Robert van der Veen - Loek Groot (eds)
Basic Income on the Agenda
Policy Objectives and Political Chances
Amsterdam University Press
Basic Income on the Agenda
Basic Income on the Agenda Policy Objectives and Political Chances
Edited by Robert van der Veen and Loek Groot
Amsterdam University Press
Cover design: Crasborn Grafisch Ontwerpers BNO,Valkenburg aan de Geul Lay-out: Brassica / Wouter Kool, Leiden NUGI: 641/661 ISBN 90 5356 461 6 ã Amsterdam University Press,Amsterdam, 2000 All rights reserved. Without limiting the rights under copyright reserved above, no part of this book may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the written permission of both the copyright owner and the author of this book.
Table of Contents Preface Osmo Soininvaara
7
Acknowledgements
11
How Attractive is a Basic Income for European Welfare States? Loek Groot and Robert van der Veen
13
Part One Policy Objectives In Search of the Double-Edged Sword Paul de Beer Basic Income and its Cognates: Partial Basic Income versus Earned Income Tax Credit and Reductions of Social Security Contributions as Alternative Ways of Addressing the ‘New Social Question’ Philippe Van Parijs, Laurence Jacquet and Claudio Caesar Salinas Activation and the Burden of Working: On Instrument Choice by a Responsibility-Sensitive Egalitarian Government Frank Vandenbroucke and Tom Van Puyenbroeck
41
53
85
Arguing for a Negative Income Tax in Germany Joachim Mitschke
107
Hush Money or Emancipation Fee? A Gender Analysis of Basic Income Ingrid Robeyns
121
Prospects for Basic Income in an Age of Inactivity? Anton Hemerijck
137
Basic Income and Social Europe Fritz W. Scharpf
155
Basic Income at the Heart of Social Europe? Reply to Fritz Scharpf Philippe Van Parijs
161
European Basic Income or the Race to the Bottom:Why Politicians Might Come to Think the Unthinkable Steve Quilley
170
Bibliography
186 5
Part Two Political Chances Clues and Leads in the Debate on Basic Income in the Netherlands Loek Groot and Robert van der Veen
197
The History of an Idea:Why Did Basic Income Thrill the Finns, but not the Swedes? Jan-Otto Andersson
224
From Concept to Green Paper: Putting Basic Income on the Agenda in Ireland Sean Healy and Brigid Reynolds
238
Short Cuts and Wrong Tracks on the Long March to Basic Income: Debating Social Policy Reform in Germany Stephan Lessenich
247
Ups and Downs of Basic Income in Denmark Erik Christensen and Jørn Loftager What Reforms are Needed for the Minimum Insertion Income (RMI) in France? Chantal Euzéby
257
268
The VIVANT Experiment in Belgium Yannick Vanderborght
276
Notes on the Contributors
285
Index
287
6
Preface Osmo Soininvaara, Minister of Health and Social Services, Finland
Throughout Europe, the idea of an unconditional basic income has been long discussed by academics, policymakers, and interest groups such as the unemployed, religious organizations, environmentalists and trade unions. Contemporary issues to which these debates relate today include unemployment, poverty, marginalization, changing patterns of family life, labour market flexibility, and institutional questions concerning the future of social policy under European integration. In Arguing for Basic Income (1992), edited by Philippe Van Parijs, the ethical foundations for granting everyone a fully unconditional subsistence income were explored in depth. The present volume follows this up by examining basic income in relation to concrete objectives of social and labour market policy (Part I), and looking at its political chances across European countries (Part II).This may be taken to reflect the fact that the international debate on basic income has become politically mature in the intervening years. What, then, can reasonably be thought of the title of the book: Basic income on the agenda? An ambitious reading might suggest that basic income, or the closely related negative income tax, is now firmly on the legislative agenda, ready to replace the meanstested and work-related forms of guaranteed income in European welfare states.As the contributions of Part II will show, basic income is not on the agenda in that sense, at least not in any European country, at the beginning of this century. But while the fortunes of the proposal depend on contingent circumstances and fluctuations in political mood, the general outline of the debate is more or less similar everywhere. It is a debate which is not likely to subside. Consequently, basic income is indeed on the agenda of welfare state politics. The challenge posed by basic income rests in its claim that unconditional guarantees have now become indispensable elements of social policy.They are said to cope more efficiently with the uncertainties of increasingly flexible labour markets, and avoid the administrative and incentive pitfalls of means-testing.They are held to provide means of job transition and retooling of labour capacity, as well as supporting unpaid activities in the domestic sphere and the associations of civil society, thereby also contributing to a more equitable redescription of gender roles. However, as proposals to institute unconditional income of one kind or another become more realistic, they also tend to mobilize opposition. This is because the unconditional nature of basic income poses a threat to the primacy of paid work, as the central source of legitimate security. Thus, basic income forces us to rethink the notion of social obligation, in a way that may seem, at times, far removed from the reality of mainstream politics.Yet, the problems which it addresses are undeniably part of that same reality. The contributions collected in Part I can be read as critical examinations of the above claims, following the discussions at the Seventh BIEN Amsterdam Congress on the theme of ‘full employment without poverty’. The main problem here is whether one can envisage alternatives to the social policies and labour market arrangements of existing welfare states that would serve the same goals as basic income does, yet in ways 7
Basic Income on the Agenda that retain the primacy of paid work. In this debate on policy instruments, the editors have resisted the inclination to select contributors according to their degree of bias in favour of the basic income solution.This gives the reader the opportunity to judge how relevant basic income is to the future of social security and labour participation, in the emerging space of ‘Social Europe’. Basic income has become topical again for very practical reasons, which, however, are slightly different from the reasons for which basic income was pursued in the 1980s. Economic development has forced the present European welfare systems to face two difficult challenges.The unskilled labour force does not find its place in the labour market, which leads to a trend of growing structural unemployment. Simultaneously, the obligation to accept a job offer as a condition of receiving unemployment benefits does not function any more. Employers do not hire people just to get their time; they want to have their sincere effort as well. Thus, refusing a job offer does not really lead to losing the benefit. Unemployment benefits have become a twisted picture of basic income that gives bad incentives. It is clearly a handicap to the European countries that the unskilled part of the labour force does not find employment. In the USA, the Earned Income Tax Credit (EITC) has proved to have positive effects. The expansion of the EITC has improved the rather bad position of the working poor and had a major positive impact on the employment situation. In the EITC system the benefit the state pays to those whose wages are low grows as the earned income rises. In the European systems, however, social income transfers diminish – and it is likely that the benefit of earning a part of your income is cut out completely. EITC is not suitable for European circumstances since the European basic rights legislation guarantees everyone the necessary income regardless of participation in the working life. It should, nevertheless, be easy to find the perfect compromise between the European way (the support diminishes as earned income rises) and the American way (the support rises as earned income rises): why not make the amount of support independent of earned income? Each country has its own history of social politics. Acting and thinking have been adjusted to the existing system which makes radical and fundamental reforms unlikely. But the need to rationalize incentives in flexible labour markets, the impossibility of controlling the readiness of the unemployed to accept work, the difficulties in finding employment for the unskilled and the requirement of guaranteed minimum income based on basic rights, lead social politics, step by step, toward a situation much resembling a basic income system that allows, with cause, many means-tested personal benefits. These new systems will vary in names and details but they all converge towards basic income. The biggest and mentally most difficult step to be taken is to combine the income transfer systems with taxation, even though taking this step would make it possible to create rational systems. Basic income thinking was originally inspired by the ideal of freedom. It is contradictory that basic income is now favoured for almost opposite reasons: creating rational incentives at the lower end of the income scale and improving the employment of the unskilled labour force – basic income can be thought of as a ‘marriage of justice and efficiency’. Basic income does, however, still include a dream of a freer society. Making this dream come true is worth aspiring to as systems of social politics inevitably converge towards basic income.When it comes to the ideal of freedom, the smallest details can make a difference. Although it may seem most unlikely that any European country would abandon its 8
Preface old traditions and reform its social politics so radically as to adopt a basic income system, this option is not completely impossible either.The fact that social policies vary much from country to country creates substantial difficulties for the EU. If, sometime in the future, the EU or some of the Member States were to unify their architecture of social security, basic income would indeed be something to build on.
9
Acknowledgements
We wish to thank the sponsors of the Seventh International Congress of the Basis Income European Network (Amsterdam, September 1998) for financial support in producing this volume. Earlier versions of all chapters (save three) have been presented in plenary sessions or workshops of the Congress. The chapter by Frank Vandenbroucke and Tom Van Puyenbroeck (in Part One) as well as the chapters by Chantal Euzéby and Yannick Vanderborght (in Part Two) were included in order to fit the general design and purposes of the book. We warmly thank our co-authors for their co-operation and patience in the different stages of – often extensive – revision.We are also endebted to Osmo Soininvaara for writing the Preface to this collective effort. In addition, we are grateful for the advice and assistance of Philippe Van Parijs in editorial matters. Finally, special thanks are due to the Board of the Vereniging Basisinkomen, in particular Saar Boerlage and Emiel Schaefer, for their help and encouragement.
The Editors
11
How Attractive is a Basic Income for European Welfare States? Loek Groot and Robert van der Veen
A basic income is an income granted unconditionally to all on an individual basis, without a means test or work requirement. It is a type of minimum income guarantee that differs from those that now exist in various European countries. Considered in its pure form, a basic income is paid (1) to individuals rather than households; (2) irrespective of wealth or any income from other sources; and (3) without requiring the performance of any work or the willingness to accept a job if offered. Its relevance to the problems of contemporary welfare states has long been recognized. From the 1970s onwards, forms of basic income have been regularly proposed for adapting the post-war institutions of social transfer to the conditions of a modern economy, in which lifetime security through earned income is no longer the norm. The guiding claim was that an unconditional floor of guaranteed income is justified as the fairest and the most efficient way of reconstructing basic security in the welfare state. Inevitably, the fairness part of this claim led to a principled debate concerning the unconditional features of basic income, in particular the absence of the requirement of willingness to work.The reason for this is obvious, for any moral justification of unconditional basic income has to deal with the objection that it is unfair to hand out transfers to ablebodied persons who are merely unwilling to earn a living. This theme has been explored in depth in Arguing for Basic Income (1992). However, basic income is being increasingly discussed in a more pragmatic context. This discussion is mostly concerned with the efficiency part of the above claim. Here, basic income is proposed as the most viable way of reconciling two of the welfare state’s central objectives – the alleviation of poverty and full employment – while at the same time allowing scope for making the labour market function in a more flexible and dynamic way. One of the reasons why basic income has attracted interest is that it seeks to reinterpret the compatibility of these two central objectives, reflecting the fact that social policy and economic policy can no longer be conceived separately. Thus, in recent years, basic income has appeared on the agenda of institutional reform as a proposal which combines adequate social protection with the demands of flexible labour markets, and may lead to a more equitable distribution of income, paid work, care work and free time among men and women.As such, it has to be pitted against the claims of (partly or fully) competing policy instruments in the welfare state: collective working time reduction, subsidized employment, paid parental care, early retirement, educational and sabbatical leave provisions, the minimum wage, and schemes of ‘workfare’. This book is divided into two distinct but interrelated parts, both of which reflect the main topics of the 1998 Congress of the Basic Income European Network.1 The first part, ‘Policy Objectives’, analyzes the potential of basic income vis-à-vis other policy schemes to achieve the above-mentioned goals of welfare state reform. The second part, entitled ‘Political Chances’, reviews the state of the debate on basic income in var13
Basic Income on the Agenda ious European countries.Although the book can be seen as following up on Arguing for Basic Income, it has a different point of departure. Arguing for Basic Income concentrated on the ethical controversies around unconditional grants, which, as noted above, have been part of the general debate from the start. It attempted ‘... to spell out a plausible conception of the just or good society which could provide firm foundations for the legitimacy of an unconditional income’ (ibid.: 8) and ‘… to derive basic income from an explicit formulation of the ideal of a free, equal or good society’ (ibid.: 29). These controversies, which are concerned with rethinking the regulative principles of solidarity and justice in the welfare state, have not yet come to rest.2 As customary in applied political philosophy, the arguments are exchanged at a high level of abstraction. Most recently, the main question has been whether granting people a substantial, or even the maximally sustainable, basic income is an appropriate instrument of liberal-egalitarian justice. The answers seem to depend on how the egalitarian aim of compensating for unequal endowments can be combined with the liberal aim of holding people responsible for their personal choices. At the level of detailed policy implications in societies with developed welfare state institutions, competing interpretations of liberal-egalitarian justice then generate different positions regarding the desirability of either worksensitive or unconditional compensation to the worst-endowed members of society: the working poor, and those who are more or less chronically excluded from the labour market, and hence depend on transfer income. In this debate, the proposal of introducing a basic income in the welfare state typically serves as a testing ground for exploring the relative attractiveness of abstract normative positions entertained on the political Left.3 While these theory-driven controversies still remain largely unsettled, the fact that they are being fought out in the international arena in the area of welfare-state policies to some extent explains why basic income has become a proposal of some interest in the problem-driven debate on social security reform. It is this debate which provides the perspective of the present book. Rather than trying to link the proposal of basic income to philosophical principles of justice, here, we want to focus on how it fares relative to other policy instruments which claim to promote politically salient objectives of welfare reform.There is widespread consensus among policymakers and other professionals that the welfare system has to be adjusted, but also disagreement about the direction of reform. Is it time to pare down the benefits of the welfare system, by making it ‘meaner and leaner’, allowing it to survive global market competition and more intense intra-European competition for advantageous tax regimes? Or do we instead have to find new ways to maintain the basic protective features of the European welfare state in the face of these challenges? To what extent is the debate on the form that welfare arrangements should take influenced by the problems of the inactivity traps besetting means-tested welfare arrangements, the persistence of (long-term) unemployment among the low-skilled, and the difficulty to get rid of poverty despite the affluence of European countries?4 Last but not least, what requirements of re-design are being imposed by flexible work arrangements, the decline of breadwinner families along with increased female participation, and the greater difficulties of combining work and family responsibilities? In addressing such questions, arguments for and against basic income figure at a far lower level of abstraction.They are more influenced by the concrete social problems in different welfare states than by general normative positions.Yet, as the contribution of 14
How Attractive is a Basic Income for European Welfare States? Frank Vandenbroucke and Tom Van Puyenbroeck in this volume will show, it is important not to lose sight of the link between these two levels of debate.Though most of the contributors of basic income in this book are to some extent moved by egalitarian or solidaristic justice, such normative commitments often appear obliquely, against the background of what is often called the ‘new social question’.This is the real threat of a permanent divide between on the one hand job holders with a strong labour market attachment (secure full-time employment with full entitlements to social insurance) and marginal groups with intermittent labour market careers (insecure access to benefits of social security, and old-age pensions) on the other.5 In Arguing for Basic Income, the importance of basic income for addressing the new social question was described by Van Parijs (1992: 6-7) as follows: … it can no longer be assumed that an overwhelming majority of households can cover their basic needs thanks to the wages they owe to the job one of their members currently holds or to the benefits they owe to the job one of their members used to hold. Under this assumption, central to the conception of the modern welfare state, the safety net of social assistance could be confined to a marginal – and ideally, shrinking – set of cases. For various reasons, this is now very far – and even further – from being the case. Throughout Europe, an increasing number of households have had to rely on social assistance and have become caught in the net it provides.The joint impact of technical change and the internalization of markets is making it increasingly difficult for the economies of advanced capitalist countries to generate a sufficient number of jobs that can be profitable while providing those who hold them with a living wage.The outcome of this process is, increasingly, a ‘dual economy’, a ‘two-thirds society’, in which the most significant divide, as far as material welfare is concerned, is no longer the one that separates capitalists from workers, but the one that separates those who hold proper jobs from the rest of the population.There is no easy way of fighting this tendency. But the replacement of the safety net, in which the weakest and the unlucky get trapped, by a firm unconditional floor, on which they can securely stand – in other words, the replacement of a conditional minimum income scheme by a genuine basic income – is increasingly viewed as an indispensable ingredient in any such strategy.
