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Issue #1765      February 15, 2017

Basic poverty trap

As the income gap continues to widen and poverty is on the rise in Australia and other industrialised nations as result of decades of neo-liberal economic policies, the concept of a universal basic income is being touted in conservative quarters and amongst some left economists. Trials are underway for some form of basic income for unemployed in Canada, Finland, the US and several other European countries.

The concept dates back to the Renaissance of the 16th century where with the new mercantilism it was no longer seen as the preserve of the church and charitable individuals to cater for the needs of the poor.

Humanists of the time such as Thomas More and Johanes Ludovicus Vives saw the need for a guaranteed minimum income so those in need would not be tempted by morally bereft behaviour such as theft or prostitution. It has surfaced from time to time over the centuries, often amongst progressive thinkers. Since the 2008 global financial crisis and the deep global recession that followed, conservatives have been pushing the idea.

There are various models but in essence concept of a universal basic income is presented as a means of ensuring that every adult has an adequate income to provide for shelter and food. It could be a partial or complete substitute for the existing social security system. The government would pay every adult a flat amount regardless of whether they were already working and regardless of their age and health.

In a trial in Oakland, California, 100 families will receive unconditional cash grants ranging from $1,370 to $2,740 a month. In Finland, about 10,000 people will receive $850 a month for two years in a program being trialled there.

The discussion has arisen to the backdrop of high and rising levels of structural unemployment, decline in trade union membership, repressive anti-terror and anti-trade union legislation, institutionalised and rising poverty, growing state authoritarianism, systemic racism, sexism and xenophobia along with the more recent targeting of Muslims.

The Brexit vote in the UK and the election of Donald Trump have given impetus to the debate around a universal basic income. Capitalism is in deep crisis, increasingly failing to meet the needs of people or to protect the environment. Growing dissatisfaction with neo-liberalism is fuelling the rise of extreme right forces.

In Australia, one third of pensioners live in poverty; denied an adequate income for a comfortable life and the right to live in dignity.

The number of unemployed is set to rise as robotisation and other technologies develop. Capitalism increasingly has no need for a large percentage of the labour force. This is to some extent covered up in unemployment figures which include an hour of work in the past couple of weeks as being employed. These figures also fail to take account of the hundreds of thousands of people who have given up on looking for work.

The economic situation is set to worsen with more people being thrown into poverty or onto the scrap heap as corporations lay them off to increase profitability.

Part-time work, casualisation and intermittent work, “zero wage” contracts, “Uberisation”, low paid visa workers, and growing deregulation of the workforce and the assault on militant trade unions are all contributing to the present crisis.

Some conservative governments are concerned that the present system of unemployment benefits with waiting periods for benefits, stringent work and income tests are acting as barriers to workers studying, taking any work that becomes available or trying to set up their own businesses.

The trials are aimed at seeing if a basic income from government would change the behaviour of the unemployed.

Proponents of the scheme tend to be rather light-on when it comes to costings. To be affordable a universal payment would need to be an incredibly low income. In Australia, there are approximately 19 million adults aged 18 or over.

One figure being suggested by academics is a universal payment of $1,000 a month – not enough to even rent a house or fund the average mortgage. It would cost $228 billion. The basic pension for an individual is close to $1,600 a month and below the poverty line.

Present costs for social security system are just under $160 billion. Would the government use the universal payment to wind back or abolish social security payments? It would go part way to funding a universal benefit.

Such a scheme avoids capitalism addressing the real economic questions, of addressing the lack of well paid secure jobs, the provision of affordable housing, of the urgent need to increase pensions and unemployment benefits by at least $50 a week.

The replacement of the current system of social security, as inadequate as it is, once abolished and replaced by a universal basic income would never be restored. The universal income could only be sustainable if it were well below the poverty line.

The scheme has other problems. For example, if the government is paying you $1,000 or what other amount, would it down the track treat it like a restricted welfare card , controlling what you spend it on?

Neo-liberal economists are winding back spending, handing out tax cuts to the rich and big corporations, and claiming the social security system is “unsustainable”. They aim to spend less, not more on the well being of people. In such conditions, by necessity, any universal basic income will result in cuts to incomes for the unemployed, pensioners and other social security recipients.

Proponents claim that it would provide an income to cover basics for the unemployed with no income tests or other conditions. This sounds great on the surface, but in reality that income would be too low to raise a family, undertake studies or live above the poverty line.

But it would create a large pool of labour desperate for crumbs from the world of Ubers and 7-Elevens. It would also generate a highly profitable source of free labour, workers hoping to get a foot in the door.

The basic income would also serve employers as a new floor to drive down wages.

The scheme also attempts to sell the idea that there is no need to work. But the reality is that human society requires work. That work is part of the identity of a human being, in particular if that work is satisfying and contributes to society.

The immediate way forward is an increase in the amount of social security payments, an increase in corporate taxes, job creation programs, shorter working hours and higher wages.

Thanks to Richard Titelius for information used in the article.

Next article – IAC’s future is unclear

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