for the New Zealand Labour Party’s Future of Work Commission, they
argue that a UBI could help compensate those who rely on flexible forms of work
such as part-time jobs and short term contracts.
political threat to free trade
A number of commentators have argued that disruptive technological
change will have political as well as economic consequences. They warn that if
the benefits of automation flow predominantly to the economic elite, those left
behind may turn against free trade and immigration.
A recent paper from the McKinsey Global Institute argues
that flat and falling incomes in many developed countries could undermine
support for free trade and immigration. The authors warn that:
... failure to correct flat or falling incomes could lead to a
rise in the number of people who see flat or falling incomes as a persistent
problem and lose faith in tenets of the global economic architecture. Our
survey found that those who were not advancing and not hopeful about the future
were more likely than those who were advancing to support nationalist
sentiment, including opposition to the European Union, as reflected in the June
2016 UK referendum, or, in France, support for the anti-immigrant National
Some thinkers argue that a UBI could shore up support for
free market institutions by giving all citizens a share of the benefits of
technological change. In an article for the National Interest, Lee
Drutman and Yascha Mounk write:
A concern about the long-term consequences of extreme
inequality has also persuaded some libertarians, like scholars Matt Zwolinski
and Charles Murray, to defend redistribution. They worry that populist anger at
widespread immiseration may eventually lead to widespread demands for the state
to take an ever more active role in the economy—or even to capitalism
collapsing altogether. They therefore favor forms of redistribution that would
limit the expansion of the state and soften popular pressure for the state to
rein in capitalism. Harkening back to Milton Friedman’s negative income tax or
even Thomas Paine’s citizen dividend, they champion a universal basic income.
The best course of action, they argue, is to transfer money to the poor in a
way that minimizes state involvement in the economy, and then let them figure
out how to spend it.
This may or may not be an entirely fair summary of
Zwonlinski’s and Murray’s views, but it is a coherent argument for a UBI from a
libertarian point of view. Zwolinski argues that governments should deal with
poverty though a UBI rather than by intervening in the market.
One of the attractions of a UBI for supporters of free markets is that it could
be part of a trade-off where the employment relationship becomes more
market-like. Employers would no longer need to offer the kinds of workplace
entitlements they do now. In a post titled ‘A neoliberal case for a basic
income, or something like it’, Sam Bowman of the Adam Smith Institute argues
that policies like minimum wages are ‘pernicious’ and that it would be better
to boost the incomes of low-wage workers through cash transfers.
against a basic income
While there is increasing interest in UBI proposals, these
proposals do not have widespread support within the policy community. Many are
sceptical of the idea that technological change will result in widespread job
destruction. This undermines one of the key arguments in favour of a UBI.
Critics also argue that the high cost of a UBI would force
governments to raise taxes to unacceptably high levels or to cut spending on
programs that currently support vulnerable groups such as carers, people with
disabilities, and the elderly.
Critics also doubt whether a UBI would be economically or
change will not result in widespread job destruction
Much of the surge in interest in UBI is a response to
concerns about job losses from technological change. However, many economists
are sceptical of the idea that developed nations are heading towards a jobless
In a recent paper for the Organisation for Economic Co-operation
and Development (OECD), Melanie Arntz, Terry Gregory and Ulrich Zierahn, argue
that studies showing that a high proportion of current jobs are at risk of
automation suffer from methodological problems. Where Oxford researchers Frey
and Osborne estimate that around 47 per cent of US employment is at high risk of
computerisation, Arntz, Gregory and Zierahn estimate the actual proportion is 9
In a paper titled ‘Why are there still so many jobs? The
history and future of workplace automation’, economist David Autor argues that
a significant number of middle-skill jobs will persist into the future. These
jobs will resist automation because they combine routine technical tasks with
non-routine tasks that rely on the kinds of things people do well and machines
do comparatively poorly—interpersonal communication, adaptability and problem
solving. For Autor:
... the issue is not that middle-class workers are doomed by
automation and technology, but instead that human capital investment must be at
the heart of any long-term strategy for producing skills that are complemented
by rather than substituted for by technological change.
This is much the same conclusion Arntz, Gregory and
Zierahn reach. They argue that the negative impact of technological change is
likely to fall hardest on less educated workers.
Jason Furman argues that UBI addresses the wrong problem.
Rather than eliminating jobs, technology will change the skills that available
jobs require. The answer is not to permanently support less educated citizens
outside the labour market but to invest in education, training and other
assistance so that everyone is able to take advantage of the new opportunities.
With so many different proposed designs, it is difficult to
put a cost on a UBI. However, it is clear that a UBI set at a high enough level
to protect individuals against poverty would be hugely expensive. Peter
Whiteford of the Australian National University’s Crawford School of Public
Policy estimates that a UBI set at the level of the age pension and paid to all
18 million Australian adults would cost around $360 billion a year. He says
that relying on income taxes to fund the payment would push the top personal
tax rate to 70 or 80 per cent.
In the US, Robert Greenstein, President of the Center on
Budget and Policy Priorities, argues that a UBI could not be funded entirely by
tax increases. This ‘would require the American people to accept a level of
taxation that vastly exceeds anything in US history’.
According to Greenstein, the US Government is already facing large increases in
future spending on healthcare and support for the elderly that are likely to
put pressure on the budget and taxes. The situation is similar in Australia,
with spending on aged care and the National Disability Insurance (NDIS)
projected to rise significantly over time.