The new social question thus basically turns around the failure of the existing labour market and social security institutions to ensure access to employment, while at the same time securely protecting people who are in or out of work from falling into poverty. In the same vein, Goodin (2000) made the case that the four pillars – the state, the market, the family and the community – on which social security rests are all crumbling. In the increasingly non-standardized world towards which we are moving, Goodin prefers some form of a basic-income type scheme above means tested and fine-tuned conditional social benefits: ‘Any standard categories or conditions fit any given individual’s actual experiences increasingly poorly, both occupationally (with the flexibilization of the labour market) and personally (with the flexibilization of the marriage market). So, if we want our social policy to cater to people’s real needs and actual circumstances, we will have to abandon categorical and conditional modes of social-policy making’ (ibid.: 147). In capsule form, the main policy objective to be kept in view in assessing the indispensability claim Van Parijs made for basic income in the early 1990s, is ‘full employment without poverty’.6 However, compared to the early 15
Basic Income on the Agenda 1990s, the conditions for counteracting the ‘dual economy’ have become less favourable. On the political Centre-Left at least, this has considerably influenced the diagnosis of the new social question. It is now conceded that flexibility in the organization of labour, footloose factors of production, and processes of tax competition, shifts in the employment volume between exposed and sheltered sectors in the economy, as well as structural increases in the demand for health care and pension provisions of rapidly ageing populations, have worsened the chances of attaining ‘full employment without poverty’.These developments have made it harder for national governments to pursue the goals of employment security and redistributive welfare that were formerly held to be viable, given sufficient political will.Yet at the same time, the Centre-Left is committed to showing that neither the ‘blind forces of globalization’, nor the adverse demographic shifts taking place in advanced welfare states, have robbed national governments of the policy space for pursuing broadly egalitarian strategies. In new and suitably adjusted ways, such strategies are still held to be within reach, depending on the development of the right kind of policies.7 At present there is a great variety of relatively novel policy instruments, amongst them forms of basic income, which may conceivably be put to use in counteracting the emergence of a dual economy, under the more restrictive conditions outlined above. But it should be noted that at present also, the proponents of basic income may have more of a rough ride to stay in the race, for two connected reasons. First, since basic income has to prove itself in an economically and politically more constrained environment, the tax cost of guaranteeing the ‘firm unconditional floor’ – if pitched at the level of subsistence needs – is now even more likely to be perceived as prohibitive than it was a decade ago. As a consequence, only partial and piecemeal movements toward unconditional entitlements of benefit are the ones that are going to figure seriously in the comparative exercise of optimal policy instruments for solving the new social question. Secondly, unlike before the early 1990s, basic income can no longer be presented as the only alternative to the status quo of work- and means-tested conditional benefits, with its large unemployment and poverty traps. For in the policy debate on the new social question, competing instruments have entered the field, such as Earned Income Tax Credit, and various kinds of wage subsidies to employees. These instruments, it is now claimed, are able to remove inactivity traps just as efficiently as a basic income would be able to, and moreover, in ways that avoid the controversial feature of basic income: its loosening of the links between transfer income and the obligation to perform paid work. These changes in the terms of the debate imply that forms of partial basic income and forms of work-oriented benefit and labour-market policies slide into a broad continuum of alternatives, each of which can claim to tackle the new social question in terms of its effects on promoting access to employment at the low end of the labour market, preventing poverty, and fighting social exclusion. The advantages and drawbacks of each of these alternatives thus have to be sorted out by a very careful comparative analysis, and in the course of such analysis, as the contributions of Paul de Beer and of Philippe Van Parijs, Laurence Jacquet and Claudio Salinas clearly show, it is difficult to claim a knock-down superiority for any particular policy alternative.Thus it is perhaps fair to say that basic income, after having won a certain kind of respectability as a normatively unorthodox way of addressing the deficiencies of existing welfare state arrangements, is now taken seriously enough to be put to the test under rather harsher 16
How Attractive is a Basic Income for European Welfare States? conditions than its proponents may have anticipated. One object of this volume is to see if basic income can survive this test.
Four Ideal Types of Basic Social Security Since the rise of unemployment in the mid-1970s, several measures have been taken to curb steadily increasing social expenditures (both absolutely and as a share of GDP) and to counteract the rising trend of unemployment which appeared after each successive recession.The ruling diagnosis was, and still is to a large extent, that the vested security entitlements of European welfare states are too permissive, and that labour markets are ridden with structural rigidities.8 Accordingly, the menu of social-economic policy recommendations has varied from tighter eligibility conditions, shorter durations and lower levels of social benefits, reduction of the level of minimum wages, and the relaxation of firing and dismissal procedures.Also, and in part independently of whether or not the overall unemployment figures in the European Union have improved (as they have in Denmark, Britain, Ireland and the Netherlands), the persistent problem of long-term unemployment at the lower end of the labour market has given rise to the introduction of wage subsidies, and a large variety of job, workfare and learnfare programs. Especially these last types of measures are held to mark the emergence of an ‘active’ welfare state, which tries to reduce ‘passive’ dependency on conditional social assistance benefits. In general, the stringency of the work-test is being raised, while at the same time efforts are undertaken to provide access to the labour market, either directly or indirectly. The idea of the active welfare state attacks the perceived passivity of both recipients and government agencies. On the one hand, active welfare state policies are committed to destroy the ‘legitimate expectation’ of claimants to holding a social benefit, subject only to the ritual of turning up at a job centre and noting that no suitable work is forthcoming. On the other hand, the bureaucracy of welfare administration must be forced into taking an active interest in getting claimants prepared for permanent attachment to the labour market. The administration of social security legislation, as well as the legislation itself, must therefore be changed, by providing job-oriented offers that claimants are no longer in a position to refuse. Such offers involve mandatory participation, in (re)training, public service employment, or subsidized (private or public) employment programmes.The active welfare state approach thus tries to strike a new balance between social security rights and the correlative duties of both claimants and agencies. It claims that this new balance is needed to maintain redistributive solidarity in the hard times of mobile capital and high-quality labour assets. It should be made clear that anyone who is ‘on welfare’ is also being redirected and resocialized to a norm of a self-sufficient working life, and that a growing proportion of the taxes to be paid for implementing solidarity is thus being spent on programs achieving labour participation, rather than on passive income support. The active welfare state approach may culminate in a system of workfare, if the government steps in to provide nonmarket ‘paid jobs of last resort’. These jobs would be expressly designed to permanently employ people whose attachment to the labour market remains weak, despite reasonable efforts.This is the extreme case of ‘activation’. So far, workfare has only been a point of discussion in Europe, rather than a concrete proposal. In 17
Basic Income on the Agenda Figure 1: Four ideal types of basic social security and labour market policies Lax
Enforcement of entitlement conditions
Stringent
Conditional Welfare Narrow
A
BÕ
Wage subsidizing and job-training instruments Conception of work and conditions of entitlement
E Subsidized exemptions from paid work
B
Workfare
C
Participation Income
Broad D
CÕ
Basic Income
so far as it is a genuine response to the new social question, workfare could be motivated by the idea that even artificially created jobs can fulfil social demands which the labour market may not supply under minimum wage constraints; can serve as bridges to regular economic participation while maintaining discipline without loss of dignity; and finally, be a signal on the part of society that active welfare has replaced passive welfare across the board (WRR, 1997).Workfare schemes, provided that they are truly motivated in these solidaristic and participatory ways, constitute one extreme on a two-dimensional continuum of policies, of which a basic income at the ruling subsistence level is the other extreme. Before going further into this, note that the arrangements on which the various possible solutions to the new social question focus are predominantly concerned with universal minimum benefits, rather than with employee-related social insurance, which covers risks of earnings losses from unemployment, sickness, or disability. In what follows, we will concentrate on the treatment of those whose access to these last benefits is limited because they have an insufficiently secure link to the labour market.9 Although there has been a spectacular expansion of social insurance and other earnings-related coverage after the second World War, a growing part of the labour force now has to rely on the transfer payments under a socially guaranteed minimum safety net. Let us call these payments ‘basic security’. In most countries, means-tested social assistance benefits would be the usual form of basic security. Thus understood, the new social question revolves around the different forms which basic security – at a poverty-preventing ruling level of individual or household income – may take, and what types of labour market policy might best accompany these forms. Figure 1 gives a bird’s eye view of four ‘ideal types’ of basic social security.Together, they define a policy space of alternatives for achieving ‘full employment without poverty’. After having explicated the dimensions of this policy space, we will use it to put into a common perspective the matters raised in the contributions which make up Part I of this volume. 18
How Attractive is a Basic Income for European Welfare States? The vantage point of Figure 1 is point A at the top-left corner, which defines basic security of the work- and means-tested type in most existing regimes. We call it Conditional Welfare. Conditional Welfare is the type which motivates our exercise, since its conditionalities set up various unemployment traps.These traps arise because (a) taking a part- or full-time job with a net wage close to the level of the net benefit causes the worker to lose the entire benefit and (b) the rules of implementation are lax enough to allow prospective workers to pass over a job that does not result in a significant improvement of income and non-income related advantages. Moreover, since means-testing is applied to the joint income of adult families, the conditionalities also discourage taking up part-time work by one or both household partners. In many cases also, Conditional Welfare (at least in its pure form) extends to wealth holdings, and does not allow benefit holders to undertake training, follow educational courses, or engage in setting up a business. It thus also discourages activities of human and financial capital formation. From point A one can move along two dimensions, vertical and horizontal. Along the vertical axis, the conditions of entitlement and the conception of what counts as ‘work’, as applied in the work-test, become progressively broader, until one ends up, in point D, with a pure – non-work tested as well as non-means tested – Basic Income, at the ruling social minimum of a single earner. Several varieties of intermediate cases can be located along this dimension, for example a partial basic income at, say, one-half of the social minimum, topped up by conditional welfare, a non-means tested but workconditional income, or a fully means-tested income with relaxed conditionalities of work, which reflect a broader conception of work entitlement. Such intermediate cases might be located at point E in Figure 1. Going back to point A, let us now consider moving along the horizontal axis.This dimension is defined by gradations of increasingly stringent implementation of the entitlement conditions of Conditional Welfare, to some maximum at point B’. The notional move from A to B’ would virtually remove the disincentive aspect of the unemployment trap, since in B’ it would become impossible to refuse any part-time or full-time job which was actually being offered to someone on welfare. This move along the horizontal dimension is only notional, because it does not correspond to any existing or even proposed basic security policy.Yet in one way, the move from A to B’ captures the logic of the active welfare state approach discussed above, in which benefits are to be discontinued as soon as paid work becomes a possibility. Of course, what the move from A to B’ does not capture is the complementary feature of the active welfare state approach.As we have seen above, this consists in making available facilities of job search, training or occupational reorientation, as well as paid work in various kinds of government-sponsored kinds of job (ultimately including the workfare jobs of last resort) which are envisaged as the ultimate consequence of the active welfare state approach.Thus, the policy extreme that we identify as constituting the active welfare state’s ideal type – here called Workfare – must be located further down along the vertical dimension than point B’ in Figure 1 at point B.This is because ‘activating’ policies necessarily involve broadening some of the conditions of entitlement, so as to include all activities which contribute to enhancing the ‘employability’ of the welfare recipient as legitimate grounds for the basic security transfer. In a similar way, one can envisage a notional move along the horizontal dimension, proceeding rightwards from Basic Income in (Point D), to point C’. Obviously, this 19
