Whether a National Minimum Income or a National Universal Basic Income

*Please note that some of this content has been presented before. This article has been updated to include issues around the sexual division of labour and presents some figures with regard to the UBI. The article also provides a more detailed argument on behalf of the UBI.

Introduction

We need to rethink the parameters of the discussion of a national minimum wage with regard to the Universal Basic Income. While we cannot doubt that the introduction of a Universal Basic Income is a reforming tool, it does have the ability to act as a short to medium term tool to address current structural conditions. There is also the consideration that the introduction of a UBI would have very significant positive net effects. What do we mean by a ‘Universal Basic Income’? A UBI is an income given to everyone irregardless of their employment status, their current income levels or their level of wealth. As a UBI would tend to be in the lower range, it is unlikely that that the wealthy and high income earners will bother to go through the administration of drawing a UBI. We can safely say to a fair degree of certainty that a UBI will provide more assistance to the poor and working classes.

The UBI will have many advantages. Firstly, it will assist in improving the standard of living for all. People will have the income and means to pull themselves out of degrading situations, out of marginalization and assist them in becoming relevant. Secondly, it will assist job seekers insofar as it will provide income security while job seekers negotiate on the labour market. Thirdly, it will assist in re-distributing wealth by specifically taxing wealthy and privileged sectors of society. Fourthly, as the number of spenders with substantial money will be dramatically increased, we will experience a stimulus in the goods market, which in turn will fuel investment and growth in agriculture, industry and manufacturing. This will have a knock-on effect through stimulus – growth in jobs and these sectors will in turn create more jobs, creating more spending, and creating a snowball effect. Fifth, by providing income security, we will see a massive increase in the number of small businesses and co-operatives.

Mechanics of the Proposal

The specific trick of the UBI is to ensure that it is funded primarily through wealth re-distribution. To this end, my proposal is that we impose the following measures:

  • A 12.5% tax on all JSE transactions;
  • We raise the effective tax rate on businesses listed on the JSE and those worth more than R10-million to 60% on all income greater than R10-million per annum;
  • We tax all earnings generated by individuals greater than R1-million per annum at an effective rate of 75% on all income greater than R1-million per annum.

These financing mechanisms have been based on the following principles:

  • That the income should progressive enough to reach 80% of the population;
  • That it should be set above the poverty-line (R2,440.00 in South Africa);
  • That any introduced taxation measures should serve primarily as a mechanism to re-distribute wealth and address income disparities;
  • There should be a disproportionately high taxation rates imposed on the wealthy and on high-income earners.

The structural problems in our economy are such that the top 4% of earners and the wealthy receive 32% of all income and the bottom 66% of the lowest households earn just 21% of all income. We want to create a society that sees a more equal distribution of wealth. This is basis for the redistribution of income and the introduction of the UBI.

By placing the taxation proposals into effect we could generate sufficient tax income to pay every person in the country (including children) a net UBI of R3,500.00. Moreover, the proposed taxation measures would leave us with an annual surplus of R13.95-billion, which can be invested into infrastructure development, development which we will use to assist with the unemployment problem. The most conservative estimate is that we could immediately put approximately 1.8-million people to work, with an increase of 258,000 per year for a duration of 10 years at which point the uptake per year would stabilize at 172,000.

Money distributed at the bottom is three times more effective at driving economic growth than money at the top. The theory that describes this is referred to as “the marginal propensity to consume”: people with small incomes spend their money quickly and the rich hoard theirs. With today’s monstrous wealth gap, the velocity of the Rand in the total money supply is lower than it ever has been. Modelling by Ricardo Reis and Alistair McKay show that “tax-and-transfer” programs that affect inequality and social insurance can have a large effect on aggregate volatility. Even data from the IMF suggests that by increasing the share of the top 20% of households by just 1% of total wealth lowers economic growth by 0.08 points. But, the same data from the IMF indicates that if the bottom 20% each receive a 1% share, economic growth increases by 0.38 points. In the scenario that would emerge from the proposed income and wealth redistribution rates we would grow the economy by 6.5% (in current GDP terms, additional national income of R343-billion per annum) initially and then taper off around an additional 2.2%. To be very clear this is not projected actual GDP growth, but is projected additional GDP growth above the main GDP figures.

Data from the IMF and OECD show very clearly that inequality and the introduction of neoliberal economics – such as we have had in South Africa – drags GDP growth significantly e.g. OECD data shows that Mexico and New Zealand lost 10 percentage points off growth solely attributable to levels of income inequality; in Italy,, the United Kingdom and the United States that figure is between six and nine percentage points off growth solely attributable to levels of income inequality. Although no data is available for South Africa, a comparison with OECD data demonstrates that conservatively, that South Africa is losing 14 percentage points on GDP growth solely through wealth inequality.

