The Feasibility of Citizen's Income

Malcolm Torry

• Publisher: Palgrave Macmillan
• Year: 2016
• Print ISBN:
  9781137530776
• eBook ISBN:
  9781137530783
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

This book is the first full-length treatment of the desirability and feasibility of implementing a citizen's income (also known as a basic income). It tests for two different kinds of financial feasibility as well as for psychological, behavioral, administrative, and political viability, and then assesses how a citizen's income might find its way through the policy process from proposal to implementation. Drawing on a wide variety of sources of evidence from around the world, this new book from the director of the Citizen's Income Trust, UK, provides an essential foundation for policy and implementation debates. Governments, think tanks, economists, and public servants will find this thorough encompassing book indispensable to their consideration of the economic and social advantages and practicalities of a basic income.

© The Editor(s) (if applicable) and The Author(s) 2016

Malcolm TorryThe Feasibility of Citizen's IncomeExploring the Basic Income Guarantee10.1057/978-1-137-53078-3_1

Begin Abstract

1. Is a Citizen’s Income Desirable?

Malcolm Torry¹

(1)

London, UK

End Abstract

1.1 Introduction

A Citizen’s Income is easy to define—which is itself a desirable characteristic. It is an unconditional, nonwithdrawable income paid automatically to every individual as a right of citizenship. Its amount would vary with age, but not in relation to any other conditions; it would be paid automatically, normally once a week or once a month; it would not be withdrawn as earnings, other income, or wealth, increased; it would be paid to each individual, rather than to couples or households; and it would be received by everyone legally resident.¹

We shall begin with an obvious question: Why start a book on the feasibility of Citizen’s Income with a chapter on its desirability? Because if it would not be desirable to establish a Citizen’s Income, then I probably ought not to be troubling Palgrave Macmillan to publish this book, and my readers ought not to be troubling themselves to read it. There are plenty of feasible policies that are not desirable. The abolition of a publicly funded police service would be feasible, but it would not be desirable; the repeal of all laws relating to contracts would be feasible, but it would not be desirable; and an income tax rate of 100 % would be feasible, but not many people would think it desirable. These policies would be feasible in theory in the sense that it might be possible for a government to carry them out. They would not be feasible in a democracy in practice because any government that carried them out would become unelectable and would therefore not implement them in the first place; and in a dictatorship, they might not be feasible in practice because they would cause unmanageable civil unrest.

Here we have already come across one of the complexities with which we shall have to cope throughout this book: feasibility and desirability are interrelated. For a policy to be feasible in anything like the normal public sense of the word, it will need a majority of the population to regard it as potentially desirable; and to be thought desirable, a policy will need to be feasible. This is as true of the detail as it is of the generality. For instance, in Chap. 6, we shall discuss the administrative feasibility of a Citizen’s Income. If it were to prove infeasible to administer a Citizen’s Income, then we would not think the proposal to be desirable; and the fact that it would be easy to administer a Citizen’s Income scheme is one of its most desirable characteristics.

However, because it would be possible for a Citizen’s Income to be feasible without it being desirable, the question of its desirability is a real one. The only way to answer that question will be to discover Citizen’s Income’s characteristics and effects, to ask ourselves which are desirable and which are not, and to see if it might then be possible to come to an overall decision about desirability, although, here again, we shall encounter a problem. When we ask whether a social policy’s effects are desirable, we might be asking an absolute question, or we might be asking a relative one: that is, it might be desirable because all of its characteristics and effects are intrinsically desirable, or it might be desirable because in some ways it is more desirable than another policy option. To take an example from another social policy field: An impartial police service is a public good, and it is the kind of public good that it would be both infeasible and undesirable for private individuals or corporations to fund. This means that if we were to ask about the desirability of a publicly funded police service, we would not be comparing a publicly funded service with another viable option. We would in fact be asking about the desirability of a police service. But when we come to a country’s tax and benefits systems, we are generally looking at a variety of options rather than only one. If the choice is between unconditional benefits and conditional benefits, then either we shall have to say that both would be desirable, or we shall have to decide that one is more desirable than the other. A policy’s desirability would therefore be relative to some other option.

Our task in this chapter will therefore be to study a variety of characteristics and likely effects of a Citizen’s Income, to decide in the case of each characteristic and likely effect whether it is either absolutely desirable or more desirable than the characteristics and effects of other viable policy options, and at the end to come to a view as to whether a Citizen’s Income would be generally desirable.

The final thing to say in this introduction is that in this book on feasibility, we can only give one chapter to the question of desirability. The desirability of Citizen’s Income is a multifaceted question, and to deal in sufficient depth with each of its aspects would not be possible. There are other books available that do that.²

1.2 Contested Desirabilities

1.2.1 The Poverty and Unemployment Traps

All developed countries have social security benefits systems of some kind, and many developing countries are creating them. Any one of us might fall on hard times, and if all else fails, then we want a safety net to be available. Only the State can provide a safety net of last resort, so in a democracy, the government will be unable to resist providing such a safety net; and even in undemocratic countries, there will be sufficient public pressure to ensure that some provision is made. Provision might be made by way of compulsory social insurance, with individuals having to pay insurance premiums in order to be protected from a variety of contingencies such as old age, sickness, or unemployment; it might be by way of tax-funded means-tested benefits; or it might be by way of universal benefits—that is, benefits paid to everyone to ensure that everyone is covered, with those who would otherwise manage without them paying more in income tax than they receive in universal benefits.