Basic Income on the Agenda move is of only analytical significance, since the conditions of basic income – citizenship status or long-time residence – are relatively simple to monitor (which is not to say that they would always be simple to enforce in a given country). For the present purpose, however, the real interest of moving along the horizontal dimension to point C’, is to locate our fourth ideal type of basic security, Participation Income, which is a special form of work-conditional citizen’s income, originally proposed by Atkinson (1993b). We arrive at this type by moving upwards along the vertical dimension, to point C. The move from C’ to C signals the fact that a Participation Income, even though it is not means-tested, like basic income, is forthcoming only in return for the performance of ‘socially useful activities’, such as care work for the young, disabled or elderly, or community work of officially approved kinds, in contrast to basic income. These unpaid activities figure as grounds of entitlement to Participation Income, in addition to the entitlements generated by paid work, or generated by the activities of enhancing labour-market employability that the active welfare state defines. It should be noted that Participation Income was envisaged by Atkinson as an independent and non-means tested alternative to Basic Income, with work-related conditions that would render it invulnerable to the powerful charge – traditionally directed at Basic Income – that it violates the notion of reciprocity. So understood, Participation Income is a form of basic security that must take the enforcement of its work conditionalities just as seriously as Workfare does, the difference with workfare being that the conditions for receiving a Participation Income are more inclusive. Note however, that the arrangements of Workfare, as described in Figure 1, are also subject to means-testing, while Participation Income is not meant to be means-tested. Thus one might envisage intermediate forms between Workfare and Participation Income on the line BC, and of course one could also imagine laxer forms of Participation Income, which would start to resemble Basic Income, as one moved along the line CD in the policy space of basic security. So far, our description of the policy space has concentrated on the possible legislative and implementation forms of basic security. In practice, these forms need to be complemented by policies of labour market regulation appropriate to each. Roughly speaking, one can locate policies aiming at enhancing the demand and supply of paid work at the top end of Figure 1, while policies that facilitate the transition of individuals between paid and unpaid work would be located at the bottom end. Policies of this first kind include wage subsidies and tax credits for workers, as well as various forms of training- and job-programmes. Policies of the second kind, by contrast, include provisions for parental leave, sabbaticals, subsidies on going from full-time to part-time work, or subsidized early retirement schemes. It should be noted, however, that these last policies have not yet been developed in the trajectory of minimum income guarantees, on which Figure 1 focuses. In so far as such policies exist at present, they are typically attached to a secure employee status offering social insurance benefits, a point to which we return later on. Moving from left to right in Figure 1 will ordinarily require the introduction of supporting labour market policies of one kind or the other. For instance, if one wants to transform Conditional Welfare into something close to Workfare (along line AB), then the corresponding increase in the stringency of benefit conditions will only be seen as reasonable, if the recipients of basic security transfers also get better chances to actually fulfil the tighter conditions. This, in turn, requires labour market policies, such as a 20
How Attractive is a Basic Income for European Welfare States? wage subsidy for long-term unemployed, combined with a retraining programme.The more these supporting labour market policies succeed in expanding employment opportunities of their target groups, the more scope there will be to impose strict duties on welfare recipients to accept work, and penalize non-co-operation. At the Workfare extreme, finally, these labour market programs would become an integral part of basic security legislation, since they would have to involve permanent jobs of last resort. In a similar manner, one can argue that moving from Basic Income in the direction of Participation Income (along line DC) will require supporting policies that actually enable the recipients to meet the broader conditions of work that this last form of basic security wishes to impose. In part, such policies are of the kind that are traditionally regarded as subsidized exemptions from paid work. As a final note, basic social security in advanced capitalist countries is mainly situated along the line AB, with the U.S. more workfare-oriented, and Europe more welfare-oriented, but perhaps increasingly shifting rightwards. What happens on the line DC is strictly virtual, since neither a basic income nor a participation income actually exist anywhere in welfare states. One can at most detect elements of these pure types here and there. Admittedly, our characterization of existing arrangements does no justice to the great, mainly group-specific, variety in entitlement conditions (nor to the great variation in basic social provisions across European countries, e.g., in Italy conditional guaranteed minimum income is not universally granted). For instance, care law exemptions for single parent families might be taken to constitute a diluted form of a Participation Income. Mandatory job programs for youthful unemployed definitely belong to Workfare. Universal and non-means tested state pensions can be seen as a group-targeted form of Basic Income, if they are paid out regardless of whether persons have worked before age 65, as in the Netherlands. A similar remark applies to the rather lumpy classification of labour market instruments in Figure 1. Although there is a vast array of different kinds of wage subsidies – varying in type, level, duration, target groups and administrative and regulatory details – the primary policy objective of wage subsidies is to raise the level of employment by impinging on either the labour demand function for low-productivity work, through employer subsidies, or on the labour supply function, through employee subsidies. Under the former, the wage subsidy reduces wage costs for the employer, while under the latter it acts as a stimulus to accept low-paid jobs. Although both types of wage subsidies are equivalent in a neo-classical framework with invariably clearing labour markets, in real life there may be a definitive preference of one type of instrument above the other. As Anton Hemerijck remarks in his contribution below, the shortfall of low-paid jobs in Europe makes it most obvious to adopt employer wage subsidies (such as a reduction of social security contributions), whereas in the U.S., the great number of working poor calls for employee wage subsidies (like an Earned Income Tax Credit). Equally, although there are numerous public employment programs and (often unco-ordinated) constituency-based training programs in most European countries, these are predominantly temporary expedients, and they are targeted to the longterm employed at the far end of the labour queue. In other words, they fall short of a permanent and comprehensive workfare scheme, in which the government truly acts as an employer of last resort. Genuine workfare would call for a much larger task than any European government (except Sweden in the past, as paradigmatic case of European workfare) has started yet. 21
Basic Income on the Agenda Despite the variety in the actual configuration of different welfare arrangements and instruments, then, the four ideal types of basic security, as linked to the most appropriate labour market instruments, may be helpful to discuss specified objectives of social policy.
Fighting Poverty, Unemployment and Gender Inequality With this overview in mind, we now ask which types of basic social security and labour market policies are recommended by the contributors of Part I, for reducing unemployment without increasing poverty or income inequality, and for enhancing a more equal gender division of paid and unpaid work. As we will see, some authors are in favour of ‘packaging’ schemes, that is, they choose positions in between the ideal types represented in Figure 1.The central question posed by Paul de Beer is which of the following instruments – an Earned Income Tax Credit, a general wage cost subsidy, direct job creation,10 or a basic income – can be seen as a ‘double edged sword’, in terms of success in simultaneously reducing poverty and unemployment. In the short run, there is a definite winner, direct job creation. If the additional jobs are targeted on the long-term unemployed, then each job reduces unemployment, and ends poverty for the job-holders, provided the remuneration is above the poverty line. If the longterm unemployed are forced to take such jobs under threat of their social benefit being withheld, then this policy comes very close to the Workfare scheme of Figure 1. Crucial for the long-term impact is the extent to which targeted job creation helps the long-term unemployed to move on to regular (non-subsidized) jobs. If it does not help, then the policy amounts to an expansion of the public sector proportionally to the number of jobs created, with higher tax burdens than would have been the case without the job program. Now consider basic income.This policy is inferior to the job creation policy in the short run, but may become superior in the long run, provided two conditions are met. Firstly, a basic income should actually work as an incentive for the unemployed to take up part-time jobs (which will also be facilitated if many who would otherwise work full-time choose to work part-time under a basic income scheme, and so leave more jobs for the unemployed to fill). Secondly, the higher tax rates required to finance the basic income should not raise gross wage costs (and hence reduce labour demand), nor impair investment in human capital. Even if the reader agrees with De Beer that these two conditions are likely to be met in a liberalized market economy, then still his conclusion is rather sobering for those who think that the introduction of a substantial basic income is around the corner. For even if basic income would prove to be the sharpest double-edged sword in the long run, the greater effectiveness of job creation, or the nearly equal performance of an Earned Income Tax Credit in the short run, might be more attractive to politicians under the pressure of re-election. What distinguishes Conditional Welfare and Workfare on the one hand from Participation Income and Basic Income on the other is not merely the conception of work, but also the presence or absence of means-testing. Both a Participation Income and a Basic Income are non-means-tested, whereas social assistance under welfare and workfare schemes are usually means-tested (including not only social assistance, but also other benefits such as rent subsidies, or subsidized day-care centres). Under the 22
How Attractive is a Basic Income for European Welfare States? present arrangements, those who draw from basic security face a very high marginal tax rate on the income they could earn, up to the level of the means-tested benefits.11 There are various ways to remedy this ‘inactivity trap’: through an Earned Income Tax Credit, or a reduction of social security contributions for low-paid work, or by means of a partial basic income. To compare these three policy alternatives in the unified framework of a common minimum guaranteed level of basic security, and a common minimum wage, is the aim of Van Parijs, Jacquet and Salinas.12 Their starting point is that with the rise of the new social question, more and more people find themselves in the range of a 100 percent marginal rate of taxation.This makes it imperative to study available options for cutting back this prohibitively high rate. With commendable rigour, the authors demonstrate the following ‘equivalence theorem’. Assuming that all income is formal wage income, the three policies to alleviate the inactivity trap are equivalent.That is to say, given a suitable choice of parameters, Earned Income Tax Credit, reduction of social security contributions and partial basic income will result in exactly the same trajectories of post-tax-and-transfer income, given that the level of basic security and the minimum wage is the same in all three cases. Since Earned Income Tax Credit policies are used in Anglo-Saxon countries, while most continental European countries are trying out some form of reduction of social security contributions for low-paid work, this insight seriously challenges the strong preferences held by politicians in favour of either of these two policies, and their almost unanimous rejection of the (in principle, equivalent) partial basic income. If it became widely appreciated, this equivalence theorem might perhaps induce the more thoughtful policymakers to re-adjust their stance towards a partial basic income. But this is only the first part of the story.Van Parijs, Jacquet and Salinas devote the remainder of their contribution to sorting out where the equivalence claim between the three different policies breaks down.Without giving a full overview of their argument, it turns out that a partial basic income is better than the other two policies for poor households with some unearned income (e.g. pensioners and divorcees with alimonies), for low-earning self-employed and for low-paid voluntary working-time reducers. Moreover, a partial basic income might have a strongly favourable impact on the bargaining power of low-paid workers towards employers.There is, however, one important drawback. Partial basic income requires higher marginal tax rates on intermediate-range and high-wage workers. Due to its unconditionality, partial basic income has greater tax costs, which are avoided by Earned Income Tax Credit and social security contribution exemptions, because these last policies are targeted at the low-wage employed. This disadvantage may or may not be compensated by two types of behavioural effects of a partial basic income on welfare claimants and low-wage workers. First, fewer applications for supplementary social benefits, and secondly, the ‘reshuffle effect’ of increased work-sharing. Regarding the first type of behavioural effect, the higher the partial basic income is, the higher the number of welfare recipients will be who can earn a small supplementary wage income which brings them above subsistence level, and hence takes them off welfare. Additionally, reduced applications for supplementary benefits can be expected because of ‘the inconvenience to the claimant of claiming the full means-tested, willingness-to-work-tested guaranteed minimum income (intrusiveness, dole queues, job applications, risk of being caught ‘cheating’, etc.)’.These effects will work more strongly to the extent that welfare recipients under 23
