The concept of basic income is not new. In 1795, in his work Agrarian Justice Anglo-American writer and thinker Thomas Paine proposed that financed from a 10 per cent inheritance tax, everyone should receive 15 pounds at the age of 21, then an additional 10 pounds in each subsequent year. In those days, this was a considerable amount: the basic income proposed by Paine is equivalent to approximately 10,000 dollars today (about HUF 2.4 million). Why has the 200-year-old theory become relevant today? (This article continues the article Towards an unemployment-based society published earlier.)
Paine argues that the income would compensate for ancient and original injustices: sometime in the distant past, the stronger appropriated land, and its gains has been enjoyed for centuries by their successors, depriving the majority from their natural heritage, the forest and arable land, which provide food. Therefore, damages are due. We must admit that his argument is not entirely unfounded.
The institution of basic income reminds many people of socialism. You went to the factory, did nothing, then collected your wages. The difference is that now there is no need to go anywhere for your wages, but the government still interferes seriously with the distribution of income. Yet, basic income allows a much more human capitalism to be created, which continues to be driven by competition, but does not involve extreme poverty. The system achieves this through the simplest and most transparent possible redistribution of income. What is more, despite all appearances, it can be fitted intelligently in the framework of capitalism, and in many respects it could even facilitate market efficiency.
One possible effect is the liberalisation of the labor market. At present, the Labor Code protects employees in many ways, including notice periods, protection against dismissal, minimum wages, requirements for work time, severance pay, etc. And that is how it should be, since an employee is existentially exposed to their employer. But there is a catch. Namely, if government regulations provide excessive protection to employees, businesses will think a thousand times before hiring. If a business employs someone and then hard times come despite its expectations, or the employee is simply unfit for the job, it will cost a load of money to dismiss them. The company had better not hire them in the first place. But that will neither help reduce unemployment, nor drive GDP growth. A number of European countries such as France are hamstrung by excessively tight regulations.
Conversely, if everyone were to receive a basic income that is sufficient to make ends meet, the protection could simply be abolished. The employee would no longer depend on the employee for their existence, in exchange for which it should be possible to dismiss them at any time. At the same time, employees’ bargaining power would be reinforced as they would no longer be willing to work for a pittance for fear of uncertain existence.
Another benefit of basic income is that its introduction allows all other government transfers to be discontinued. Subsequently, there would be no need to pay unemployment allowances, pensions, sickness benefits, childcare aid, gas price subsidies, etc. What is more, there would no longer be a need for the bureaucratic and wasteful government institutions maintained for the assessment, recording and disbursement of the benefits. The government would provide a decent living to all citizens, but no more. There would no longer be preferred social groups picked according to the political weather. At present, in a country with a high number of pensioners, it is possible to buy the votes of a comparatively broad and homogeneous class relatively cheaply, at the expense of the active population and the economy.
The market-friendly character of basic income is also demonstrated by the fact that the US, one of the countries based on the most solid foundations of capitalism, was on the point of adopting a similar scheme in the 1970s. Under the negative income tax scheme, which was originally proposed by Friedman (a man difficult to accuse of being anti-market) and subsequently underwent a series of changes, the government would collect taxes above a certain level and “distribute” taxes below that level, i.e. supplement the income of those earning below a certain wage level. People who earned nothing would be eligible for the highest reimbursement, but employees receiving a single dollar in wages would still be better off. The bill was passed by the House of Representatives, but thrown out by the Senate. Finally, Watergate and Nixon’s demise blew the chances of any refinements of the bill.
Can we afford it?
Today Hungary is obviously not in a position in which the government could pay a basic income to provide a decent living. But the situation is not the same everywhere. In Switzerland, a referendum on its introduction is scheduled to be held soon. Although the proposal will probably be turned town, it was certainly a sight to look at when as part of the campaign its supporters dumped 8 million 5 rappen coins (the Swiss coin of the smallest value, gold in color) from a truck in front of the house of parliament in Bern. One for every Swiss.
We will be hearing more and more about basic income. For the time being, it is a matter of values whether an affluent society forces those citizens into employment who find happiness in other than gainful activities. Over time, however, as the economy grows and opportunities to work become scarce, it will no longer be a matter of values, but one of necessity.
The two main arguments against basic income are that it reduces the incentive to work (what would anyone work for if they get enough money anyway), and that it is expensive. All that is true, but will come in handy in an automated world. The goal is in fact to reduce the incentive to work, given that there will be a shortage of work as we understand it today. At the same time, the expensiveness of basic income will not be a problem either. As robots start work (see the first part of the article for details), great progress will be made in terms of improved efficiency and reduced costs. The owners of those companies can be asked for a part of their skyrocketing profits, which can then be used to finance basic income.
Any they will probably be glad to give. Indeed, who will buy from them if no one has jobs and money? There they would be super-efficiently with their super-intelligent robots working super-cheap—without any effective demand. Let us just consider the case of Henry Ford, who in the early 20th century introduced the assembly line to his plants to achieve massive cost savings. However, For returned some of the savings to his workers in the form of a pay rise and work time reduced to 8 hours. In turn, the car manufacturer also made a handsome profit on his generosity, since his cars mass-produced cost-efficiently could indeed be bought by the masses. His workers had the money to buy the car, and the time to use it. The same story could be revisited in the future, except that future workers would get a share of the money from cost savings in the form of a basic income and work time reduced to zero hours.
There is a fair chance that children born today will neither be required nor have the opportunity to work as we understand it today. This is at the same time cause for comfort and despair. The effect of basic income on the human psyche is far more complex than reduced incentive to work. What will they do with their lives, what goals can they set for themselves? Hopefully, the need for human relationships will remain constant, and that is something to build on. They must be prepared so that they can do something with their existential freedom, and find meaning for their existence. That will be the greatest task of future schools, not vocational training.
Of course, it is possible, and even probable that things will turn out completely different. Presumably, the increasing prevalence of robots will indeed cost a large number of lost jobs, but introducing basic income is not the only answer to the problems arising. Nevertheless, the way things stand today, as mankind is marching towards better days on an increasingly firm ground of existence, an ever smaller part of it will be required to work for a living. And moving towards zero employment rate, we will face the fact that a society based on unemployment has to overcome difficulties that are completely different from what we are preparing for today. We had better remember that.
Previous part of the series: Towards an unemployment-based society