Troy Henderson, PhD candidate in political economy at the University of Sydney

The progressive case for a universal basic income in Australia means providing an unconditional income to all Australians alongside – not as a replacement for – the welfare state. This case rests on UBI’s potential to reduce inequality, improve social security and enhance personal freedom through the introduction of a new universal right.

Australia has experienced rising economic inequality in recent decades. The top 1% saw their income share increase from 6% to 9% between 1990 and 2013, the top 10% of households hold over 50% of household wealth and more than 13% of Australians live in poverty.

Women are more likely to work in low-wage industries, live in poverty and do a disproportionate share of unpaid work. UBI – set at a sufficient threshold and funded via an appropriate tax mix – could substantially reduce these class and gender-based inequalities over time. It would also result in a net transfer of financial resources to under-remunerated forms of work, such as caring for children and elderly parents.

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UBI could reduce the levels of insecurity experienced by Australians in important ways. It could provide the means to bargain for better pay and conditions, or to leave an exploitative employer. If you lose your job, UBI means knowing you can pay next week’s rent or power bill without having to interact with Centrelink. If you leave a violent relationship, UBI means knowing you can pay for a few nights in a hotel if the refuges are full.

UBI could also afford Australians greater opportunity to take a risk or have a break. It might provide seed capital for a small business, support while doing voluntary work, or some cash for a much-needed holiday.

A UBI sufficient to achieve these goals would be expensive. It would mean Australians accepting a tax to-GDP-ratio as high as France (44%) or Denmark (47%) compared with our current level of around 27%.

It’s no panacea. But implementing a progressive UBI would put some meat on the Australian “fair go” bone. And the fight to achieve it could help revivify our moribund politics.



Gigi Foster, associate professor with the school of economics at the University of New South Wales

The rich, relatively socially progressive country of Switzerland recently asked its citizens directly whether they would support a universal basic income scheme, and they said no. Why?

A UBI means giving money universally – to everyone, or at least to every adult. To make a material difference to people’s circumstances, this transfer has to be reasonably large. I’ve heard figures floated for the Australian context of between $10,000 and $30,000 per adult per year. Using a mid-range figure of $20,000 yields a total cost of about $380bn per year, which is more than twice our present welfare bill. Where would this money come from?

Troy suggests “an appropriate tax mix.” Rather than sweeping the financial feasibility of UBI under the carpet, he should clarify exactly what he has in mind that would generate the required cash.

Troy and I are agreed that inequality is a problem, and that in Australia a big part of the problem is the super-rich.

Some proponents of modern monetary theory have suggested that the government could just credit people’s bank balances, rather than requiring the money to be raised via taxes. But this is inflationary unless Australian output and hence demand for our currency rises at the same rate as the money being created – which won’t be the case if we are paying people to do what they are already doing, like raising children.

Nobody wants Australians living in poverty, feeling unable to move out of bad domestic situations, or wasting their creative energies in dead-end, insecure jobs. But wrapping a UBI proposal in these heart-string-tugging images is a sleight of hand that distracts us away from confronting these problems in a pragmatic and targeted way.

Troy and I are agreed that inequality is a problem, and that in Australia a big part of the problem is the super-rich. For political reasons, this problem is sticky and entrenched. Any reforms proposed to tackle it must be assessed for both economic and political feasibility – and universal basic income fails on both counts.

TH: Gigi’s right. UBI advocates should not sweep the cost of a substantial basic income under the carpet. I agree that the gross cost of a UBI in the $10,000 to $20,000 range would be in the order of $200-$400bn annually. The 2016-17 federal budget was $450bn so we’re talking about a very big increase in taxation.

I’m currently working with ANU economist Ben Phillips to generate more precise estimates of the net cost.

To fund a progressive UBI, it’s likely all forms of direct and indirect taxation would have to increase substantially and major tax concessions would have to be scrapped. But the exact “tax mix” is important due to its impact on the post-reform distribution of wealth and income and the structure of incentives in relation to work and investment.

I agree with Gigi that funding UBI entirely through direct public credit creation would be inflationary. The purchasing power of UBI has to be held constant – or increased – for it to be effective.

At a time when our politicians squabble over a relatively small measure like the backpacker tax the short-term prospects of UBI don’t seem bright. But the picture looks different if we take a somewhat longer view.

