On Saturday, the Swiss public voted against the introduction of the Universal Basic Income system (UBI), which proposed to give every adult citizen around 2500SFr francs (around £1,782) a month regardless of whether they work.
The failure for UBI supporters in Switzerland coincided with the UK’s shadow chancellor John McDonnell saying at the weekend that the system “is an idea Labour will be closely looking at over the next few years.”
The most obvious criticism of UBI is that it would be far too expensive to implement. If we paid every person an unconditional salary of close to the national living wage, there would have to be huge tax rises, or massive cuts in other areas of government spending.
Another possibility would be to implement a UBI system using the same budget as we have for our current welfare system. In this “fiscally neutral” situation, we would divide our welfare budget by the number of people in the country, and share it out equally. This works out as much less than the living wage, but it could still provide some of the same benefits. For example, it would greatly reduce the bureaucracy of the welfare system and give people more choice about what they do for a living.
So, we decided to do some back-of-the-envelope maths to calculate what this might look like in the UK. We wanted to know how much each Brit would get if the current welfare budget was axed completely and the total pot was divided equally among everyone in the country?
UK WELFARE BUDGET FOR 2013-14
- Total welfare spending: £251 billion
- Population: 64.5 million
- Of which, children: 15 million
If that budget was recast as a universal basic income, this is what you would get:
UK BASIC INCOME BUDGET FOR 2013-14
- Basic income per head for all residents, annually: £3,891
- Basic income per head for all residents, monthly: £324
- Basic income per head for adults only, annually: £5,081
- Basic income per head for adults only, monthly: £423
One of the criticisms of basic income is that it would kill off the desire to work. Few studies have been done of this, but those that have indicate that people only reduce their work hours by a small amount on average.
The fact that a fiscally neutral basic income scheme would pay out only £423 per month (€585 or $644) to adults means almost everyone receiving it would still need a job. £423 a month is simply not enough to survive — or even pay rent — in most areas of Britain.
It might disincentivize some work, however. Young people living for free with their parents might suddenly feel rather rich. And that would mean employers currently offering unpleasant jobs with low pay might need to increase their pay rates or go out of business.
That might not be a bad thing: A basic income pre-supposes that most people want to work anyway, because productive activity is how we create meaning and identity. Basic income would give workers the freedom to not be forced into the jobs that no one wants — think about rubbish collectors — or to let people grow richer by taking on those onerous tasks. It might force society to revalue unpleasant but necessary tasks, and reward them more justly.
It would alter the labour market in favour of labour, in other words.