June 7, 2016 by Speakers' Spotlight

Switzerland May Have Voted No, But the Idea of a Universal Basic Income is Not Dead

The world we live in is morphing into a new one as we speak—that’s a scary prospect for many, but after a presentation by economist and trends expert Linda Nazareth, you will feel like you have a handle on the future. The Senior Fellow for Economics and Population Change at policy think-tank The Macdonald-Laurier Institute, Linda is an expert in demographic and economic trends. Her talks focus on what will happen—and what you need to think about to be on the right side of change. Below, Linda writes on the feasibility of the Universal Basic Income:

Really, it seemed like the universal basic income (UBI), was going to be the hot new thing in economic policy. It sounds like such a simple solution to economic woes, so uncomplicated, just so basic really. Give every citizen in a country some form of stipend so that at the very least everyone has enough to live on, goes the argument, and the issue of poverty would be solved. Why then, if it such an elegant solution to a bunch of thorny problems, have the Swiss so overwhelmingly rejected a plan to implement the UBI, and why it the backlash against it growing.

But voted against it they have. On June 5th, 77 percent of Swiss voters said no way to a proposal to give every adult Swiss resident about $30,000 Swiss francs a year (a little over $30,000 U.S.), and every child about a quarter of that. Although the proposal (which was not put forth by a mainstream political party) did stipulate that the adoption of a UBI would go hand in hand with the elimination of all country’s welfare programs, it did not provide a lot of details on how much it would end up costing and whether would need to be raised to pay for the whole thing. Not surprisingly, the voters were wary and voted ‘no’.

The Swiss might have opted out of the UBI, but it is something we are going to be debating more and more in future. It is an idea that has its supporters from the political left (primarily because they think it might be a judgment-free way to pay people enough to end poverty) and even more from the political right (who believe that it is a way to lessen the size of government and treat everyone the same). Ultimately, however, the real support for a UBI may come from a wide swathe of people who are concerned by what technology may do to employment, or rather to unemployment.

We are at an exciting and scary time in terms of the global economy. Technology, which has more or less been our friend up to now, is now at a place where it threatens to out and out replace jobs, leaving a large portion of the population unemployed or underemployed. It is not a change we have seen before. When cars replaced the horse and buggy, buggy whip makers were able to find work in car plants. This time round, however, the elimination of jobs as a result of automation and robotics may well take a much broader toll, encompassing more and more jobs at all skill levels. A recent report by the Bank of England said as much, suggesting that as many as 15 million British jobs (close to half of current total employment) may disappear as a result of automation. If you believe that, and if you believe that it is a trend that might be replicated in other countries, then it is clear that a sea change is afoot. Looking ahead to ten or twenty years from now, perhaps we will not have a fully employed populace and the ‘sharing economy’ may indeed mean sharing the jobs. In that case, maybe it does make sense to move to a Universal Basic Income and have governments sort out the payment details.

The problem is, most of the details regarding a UBI are not well fleshed out anywhere. Paying a basic income to everyone in a country would come at a whopping bill that would have to be paid for somehow. Most likely that would come from taxes on those who were also working, which would erase any benefit that they got and act as a disincentive for many to work (opponents to the UBI in Switzerland made that case, suggesting it would lead to a flat out shortage of workers). I suppose another way of paying for the UBI would just be to print money to pay everyone although that would be an out and out disaster in terms of inflation.

In theory a UBI might work if it came in exchange for you every single other welfare program or government expenditure, but that also seems crazy. Close the libraries and let everyone buy their own books? Okay, maybe. What about erase every kind of disability payment and figure the basic income covers it? Or get rid of drug benefits or food stamps and assume that everyone will make the right choices when it comes to meeting their kids’ needs? Maybe not . And all of that is aside from the question of how to keep those that thinks a UBI sounds cool from heading to the region that provides it. If one U.S. state offered it, they would probably have a flood of people from other states moving in. If it was a whole country providing the UBI immigration rules might make it difficult for everyone who wanted to enter to do so, but it would provide a policy challenge just the same.

At the moment Finland, the Netherlands and Canada are planning tests of the UBI (in the case of the latter, the province of Ontario will be pilot testing a UBI in an unnamed region this fall) and the idea is gaining traction in Britain as well. The UBI may not ultimately be the magic solution to what is turning out to be a sea change in the economy, but if it is not it is certainly time to discuss some alternatives.