Hehir on UBI

Liam Hehir writes:

So now that Andrew Little has said Labour is “keen” to have a “debate” on whether New Zealand should adopt a Universal Basic Income, you might infer this means that a UBI is something he would like to see happen. And the chances are you’re probably right. 

Under a UBI, every New Zealander would receive a benefit. Everybody would get the same amount, regardless of their employment status, wealth or needs. There would be no strings attached and so every person would be guaranteed the bare necessities of existence without the need for work (though if mere existence were not enough, you would certainly be free to pursue employment).

You can spend your life never working, if you want to!

In fact, the idea of a UBI has tempted many anti-socialist thinkers down the years. And I’m not just talking about eccentric cranks here. Nobel laureates Friedrich Hayek and Milton Friedman, arguably the most influential free-market economists of the 20th century, both supported some form of a UBI. 

A UBI is attractive in theory. But no one has ever managed to get the sums to work without either it being set at a level too low to live on, or without it needing massive tax increases.

In the first place, these schemes usually operate on the basis that the new system would completely supplant the existing galaxy of benefits, allowances and other payments comprising the constellations of the modern welfare galaxy. For example, the UBI proposed by Charles Murray (an influential American political scientist) would see the termination of all individual social welfare programs in favour of a simple annual payment to all adults of $10,000 USD.

Because the UBI would be so easy to administer, the argument goes, its implementation would allow the wholesale dismantling of much of the existing state bureaucracy. Many on the Right see the existing welfare apparatus as being unavoidable expensive, clunky and impossible to control – and a few even see it as a threat to democracy itself. The UBI looks almost elegant in comparison.

The trouble is, it never will replace all benefits. Can you imagine any Government (let alone Labour) saying to a couple with five kids that they won’t get a cent more than a couple with no kids?

The obvious problem is the cost. A serious UBI would almost certainly consume most existing state revenues. Some would argue the answer would be to fund it through massive tax hikes. The trouble is that you can only do that so much before government revenue actually decreases as the productive sector disintegrates under the weight of ever increasing taxation.

Labour’s UBI would need an 82% tax rate on those earning over $48,000.

The reality is that a UBI is fun to speculate about, but it is entirely detached from the realities of today’s politics. 

This is the real problem with what Little said. The Opposition gets a limited amount of free media attention. Why burn it up by calling for a “debate” on something that will never happen? 

Shoot for something a little more achievable, I say – like colonising the moon.

I’d be amazed if Labour adopt it as a hard and fast policy, as simply the numbers don’t add up.