Unfortunately, what might seem the obvious way of achieving a policy goal might also have unintended consequences. It might at first sight seem sensible to keep control of public expenditure by means-testing benefits. Somebody might be receiving an income from the government because they are not in employment, are sick or disabled, are caring for young children, or are in work and not earning enough to live on. If they then started to earn an income, or their earned income rose, then the government might decide that they no longer needed as much from the public purse and so reduced the level of benefits received. This might appear to be a desirable way to manage a benefits system. However, if someone is in low-paid employment, and on means-tested benefits, and their earnings then increase, they will find their benefits reduced and they might be little better off. They might therefore have little incentive to increase their earned income.³ This unintended consequence⁴ of means-testing is the poverty trap. It keeps people poor. If, on the other hand, someone has no employment and they are on means-tested benefits, then if they find employment, their benefits will be reduced and they will experience additional costs, such as fares to work. They might be no better off. They are in the unemployment trap.⁵

If means-tested benefits were to be wholly or partially replaced by a Citizen’s Income, then the effects of the poverty and unemployment traps would be ameliorated because, by definition, someone’s Citizen’s Income would not be reduced if they started to earn an income or their earnings increased. If someone’s means-tested benefits were to be completely replaced by a Citizen’s Income, then any additional income might be taxed, but it would not result in benefits being withdrawn. There would therefore be a far greater incentive to seek employment than if they were receiving means-tested benefits, and there would be a greater incentive to increase earnings by working longer hours or by seeking new skills. If only some of someone’s means-tested benefits were to be replaced by a Citizen’s Income, then they would still experience benefits withdrawal as other income rose, but because they would be on less means-tested benefit than if they were only on means-tested benefit, their other income would have to rise by less than would previously have been the case before they ceased to suffer benefit withdrawal.⁶ In both cases, it would be easier for individuals and households to climb out of poverty by increasing their earned income.

A Citizen’s Income would not disincentivize employment, skills acquisition, or seeking additional income, in the way that means-tested benefits do, and it would more easily enable individuals and households to earn their way out of poverty. In these respects, a Citizen’s Income is more desirable than means-tested benefits.

Social insurance benefits are not the same as means-tested ones, but in practice, they can result in similar effects. Social insurance or contributory benefits are generally time-limited (for instance, to a certain number of months of unemployment or illness), and, once they have run out, an application has to be made for means-tested benefits, at which point the disincentives discussed above will apply. The amounts and lengths of payment of social insurance benefits generally depend on contribution records: that is, the amounts that individuals have contributed. Some people might have more ability to contribute than others; and it might be those who are less able to contribute who will be in most need of benefits, particularly in today’s complex world of fluid employment patterns. Again, people can find themselves on means-tested benefits. Because the amounts of contributory social insurance benefits paid out are not calculated in relation to people’s needs, and means-tested benefits take needs into account, individuals and households can find themselves on means-tested top-ups. In order to solve these problems, some governments pretend that people have made contributions when they have not, or the benefits paid out bear little relation to amounts contributed—in which case the benefits have ceased to be social insurance benefits and are on their way to becoming universal ones. It might then be best if they were to complete that journey.

The above logical argument has shown that a Citizen’s Income could set poorer households free from poverty, whereas means-tested benefits dig them further into it,⁷ so a Citizen’s Income simply must be more desirable than either means-tested or contributory benefits, but that is not how people necessarily feel about the situation. If an individual who is earning an income is asked whether they think a Citizen’s Income or means-tested benefits is the more desirable approach, then they might argue as follows: ‘I wish to pay as little tax as possible, so I want public expenditure to be as low as possible consistent with preventing anyone from falling into destitution. If people are poor then they should receive benefits from the government; but if they are not poor then they should not.’ To this individual, a Citizen’s Income will look less desirable than means-tested benefits. Similarly, someone receiving means-tested benefits might understand those benefits in the way in which they might understand temporary financial assistance from family or friends. When in need, they ask for help and receive it, and when they do not need help, they do not ask for it because other people might need the money more than they do. They might not always need to rely on benefits, and if they were to find themselves able to get by without them, then they would not wish to receive them because other people might need the money. These thought processes rely on deeply embedded presuppositions about how social relationships function, and the fact that means-tested benefits cause poverty and unemployment traps, and that a Citizen’s Income would not, does not impinge on the ways in which people’s minds work in the real world.

Equally embedded in our thought patterns is the ‘less eligibility’ presupposition: that an able-bodied unemployed adult is less eligible to receive financial assistance from the State than are disabled people, elderly people, and children. The UK has lived with this assumption since the Elizabethan Poor Law established ‘houses of correction’ for able-bodied men who could not find work; and it has lived with the phrase ‘less eligibility’ since the 1834 revision of the Poor Law.⁸ The fact that someone might be unemployed because the only factory in their town has just closed down does not come into it. For any member of society that has lived with the ‘less eligibility’ presupposition for any length of time, the idea of providing an able-bodied adult with an income for doing nothing meets with immediate rejection. It would not matter that a Citizen’s I...

Table of contents

• Cover
• Frontmatter
• 1. Is a Citizen’s Income Desirable?
• 2. Is a Citizen’s Income Feasible? And What Do We Mean by ‘Feasible’?
• 3. Is a Citizen’s Income Financially Feasible? Part One: Fiscal Feasibility
• 4. Is a Citizen’s Income Financially Feasible? Part Two: Household Financial Feasibility
• 5. Is a Citizen’s Income Psychologically Feasible?
• 6. Is a Citizen’s Income Administratively Feasible?
• 7. Is a Citizen’s Income Behaviourally Feasible?
• 8. Is a Citizen’s Income Politically Feasible?
• 9. Is a Citizen’s Income Policy Process Feasible?
• 10. From Feasibility to Implementation
• Backmatter