Basic Income on the Agenda present arrangements hesitate to take a job because of ‘the fear of leaving the relative safety of a regular flow of benefits for the uncertainty of a job that may pay late or prove too demanding’. The second behavioural effect of a partial basic income that may compensate its higher tax cost is the ‘reshuffle effect’. Under a partial basic income, more full-time workers will choose to work part-time, freeing up jobs to the unemployed, while at the same time these unemployed have greater incentives to accept part-time jobs. As a result, both savings in social expenditures from fewer applications for supplementary benefits, and a more equal distribution of jobs among the workforce through work sharing (and hence, a smaller caseload of supplementary benefits) may be large enough to compensate for the higher fiscal costs of a partial basic income. To the extent that this holds good, a partial basic income would then compare favourably to the two other policy alternatives of Earned Income Tax Credit and reduction of social security contributions. So, by a different route,Van Parijs, Jacquet, and Salinas arrive at a similar overall conclusion to De Beer. Taking into account its likely behavioural effects, a partial basic income may be superior to other alternatives on the table, once there is enough time to let those effects play their part in the complicated institutional environment of the labour market and social policy constraints. However, partial basic income is bound to be the politically least feasible policy option, not least because giving unconditional income to the rich, in the interests of the poor, is a message difficult to understand for the ordinary citizen. Frank Vandenbroucke and Tom Van Puyenbroeck address the policy choice between proportional working hour employment subsidies and basic income from an entirely different perspective. This is the perspective of ‘responsibility-sensitive egalitarianism’, that is to say, a criterion of justice which seeks to compensate for low productivity, but holds people responsible for their own choices of income and leisure.They first explain why even a well-defined egalitarian yardstick of this type does not in itself dictate either of these two types of policy. The choice of employment subsidies or basic income (or some combination of the two) is shown to depend on the government’s stance towards the non-pecuniary (dis)advantages of (un)paid work, leisure and labour market participation.This implies that under responsibility-sensitive egalitarian principles of distribution, the government’s view on the work ethos is decisive for the choice of policy instruments. For example, if participation in paid work is highly valued by the government, because of its beneficial consequences for sustaining solidarity, the integration of immigrants, or the development of skills and social contacts, while it does not believe that these effects would result from participating in activities outside the domain of paid work, then the government may definitely favour employment subsidies and supplementary activation programs above the basic income solution. Conversely, if the general wisdom is that paid work imposes heavy burdens on workers (revealed in stress, burnouts, incidence of disabilities, etc.) whereas non-market activities (care and volunteer work) and leisure are experienced as highly valuable, then this would give a basic income a much better chance.13 Vandenbroucke, who is currently the Minister of Social Affairs in the Belgian Labour-Liberal government, and one of the most progressive proponents of the active welfare state approach, thus makes the point that the choice of the most appropriate instruments of basic security policy depend both on principles of egalitarian justice and on democratic judgements concerning the good life of citizens. 24
How Attractive is a Basic Income for European Welfare States? Joachim Mitschke takes issue with the conditional welfare arrangements in Germany for their manifest inability to provide enough low-wage jobs. As he points out, this is partly caused by the wage bargaining policies of the unions, which set the lowest wages above the productivity of low-skilled workers. The other cause of the German failure to induce employment at the low end of the labour market is that minimum social benefits are contribution- rather than tax-financed. This raises the non-wage labour costs of employers. Job creation and training programs are only of limited use, Mitschke argues, because ‘qualifications can only be improved within narrow talent-, milieu-, and age-specific boundaries’. Mitschke is also pessimistic about the adoption of temporary wage subsidies (e.g. equal to half the pre-tax wage up to one year):‘To fetch an unsubsidized job at the same wage rate, after the subsidy ceases, the former social assistance recipient would have to double his productivity within (less than) one year’.These perversities of employment-unfriendly social security can be set right by introducing a negative income tax, or ‘Bürgergeld’, of which Mitschke has designed several variants that have been widely discussed in Germany from the late 1980s onwards.These proposals show the potential of a negative income tax for harmonizing a wide range of existing instruments of social policy directed at the low end of the labour market. A negative income tax would act as a uniform and permanent graded wage subsidy directed to the workers, without the behavioural drawbacks of temporary wage subsidies, or the administrative complexities of local wage subsidizing policies. Having looked at several contributions that address the dual objectives of poverty alleviation and employment growth, we now turn to the issue of gender in the labour market. With reason, Ingrid Robeyns can claim that with minor exceptions, serious analyses of how basic income impacts on different policy objectives are gender blind. The same applies to other policy instruments. In this respect, it would be of interest to find out what a workfare scheme, with its narrow focus on the virtues of paid work, would mean for the position of women. Robeyns, however, is concerned to investigate the effects of basic income in her systematic overview of the literature. Among the female population, a precarious attachment to the labour market is much more common than among the male population. This fact justifies taking a critical look at the contention, dear to proponents of basic income, that basic income will act as an ‘emancipation fee’. It will, so proponents say, improve the bargaining position of (especially poor) women against bosses and husbands, and also encourage men to start working part-time, in order to take a larger share in care work. Robeyns compares the plausibility of this contention with the opposite view, which maintains that basic income, far from acting as a stimulus of emancipatory practices, is essentially a form of ‘hush money’. In this view, basic income will act to serve as a housewives’ wage, despite – or, for some, because of – the fact that a basic income recognizes the social value of unpaid work for both men and women, in a ‘gender-neutral’ way.As a result, so the hush money argument goes, men and women would sort themselves spontaneously into the traditional categories of breadwinners and housewives, and there would be hardly any way to complain about that, since it would be the consequence of ‘free choices’. In between these two extremes is the view of Hermione Parker. She argues that a basic income is to the advantage of women, not because it is especially women-friendly, but because present social security arrangements are far more biased towards male breadwinners, given that these arrangements are still strongly based upon the presumptions of the postwar 25
Basic Income on the Agenda welfare state: the stable, long-term employment relationship of the male family provider. This gives men a large stake in preserving the structure of earnings- and work-historyrelated social insurance benefits of unemployment, disability and retirement.Against this background, a basic income, as well as a participation income, would be reforms that revalue the importance of non-market work for society at large, and reduce the stakes involved in building up social insurance rights through paid labour. As Robeyns shows, considerable clarity in this controversy can be attained by distinguishing three dimensions: (i) the short-term and long-term effects of basic income, according to whether (ii) women are highly skilled or low skilled, and whether (iii) women have a weak or a strong labour market attachment. In the short run, a substantial basic income will probably decrease women’s overall labour supply.This might be taken to support the hush money thesis. In the long run, however, when new generations enter the labour market, among which it is more commonplace for men to work part-time, and take a greater share in domestic work, it is far less obvious that hush money effects will dominate the emancipation effects of a basic income. Robeyns’ distinction by groups then indicates that the real winners from a substantial basic income will be low-skilled women with a weak labour market attachment: greater economic independence, more bargaining power, and no loss of non-pecuniary advantages of paid work, given their already low participation rate. On the other hand, it is unlikely that career women, being high-skilled, and having paid-work as a central life interest, will give up their jobs to live from a basic income only.The evidence is mixed for the other two groups of women in Robeyns’ classification. Perhaps it is fair to say that the final evaluation of a basic income, from the standpoint of women’s emancipation, depends as much on the expected effects as on one’s view of what emancipation is all about. Does gender equality require no educational and occupational segregation, as well as no gender division of labour, or can some of this be tolerated, if equality of opportunities still results in different choices reflecting different preferences between men and women? These questions clearly emerge from Robeyns’ thorough treatment of the empirical issues. As a final note, we would like to point to an idea only casually mentioned by Robeyns.This is a basic income targeted at children, which would cover the material costs of upbringing, as well as some of the opportunity costs of child care. Of course, even though such a basic income would replace all present child allowances as well as existing subsidies for child care and family tax allowances, it will still be a very expensive measure. But it would offer each parent – especially mothers, as long as they are the ones predominantly taking care of the children – much more of a real opportunity to choose freely between full-time work, full-time care work, or any mix of these. The essays discussed above suggest that participation income or basic income are promising ways to address the problems posed by the new social question, or to empowering low-skilled women. However, as Anton Hemerijck’s essay makes clear, experience in the Netherlands has shown that less radical measures in between basic income and workfare can serve to address the new social question as well. In particular, the Dutch policy of sustained wage moderation has proved to be successful in terms of employment growth.This policy has recently been flanked by targeted wage cost subsidies for long-term unemployed and low-wage workers, the introduction of modest schemes for educational, parental and sabbatical leaves, and a central agreement between unions, employers and government which traded a relaxation of firing and 26
How Attractive is a Basic Income for European Welfare States? dismissal procedures for full-time core workers against greater job and social security rights for flexible and part-time workers. Despite the apparent ability to accommodate the trend towards more flexible labour markets – the Netherlands has an unparalleled high share of part-time workers – the Dutch miracle has not yet succeeded in overcoming structural inactivity, nor the precarious position of specific groups on the labour market.As Hemerijck points out, structural inactivity has remained more or less constant at about 20 percent of the labour force, and it is concentrated among the low skilled, older workers, immigrants and women. The majority of the older, predominantly low-skilled, workers are either on early retirement or on disability insurance. Finally, the problem of long-term unemployment, still about half of total unemployment, persists as long as the ‘baby boom’ cohorts of younger and better skilled workers, along with increased participation of women, absorb employment growth. For the near future Hemerijck is in favour of embracing wage subsidies following a ‘negative income tax logic’, as the most effective and feasible route to increase participation of the most vulnerable groups. Hemerijck is right in stressing that in a corporatist climate, with the commitment of all parties (unions, employers’ associations, and government) much can be achieved by piecemeal engineering. However, it may be doubted that the Dutch case can serve as the benchmark of a ‘best practice policy mix’ for other European countries. For one, wage moderation can be expected to have less favourable results on labour demand when adopted Europe-wide than when it is practised in one country (the ‘beggingthy-neighbour’ argument). Secondly, shared commitments and collective agreements on wage moderation may be more difficult to achieve in countries like Germany, France and Britain, with their more militant trade unions, than in the consensus-oriented society of the Netherlands.This raises the question of the next section, whether European countries would at all be able to find new ways of co-operating in the search for full employment without poverty.
A Participation-Based Eurodividend: The Key to Social Europe? To introduce the European dimension, consider the following statement, in which Atkinson (1998: 148-9) reiterated his earlier plea (1993b) for a European Participation Income: It is noteworthy that, despite the attention which basic income has been given, and despite finding supporters in all political parties, the scheme has not got close to being introduced. If one asks why, then, in my judgement a major reason for opposition to basic income lies in its lack of conditionality. There are concerns that it will lead to dependency, or stateinduced social exclusion. I believe therefore that, in order to secure political support, it may be necessary for the proponents of basic income to compromise – not on the principle of no test of means, nor on the principle of independence, but on the unconditional payment… I believe that such a Participation Income offers a realistic way in which European governments may be persuaded that a basic income offers a better route forward than the dead end of means-tested assistance. New ideas in this field are needed, and this one combines the twin concerns with poverty and with social exclusion.
