How can a universal basic minimum income be made compatible with socialist principles and avoid inadvertently furthering a neoliberal agenda?

Ursula Huws continues the conversation on Universal Basic Income in this article, originally published on Open Democracy’s New Economics section:

More than one in five UK workers, over seven million people, are now in precarious employment according to this analysis of official figures by John Philpott. Since 2006, the numbers on zero-hours contracts has grown by three-quarters of a million are and over 200,000 more are working on temporary contracts. My own recent research has found that some two and a half million adults in the UK may be working for online platforms like Uber, Taskrabbit or Upwork at least once a month, with about 1.2 million people earning more than half their income from this kind of work. A growing proportion of the population is piecing together an income from multiple sources, in many cases making even the concept of a fixed occupation anomalous.

Large numbers of worker do not know, from one day – or even hour – to the next if and when they will next be working. Yet we still have an anachronistic benefit system based on the principle that any fit adult (and, under the current regime, many who are less than fit) must either be ‘in work’ or ‘seeking work’. The old Beveridgean welfare state model is, in short, bust. What is left of the old welfare safety net is fundamentally incompatible with a globalised just-in-time labour market in which workers are increasingly paid by the task.

The victims of these incompatibilities are among the most vulnerable in our society – forced to take any work that is going but often unable to claim benefit when none is available. They are caught between the rock of harsh sanctions regimes and the hard place of capricious and unreliable employers, often with no dependable source of income whatsoever. And the numbers of these people missed by the safety net keep growing. The use of food banks has increased more than forty-fold since 2008, the estimated  number of rough sleepers has risen by 55% since 2010 and the number of children in poverty rose from 3.7 million in 2014-2015 to 3.9 million a year later – an increase of 200,000 in just one year. Something is clearly terribly wrong and the increasingly urgent question is how to fix it.

This is part of the problem to which the concept of a universal basic income (UBI) now presents itself as a solution to an expanding range of analysts. UBI is not only promoted as a way to update the benefit system to bring it into line with new labour market realities. It is also seen as a way to reward carers and others who carry out unpaid reproduction work in the home, to support artists, enable lifelong learning or give more autonomy to disabled people. This once-marginal idea is now seriously espoused in the UK by the Green Party, the Scottish Nationalist Party, some trade unions and sections of the Labour and Liberal Democrat parties and Plaid Cymru. Further afield is also actively promoted (including setting up experimental schemes) in Finland, the Netherlands, India, South Africa and, at the neoliberal end of the spectrum, by high-tech entrepreneurs in Silicon Valley.

At the headline level, indeed, UBI can seem to represent some sort of magic bullet that will solve all these problems simultaneously, and is often promoted as such. But a closer examination of the various models proposed reveals considerable differences between them. If these are not recognised, attempts to operationalise it could lead at best to risks of unintended consequences and at worst deep political fissures that could even exacerbate some of the problems UBI is intended to address. Most attempts to model how UBI could be implemented in practice in the UK (for example by Howard Reed and Stewart Lansley, Malcolm Torry and Gareth Morgan) have looked at it in what might be called a policy-neutral context, in which all other features of the economy and the tax system remain unaltered. But of course the reality is that any change in government policy that could lead to the introduction of UBI would be part of a much broader political upheaval that would transform many of these other features. Abstracting UBI from its broader setter in this way makes it harder to see such potential hazards.

For people who believe that the world’s sixth largest economy should be able to protect its citizens from penury, and are committed to (re)developing a welfare state that reduces social inequality and enhances choice and opportunity for its citizens, perhaps the time has now come for a serious debate, not just about the pros and cons of UBI in the abstract, but about which other policies it should be linked with to ensure that these objectives are met. This involves grappling with some difficult questions. Here I look at four of the risks that could arise if a UBI is introduced without such policy safeguards.

The risk of driving down wages

In the abstract, the relationship between a UBI and wage levels can be argued to be either positive or negative. Some argue, quite plausibly, that a guaranteed minimum income would enable people to be much choosier about which jobs they accept, giving them options to turn down really exploitative wage rates and perhaps even providing them with the equivalent of strike pay to enable them to negotiate more effectively with employers without their dependents suffering.

An alternative view draws on the experience of tax credits (and now, universal credit) to point out that providing an income top-up is, in effect, a subsidy to employers who pay below-subsistence wages. In 2015-2016, this subsidy was estimated at about £30 billion. Had this been paid out by employers as part of their wage bill then this would also have led to an increase in national insurance and tax revenues. These credits therefore represent a factor which, whether inadvertently or not, increase inequalities between those who rely on their wages for their livelihood and those who derive their incomes, directly or indirectly, from corporate profits.

