Why the state should be paying people just for staying alive

12 Dec 2013

Outrageous though it may seem, there is a lot to be said for the new phenomena in the world of economics – the revival of the Guaranteed Minimum Income concept. It’s a theory which dictates that everyone – adult, child and pensioner – be given a sum of money from the government just for being alive.

That is probably a simplified way of putting it, though it would be unfair to say that it is overcomplicated; rather, it is brilliant because it makes so much sense. It’s a simple reform of the welfare system which would eliminate poverty by giving every citizen a basic income, but to what extent varies.

 

Indeed, this idea has caught on in Switzerland, where a petition to introduce a basic income gained 125,000 signatures – enough to trigger a referendum. Alongside this, the movement, led by a German-born artist named Enno Schmidt, hired a truck to drop 8 million coins outside the Swiss Parliament building in Bern, one for every citizen as a symbol of solidarity.

Schmidt himself isn’t an economist, but neither is he a crazy Russell Brand-type or by any means a revolutionary. It’s indisputable that this idea seems crazy, but it is also innovative in its aspirations and completely realistic. The idea was actually trialed in Canada in the 1970s in a small town called Dauphin in Manitoba.

Before it had even started, critics cited several problems with the scheme. For example, if you receive a Guaranteed Minimum Income, what would be the point in working at all? Surely GMI would disincentive hard work and, besides, how on earth would it be funded?

The actual trial went underway from 1974 to 1979, funded in part by the Canadian government purely to see what would happen to the labour market. It was widely expected that many would drop out of work, or do fewer hours, but the reality was far more modest. In fact, the work hours of men in Dauphin dropped by a mere 1% – barely negligible – whilst the figure for women with children was just 3%.

Teenagers too took on far fewer jobs and the results were brilliant. School and college dropout rates shrunk drastically, more adults stayed in education and parents could stay at home and spend more time bringing up their children.

But something more interesting happened. Hospitalisation rates went down 10%, with fewer car accidents from reduced stress. There were not as many admittances for psychiatric illnesses for the same reason, and a reduction in the level of domestic violence, not to mention lower overall crime rates. If it was to be rolled out across the country, billions could be saved in medical and police costs. It’s also fair to say that the social benefit far outweighs the economic cost.

There’s another aspect of the basic income idea that captures the hearts of the right wing. Guaranteed Minimum Income seems a bit like Communism Lite, or ardent socialism at the very least, but its libertarian credentials are worth mentioning.

The strongly conservative American Enterprise Institute supports GMI because it reduces the role of the State and replaces the need for a variety of social security programmes such as food stamps and housing vouchers. H.U.D. Charles Murray, of the AEI, proposed in a book about the welfare state that every American over 21 be given $10,000 a year for just that reason.

Imagine the repercussions in Britain. You could close all the Job Centres in the country and make every employee of the organisation redundant; in fact, there’d be little need for a Department for Work and Pensions at all. With lower crime and less use of hospitals, the government could easily slash funding for the NHS and the police. We would have a more educated and thus more competitive workforce. The quality of life for everyone would improve enormously; even if taxes did have to go up, it would be worth every penny.

The idea has the support of thousands of economists. Even Napoleon Bonaparte once remarked that, since we all own the planet on which we live, everyone is entitled to a share of it. What is most remarkable about it is the simplicity of the system; it just seems to make sense. As Martin Luther King once said: “the solution to poverty is to abolish it directly by a now widely discussed measure – the guaranteed income.”

By Jake Pitt

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