Wednesday, August 31, 2011

A universal basic income is not the answer

Gareth Morgan's answer to the burgeoning welfare system, the Universal Basic Income (UBI) of $11,000 per year for every adult, leaves three acknowledged cohorts worse off - superannuitants, sole parents and the asset rich - probably a third of the adult population. Gareth addressed those but ignored a fourth group - 144,000 sickness and invalid beneficiaries many of whom are receiving more than $211.50 per week. Over half receive an accommodation supplement and many receive disability allowances. The targeted assistance Morgan wants to dispense with helps these people to a much greater extent than the UBI would.

Treasury modelled a Guaranteed Minimum Income for the Welfare Working Group (at the group's request after Gareth and Sue Bradford both proposed some form of universal basic income at its initial conference). It pointed out that some of the neediest welfare recipients would be worse off even at a level of $15,600 per annum. As well Treasury noted the negative effect these schemes would have on productivity, savings and investment, none of which can be over-emphasised in my opinion.

Similar experiments have been tried before, notably negative income tax in the US, and did not have beneficial outcomes. Which is hardly surprising. Paying all adults - Treasury modelled from 16 years up - with or without productive return, is surely more of what has unhinged the present system which provides a viable alternative to work but indulges family breakdown and self-destructive behaviour. Morgan is extolling more of the state-legislated wealth redistribution which has us in the mess he now wants to 'fix'.

Surely the point is that individuals used to rely far more heavily on each other. They formed stable and committed families that provided for raising children, caring for the elderly, and supporting each other in times of adversity. Incidentally, very much the Asian way of providing welfare. For three decades after the 1938 social security net was created people relied on it sparingly and treated the system and, by inference, each other with respect. That was the overriding value that has weakened and needs to be restored.

People are born to make their way in life through endeavour and forming positive partnerships. Not to wait till they reach 16 and have the state chuck a couple of hundred bucks their way unconditionally for the duration. Morgan fails to acknowledge the enormous personal disincentive effect such a practice would incur.

For instance, drug and alcohol abuse are increasing problems in society. Young people could pool resources and lead lives that require none of the discipline associated with working for a living. All of the social fall-out and intergenerational dysfunction would continue.

Rather than re-invent 'welfarism' - broadly speaking, any subsidy from the state - New Zealand needs to reduce it. That begins with the clear, unequivocal message that welfare is a strictly temporary hand-up for any person capable of working and supporting themselves. As well, the eligibility age for Super must be lifted to match lengthening life expectancies. That will enable lower taxation - not greater as required by the UBI - and will bring investment, entrepreneurship and jobs to a country that is now blessed with its geographic position in relation to the rapidly economically transforming world.


Unknown said...

We are born to enjoy life to the max....the best way we know how, for when we die....large salaries, and careers will not bring us back to life

Mark Hubbard said...

Very good summary Lindsay, especially your last paragraph.

The more I read Gareth, the more I wish he'd get on that bike of his and ...

James said...

Try and get this in the Herald Lindsay....Morgan needs countering.

Anonymous said...

Looks like Labour has half of a good policy:

Labour would cut spending on the dole


and redirect millions in to apprenticeships, leader Phil Goff has announced.


Going to cut $60m on the dole, and waste $250, on the ex-bludgers.

The only way to end welfare dependency is to end welfare.

Anonymous said...

Last summer, from my front windows, I could see three new houses being built below mine, almost side by side. Two were being built by sole builders, both men in their fifties, and the third house engaged an older man, sixty-ish, and two young men, twenty-ish.
The two sole builders worked at a very efficient speed, sometimes working until about 7pm to finish an aspect of the job, and sometimes on Saturdays while the weather was favourable. Progress was swift, and I was impressed at how they were able to handle wall frames and roof trusses by themselves. Neither called upon my offer of a free hand for the heavier and trickier bits.
The trio were slow and ponderous, worked to the clock, and generally lacked any semblance of efficiency.
Theirs was the first job to begin, and the last to finish by a very long time.

Daddy said...

The problem with the NZ "welfare" system is that too much is spent on those that don't need it, leaving insufficient money to adequately those that truly need the assistance. WFF, interest free student loans, free doctors visits, superannuation et al mean the disabled, vulnerable and truly sick people cannot be provided for adequately. Morgan's proposal simply makes the situation worse, with even more people given assistance even though they don't require it.