As this passage makes clear,Atkinson is in favour of reforming the present means-test27
Basic Income on the Agenda ed basic social security arrangements (in terms of Figure 1, Conditional Welfare) into non-means tested basic provisions, preferably conditioned on a broadly applied worktest. Atkinson’s preference for non-means tested social benefits is motivated by the problems of the new social question, in particular the fact that a two-tier structure of (non-means tested) social insurance and (means tested) social assistance strongly discriminates against the most vulnerable in the labour market. This focus on the detrimental effects of means-testing explains why Atkinson prefers a participation income to a basic income, on the assumption that the work test of the former would be capable of securing the required political support for doing away with means tests in basic security.This view is attractive, even though a more relaxed work test would have to be enforced seriously, as we have pointed out in our discussion of Participation Income as an ideal type of basic security (see Figure 1).This may well prove to be no easy task, in view of the reasonable disagreement as to what counts as ‘participation’. In any case, the proposal for implementing some kind of participation income at the European level, here stated in guarded terms by Atkinson, is essentially favoured by Steve Quilley, as we will discuss below.14 But before turning to Quilley’s argument, we want to introduce the exchange of views between Fritz Scharpf and Philippe Van Parijs on the importance of European co-ordination. As Scharpf argues powerfully, the hope that any form of ‘Social Europe’ will come about without concerted decision-making at the European level is entirely unrealistic. Competitive pressures resulting from the single economic market (shortly to include several Eastern European countries), and from a single currency, would continue to have an adverse impact on the national social and economic policies of the Member States.According to Scharpf, economic integration constrains national welfare arrangements in two important ways. First, in a relentlessly competitive market without borders, governments are forced to shape social policies with an eye to the establishment of a competitive welfare state. Secondly, even if one country could manage to provide generous welfare arrangements, while preserving its international competitiveness, sooner or later it would become vulnerable to welfare migration, particularly of lowskilled workers from other countries in or outside the European union. In the longer run, this would undermine the viability of the generous policies. Tax competition between European countries, and unco-ordinated reshaping of welfare arrangements is likely to lead everywhere to a separation between ‘individualistic’ social insurance and ‘solidaristic’ redistributive programs. If so, the new social question would be reinforced.That is, the gap in lifetime prospects between a core of medium- and high-skilled workers with stable job and income security assets, and a marginalized workforce which has to rely on basic security, would widen. Why? According to Scharpf, workers would tend to regard social insurance entitlement as a form of delayed earnings (because of the actuarial fairness between contributions paid and coverage provided). Therefore, social insurance would be less vulnerable to tax resistance everywhere, and it thus would not create competitive disadvantages. By contrast, generous tax-financed redistributive programs would be likely to run into far more resistance, on the part of the net contributors.As a result, keeping such programs at a high level would be electorally unpopular, hence far more vulnerable to being eroded by tax competition. Countries that decide to maintain generosity in basic security would have to pay the price of reduced international competitiveness, while at the same time attracting welfare migration.As long as social policy remains a national pre28
How Attractive is a Basic Income for European Welfare States? rogative, the institutional separation of social insurance and basic security will continue to induce new rounds of competitive pressure on basic security. In the absence of European policy co-ordination, this may lead to a ‘race to the bottom’. Under such conditions, it seems obvious that national states would want to avoid introducing a taxfinanced and highly redistributive basic income scheme, or a participation income. So in Scharpf ’s view, the only hope for the disadvantaged is that competing redistributive alternatives of basic income, like the Earned Income Tax Credit and reductions in wage costs, can still command sufficient political support. But is this all one can say? Not entirely. For Scharpf ’s realistic assessment is logically compatible with some kind of a European basic income.This, however, would require a prior effort at co-ordination of social policy. For example, if Member States can somehow first agree to guarantee a system of Europe-wide minimum income standards (for example, related to the per capita income of Member States), and if, moreover, the rich Member States were willing to fund the required additional expenditures, then this would check the tendency of levelling down basic security provisions. Against this more optimistic background, Scharpf says:‘if such support were forthcoming – perhaps through a redirection of the cohesion funds – it might be necessary and possible to avoid the work disincentives inherent in the present social assistance programs of the richer Member States. In that case, basic income programs, most likely in the form of the negative income tax, might indeed provide the most effective and efficient solution to the twin problems of poverty and unemployment, and European policymakers might well be persuaded to promote this strategy’. Van Parijs’s reply to Scharpf seizes on this possibility of prior co-ordination in a ‘Social Europe’. His assessment is that a European participation income along the lines suggested by Atkinson, would then be the way forward in an attempt to reduce the danger of fiscal and social competition between Member States still further. As we explained in the previous section, while a participation income avoids means-testing and the ensuing inactivity traps, it is politically more viable because its broad participation conditions signal a concern for tying the receipt of transfer income to the reciprocal performance of ‘socially useful activity’. It is thus a good candidate for counteracting the divisive effects of the separation between social insurance and basic security. For these reasons,Van Parijs proposes to recast the term ‘participation income’ as a ‘Euro-dividend for all active European citizens’. He sees two further advantages. First, if the Euro-dividend were to be set at a uniform level – which would probably be close to the level of the minimum income guarantee of the poorest countries in the EU – this would provide a universal floor, on top of which each more affluent Member State could then maintain its own favourite mix of welfare arrangements. Secondly, a uniform Euro-dividend, even if it were low in comparison to the average European level of basic security, would considerably increase inter-European solidarity. For, irrespective of its tax base, a uniform Euro-dividend would raise redistribution from rich to poor countries, or from booming to depressed areas, far beyond the present redistributive effect of the structural funds.15 Steve Quilley’s political reflections chime in with Scharpf ’s assessment as well. Since there is hardly a chance that any full-fledged basic income scheme will get off the ground at the national level under increased intra-European competition, a framework of co-ordination is imperative for getting politicians ‘to think the unthinkable’. In a way, taking this as a starting point is to admit that the project of basic income depends 29
Basic Income on the Agenda on a degree of institutional co-operation that may seem rather utopian, given that social harmonization is at the tail end of the agenda of European integration at present. Quilley’s main concern is to address this problem. He argues that while the debate on basic income has become more mature in clarifying the ethical desirability of unconditional grants, as well as the feasibility of (revenue-neutral) schemes of basic income, ‘…such intellectual clarity does not flow naturally into a plausible political project’. The debate, so far,‘has offered few clues as to possible points of departure and the politics of transition’. It is necessary, therefore, to reflect on why it makes good political sense, in the longer run, to regard a small Euro-dividend of the type envisaged by Van Parijs (see above) as the nub of a ‘basic income trajectory’, that is to say, as a strategic measure that could create the conditions for its own ‘metamorphosis into a more substantive redistributive mechanism’.The merit of Quilley’s contribution to Part I is that he seeks to locate the political opportunities that exist, at present, for discussing the new social question at the European level, in ways that would move likely solutions away from Conditional Welfare and Workfare, and towards Basic Income or Participation Income – that is to say, downwards along the vertical dimension in the policy space of Figure 1. According to Quilley, there are several reasons for expecting a more favourable political constellation over time. First (and especially looking at the problem from the British point of view), the operation of the European single market under conditions of increasing flexibilization is creating pressures to introduce an element of fairness and even-handedness in the process of corporate restructuring and relocation. Secondly, the inter-regional and national inequalities resulting from the single market can be sustained only if they are partially legitimated by a sense of European citizenship. But while both of these features show that the logic of competition that has driven European integration so far is creating a political need for redistributive social cohesion, this in itself does not imply a policy preference in favour of basic income. As Quilley admits, the redistribution involved in basic security seems to be tied more closely everywhere to the work ethic, targeting, and means testing. If anything, then, European basic security is moving from Conditional Welfare to Workfare, along the horizontal dimension in the policy space of Figure 1.There is no straightforward way to achieve a ‘ninety-degree change of direction’.What one can envisage, however, is a possibility to attract political forces toward Participation Income, by appealing to the ideology of a broadened and civic work ethic, which would be compatible both with the Anglo-Saxon rhetoric of communitarianism and self-help that underlies at least some of British New Labour’s work-to-welfare policies, and some of the more enlightened forms of the ‘active welfare state’ on the continent. Thirdly, Quilley strongly endorses the funding of the Euro-dividend through a combination of ecotaxes, because taxing ‘environmental bads’ (rather than productive activities) may seem a more acceptable ethical basis for the distribution of universal benefits, and also because linking basic income to the Green movement is politically opportune: ‘The emergence of a space for a green and socially responsible capitalism, is perhaps the nearest thing to the ‘big economic idea’ for the left since Keynesianism’. As Quilley emphasizes, these features of the political landscape create no more than windows of opportunity, which can be utilized in the development of a ‘basic income trajectory’. But it should be understood that the effectiveness of such a trajectory will require dropping the idea that basic income, in whatever form, is a self30
How Attractive is a Basic Income for European Welfare States? contained blueprint to be put up on the political agenda as a straightforward choice. Thus, any realistic attempt to move the politics of European redistribution in the direction of more universality and less conditionality will have to be a ‘war of position’, of institutional and political jockeying, in which proponents must seek to link these objectives with other political agendas, emphasizing similarities of purpose, rather than focusing on programmatic contrasts. While there is certainly a lot to be said in favour of Quilley’s realist utopianism, it does of course presuppose that the idea of basic income has gained sufficient foothold in the European Member States. We now want to examine to what extent this can be said to be the case.
Basic Income in European Countries The second part of this volume is entitled ‘Political Chances’. It offers seven papers, each of which illustrates major aspects of the political fortunes and failures of the basic income proposal in European countries, without necessarily attempting to cover every relevant development. In order of population size: Germany (Stephan Lessenich), France (Chantal Euzéby), Finland and Sweden (Jan-Otto Andersson), the Netherlands (Loek Groot and Robert van der Veen), Belgium (Yannick Vanderborght), Ireland (Sean Healy and Brigid Reynolds) and Denmark (Erik Christensen and Jørn Loftager).16 These papers enable one to assess the claim with which we started: that basic income has evolved to the stage where it has entered the political agenda, that is, has become a recognized political possibility. But it is important at the outset to see what it means to say that basic income is ‘on the political agenda’. Does it just mean that it is regularly discussed in the broad forum of public opinion (the popular media, position papers of policymakers, academic conferences) or does it mean that properly costed reform proposals involving a full or partial basic income, participation income, or negative income tax, have been, or are about to be, put up for decision on the legislative agenda of a ruling government? Obviously, the answer must be varied: everything that goes on in between these two definitions should be counted. Then there is the separate question of judging the results of these discussions and decisions. Since at present the policy space of basic security is really only inhabited at the top half of Figure 1, if basic income has at all been on the agenda of a particular country for a certain length of time, this has not yet had much of a definitive policy impact. So far, then, the ‘agenda status’ of the proposal must signify that basic income has been considered and then rejected, only to resurface at a later date, perhaps in a different form, and with different arguments, for a new round of consideration and rejection, or hopeful postponement, as the case may be.At the end of the period considered – roughly from the late 1970s up into the first months of the new millennium – the commentator may be in the downswing of facing up to the latest rejection (‘basic income is now nearly dead’), or be able to give a more upbeat report to the effect that ‘finally’, the idea has been taken up by a social movement, is being ardently discussed in the media, is being seriously debated in parliament, or is at least being singled out for further study, by some prestigious commission, or governmental advisory board.As the papers of Part II show, moreover, the agenda status of basic income between different countries must be considered against the background of the widely varying social security systems that have been in existence in each of them in the last two decades, as 31
Basic Income on the Agenda well as the country-specific major events that induce changes in the climate of policy, such as the re-unification process in Germany. In some cases, the institutional status quo has effectively prevented basic income from being admitted at all into the arena of discussion. This is the case most notably in Sweden.As Andersson shows, the reason is the highly developed Swedish welfare state, with its wide and effective coverage of social insurance, its long history of active labour market policy, and the firm hegemony of a social-democratic work ethic. In this setting, basic income does not seem much of an issue, primarily because the area of basic security itself does not yet stand out as being particularly problematic. Even where basic security certainly is seen to be problematic, as in Germany, the predominance of social insurance, the sheer complexity of the patchwork of social assistance, and the tradition of corporatist wage bargaining practices present conditions under which a basic income solution, such as Mitschke’s Bürgergeld, may in the end be rather far removed from what are perceived to be politically viable deviations from the status quo, as Lessenich notes in his instructive discussion of the policy stance of the social-democratic Friedrich Ebert Stiftung. However, in France, basic income is largely confined to the margins of academic discussion, precisely because it seems to be more of a pressing problem to get a universal system of basic security – one which covers all age groups – off the ground in the first place, following up from the 1998 Revenue Minimum d’Insertion (RMI). In such a political context, as Euzéby puts it politely, basic income is an ‘interesting but uncertain idea’.The reason is that policymakers with solidaristic goals find it more rewarding to start working on a basic pension system, and to take steps in the direction of including the young, the intermittent workers in the service sector, and the self-employed, in one integrated national safety net. From that point of view, rightly or wrongly, further questions about the conditionalities of social assistance are ones that have to be decided along the way, in order to advance at all. In addition, policymakers in France are strongly concerned to improve the employability conditions of the RMI, which has up to now largely failed to connect its clients to the labour market. In view of this goal, as Euzéby notes, it again stands to reason that a move to basic income should be preceded by intermediate and far less radical measures. Given what we have said up to now, the natural home of basic income policies would seem to be countries with highly developed (and cost-of-living or wage indexed) universal basic security provisions with high rates of take-up. Roughly, these are represented by the smaller Nordic welfare states of Belgium, Denmark, and the Netherlands. Here, it would at least seem that insofar as the ideological constraints (the recent activism of the work ethic) and financial restrictions (budget neutrality, the EMU-norms) allow, there is some scope for a gradual erosion in the conditionalities of a social minimum framework which is already securely in place. However, judging from the contributions from these countries, the current political prospects of promoting a basic income with open vizier are not favourable. This message is conveyed in different ways. In the Danish case, as Christensen and Loftager show, basic income was effectively removed from the political agenda in the 1990s by a decisive ‘top down’ ministerial intervention, silencing the Radical Liberal, Green, and generally the ‘alternative’ voices in favour of the idea. In Belgium, the sudden advent of a political party (VIVANT), which was committed to a clear and unambiguous form of basic income head on, has not seriously affected even the state of the 32
