Matters Of Debate | Issue 7

Matters Of Debate | Issue 7

That New Zealand should introduce a universal basic income

This column is written by the Otago University Debating Society, which meets for social debating every Tuesday at 6pm in the Commerce Building

Affirmative, by By Old Major

The thought of Government paying an “adequate basic income” to every resident citizen is a powerful one. As automation, robotics and technology erode future jobs, we will be faced with a sinking lid on employment. Let’s be clear, the Maccas and Mitre 10 jobs just aren’t going to be there much longer. In the not too distant future, many jobs will be as extinct as the Moa. The present system of remuneration through work will eventually become obsolete, meaning that new methods to distribute wealth will be required. A new economy will need to be based on the concept of the universal basic income (UBI). People will work for satisfaction and enjoyment, rather than to support themselves.  

The UBI would be paid regardless of employment, so every adult in the country would receive it. Not only would it be a godsend to most students, but it would also eventually replace all current welfare benefits and allowances. A UBI removes the stigma certain benefits create, simply by their very name.

This “new wave” economy may take many forms, but it will rely on a more universal or equitable tax take. We will need to find the money for the UBI from somewhere, and the present income streams will suffer the same demise as jobs. NZ will have to consider a financial transactions tax to replace those that are redundant. This system taxes every transaction through banks and stock exchanges at as little as one percent.  Personal income tax would shrink markedly but money would be gained from speculative markets, money trading and derivatives, amounting to just under 20 percent of the NZ economy.

The UBI’s simplicity will reduce bureaucracy and costs involved in administering the welfare system, such as stand-down periods to ensure people actually qualify for welfare support (which makes life a lot more difficult for those left without income for a few weeks). The UBI does not discriminate, judge or manipulate its dependents. This is really important for removing the current stigma attached to receiving welfare – if everyone receives the UBI, then more people in society are invested in the political process of refining it and ensuring that the level of support is sufficient. The UBI is vital for New Zealand. It gives us hope that there can one day be a world where everyone can do more rewarding things than work to make money.

Negative, by Squealer the Pig

The purpose of welfare should be act as a safety net for those in our society who deserve help the most. As a society, we gain far more value from targeting welfare towards those who need it. We don’t get much value from giving free handouts to middle-class people who aren’t actually in need of this money. This is why we have different welfare rates targeted to different groups of people in the first place – university students actively choose to forgo full-time work in order to gain qualifications that improve their lifetime earning prospects. It’s fair that they get lower payments than, say, sickness beneficiaries, who generally won’t have such choices available to them. 

There is also the problem of determining the level of payment that constitutes a “basic income”. Economist Gareth Morgan’s suggestion of $211 a week may be (barely) enough for a student to live on, but it is far less than current jobseeker support rates and would be a major challenge for most to live on. If this policy is to be universal and actually serve as a replacement for current welfare benefits, it can’t leave those who currently rely on welfare (such as the unemployment benefit) any worse off, so it would need to at least match current welfare rates. 

However, a universal basic income would require that you pay every adult the exact same amount, regardless of how much income they earned from employment and other sources. This makes the universal basic income incredibly expensive to maintain, and it seems like the cost isn’t justified as those with incomes above the average wage won’t gain as much value from this spending as current beneficiaries would. Moreover, the trade-off is that the government would need to massively hike up tax rates in order to sustain this spending. That’s generally not something we should welcome, as higher taxes are likely to lead to bad outcomes. They encourage people to work less: they can rely on the universal basic income payments, so why bother doing another 20 hours of work a week if most of that just goes on taxes? If people choose to work less that erodes the tax base we need to support this policy. A financial transactions tax can’t be a complete substitute – firms will simply move offshore, which happened when France and Sweden experimented with the idea. 

The universal nature of the policy places a structural limitation on its value for money. We would be significantly better off by spending money where it would deliver greater social benefits, such as improving the support available to jobseekers.

This article first appeared in Issue 7, 2016.
Posted 12:10pm Sunday 17th April 2016 by Otago University Debating Society.