Simply leaving the social welfare net where it is, or making adjustments to it isn’t going to address income equality – the UBI can only act as an effective programme if it significantly assists – at the very least – 40% of the population, not just the bottom 10% of the poor. Reducing income concentration at the top where money makes more money to hoard is beyond a moral issue or a matter of justice: it is a matter of economic savviness.

The introduction of a universal basic income is already been pioneered and found to successfully work in areas such as:

  • The City of Utrecht, Netherlands;
  • Nijmegen, Wageningen, Tilburg and Groningen in the Netherlands;
  • Switzerland;
  • Finland; and
  • Catalonia, Spain

Theoretical Insights into the Universal Basic Income

Any of the genuinely progressive features of social democracy mitigate the social costs of capitalism and divide the working class. See Marx’s comments on Adam Smith’s early proposal for universal free education “in homeopathic doses” as a response to the effects of the division of labour on the moral, intellectual and martial virtues of workers. Within capitalism, at a low (politically) sustainable level perhaps UBI would have a divisive effect, but in a socialist context, it will become an important pillar of social solidarity, one of the entitlements that a socialist society can sustain more effectively than capitalism.

If we examine the capitalist system, what we observe is that there are already those who earn unworked for income, whether it’s through interest on a lump sum, the ownership of listed companies where income is derived in the form of dividends, people who inherit money and other forms of obtaining rent in the capitalist system. In essence these groups have no moral obligation to work, nor do they have any financial incentive to work either. Capitalism inherently produces these individuals – the paid but not laboring classes.

Most other socialist ideas can be regressive within a capitalist context. Workplace democracy can divide the working class between the relatively well off workers in primary sector labour markets – e.g. airline pilots and mechanics – and the relatively worse off workers and unemployed. What we have to address is how to put together a package of social programs that will bring everyone together in a commonly shared social movement despite the potential for divisions. A UBI achieves this aim.

It is in fact true that it would be easier and cheaper to provide everyone with a UBI )or its Rawlsian equivalent – an income floor beneath which no one would be allowed to sink) than it is to provide everyone with a decent paying job. This is one of the main attractions in favor of a UBI as opposed to imposing minimum wages. It is in fact impossible to provide everyone with decent work under capitalism. We have here another classic contradiction of capitalism: in undermining feudal privilege, capitalism generated the ideology that everyone should work – but its institutions, in demolishing slavery, serfdom and the guilds, made it increasingly impossible for many people to find work. Moreover, since wage labour requires unemployment as a disciplinary mechanism, unemployment cannot be eliminated under capitalism. It can done under Economic Democracy – 1) market does not automatically create enough jobs; 2) many people are mentally and physically unfit for those jobs that are there and those that might be created. However, it is the historical task of socialism to clean up the messes left by capitalism. This task is furthered by empowering people to refuse degrading jobs. Most will work, because most will not be content with a minimum, but work won’t be the only source of income or benefit. We also need to ask, looking down the road to the “higher phase of communism” whether the work ethic – especially that focused on paid work – is not one of the messes of capitalism. Marx’s historical materialist scheme for transition to communism suggests that the principle of distribution according to need only comes after an extended period governed by a work ethic, and only after the division of labour has been overcome, abundance has been achieved, and work has become “life’s prime want”. But to the extent that one approaches these conditions in certain respects under capitalism, can it not be possible to begin introducing need as a standard alongside work and over time phasing out the latter while phasing in the former? Is this not part of the appeal of shortening the working day and the workweek? Does not a historical materialist approach to distributive justice support the UBI?

The UBI also has another function in terms of the current financial crisis, the ‘crisis of the reproduction of the capital-labour relation itself” which is becoming manifest through the global restructuring of capital and its current turn towards automation and widespread austerity measures. The introduction of UBI could not only be used to solve the current economic crisis, but also to put those who have been most heavily impacted on by the excesses of capital’s instability into a position of power, or at least one that is advantageous in the struggle against capitalism. In South Africa we are specifically talking about the financial sector, and with reference to the massive surge in the growth of the financial sector at the expense of other sectors in our economy; indeed to the point where the growth of the financial sector occurred to the expense of the agricultural, economic and industrial sectors. The UBI will solve many of the problems currently faced by capitalism. As we move into a world of surplus labour and lack of employment through increasing automation and austerity measures, it offers us an egalitarian measure to aid in overcoming the ills of crisis prone late capitalism. The UBI also addresses the notion that the majority of people do not have a liveable income. We should be careful of the equality argument: economics is not about creating equality but about dealing with needs. It is precisely the logic of equality, exchangeability and generalized equivalence that capitalism relies on, a state of affairs in which people and their needs become subordinate to the dictates of the market. It is in this way that the UBI provides a means to address the production of value and to perpetuate the capitalist mechanism of the production of value and its relations.

