How would Universal Basic Income work in Australia?

Finance & Fury Podcast

Let’s take a look at a recent Press Club speech from the Australian Greens leader, Dr Richard Di Natale,

“With the radical way that the nature of work is changing, along with increasing inequality, our current social security system is outdated…A modern, flexible and responsive safety net would increase their resilience and enable them to make a greater contribution to our community and economy.

That’s why we need a Universal Basic Income. We need a UBI that ensures everyone has access to an adequate level of income, as well as access to universal social services, health, education and housing.

A UBI is a bold move towards equality... It’s about an increased role for government in our rapidly changing world.”

You can find this Press Club speech on the Greens’ website https://greens.org.au/npc-2018

What is Universal Basic Income (UBI)

Here in Australia, it has been suggested the government might hand out somewhere around A$20,000 per year to every man and woman (with figures between A$10,000 and A$25,000 discussed).

The UBI scheme proposes that the government distribute a flat-rate payment to every adult citizen, without work testing or individual level of participation in the labour market, without job-search requirements or even submission to drug tests and would be implemented as either a partial or complete substitute for social security and welfare programs.

Where does it stem from?

1. UBI has returned to the policy agenda as the result of concerns about technological change.
2. Some commentators argue that new technology will permanently reduce the demand for labour leading to job losses, stagnant incomes and worsening inequality.

Technological unemployment – a long history

1. During the Renaissance period for example, where a lot of people were put out of work in transcription and textiles with the invention of the printing press in the 15th century and knitting machines in the 16th century
2. Industrial revolution – Steam power, eventually engines
3. Agriculture 1920s – Tractors – A decline from 65% average in the 1500’s, down to 40% in 1800’s. Now it’s down to 1-2%. This is a massive displacement of employment wouldn’t you say?

Has employment gone anywhere?

1. Employment at all-time high.
2. More people on the planet than ever, lower unemployment rates. That means, there’s lots of jobs - as tech increases, options increase, jobs increase.
3. Okay, say we do get to the point tech can do everything for us…we may as well collect our income from these robot slaves. Just hope they don’t become self-aware otherwise they might want to keep some of what they work for.

How it might work?

1. The numbers – population of 24 million

   18+ at $22,000 (Age Pension rate) = $428 billion

   Is there a solution? Tax more (or borrow): Get rid of Tax free threshold?

2. On top of what we earn? Cost money to collect, so they would have to take more to give back less …20% slippage on their collection costs.
3. The tap will run out! Socialism doesn’t work as eventually there is nobody left to take stuff from.
4. Example – 5 friends in bar
   • Guy #1 spent years working 80-hour weeks, good job now, banker
   • Another went to Uni – comfortable job at 35 hours a week
   • The other 3 are unemployed
   • Every week the 3 who are unemployed ask the guy #1 to buy their drinks, guy #2 gets his own drinks, since he has a job.
   • One week, guy #1 says no, so his friends start laying on the guilt …How long does he go and buy round after round for his friends? Then, when guy #1 stops paying, who is going to pay the bill? Guy #2?
   • After a point, the 3 unemployed guys are suddenly in a much, much worse position because no one is buying the drinks.

In the real world

1. That one guy, or top 20% of people, pays 71% of income tax. How long would they keep footing the bill for their friends who are not working?
2. The what about companies? When robots take over and production costs decrease, do they make a tonne more profits? Not necessarily. Lower production costs see in greater competition. Company profits don’t increase in the long term, but prices of goods do drop!

Going back to the quotes from the speech…

“With the radical way that the nature of work is changing, along with increasing inequality, our current social security system is outdated,”

Needing a radical way that will assist everyone with our current social security system. I do agree that it’s a bit outdated and might be looked at in the future…however…

“A modern, flexible and responsive safety net would increase people’s resilience and enable them to make a greater contribution to our community and economy.”

The part in the speech about being more resilient as a result of this income, its actually the complete opposite when you look at it. Its 100% reliance on the government. Some people may stop being self-reliant and making their own income - that makes you reliant! The government will (apparently) take care of everyone if only you give them the money to do it.

In my experience I tend to know how to care for myself in better ways than the government can.

“It’s about an increased role for government in our rapidly changing world.”

Sadly, this is the only true statement in this speech.

A better solution

Helping each other - why can’t people go back to helping their local community? Kids helping support their parents? It’s hard when a decent chunk of your income goes to funding someone else’s parents as well.

Go to financeandfury.com.au to ask a question

Unless you want me to cover how different political institutions lead to different conditions of living and equality? Or how legislation to protect consumers leads to an increase in monopolies, hurting them more?