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Would an 'unconditional basic wage' work?

By Julie Novak - posted Tuesday, 3 December 2013


One of the more unconventional public policy proposals discussed in academic and political circles is all people should be provided with a form of guaranteed income, regardless of their circumstances.

In Switzerland, citizens will eventually vote on a referendum proposal to provide each citizen a monthly 'unconditional basic income,' to ensure 'a dignified existence and participation in the public life of the whole population.'

Advocates for the Swiss basic income have called for a universal, flat payment of 2,500 francs ($A 3,017) provided by the state, and recently secured the requisite minimum number of petition signatures for a referendum on the matter to take place in that country.

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Support for a basic income is not limited to social‑democrats or progressives seeking to reduce inequality, but variations of this have also been suggested by prominent classical liberals such as Milton Friedman, Friedrich Hayek, and James Buchanan.

Friedman famously advocated a 'negative income tax' arrangement, whereby individuals earning above a threshold income level would be liable to pay income tax, but those below the threshold not only pays no tax but receives a government subsidy.

The lower an individual's income falls below the income tax threshold, the greater the subsidy (or 'negative tax') he or she would receive to ensure their upkeep.

Writing in the 1960s and 1970s, Friedrich Hayek gave qualified support to 'a certain minimum income for everyone, or a sort of floor which nobody need fall when he is unable to provide for himself.'

During the 1990s the public choice theorist James Buchanan suggested that the government should provide an equal‑per‑head 'demogrant' transfer payment, in combination with a flat rate or proportional rate income tax.

Other figures within the modern liberal and conservative traditions have expressed support for a basic or guaranteed income, including Charles Murray's $US 10,000 ($A 10,958) per annum basic income for Americans with pulses, as well as the respected British economic journalist Sir Samuel Brittan.

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Leftist aspirations to alleviate poverty may seem, to many, as an intuitively obvious reason to support a basic income model, but why did some of the most famous liberals of the last century support what appears to be a socialist redistribution scheme?

A key argument put forward by some liberals is that a basic income would be a more efficient way to redistribute resources, at least compared with the plethora of current welfare state subsidies.

Substantial amounts of taxpayers' funds are presently siphoned off enabling bureaucratic middlemen to administer numerous welfare programs, each with their own eligibility and other criteria, which leads to unnecessary administrative complexities.

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About the Author

Julie Novak is a Research Fellow with the Institute of Public Affairs. She has previously worked for Commonwealth and State public sector agencies, including the Commonwealth Treasury and Productivity Commission. Julie was also previously advisor to the Queensland Chamber of Commerce and Industry. Her opinion pieces have been published in The Australian, Australian Financial Review, The Age, and The Courier-Mail, on issues ranging from state public finances to social services reform.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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