The big question: universal basic income

The COVID-19 pandemic has had an unprecedented financial impact on most Australians. Countless businesses have ground to a halt as the nation has plummeted into a recession nobody could have planned for. If the huge queues outside Centrelink offices are anything to go by, Australians are suffering, and turning to the government for help.

To address the situation, the Australian Government introduced a suite of significant new welfare payments in March to buffer the financial fallout of the pandemic, including JobKeeper, JobSeeker (to replace Newstart), and a Coronavirus Supplement.

The move has reinvigorated debate around the idea of a universal basic income (UBI), and was discussed at a recent Brisbane Dialogues event, the brainchild of UQ alumnus Murray Hancock. Despite its various iterations, at its core, a UBI is a fixed, regular cash payment made to all adult individuals without conditions attached. A living wage is simply delivered into your account – no questions asked.

For proponents of UBI, it is an effective solution around bureaucratic red tape and a fair way to support low-income workers. For its opponents, it is the act of a wasteful government rewarding idleness and fostering unemployment.

While JobKeeper and JobSeeker aren’t true UBIs (as they aren’t completely universal), they have raised the question of how much support our government should offer Australians.

We put the big question to four of our UQ experts: how would a UBI system impact Australian society and its economic recovery post-COVID-19?

Professor Greg Marston

School of Social Science
Faculty of Humanities and Social Sciences

A UBI paid at a sufficient level to lift all adult Australians out of poverty would provide economic security at a time of great uncertainty, as unleashed by COVID-19.

A UBI is not anti-work. Experiments and trials of basic income around the world show that people continue to undertake paid work when they receive a basic income. Individual health improves and participation in education also increases. A basic income also reduces government expenditure on counter-productive and complex welfare bureaucracies, as well as strengthening workers' rights by changing the dynamics between capital and labour.

A UBI is affordable. In Australia, its implementation would require tax reform, including the introduction of a wealth tax. If we are smart about inclusive tax reform, however, we can ensure we don’t hurt the economy, workers or productivity, all while reducing inequality and addressing poverty. One of the worst things we could do would be to go back to the old rate of the Newstart payment, which condemned people to deep poverty.

A UBI challenges stigma and stereotypes. The idea that poor people will mismanage their money is a product of a deep-seated bias, rather than emblematic of the truth. Poverty is not a lack of character; it is first and foremost a lack of cash.

It is important to caveat that UBI is not a silver bullet, nor a panacea. It is a big idea that will help meet some of the big challenges of our time, working together with other economic, social and environmental reforms to ensure we build back a fairer and better Australia.

Associate Professor Sunil Venaik

School of Business
Faculty of Business, Economics and Law

COVID-19 has seen the Australian Government establish a generous JobKeeper payment for eligible employers and employees, irrespective of the employees’ current income. Given that most part-time and many full-time wages are often lower than the government’s $39,000 annualised JobKeeper payment, it begs the question: where did this open-handed idea originate and why?

JobKeeper may create perverse incentives. People may not seek or accept jobs if their JobKeeper payment exceeds their expected income in paid employment. Furthermore, many individuals with personal challenges – such as age and health-related conditions – continue to work hard, with some of them earning less than those who receive generous JobKeeper payments without lifting a finger. Needless to say, people earning more by doing nothing demoralise those who work hard to make a living.

Once this government policy is refined at the end of September, it will hopefully remove the labour market distortions, enhance the social and economic fabric of Australia, and restore the social contract on which the economic and equitable foundations of society are built. Like tightrope walking, setting the amount of JobKeeper payment requires a fine balancing act. While a small government payment may improve basic welfare, large payments will discourage people from seeking work and undermine those who work at a wage lower than the government’s work-free payments.

It is for good reason that the central idea of UBI is basic income, not a comfortable income. The JobKeeper payment should be aligned with this ethos to be reasonable and sustainable in the long-term.

Dr Priscilla Man

School of Economics
Faculty of Business, Economics and Law

The old proverb goes: “Give a man a fish and he will eat for a day. Teach a man how to fish and you feed him for a lifetime.”

In the case of a UBI discussion, the “how to fish” does not necessarily refer to employable skills, but social capital – social connections, inclusion and integration.

Indeed, social isolation is often an indicator of poverty. In light of this, a successful UBI regime ought to be conceived and implemented as a tool to strengthen the social fabric, rather than throwing money to individuals and tell them to fend for themselves.

One possibility is to set a 'social contribution' requirement for the income guarantee. This should be a permissive requirement, allowing almost any activity that provides some social connections to the individual involved. It can be as simple as helping out at the local parents’ group or men’s shed, and, of course, should include the common forms of social contributions mentioned elsewhere. The hours required should be set low, to avoid exploitation.

Admittedly, such a scheme lacks the appealing simplicity of a ‘pure’ UBI, but having the strings of community attached is probably better than no strings attached.

Associate Professor Begona Dominguez

School of Economics
Faculty of Business, Economics and Law

Most welfare systems around the world include unemployment benefits and/or disability payments that insure individuals against the risks of losing their jobs or becoming disabled.

The COVID-19 pandemic has made apparent that current welfare systems are ill-equipped to deal with risks that have not been well assessed. A UBI would be a simple way to deal with this type of event as it would provide a level of income to all, independent of circumstances.

A UBI would provide an insurance to all those unknowns. However, at which level should that basic income be set? That’s a difficult question. If too low, it would not be able to serve that insurance role adequately. If too high, it may discourage work, study or relocation and require higher taxes. The answer to that question is surely contentious and definitely is not only an economic one – it depends on social values. So, what type of society do you want to live in?

Dr John Humphreys

School of Economics
Faculty of Business, Economics and Law

There are two versions of the UBI idea, which I unimaginatively call 'big-UBI' and 'small-UBI'. A big-UBI increases universal welfare payments to perhaps $2000 per month. A small-UBI would sit at about $1000 per month, which is less than the current welfare payment. It's important to remember a UBI does not have to be large – it just has to be universal.

I am a proponent for a small-UBI. By providing a relatively low basic payment – but one that is universal and unconditional – welfare for the unemployed is effectively reduced. For the working-poor, it is effectively increased.

This does two things. First, it addresses the 'effective marginal tax rates' trap, in which low-income workers lose up to 80 per cent of their income as they earn more money – the current system gives them little incentive to work their way out of poverty. Second, it makes it possible to reduce the minimum wage, while ensuring workers are not worse off. While many people take it as a point of religion that the minimum wage cannot be questioned, people who value evidence have long known that a high minimum wage leads to fewer jobs. In Australia, evidence on elasticity of labour demand suggests that a 10 per cent decrease in minimum wage would create more than 300,000 new jobs. For anyone who genuinely cares about reducing poverty, this is a game-changer.

The current annual minimum wage is about $40,000. If reduced by 10 per cent, a hypothetical worker would be earning $36,000 instead. But if that were topped up with $6000 in welfare payments, then the working-poor person would have $42,000. And some 300,000 unemployed people would be able to start on their journey of work, dignity, social inclusion, and self-respect.

Professor John Quiggin

School of Economics
Faculty of Business, Economics and Law

While some supporters of a UBI favour a radically new system of taxation and social welfare, I believe it is better to build on the changes made to our existing system in response to the pandemic, particularly JobSeeker. I favour a Liveable Income Guarantee which would:

set unemployment and similar benefits permanently equal to the age pension
end punitive compliance procedures such as high job-search targets and robodebt
expand the range of contributions to society that would attract support to include voluntary work, creative and artistic contributions, a wider range of care activities, and small business startups.

Such a program could be financed by forgoing currently legislated tax cuts for high income earners.

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