Relying heavily on cuts to existing welfare services to fund
a UBI would shift much of the burden onto people who are elderly, or who have
disabilities, or caring responsibilities. UBI advocates argue that cash
payments would promote freedom by giving everyone the means to live the kind of
life they value. However, as philosopher Elizabeth Anderson writes:
... in providing equal levels of income to all, the UBI does
not adjust for the fact that, due to variations in internal traits, social
roles, and other circumstances, some people are better able to convert income
to freedoms than others. Disabled people typically require more resources to
achieve equivalent freedoms—to move around, to get access to information, and
so forth—than those who are not disabled. People who engage in unpaid dependent
care work also require more resources to achieve equivalent freedoms to those
who do not take care of dependents. (For example, to be free to participate in
the realm of paid labor, they need access to alternative sources of care for
their dependents while they work.) The UBI therefore best serves the interests
of healthy adults who care for no one beside themselves.
Anderson’s comments also point towards another criticism of
the UBI: opportunity cost. If there was an economically and politically
feasible way to raise enough revenue to fund a UBI, would it be the best use of
these resources? If government had access to billions of dollars of extra
funding, it could be spent on prevention and early intervention programs for
disadvantaged children; on better services for people with disabilities; or on
improving access to higher education.
Critics worry that a UBI would significantly reduce economic
output by encouraging individuals to withdraw from the labour market. This
would not only reduce living standards but make a UBI more difficult to sustain
over the long term.
In the lead up to the recent Swiss basic income referendum,
the Swiss government argued that a basic income would weaken the economy by
encouraging low-income earners to drop out of the workforce.
In Australian modelling of a basic income/flat tax proposal, Rosanna Scutella
also reported that the high tax rate needed to fund a basic income would also have
an effect on labour supply by middle to high-income earners.
Some critics also worry about the political sustainability
of a UBI. For example, philosopher Elizabeth Anderson argues that the welfare
state depends on an implicit social contract. The UBI’s lack of reciprocity
would weaken people’s commitment to social obligation and, in turn, weaken
commitment to the welfare state. In particular, the perception that many people
were enjoying a life of idleness at government expense could undermine willingness
to work and pay taxes:
... in granting a Basic Income that is not conditioned on the
willingness of the able to work, the UBI promotes freedom without
responsibility, and thereby both offends and undermines the ideal of social
obligation that undergirds the welfare state. A UBI would not only inspire a
segment of the able population—largely young, healthy, unattached adults—to
abjure work for a life of idle fun. It would also depress the willingness to
produce and pay taxes of those who resent having to support them.
Survey research shows that while the majority of Australians
support the income support system they also want work obligations to be
stronger rather than weaker for those who are able to work.
Attitudes would have to shift drastically for an unconditional basic income to
win support from a majority of Australians.
Demonstrators dressed as robots danced through the streets
of Zurich as part of the referendum campaign for a UBI in Switzerland.
But instead of representing a threat to workers’ livelihood, the smiling robots
symbolised an opportunity: freedom from the need to work. While some UBI
advocates fear that automation will destroy jobs, others hope that this will
happen. Recent controversies about technological change driving increases in
inequality, creating widespread joblessness and sparking social unrest have
reawakened utopian social movements that look forward to a post-work future.
In the lead up to the Swiss referendum, researchers at
gfs.bern (a private research institute) commented:
The unconditional basic income
reflects the desire for self-expression outside the confines of a
performance-oriented society. This desire is rooted in the post-materialistic
values which are typical for affluent societies which have high expectations of
each individual. Current fundamental attitudes are very different—the key
priority is to safeguard economic strength—and will undoubtedly thwart the
popular initiative’s ambitions.
In short—this popular
initiative for an unconditional basic income is a minority issue with a certain
degree of potential for support which can be expected to be clearly rejected by
Two of the most radical advocates of the post-work
approach are Nick Srnicek and Alex Williams. In their book, Inventing the
future: postcapitalism and a world without work, they call for ‘full
automation’ as a way to reduce the need for labour without reducing economic
Srnicek and Williams want to accelerate automation by pushing up wages. They
envisage a world where hours of work are reduced and individuals receive
support through a combination of a UBI and the welfare state.
Visions of a post-work future mark a return to the ideas
of earlier thinkers like Keynes. However Srnicek and Williams recognise that
there is a very different vision for a UBI among some libertarians. Libertarians
like Charles Murray draw on the ideas of economically liberal economists like
Milton Friedman. In the early 1960s Friedman proposed introducing a negative
income tax as a way to deal with poverty while sweeping away most of the
welfare state along with subsidies to groups such as farmers.
Friedman’s ideas helped shape many of the anti-poverty
proposals of the 1960s and 70s. However by the 1980s the debate had shifted
away from poverty and towards problems like welfare dependency.
Interest in the negative income tax waned.
A package of reforms that helped usher in a utopian
post-work future would be very different from a package of reforms designed to
abolish the welfare state. Free market advocacy for a UBI is part of reform
program that includes reducing government intervention in the market and
reducing the size of the state. It involves reducing government regulation of
workplace relations and making the employment relationship more market-like.
While commentators often remark that UBI has support from
both the left and the right, there is no single reform package based around a
UBI that has such broad support. The current debate is more about vision and
values than about concrete policy.
. A work test
is a requirement that an income support recipient must look for work and accept
it if is offered. An activity test is broader. It is a requirement that a
recipient must also participate in programs such as job search and training
courses, work experience placements and so on.
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writer Tim Dunlop makes a similar point. He argues that claims about left–right
bipartisanship are problematic because ‘the goals of proponents of each are
diametrically opposed, with supporters of the NIT aiming to diminish the role
of government while supporters of the UBI, at least in the short-term, are
looking to enhance it’: T Dunlop, op. cit., p. 154.
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