There is another strong motivation for the UBI, and that this is the old wages for housework idea. The “Wages for Housework” campaign was initiated in the UK in the 1970s and was an attempt to draw awareness to forms of domestic labour that were not traditionally thought as being within the sphere of ‘wage-labour’. The key difference being that there is an absence of a wage for those who work within the home. Capitalism and a layer of workers rely heavily on all sorts of unpaid (and gendered) pay. Indeed, there seems to be an arbitrary line drawn with regards to which the social contributions made by some are not rewarded with wages. Negri relies on an analysis that discusses the extension of the sphere of value production into the “social factory”, an extension which necessitates the introduction of a UBI for everyone being paid for social work. The payment of a UBI would – to use Federici’s argument – generate a demand for currently unpaid forms of social work – most notably housework. In this sense, the UBI can be seen as an attempt to identify women qua women as productive of value. Therefore UBI represents a progressive step toward overcoming this very relation through the realization of (typically) women as producers of value in the home. The UBI will go a long way to ensure that there is fair value provided for currently unpaid forms of labour, as well as acting as a strong catalyst to overcome (gendered) oppression. UBI, however, goes further than this in that it acts as a mechanism of addressing the exploitation of all those who produce value without recompense. At the very least, the discussion of UBI should bring to light hidden sites of production and sites of exploitation and oppression. Recognizing this hidden work will aid in addressing and exposing one’s own subjective position (and therefore allowing the possibility of challenging or negating that position) as producer of value.  The argument can be made that the basis for which these differing forms of work being remunerated is somewhat arbitrary. To accept the UBI in Marxist orthodoxy we need to reevaluate the argument centered around value-production. In these cases, the UBI would also be making major inroads into patriarchal forms of domination which themselves are intricately linked with capitalist value production.

The UBI would not be a stand-alone institution: we cannot simply implement the UBI without fixing certain other aspects of our economy and property relations. Notably, the UBI would need to be followed with rent caps in order to prevent the rentier economy from taking advantage of the introduction of such money. We cannot dismantle any other aspect of the welfare state as a justification for introducing a UBI – the UBI in terms of the welfare state needs to be seen as one of a variety of social wages.

The UBI has the potential to address the problems faced by our neoliberal economy. What it will certainly do is to radically reconfigure the market economy by highlighting and exposing its current contradictions. What the UBI will do specifically is to address the notion of a growing surplus population to the needs of capital – due to various factors such as the re-structuring of capital. The UBI addresses directly the surplus population and surplus labour problem. Those who have found themselves forced out of the current labour market would be re-integrated as potential consumers.

The UBI will also provide a direct means to improve working conditions, for instance by ensuring that there is a drastically reduced extension of working hours into ‘lived’ life. The proposal is not for government to provide a large enough income to allow citizens to completely avoid work, simply enough to ‘get by’ (and based on the quantities considered, perhaps not even that), while indirectly ensuring that the workforce becomes more flexible.

Further to this, the UBI isn’t just a measure against poverty but would be an integral part of an overall economic policy intended to act as a stimulus for economic growth and give a guaranteed material existence and hence effective freedom to all members of society. This effective freedom of the non-rich bears the seeds of subversive political power – the ability to give all true political power. The UBI is anti-neoliberal measure and is based on the insistence that a person cannot be free if the means of his or her material existence are not guaranteed. One of the major advantages of the UBI is that it would free people from the tyranny of the job market in which they are mere commodities by guaranteeing the most basic human right of all, that of their material existence. A UBI, in practical terms, would allow people to expand their lives and defend themselves against assaults on their freedom and dignity.

Since these basic human rights are declared universal, there’s one myth that I want to deal with – namely the myth that only rich countries can contemplate the UBI. As our calculations demonstrate, a R3,500.00 minimum UBI is not only possible, but the proposed taxation measures would redirect money into the hands of poorest in the country and turn them into spenders. As has been shown, by reducing income and wealth inequality, we could raise the growth of the GDP by 14 percent points. This is excluding the knock-on effects that spending would have on the agricultural, industrial and manufacturing sectors, as these are more difficult to quantify with broad certainty. It is achievable with the right policies and legislation. However, we also have several examples of a UBI being implemented in third-world countries:

  • Brazil;
  • Namibia;
  • Mexico;
  • India;
  • Kenya;
  • Malawi

Indeed, the most remarkable of these was the introduction of a UBI-like mechanism in Otjivero-Omitara (Namibia) where 930 inhabitants received a monthly payment of 100 Namibian Dollars (about R186). The effects were (using Millennial Development Goals as benchmarks): a reduction in poverty from 76% to 16%; child malnutrition fell from 42% to 10%; school drop rates plummeted from 40% to almost 0%; average family debt dropped by 36%; local police reported that delinquency figures were 42% lower; the number of small businesses tripled, and more broadly, the purchasing power of the inhabitants increased, creating a market for new products.

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