How Attractive is a Basic Income for European Welfare States? public debate, according to Yannick Vanderborght. Significantly also, the efforts of this party have hardly been supported by the two Green parties, both of which have been consistently in favour of basic income since the late 1970s. And while in the Netherlands, after twenty years of dramatic ups and downs, a small – though analytically significant – element of negative income tax has been built into the recent tax reform, the political understanding shared by policymakers and politicians alike is that this, surely, has nothing at all to do with the concept of basic income. If one believes that these countries can resist the grim process of convergence to the ‘competitive welfare state’ (as described by Scharpf) long enough, however, it would be natural to think that astute ‘institutional jockeying’ (as advocated by Quilley) may go some way to achieve slow shifts towards forms of negative income tax or participation income Finally, there are two countries that might be regarded as the ‘jokers in the pack’ – Ireland and Finland. Both of these seem to have in common a climate and history of social policy which is more conducive to sudden changes, and is more receptive to the central intuitive argument of fairness, efficiency and simplicity, which is associated with basic income. Sustained economic growth from a relatively backward starting position (Ireland), and the combined impact of high unemployment and exposure to the electronic age in the 1990s (Finland) may have something to do with this apparent volatility in the policy space of basic security. Cultural variables may also matter, in the case of Finland. If it is true, as Andersson argues in his survey, that as compared to Swedes, Finnish workers and citizens are more disposed to go for innovative and radical solutions, then some of the many concrete proposals that have been circulating in Finland since the 1980s involving basic income or negative income tax may be actually implemented.The more so, since Osmo Soininvaara, one of the main players in this field, has taken office as Minister of Social Affairs in a coalition including the Finnish Greens (see his Preface to this volume). We resist the temptation to speculate at length on these cases.There is not enough information to go on, as yet, to decide whether the impression that basic income is on the fast track in either Ireland, Finland or both, is justified. One small remark about Ireland, though.The sudden popularity of basic income can partly be explained by the fact that although the Irish economy is booming, the incidence of poverty remains high. The former gives some leeway to increase social expenditures (Healy and Reynolds use the wonderfully optimistic expression of ‘revenue buoyancy’), while the latter forces politicians who want the poor to share in the fruits of growth to seriously consider radical solutions.The case also illustrates how a relatively small but excellently well-organized community group (the Conference of the Religious of Ireland CORI) can have a major impact on the political agenda.Yet the outcome of CORI’s costed proposal for a full basic income is extremely uncertain, until the Irish government has actually taken an official stand on the substance of the proposal – which it has not yet done, despite its promises.The Dutch experience, meanwhile, has shown that as soon as the political establishment takes basic income reform proposals seriously, such proposals are subjected to extremely harsh tests, and moreover, that actual decisions on them tend to be shifted forwards in time, when an outright rejection is inopportune. It is to be hoped that the Irish élan will be kept alive if the window of opportunity were to narrow to the point of piecemeal implementation, and the long march through the institutions starts to take its toll. 33
Basic Income on the Agenda
Some Common Themes The surveys of Part II speak eloquently for themselves. By way of concluding this introduction, however, we want to look at some common themes. First, the initial attempts to launch basic income on the agenda in the 1970s (at least in countries with long histories of the idea) came from relative outsiders, whose interest was to promote a critical politics of free time, as opposed to the mainstream productivist politics of full employment. Secondly, what helped these ideas to gain wider currency in politics has invariably been sudden rises of unemployment, together with the idea of jobless growth, or – later in time – the fear that economic growth is permanently linked to insufficient demand for low-skilled labour. Thirdly, the radical unconditionality with respect to the willingness to work has invariably proved to be a stumbling block for basic income to become part of the mainstream alternatives, despite its heightened salience under conditions of high unemployment. Apart from the popular spectre of ‘able-bodied scroungers’, the objection to the no-work feature of basic income translates naturally into the recurrent (and highly damaging) images of ‘generalized state dependency’ and of ‘legitimizing the ongoing process of social marginalization’ (see Christensen and Loftager, below). In part, the intellectual state of the debate on basic income may be measured by the frequency with which convincing answers to these standard points are brought into play. As the account of Healy and Reynolds suggests, at least some of the success of moving basic income closer to the Irish legislative agenda must have depended on the sheer didactic effort of the proponents (notably, but not exclusively, CORI) in patiently countering a host of popular objections. Many commentators to Part II note the unmistakable shift of European social policy towards the active welfare approach, since the early 1990s. As Lessenich observes for the German case, this has put basic income advocates in the difficult position of having to argue that their proposals are the most cost-effective method of how to make them all work, which he rightly considers to be ‘utterly sobering for any apologist of basic income in its purist sense’. But, as the histories of the Dutch, Danish and Finnish cases show quite clearly, the no-work objection predates the shift to active welfare policies. It has always been quite powerful, and there is reason to think it will remain powerful – not merely as a policy conception, but mainly as an electoral constraint on feasible policies – as long as the no-work objection seems to be widely shared by net contributors to basic security and net beneficiaries alike. Note, however, that the extent of this presumed sharing is far from being a well-researched fact. It is not known exactly what ‘the electorate’, or ‘the ordinary people’ actually think about issues of income conditionality, since nowhere are citizens being asked to give their opinion on those issues in any systematic way, apart from the occasional survey question. Fourthly, even though it is difficult to generalize across the European ideological landscape, the social-democratic parties have always been highly critical of basic income, whereas the radical Left (early on, in the 1970s) and the Greens (in the 1980s and 1990s) were basic income’s most loyal allies.This is so, at least, if they do not come to power all of a sudden. See below, where Lessenich acidly remarks on how the German Greens silently dropped their advocacy of a more or less basic-income-friendly proposal, on entering the Red-Green government coalition. 34
How Attractive is a Basic Income for European Welfare States? Social democracy has its roots in the trade union movement, and to some extent it remains stamped by the old social question of capital against labour. Unsurprisingly, therefore, the social policy of much of modernized Labour is strongly oriented to the activity of paid work, though predominantly in the form of employability and of disciplining transfer recipients in acquiring work skills, as the developments in the United Kingdom reported by Quilley also show. Outside of Sweden, where an enlightened attitude to paid work has always been a marked feature of the welfare state, there are recent signs of an increased willingness to engage in the discourse of integrating unpaid work and leisure. A good example is the Dutch Labour Party’s 1994 election slogan of a ‘relaxed organization of work’, which refers to a kind of lifetime ‘employability’ in both paid and unpaid activities, with flexibility of choice to move in between the two. But just as in Sweden, this more relaxed attitude is at present largely confined to the sphere of work-related social insurance. With respect to basic security, Dutch socialdemocrats generally still tend to insist on the centrality of paid work, perhaps driven by a vaguely Victorian logic of the need to discipline the poor. This explains why the enlightened stance of ‘unpaid work counts as well’ can nicely go together with branding basic income as a defeatist policy, which is bent on trading away the ‘right to work’ for those ‘who need it the most’, against a politically insecure ‘right to income’. The same may be said for Denmark, on Loftager and Christensen’s account.There, as in the Netherlands, basic security is moving towards the activation of welfare clients, in tailor-made instatement contracts with administrative case-workers.17 In the Danish case, this goes together with the further expansion, and the great popularity among workers, of comprehensive schemes of paid leave. In terms of Figure 1, one might be tempted to see this last development as a vertical movement, in the direction of the ideal type of Participation Income. But as we stressed, that would be a mistake. For Figure 1 exclusively depicts the policy space of basic security, not that of work-related social insurance. Paid leave, obviously, is the privilege of those performing paid work in collective (or in semi-private) arrangements, from which an increasing number of people are excluded.The distinctive hallmark of a basic income, and similarly of a participation income, is to extend such privileges universally, at the level of basic security. The sympathy and occasional support for basic income of Green parties across Europe can be traced to the progressive middle-class intuition that the productivist stress on employment sits uneasily with promoting environmentally-friendly ways of life. Nevertheless, as the Greens have moved to the centre of politics in Europe, they tend to be more in favour of a moderate partial basic income strategy (Germany and the Netherlands), or for shortening the standard working week, as in France. As Quilley notes, this might be explained by the fact that social policy is only one item, and not necessarily the main one, on Green platforms of ecological modernization. Taxing ‘environmental bads’ instead of labour may be a way of creating a new, and more generous, foundation for basic security. But it may equally be used to simply shift the tax base (as in the recent tax reform in the Netherlands), or to create the fiscal means for assisting investment in renewable energy sources. In any case, up to now, Green parties have not yet actively engaged in bringing forward the national or European eco-dividend, as envisaged by Van Parijs and Quilley. Fifthly and finally, moral intuitions and efficiency concerns are connected in politics.This can be seen from another recurrent theme. Understandably, those who regard 35
Basic Income on the Agenda basic income reforms as morally suspect attempts to provide ‘handouts to everyone’ will also tend to regard such reforms as fiscally and economically unsound.There is no need to illustrate this standard point by reference to the surveys of Part II. But as the debate on basic income has matured over the years, a host of more sophisticated efficiency arguments have emerged from the heart of political exchanges. One of these is the impossibility theorem, as we have called it in our report on the Dutch debate.The impossibility theorem asserts an inescapable dilemma: in its economically or politically feasible range, a basic income will be too low to be socially acceptable, while in its socially acceptable range – which must be close to the ruling level of conditional basic security – basic income is too expensive for it to be either economically sustainable at all, or too expensive, given political constraints on marginal taxation levels. This line of reasoning has been used both in Denmark and the Netherlands to great effect. It obviates the need to argue the moral issue directly, granting for the sake of argument that unconditional incomes would be ‘socially acceptable’, if they could feasibly be pitched at the level of the ruling social minimum. Now, if a sensible proponent of basic income admits that this, indeed, is not economically feasible at present, then she is also forced to admit that a partial basic income is the only possibility, and that in order to be socially acceptable, the partial basic income will need to be supplemented with conditional benefits. The next move of the opponent is now to grant that a full basic income could combine adequate social protection with the demands of flexible labour markets; that it could lead to a more equitable distribution of income, of paid work, of care work and of free time between men and women; to less involuntary unemployment; to better working conditions for low wage workers; to a removal or shortening of poverty traps; and to a reduction in the administrative costs of providing social security. However, the opponent then goes on to say that while all of this might be true, the beneficial effects of a partial basic income would surely not be significant enough to make the reform worth the trouble. The opponent finishes by concluding that the modified basic income proposal will not make good on its initial promises, and would still be more expensive than a streamlined and more employment-oriented scheme of basic security would be. Even though this argument has often been put forward by opponents who also resist basic income on moral grounds, it is by no means an easy one to answer. In fact, as we show below, the argument has contributed to the development of costed basic income models in the Netherlands, which attempt to track the dynamic behavioural effects of specified changes in tax rates and benefit levels under various conditionalities of the benefits. In view of the uncertain validity of such models, however, arguments of the type of the impossibility theorem also point to the need for generating more reliable knowledge by promoting local experiments with basic income schemes.18 With this last point, we are back where we started in this Introduction: the undisputable success of the basic income discussion of the last two decades has been to set higher standards of expectation. We now invite our readers to judge to what extent these standards are being met in the contributions that follow.
36
How Attractive is a Basic Income for European Welfare States?
Notes 1
2 3
4
5 6 7 8
9
Founded in 1986, the Basic Income European Network (BIEN) aims is to serve as a link between individuals and groups committed to, or interested in, basic income, and to foster informed discussion on this topic throughout Europe.The name has turned out to be somewhat mistaken by now, as not only European, but also politicians and scholars from North and South America have joined the network. BIEN publishes a Newsletter which provides an up-to-date and comprehensive international overview on current ideas and publications, organizes bi-annual BIEN-congresses where people from more than twenty countries meet to report and discuss on all aspects of basic income and related proposals, including its moral, economic, political, social, and fiscal justifications, feasibilities, alternatives, objections, premises, experiments and outcomes. More information, as well as the previous BIEN Newsletter issues, can be found at BIEN’s Web-site: http://www.etes.ucl.ac.be/BIEN/bien.html. See White, 1997;Van Parijs, 1995;Van Donselaar, 1997;Vandenbroucke, 1999a; and Van der Veen, 1998. In the normative discussion, moreover, the debate around basic income is also concerned with exploring the consequences that work-sensitive or unconditional forms of redistribution may have for the self-respect of claimants (Wolff, 1998) and for the extent to which the labour market will work so as to compensate for the disutility of lowly productive jobs (Groot, 1999 Chapter 4). The contributions of Van Parijs et al. and De Beer in this volume revolve centrally around this hard exercise. It may be said, perhaps, that the proponents of basic income in the traditional sense of full unconditional grants at social minimum level will not receive maximum reassurance from what is said. A response which is invited by the exercises of examinations of ‘unheeded differences’ by Van Parijs et al., and De Beer’s cautious assessment of short- and long-term advantages, is to revert to the well-tested strategy of pointing out that if basic income cannot win out on any one or two policy objectives, then surely it may still prove superior on a more inclusive set of objectives. We shall not be offering examples of this seductive reasoning here, but point out the connection between the themes of Robeyns (gender equality) and Hemerijck (citizenship) in Part I and to the ‘middle range effect’, described by Fitzpatrick (1999: 44-45) as follows:‘... in terms of each policy objective taken individually basic income would be trumped by the other proposals..., but scores rather well when the entire range of objectives is taken into account... the reason why basic income has been ignored is because of the tendency of politicians and policy-makers to examine social objectives in isolation’. See Van Parijs et al. in this volume; Offe and De Deken, 1999; and Standing, 1999. This was one of the main themes of the Basic Income European Network Congress in Amsterdam, 1998. For similar assessments of the present situation, see e.g.Van Parijs, 1993: 134-39; Scharpf, 1999; Standing, 1999; and Vandenbroucke, 1998. Poverty and unemployment traps (giving rise to hysterisis among long term unemployed), binding minimum wages restricting the number of low paid, labour intensive service jobs at the bottom end of the labour market, restrictive firing and dismissal procedures, and extensive collective labour agreements (see e.g. De Neubourg, 1995). We do not want to suggest, of course, that present arrangements of earnings-related social insurance or tax-financed benefits are immune to the call for reform.