The eight-hour day, the vote and equal rights for women were not won on the basis of dispassionate cost-benefit analysis

Australia’s tax-to-GDP ratio increased six-fold from 5% at federation to around 30% in 2006. The massive welfare states and public sectors that exist in all advanced capitalist countries today would have been unimaginable to most people 100 years ago. In fact, many of the rights we enjoy today, from the age pension to universal healthcare, seemed every bit as utopian as UBI not so long ago.

Gigi chastised me for using emotive examples. But policy outcomes are decided in the political arena and politics – like life – has an affective dimension. I think it’s legitimate to appeal to emotion and reason in making a case for UBI.

Pragmatism has its place. Social scientists and policymakers should subject UBI to rigorous critical analysis. But pragmatism also has its limits. The eight-hour day, the vote and equal rights for women were not won on the basis of dispassionate cost-benefit analysis. UBI won’t be either.

The suffragettes didn’t give up after their first petition was rejected. UBI advocates shouldn’t be discouraged by one failed referendum.

GF: I’m glad to see Troy acknowledge the huge cost of a UBI. But even if you believe that funding and implementing a UBI is a desirable long-run goal, which is dubious, it is morally irresponsible to allow yourself to be seduced by a utopian vision that does nothing to alleviate suffering today. Our citizens can benefit, today, from targeted reforms to Australia’s present policies that are within our reach.

The massive cost of a UBI is not its only problem. UBIs are also inefficient: not only those who need the money, but also those who do not, are paid. And depending on the dollar figure, people presently receiving social support might see a reduction in their incomes. This is why – paradoxically for its leftwing supporters – a UBI might well end up being a reverse Robin Hood scheme.

Facebook Twitter Pinterest If Australia adopted a universal basic income, even Gina Rinehart would be entitled to it - although she would be expected to pay more in tax than she received in a UBI. Photograph: Dave Hunt/AAP

Paying people regardless of whether they work, train, or sit on the couch also invites even more social isolation for the disadvantaged, and may have negative long-term effects on work incentives.

Giving people money without access to markets, training, or other social-integration support also ducks some of the most vexing problems faced by our least well-off citizens.

Economic suffering in the developed world is hard to alleviate because it often results from multiple layers of disadvantage. Our present society tackles such disadvantage through the institutions of the welfare state, like the Department of Human Services and the Department of Social Services. Throwing money at complex problems while dismantling these sorts of long-established government departments that presently provide in-kind support for struggling people – often a feature of UBI proposals, allegedly to save administrative costs – is both morally suspect and economically nonsensical.

In fact, we don’t really know what the long-term effects of a UBI would be, because no long-term UBI trial has ever been run and properly evaluated.

Let’s not get seduced by a supposed magic bullet that could end up shooting our country in the face.

What, then, should we fight for? A better support program for the unemployed, to improve upon work for the dole programs, in which the government offers training and productive work to anyone who wants it. Improved childcare quality, subsidies, and access for families Australia-wide. Reforms that hit the upper end of town in the back pocket, like caps on the salaries of workers in heavily regulated industries.

Let’s not get seduced by a supposed magic bullet that could end up shooting our country in the face. Let’s instead work within the present system to reduce economic inequality, right now.

TH: The design of a progressive UBI is clearly of critical importance. The ratio of net beneficiaries to net contributors will determine not only UBI’s effectiveness in reducing inequality and insecurity but also its capacity to attract and maintain political support.

Let me explain: if you had a UBI of $15,000 a year that means everyone, including Gina Rinehart and Jamie Packer, for example, would be paid $15,000 by the government. But in practice, the extra tax levied on Gina and Jamie would make them net contributors to funding a progressive UBI. They would be paying more in additional tax than they are receiving in UBI.

So why pay UBI to the wealthy if you’re just taxing it straight back? Because of the principle of universality. Everyone would have the same right to that basic income. As incomes increased above that threshold, people would pay higher rates of tax as they do today. A progressive UBI needs to create more winners (net beneficiaries) than losers (net contributors) at any point in time.

But it’s also important to stress that most people would likely fall into both categories at different stages of their lives. The person whose business in thriving could be a net contributor one year, and a net beneficiary the next year when that business goes bust.

