Wednesday, September 21, 2016

UBI for kids

Here's a group advocating a universal basic income for all children of $40 a week.
Lowell Manning, President of Basic Income New Zealand (BINZ) is calling for a Universal Basic Income for Children. “I like to call it a Kids’ Basic Income” he says. Mr Manning said that a Universal Basic Income for Children would work much better than tax cuts, substantially reducing child poverty in New Zealand and boosting the economy where it is needed.

Referring to reports (Radio New Zealand 27th May on Nine to Noon), that Prime Minister John Key and Finance Minister Bill English would like to cut taxes by about $2-3 billion*, Manning says, “if we are serious about eliminating child poverty here in New Zealand, the Government is well placed to lead the world in 2017 by implementing a Universal Basic Income for Children”.

“The Kids’ BI would be similar to the old Universal Family Benefit that ended in 1991 after 45 years of continuous use”, he said, “so the idea is neither new nor radical. What was radical was abolishing the Universal Family Benefit in the first place”.

“A Kids’ basic income of $40 paid weekly in addition to all existing income support to every child under the age of 18 irrespective of family income or assets would return about $2.6 billion annually to the productive economy excluding establishment and administration costs”, he continued. “That’s about the same as the tax cuts the Government is considering. It creates a clear choice between substantially reducing the rapidly worsening child poverty that is causing widespread concern throughout the country and tax cuts that poorly target child poverty.”

“Moreover, the $2.6 billion a year spent on the Kids’ Basic Income would generate more government revenue because the Kids’ Basic Income will increase national output, GDP, by about 1%, and the tax on that extra output will increase Government revenue more than tax cuts will”, said Mr Manning.

“The Kids’ Basic Income is about the wellbeing of children, not family size or structure, ethnicity or social status” he concluded.
I'd like some expert economic comment on that bit of maths. Sounds like the impossible task of standing in a bucket and trying to life yourself up by the handle. We cannot tax ourselves into prosperity etc.

That not insignificant matter aside, I see a number of problems.

The income would be paid to the parent. If it's like the old Family Benefit it would be paid to the mother. In other cases to whoever has legal custody I guess. But it'll be that person who decides how it is used. Yes, poorer parents will tend to spend it but the wealthier might choose to save it towards future costs eg university fees.

So it cannot assumed it will automatically add to GDP.

Second, the behavioural effect on those who would rather breed than work for an income is a worry.

Third, how can it be fair to anyone who isn't  a parent and aged 18 and over? They don't get any tax relief because proposed cuts would be going to parents with dependent children only. So those just starting out, many already burdened with student debt, become relatively poorer.

Fourth, to really quibble, if all families with children receive the income boost, median household income rises as does the poverty threshold. On paper, relative child poverty persists.

Finally, the universal family benefit was stopped in favour of targeting poorer children. This is a reversal.


Mark Hubbard said...

I've spent hours debating the UBI free-lunchers, particularly Geoff Simmons who heads up the loathsome Morgan Foundation.

I mean this when I say this: a UBI does not lead to Star Trek; it leads to the end of civilisation and perhaps the human race. It is the death of the innovative and exploratory urge we must have to survive, and the replacement of that, and the prosperity of capitalism, with a subsistence society built like a parasite on what would be left of a dwindling productive class.


Lindsay Mitchell said...

On behalf of David having trouble getting a comment through...

"...the problem is that if we pay benefits only to people who don’t work that reduces the incentive to work.

Ideally we would wind back the welfare system but I suspect we have already lost that battle.

UBI reintroduces the incentive to work by not penalising those that do. Is there any other way of restoring incentives?

I have suggested before that one possibility is that benefits, once set, continue for a fixed period irrespective of income, but after that period they are reviewed. This means that during the period there is an incentive to go out and find work. At the end of the ‘contract’ period, the benefit would be reviewed. If the person had found work, the benefit would be reduced. The reductions could be in steps so that the recipient was always better off to continue working.

Mark Hubbard said...

Problem is Lindsay this terminology, UBI (Universal basic income), is significant. It's part of an unfortunately growing movement to institute a UBI for every adult. So this limited UBI is simply softening us all up for that. I think it has to be fought (in principle) against at every stage, starting with this.

Lindsay Mitchell said...

I am opposed Mark. The last comment was David's. I didn't close the quote. Messy.

david said...

In terms of desired outcomes I agree with both of you (and disappointed you stopped blogging Mark). I think we have dug ourselves a big hole with welfare payments that are well meaning but end up being the problem not the solution. Means tested welfare creates a poverty trap and an incentive not to work. There are two possible ways to ensure that people are actually rewarded for working - one is to wind down welfare payments. The other is to pay them to everyone. I don't think any government would be willing to do the first. So I am interested in exploring the second. I think the math is against it, but I don't dismiss the idea.

Anonymous said...

On paper, relative child poverty persists.

Nope: relative child poverty increases because this is paid to every child, and (even CPAG agree) there are more "non-poor" children than poor children. So almost all the money goes to the "non poor" children, which drags the mean and median and the poverty line up, making more (relatively) poor kids.

S.Beast said...

All I can think is ....$40 mixture!