37
Basic Income on the Agenda 10 Direct job creation occurs through generous marginal wage subsidies for additional jobs open to long-term unemployed workers only. 11 This is due to the high withdrawal rate on all net labour income up to the social security benefit, and because working may engender additional costs (e.g. travelling expenses, costs of day-care centres, etc.). It is no exception that welfare recipients face a marginal tax rate of 100 percent or more.Those caught in these poverty and employment traps therefore experience a strong disincentive to work: they can only escape the poverty trap when they succeed in finding a job with pre-tax earnings considerably higher than the level of their benefits.All (part-time) work with pre-tax earnings below a certain threshold will not yield any financial reward for those on welfare.This may partly explain why part-time work is mainly undertaken by women.Women with a working partner are not entitled to any benefit and therefore they do not face the poverty trap. For them, any part-time work will raise family income. 12 Note that the authors do not include stringent workfare policies among the alternatives to be considered. Their comparison does not cover the whole of the horizontal dimension in Figure 1. 13 Even in that case, it still has to be shown that a basic income policy is better than, say, a comprehensive scheme of paid – sabbatical, parental, educational – leaves. 14 In the concluding chapter, Atkinson (ibid., 152) writes in less guarded terms: ‘As we have seen, the popular recommendation of greater targeting is less promising than appears at first sight.We have to search for new approaches, particularly at the European level.The way forward, in my view, is in (reformed) social insurance at the national level, coupled with a Participation Income to provide a European minimum’. 15 See Genet and Van Parijs (1992) for a clear exposition. 16 We regret not having been able to include a contribution from the United Kingdom, in which basic income has been promoted actively for many years by the broadly based Citizens’ Income Trust. However, for a comprehensive survey of the debate in the United Kingdom, see Fitzpatrick (1999). 17 See Van der Veen (1999). 18 Comparing basic income and workfare (or the shift towards activating labour policies replacing passive welfare), it is interesting to note that a basic income experiment may serve as the right counter-experiment for all kinds of workfare-oriented experiments.As argued by Peck and Theodore (2000: 124-5), the recent popularity of workfarism in the US and the UK can to a large extent be attributed to the positive results of local workfare experiments in the early 1990s.Workfare experiments show the effects of mandatory welfare-to-work programs compared to the normal treatment (e.g. the duty to apply for jobs, the duty to resume work as soon as possible) of a control group of welfare beneficiaries. Running a workfare and basic income experiment simultaneously might show what a difference it makes when recipients must participate, as a condition of income support, in programs designed to improve their insertion in paid work as under workfare, or when they can freely choose themselves what to do as under basic income. Because there are no basic income experiments going on, we can only guess what the differences would be.
38
Part One Policy Objectives
In Search of the Double-Edged Sword Paul de Beer
As is well-known, the United States and continental Europe have shown a remarkable divergence in socio-economic development the last 15 to 20 years (e.g. OECD, 1994c; Nickell, 1997). On the one hand, unemployment rates in the United States have remained quite low, at about the same level as in the 1960s and 1970s, while income disparities have risen sharply and poverty has increased. On the other hand, in most continental European countries unemployment levels mounted in the first half of the 1980s during a deep economic recession, fell only slightly in the second half of the 1980s and rose again in the first half of the 1990s, only to decrease recently. But income inequality either remained stable or increased only moderately while the poverty rate also showed no marked increase.This diverging development seems to be a perfect illustration of the famous (or should one say, notorious?) ‘trade-off between equality and efficiency’ (cf. Okun, 1975). Or, to put it in plain English, you can’t have your cake and eat it. Each country seems to be faced with a choice between either a low unemployment rate and a high poverty rate, or a high unemployment rate and a low poverty rate.1 The former outcome can be attained by a (neo-)liberal free market policy, combining low tax rates with a residual and harsh welfare state, the latter by a Keynesian policy of extensive market regulations, a generous but lax welfare state and high tax rates. If this trade-off between efficiency and equality is some kind of ‘natural’ (or economic) law, as many seem to believe, the only option is to move along a downward sloping transformation curve of efficiency and equality.This means that one has to pay for every small reduction of the unemployment rate by an increase in the poverty rate, and vice versa (see Figure 1). The position of different countries on this curve would then simply be a matter of social preferences instead of inferior or superior economic performance. However, it seems that both Americans, who worry about their high poverty rate, and Europeans, who are concerned by their massive unemployment, believe it is possible to improve their performance by either reducing poverty without simultaneously increasing unemployment, or reducing unemployment without increasing poverty.That is, they attempt to shift the trade-off curve inwards instead of moving along the curve. The American attempt to shift the trade-off curve inwards amounts to abstaining from interference with the unfettered labour market while alleviating poverty by some sort of income relief for the working poor. This is accomplished by the so-called Earned Income Tax Credit (EITC), a tax subsidy which equals a fixed percentage of selfearned income, up to a (quite moderate) income ceiling.The European approach, on the other hand, tries to change the lax and passive welfare system into more active labour market policies, without reducing the level or duration of their social benefits substantially. A range of measures are being adopted to achieve this, most of which amount to either a wage cost subsidy to employers, in order to boost low wage 41
Basic Income on the Agenda
Figure 1: The trade-off between poverty and unemployment
poverty
?
unemployment
employment, or an income incentive to the unemployed to encourage their search efforts and willingness to accept a low paid job. In this paper I will try to assess the impact of both kinds of policies and compare them with a third possible way to try to shift the trade-off curve, viz. the introduction of a basic income scheme. In their paper in this volume,Van Parijs et al. show that it is possible to shape these different measures in such a way that they are in effect equivalent as far as their direct impact on net incomes is concerned. However, it is unlikely that these measures will really be equivalent in practice. First, they will be implemented in different labour market contexts and with the different purposes of the policymakers in mind. Secondly, they will generally not be equivalent as far as the (dis)incentives for the subjects of these measures are concerned. So, despite the theoretical similarities, it seems justified to consider them as really different policies to tackle both unemployment and poverty in practice.
Short-term versus Long-Term Effects and Relative versus Absolute Poverty Measures The test for the success of these different policies is of course the expected outcome in terms of unemployment level and poverty rate. In assessing the impact of a particular policy it is important to differentiate between short-term and long-term effects. Of course, it would be possible to reduce both unemployment and poverty considerably in the short term by raising benefit levels and simultaneously creating a lot of additional jobs for the unemployed in the public sector. But it is generally believed that the huge increase in tax rates that would be necessary to finance such a policy would have detrimental effects in the long term, so the favourable short-term effects would not last. 42
In Search of the Double-Edged Sword In the following analysis, I will distinguish between three time periods. First, I will assess the initial redistributive impact of a particular measure, before economic agents have had time to react to it. Secondly, the short-term effects which manifest themselves after the agents have adjusted fully to the particular measure, will be examined. And thirdly, the focus will shift to the long-term effect which results from the interaction of the behaviour of all economic agents. A full and consistent assessment of these longterm effects is very difficult and calls for an analysis with an advanced econometric general equilibrium model. I will not attempt such an analysis and will restrict myself to a few remarks on the possible long-term effects of different policies, especially their impact on economic growth. The economic growth rate is of crucial importance with respect to a specific interpretation of the poverty level. As is well-known from the extensive literature on poverty measures, in the long run it matters greatly whether one uses a relative poverty measure or an absolute poverty measure (see, e.g., Foster, 1998).A relative poverty rate is calculated as the share of the population that has an income of less than half or two thirds, or some other percentage, of the average or median income of the population. Whether one is poor relatively speaking depends therefore on the incomes of other, non-poor people in the same population. An absolute poverty measure, however, is independent of the average or median income of the population. It counts the number of people (or the share of the population) with a real income below a certain absolute poverty threshold or poverty line.A rise or fall in the average income of the population does not affect the absolute poverty line. Since the level of both the relative and the absolute poverty line can be fixed arbitrarily, it makes no difference in the short term which poverty measure is applied (although the level of this threshold matters greatly, of course). But in the long term, using a relative measure might result in a completely different conclusion than using an absolute measure. For example, if there is a secular rise in national income (or GDP) per capita while income inequality remains constant, the relative poverty line will keep pace with the per capita income, while the absolute poverty line, by definition, will remain the same. Hence, the relative poverty rate will not change whereas the absolute poverty rate will drop sharply. In this respect, it is important to note beforehand that in the 1980s and 1990s the United States and Europe did not diverge as far as economic growth is concerned: from 1980-1996 real GDP per capita grew on average by 1.7 percent a year in the fifteen countries of the European Union and by 1.6 percent in the United States.2 This implies that, as long as income disparities remain constant, the absolute poverty rate in the US and in Europe would fall in about the same rate. For one country to perform better than the others it would have to succeed in either reducing relative income inequality or boosting economic growth.
Income Support for the Working Poor To make things as simple as possible, I start with an ‘ideal-type’ liberal market economy, with a very flexible labour market, without a statutory minimum wage (or a very low one) and an austere welfare system. I will further suppose that not only all unem43
Basic Income on the Agenda ployed people who are dependent on a social benefit are poor, both by a relative and an absolute poverty standard, but also a considerable number of the working population, whose wages are below the poverty line. This ‘neoclassical’ labour market can be regarded as a stylized version of the present-day American labour market. I will also suppose that an Earned Income Tax Credit (EITC) is introduced, which raises the net disposable income of all employed people whose wage is below or a little above the poverty line. Of course, the immediate impact of the EITC will be to lift the income of some, but probably not all, of the working poor above the poverty line. Scholz (1994) estimated that about one in every four households in the US that are eligible would be taken out of poverty by the EITC.The income of the non-working population would however not be affected by this measure.The poverty rate would therefore be slightly reduced, but only for people already employed. How would people react to the EITC? For people in a low paid job the EITC is effectively an incentive to earn more, since every self-earned dollar is, up to some limit, supplemented with 40 dollar cents.3 The main impact of this incentive would probably be to increase the number of hours that people in low-paid jobs are willing to work. This would lift an additional number of people above the poverty threshold. People in the so-called phase-out range, earning more than the income which offers the maximum EITC, would however experience a disincentive, because 21 cents of every extra dollar are withheld. This might induce them to reduce their number of working hours, although it seems unlikely that their net income would fall below the poverty line. Although the EITC widens the net income gap between non-working people and people with a low paid job, it is questionable whether this would much encourage the willingness to accept a low paid job. After all, the benefit level of the unemployed would already be so far beneath the poverty line that an extra incentive to look for a job can hardly be expected to exert much influence on their job search behaviour. The long-term effects of the EITC are hard to predict, but would probably differ not much from the short-term effects.The crucial point, as observed above, is whether the EITC would speed up or slow down economic growth. To judge the impact on economic growth one has to weigh the probable positive effects of the incentive for the low wage earners against the disincentive for the (much larger) group in the phaseout range of the EITC and the overall increase in the tax rate which would be necessary to finance the EITC. If anything, it seems likely that this would slacken economic growth a little. Since it is unlikely that the EITC would result in a substantial increase in the number of working people, there is not much compensation to be expected from that side. As far as our two poverty measures are concerned, the relative poverty rate would probably fall slightly as a consequence of the EITC, especially in the long run when the working poor with a part-time job would succeed in expanding their working hours. But, since the EITC would not alleviate the poverty of the non-working poor, it is unlikely that the relative poverty rate would fall to the level of continental European countries.The absolute poverty rate would probably also fall, but to what extent seems to depend far more on the general economic development – which is hard to predict – than on the specific impact of the EITC.