If a UBI is not to exacerbate this state of affairs, it is imperative that it is linked to a high minimum wage and one, moreover, that can be linked to systems where workers are paid by the task, not just to hourly rates.

The risk of undermining collective bargaining for employer-provided benefits

An important argument against UBI comes from social democratic parties and trade unions, especially in parts of continental Europe with a strong tradition of sector-level bargaining, who argue that its introduction would undermine their efforts to make employers pay into schemes that provide negotiated benefits, such as pensions, health insurance or childcare. A UBI provided by the state would, they contend, shift the burden of paying for it from employers to the general taxpayer. As Richard Murphy has shown, ‘the poorest 20% of households in the UK have both the highest overall tax burden of any quintile and the highest VAT burden’. This shift would therefore exacerbate inequalities, rather than reducing them, at a societal level.

To avoid this risk, it is therefore important that the introduction of UBI should be accompanied by measures that support trade unions’ abilities to bargain with employers at company and sector levels for benefits for their members, by protection for existing company pensions schemes and by other measures that ensure that employers continue to contribute their share of the cost, for instance through employers’ contributions to National Insurance.

The risk of undermining collectively-provided public services

By giving everyone cash, neoliberal models of UBI play along with the grain of an increasingly marketised economy in which services are individually purchased from private providers. There is therefore a risk that UBI could become a sort of glorified voucher system, undermining collectively provided public services that are designed by bodies democratically answerable to the communities they serve, under the guise of offering individual choice. Quite apart from the considerable risks that this poses to democracy, social cohesion and the quality of services, this could disadvantage individuals with special needs who require more expensive and/or specialised services than the average, exacerbating inequalities even while purporting to offer everybody the same.

It is therefore imperative that the introduction of a UBI should be embedded with policies that protect the scope and quality of public services and their collective and universal character.

The risk of creating racist definitions of citizenship

If a UBI is defined as a right of citizenship, then this raises the question of entitlement: who is, or is not, a citizen? And on what basis is their right to UBI established? A final serious risk associated with the introduction of UBI is that it could become linked to a narrow definition of citizenship from which some people (for example refugees, asylum-seekers or residents who do not hold UK passports) are excluded. In addition to the support this could give to racism and xenophobia this could also lead to a two-tier labour market in which people who are not entitled to UBI become an exploited underclass.

The introduction of UBI must therefore be integrated with humane and well-thought-out policies on immigration and citizenship, perhaps by linking entitlement to the place of residence, rather than nationality.

Conclusion

I have highlighted here what I see as four major challenges that need to be confronted if UBI is to be introduced as a genuinely progressive initiative that can restore some dignity and security to the most vulnerable members of our society, enable a flexible labour market to function in ways that avoid exploitation while encouraging entrepreneurship and creativity and reduce social inequality. In doing so, I do not wish to pour cold water on the very idea. On the contrary, I think that, at this moment in history, it is crucially important – so important that what is needed now is a debate, not about the abstract idea of a UBI, but about how it could be introduced in the real world in a way that is genuinely compatible with social-democratic and feminist ideals and starts to rebuild the train-wreck that is currently all we have left of the 20th century welfare state that so many people worked so hard to create.

Photo by Mister Higgs

2 Comments The key criticisms of basic income, and how to overcome them

  1. Jason

    Unfortunately, another article attempting to consider criticisms but failing to ask the most basic ones. Will prices rise accordingly, with universally increased income? And where will the UBI end up? Unless the redistribution aims to change the distribution of ownership of basic supply (example housing, food, energy etc), bringing about greater ownership (private or collective) to those of low income and low capital, any additional income will be quickly absorbed by owners of capital – able to extract rent from those without capital. It seems obvious to me, any plan for UBI that does not include an equitable shift of equity, will be quickly absorbed in to the pockets of those least in need of UBI. Capital concentration will be further empowered to concentrate more ownership and further deregulate the protections, weakening the defences against monopoly and hastening further for profit privatisation of the commons. All the while using the misleading excuse, “but of course this deregulation or privatisation will be offset by giving everyone a generous UBI (like more drugs to dependent addicts)”.

  2. Max Pont

    The key issues are:
    Will UBI replace the myriad of targeted benefits systems as a way of reducing the costs?
    Will UBI be used as an excuse to increase fees for social services?
    Will unemployed people on UBI be less inclined to race to the bottom for temp jobs etc.?
    How to avoid abuse (e.g. if foreigners move to an UBI area and only stay long enough to become eligible, and then move back to their own country, asking someone to collect the UBI and help them with fake facade of living in the UBI area)?
    What will happen in the robotics driven end-of-work scenario?

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