I agree with Gigi that savings in administrative costs related to UBI would be trivial compared to the net cost of UBI itself. But the impact on individuals who no longer need to engage in complex bureaucratic procedures in order to access a means of subsistence would be very far from trivial.

I’m sceptical of the robots-will-take-all-the-jobs argument for UBI.

UBI would also free up staff in the Department of Human Services and Department of Social Services to focus on helping people address those multiple layers of disadvantage Gigi mentions instead of surveilling clients within a punitive workfare system. Short-term and long-term goals are not mutually exclusive. I think better social services, full employment and UBI can be pursued simultaneously.

I’m sceptical of the robots-will-take-all-the-jobs argument for UBI. And I know a $15,000 UBI is not an adequate substitute for a $70,000 manufacturing or transport job. But UBI could still function as a form of limited social insurance for individuals and communities that bear the brunt of technological and structural change.

Gigi mentioned the lack of empirical evidence from longitudinal UBI trials. There are mixed views on the usefulness of trials, including those conducted in the US and Canada in the 1970s. The recently launched two-year Finnish trial, and possible pilot studies in the Netherlands and Canada, should at least provide social scientists and UBI advocates with some interesting additional evidence to analyse.

But could Australia be more ambitious? How about we pay every working age Tasmanian (330,000 people) a $15,000 UBI for the next five years? That’s about the same as the maximum Newstart payment and would cost around $5bn a year. That’s easily affordable when you consider that the super tax concessions that disproportionately benefit the well-off cost the federal budget over $30bn in 2016-2017.

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What would be the impact on jobs, crime rates, mental and physical health? Would it boost Tassie communities reliant on seasonal work like tourism and agriculture? Such a trial would not fully replicate a national UBI unless it was funded by increasing the tax burden just on Tasmanians. But it would certainly make for an interesting, and feasible, experiment.

Another approach to UBI suggested by political economist Ben Spies-Butcher would be to make the age pension genuinely universal – as in New Zealand – and gradually lower the age at which you’re entitled to it.

There are many possible roads to UBI. What ultimately sets UBI apart from the targeted – piecemeal? – programs Gigi favours is its “universal” and “unconditional” nature. A progressive UBI would be an economic analogue to the political right to vote. It’s not a special benefit paid to “dole bludgers” and “welfare queens”. If Gina Rinehart or Jamie Packer fell on hard times, they’d get it too.

A progressive UBI would create a universal income floor beneath which no one could fall.

GF: The idea of trialling new types of social support is not new, but it is taking a long time to become embedded in the way Australians think about optimal policy-making. Kela, the Finnish social security agency running the UBI trial in Finland, expressly calls the trial an “experiment” and is treating it as such: a test, to be evaluated objectively for its results, in the model of best-practice international social science research.

While some Australian politicians have long been fighting for rigorous tests of proposed social-policy adjustments, the scientific approach to social policy development has yet to break into mainstream public discourse.

It’s not only on the spending side that trials could be run. We could trial the new taxation system that Troy proposes – or custom-built flavours of promising existing proposals like the transaction tax (which could be extended to cover more than just financial transactions) or the land tax. If we are going to trial a UBI, then we should also trial the new way in which we would pay for it.

But there are many other incremental improvements to our existing social support schemes that are just as good, if not better, candidates for trials than a UBI. I’ve mentioned above a few of these candidate improvements, like a government job guarantee.

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We could even preface such trials with independent research in which struggling people are asked directly to choose between different possible variants of government support – and to comment on where the bureaucratic barriers are in our present system that make it hard to access help when they need it.

Troy is right to worry that a UBI could be dead on arrival politically unless it appeals to enough of the right people. As we have seen this year, however, politics is not a game that is won on the basis of carefully-calculated percentages of net gainers and net losers. The sea change represented by Troy’s vision for an Australia UBI needs to win people’s hearts before it will have a hope of passing parliament.

Like Troy, I don’t buy the argument that we need a UBI in order to make sure everyone can survive in a new age where robots do all the work. But neither do I buy the idea that a massively expensive new way of providing a safety net for struggling people is better than a somewhat-tweaked version of our present way of doing the same thing, just because the new way more comfortably wears the label of “universal right”.