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In Search of the Double-Edged Sword
Activating the Passive Welfare State Continental European welfare states have been quite successful in fighting poverty, but since the early 1980s they have shown a deteriorating performance regarding their unemployment level. This is often imputed to the passive character of these welfare states, which have been far more concerned with compensating income losses as a result of unemployment and illness than with the re-entry of the beneficiaries of the welfare system into employment. Recently, most European countries have switched to more activating labour market policies without seriously impairing the protection offered by their welfare state. One of the means to achieve this is to supply wage cost subsidies to employers who create (extra) low paid jobs for the unemployed.This is intended to increase the number of jobs at the lower end of the labour market but above the poverty line, and to promote the outflow of non-working poor from welfare to work. It is important to distinguish between two kinds of wage subsidies, viz. general and marginal wage subsidies.The former apply to all low-wage jobs, the latter only to extra jobs or to vacancies that are filled by (long-term) unemployed job seekers.The impact of both kinds of wage subsidies will be discussed separately. A general wage cost subsidy is in effect equivalent to a shift in payroll taxes from low wages to higher wages.This is sometimes called a ‘Robin Hood policy’ (Bovenberg, De Mooij and Van der Ploeg, 1994).The immediate impact on unemployment and poverty is, of course, nil, since this kind of wage subsidy is only effective if it induces employers to create extra jobs. The positive impact of lower payroll taxes on the demand for low skilled workers in the short run will be at least partly offset by the displacement of high skilled workers. The net effect on total employment depends on the wage cost elasticity of the demand for low-skilled labour compared to the demand elasticity for high-skilled labour. If the demand for low-skilled workers is more elastic than the demand for high-skilled workers, as seems likely from empirical research,4 the net effect on employment of an upward shift in payroll taxes will be positive. Nevertheless, this net effect is probably quite small. Besides, it does not necessarily imply a falling unemployment level, since the extra jobs might also be taken by new entrants to the labour market, e.g. school leavers and housewives.This is quite likely to happen, since the wage of the new jobs will in most cases be not much higher than the social benefit of the unemployed, who will therefore experience hardly any financial incentive to apply for these new jobs.This problem might be aggravated if many of the new jobs are part-time jobs and if meanstested subsidies and income supplements are reduced or withdrawn if one accepts a job (which causes the so-called poverty trap). One may object that this still reduces the hidden unemployment of people who are not officially registered as unemployed but are nevertheless looking for a job. However, this would not contribute much to alleviate poverty, since most of these newcomers probably belong to non-poor families. A wage cost subsidy might also have an unintended negative effect if employers lower the wage of existing jobs that are just above the income ceiling of the subsidy in order to become eligible for the wage subsidy. Although the workers in these jobs would not drop below the poverty line, the position of this low income group would nevertheless deteriorate. 45
Basic Income on the Agenda So, although a general wage cost subsidy will probably increase employment in the short run, the expected decline in unemployment is small and the impact on the poverty rate negligible. The long-term effects of a general wage subsidy might differ from the short-term effects, firstly, if the wage subsidy hampers the upward mobility of low wage earners, and secondly, if part of the wage subsidy is appropriated by the workers. The former effect is likely to occur since the cut-off point of the wage subsidy puts a very high marginal tax rate on workers whose wage rate surpasses this point.This might be a disincentive to invest in skills, something which, in the long run, also hinders productivity growth and hence economic growth. If the labour market is in equilibrium, the part of the wage subsidy that ultimately results in a rise in the net wage (instead of a reduction of wage costs) is determined by the elasticity of labour supply relative to the elasticity of labour demand. As explained above, in the short term labour supply might be quite elastic because of the influx of school leavers and housewives, so not much of the wage subsidy would be shifted to the employees. However, in the long term, this additional labour supply might dry up and the labour market might become more tight, which would increase the opportunity for workers to appropriate a (large) part of the wage subsidy. Of course this would improve their income (but they were already above the poverty line), although it would impair the positive impact of the wage subsidy on employment. To summarize, a general wage subsidy or, equivalently, an upward shift of the payroll tax, probably increases employment in low-paid jobs, although this positive effect might be slightly weakened in the long term. However, this may result in only a slight decrease in the number of unemployed and hence the poverty rate would hardly change at all. Since investment in skills is somewhat discouraged, a general wage subsidy might have a small detrimental effect on economic growth, which would increase absolute poverty a little in the long term. A marginal wage cost subsidy is only paid out for extra jobs or for hiring unemployed job-seekers.As with a general wage subsidy there is no immediate redistributive impact on poverty or unemployment, since a marginal subsidy is, by definition, only paid out if something happens first. In the short term, a marginal wage cost subsidy is of course much cheaper than an equivalent general wage cost subsidy, since only additional jobs or formerly unemployed job-finders are subsidized. So, given a particular budget, a much larger financial incentive can be given. In this respect the most efficient application of a wage subsidy seems to be the creation of additional jobs for the (long-term) unemployed in the public sector. Every Euro spent on these jobs would directly benefit the unemployed who are employed in these jobs. If the wage of these jobs is above the poverty line, this would also immediately reduce the poverty rate. Of course, creating an extra job is more expensive than paying an unemployment benefit or social assistance, so a rise of the tax burden would be necessary to balance the government budget.This tax rise might have some deleterious effects on employment, weakening the positive impact of the job creation scheme somewhat. Creating extra jobs in the public sector might also be more expensive than is at first apparent, because part of the unemployed who obtain these jobs would also have succeeded in finding a job otherwise. This so-called deadweight loss can be quite large, since in many active 46
In Search of the Double-Edged Sword labour market programs a process of ‘creaming’ takes place: the unemployed with the best chances on the regular labour market are selected to take part in the program (cf. Erhel et al., 1996). Nevertheless, in the short term it seems likely that creating additional jobs in the public sector reduces both unemployment and poverty substantially. The long-term effects are, however, far more insecure. The more successful a job creation scheme is, the more likely it is to reduce effective labour supply on the regular labour market, causing an upward pressure on wages. This hurts employment growth in the private sector in the long term.An important issue is, therefore, whether people in subsidized additional jobs move on to regular, unsubsidized jobs. If they do not, the job creation scheme amounts to a structural expansion of employment in the public sector, which has to be financed on a permanent base.The unemployment benefits or social assistance that can be ‘used’ to finance the subsidized jobs in the shortterm do, in principle, have a temporary character. So, in the long term, subsidized jobs cannot be considered ‘additional’ and the full weight of them will be added to the tax burden.This might worsen the deleterious effects on the overall employment level and on economic growth. In the long term, it is also hard to persist in discriminating between the formerly unemployed and other job seekers, so it will be tempting to open these jobs to all applicants. In effect, the question of the long-term impact of subsidized jobs boils down to the question of the economic sustainability of a structural expansion of the public sector. Since the mounting unemployment level in continental Europe in the 1980s is often – at least partly – blamed on the size of the public sector, it is rather doubtful whether in the future an expansion of the public sector could be the solution to Europe’s unemployment problem. If the expansion of the public sector and the rise of the tax burden hurts economic growth and employment in the private sector, one ends up worse than where one started from. In the end, this might result in a substantial increase in the absolute poverty rate, and perhaps even in the relative poverty rate.The warning of the poor Swedish performance in the 1990s should be taken to heart in this respect. To conclude, creating additional jobs in the public sector seems to be quite an effective means to reduce both unemployment and poverty in the short term, but the durability of these positive effects in the long term is questionable. Instead of subsidizing employers in order to promote job growth, some European countries try to induce the beneficiaries of social benefits to actively search for and/or accept available jobs. This is accomplished by some sort of income support to lowwage earners in the form of a subsidy or a tax credit.Although the exact form may differ, such income support is similar to the EITC.The impact on (un)employment and poverty might, however, be different because it is applied in a different labour market context.Whereas the EITC is meant to lift the working-poor out of poverty, in Europe income support is intended to stimulate the transition from social benefit to work by alleviating the poverty trap. With respect to this purpose it is important whether the level of income support depends on the hourly wage rate or on monthly or annual income. In the latter case, most people who receive the income support will probably have a part-time job. But many of them would not be entitled to social benefit in case they were out of work, since their (male) spouse has an income above the poverty line. So, by mainly inducing housewives to accept a part-time job, this measure will reduce neither unemployment nor poverty. If the income support is restricted to working 47
Basic Income on the Agenda people with a low hourly wage (and perhaps a full-time job), the problem might be that there are simply not enough jobs for which the unemployed are qualified. At the same time the unemployed who receive a social benefit will not have any incentive to accept a part-time job, of which a larger number might be available. In the long run – as neoclassical theory predicts – there is probably not much difference between the impact of a subsidy to employers and a subsidy to employees, so it is likely that the aforementioned effects of a general wage subsidy also apply to an income-support measure. To summarize the preceding sections, softening the harsh effects of a liberal free market economy by way of a tax credit for the working poor will probably reduce the poverty rate somewhat, without worsening the unemployment rate, both in the short term and long term. It might therefore result in an inward shift of the trade-off curve, but this effect will probably be quite small.The non-working poor will find no relief, since income support is targeted to the working-poor and the chances of finding a job are not improved. Adding general wage cost subsidies for employers to the generous and passive European welfare state will probably increase employment, but hardly reduce (formal) unemployment and the poverty rate. In the long term these effects will be even smaller than in the short term. A job creation program in the public sector seems to be far more effective in the short term and may reduce both unemployment and poverty substantially.The long-term effects however are dubious and might well result in a serious deterioration of both the unemployment rate and the poverty rate (the absolute rate in particular). Income support to people with a low-paid job might stimulate labour market participation of housewives, but will probably not result in a lower unemployment or poverty rate.
Basic Income: The Double-Edged Sword? Although each of the policies mentioned above will very likely ameliorate the unemployment-poverty trade-off slightly, either in the short term or in the long term, none of them can really be considered a double-edged sword, that is, an instrument that cuts both unemployment and poverty at the same time and is sustainable in the long term. Hence, one might wonder whether perhaps an entirely different instrument, namely a basic income scheme, turns out to be such a double-edged sword after all. To assess the impact of a basic income it is, of course, very important to specify what kind of basic income one has in mind. Because I am looking for some kind of ‘golden mean’ between the American and the European model, it seems reasonable to start with a basic income which is comparable to the level of social assistance in the United States.5 In fact, I will simply assume that this kind of basic income is introduced in a liberal free market economy.This means that the basic income will replace all existing social benefits (except wage-related unemployment and disability insurance), but will be added to the gross income (wage, profit) of all other people. To finance this basicincome scheme the income tax rate will have to be raised by about 10 to 15 percentpoints.6 48
In Search of the Double-Edged Sword In contrast with the aforementioned policies, a basic income is not targeted at the groups that are most in need of assistance, such as the poor and the long-term unemployed. Accordingly, a basic income is often charged for being inefficient: the bulk of basic incomes is paid out to people who are neither poor nor unemployed, so there is a very large deadweight loss. However, if the basic income is implemented as a negative income tax, most people will not actually receive a basic income since it will be cancelled out by the rise in the marginal tax rate. So, in effect, a basic income is also targeted at the low-income groups.A basic income is not, however, tagged to employment status: people with and without a job are treated alike.This has the advantage that a basic income can act as a wage cost subsidy and an income supplement at the same time. Besides, there is no danger of displacement effects, since both employed and unemployed, low-skilled and high-skilled people receive the basic income. The immediate redistributive effect of the introduction of a basic income will be a substantial increase in the net income of people with a low wage and people with (at present) no income, mainly non-working spouses whose husbands earn an income. The higher-income groups will of course lose some money, since for them the rise in the tax rate exceeds the basic income.The immediate impact on the poverty rate will be similar to that of the EITC, for at first, only the working poor profit from the basic income. But since the basic income level is higher than the EITC, the magnitude of the initial effect on poverty will be larger. Nevertheless, due to the fact that the basic income is, by assumption, much lower than the present social-benefit level in Europe, the poverty rate among the non-working population will be much higher than in present-day Europe. In the short term a basic income will evoke different reactions as compared to the EITC. A basic income does not incite employed people to supply more working hours, as the EITC does. On the contrary, both the income effect (of the basic income itself) and the substitution effect (of the higher tax rate) will encourage workers with a low-paid job to reduce their working hours, although it is unlikely that this will cause them to fall below the poverty line. However, a basic income does work as an incentive for the unemployed to try to find a part-time job.After all, the extra income is not deducted from the basic income, so every self-earned dollar or Euro, net of income tax, will be added to disposable income. It is quite probable therefore, that many social-benefit recipients will try to supplement their basic income with a part-time job. On an unfettered and flexible labour market many of them may indeed succeed in getting a small job (especially if many employed people want to reduce their working hours simultaneously), thereby raising their income just above the poverty line. The poverty rate might then drop appreciably. Nevertheless, non-working people who do not succeed in getting a job and who have to live on only their basic income, will stay below the poverty line. The financing of the basic-income scheme might hurt employment if the tax rise is shifted onto employers, and wage costs rise. However, both theoretical and empirical evidence suggests that a rise in the marginal tax rate might compensate the upward pressure on wages of a higher average tax rate (e.g. Koskela and Vilmunen, 1996; Gelauff and Graafland, 1994). This is explained by the fact that a higher marginal tax rate reduces the net worth for employees of a given rise of the wage cost for the employer. So, relatively speaking, it is cheaper to shift priorities from a wage raise to, e.g., a reduc49
Basic Income on the Agenda tion in working hours or an increase in employment. Hence, it is quite likely that a simultaneous rise in both the average and the marginal tax-rate, will not exert a large negative influence on the demand for labour. If a basic income turns out to be a stimulus for shorter working hours, there might even be a substantial increase in the number of jobs as a result of worksharing. In the long term, the crucial point, as before, is whether a basic income will exert a substantial influence on the structural rate of economic growth. Again, this is hard to predict. If the rise in the tax rate, needed to finance a basic income, does not put an upward pressure on wages, there is probably no negative impact on capital investment and hence on productive capacity. As far as investment in human capital is concerned, the negative effect of a higher (marginal) tax rate on the return on human capital may be counterbalanced by the fact that investment costs are lower. The net effect of a basic-income scheme on human capital might, therefore, be quite small, perhaps even negligible. So there does not seem to be a decisive argument that a basic-income scheme will hurt economic growth. The long-term impact of a basic income on unemployment and poverty may not differ much from the short-term effects.The most important question is which share of the non-working population will be able to find a (part-time) job in the long term. Since there is no impediment to a completely flexible labour market under a basic-income scheme, it might turn out that, ultimately, the greater part of the non-working population will succeed in finding a (small) job and hence climb above the poverty line.
A Trade-Off between Short-Term and Long-Term Prospects The foregoing discussion of three different strategies to shift the trade-off curve inwardly by simultaneously reducing poverty and unemployment, does not end with a definite winner.The reason is that there is not only a trade-off between unemployment and poverty, but also a trade-off between the short-term and the long-term impact of labour market policies. If one restricts attention to the short term, there certainly is a clear winner: creating a large number of extra jobs in the public sector for the (long-term) unemployed reduces both the unemployment rate and the poverty rate considerably in the short and medium term. But there is a serious risk that this kind of policy will turn out to be the worst alternative in the long run. Compared to the extension of the public sector, the introduction of a tax credit for low paid workers seems quite innocuous. However, both in the short term and the long term the positive effects are probably quite modest, because the EITC only affects the income of the working poor, who in Europe make up only a small portion of the poor. A basic income-scheme will initially fall short compared to an extension of public sector employment, since its level will inevitably be below the minimum social-benefit level in Europe. Nevertheless, its short-term impact on the poverty rate will be favourable compared to the EITC, since many non-working people who succeed in finding a part-time job will profit from a basic income. In the long term, the crucial issue is the impact of a basic income on the economic growth rate.The economic sustainability of a basic income is subject to much debate. Definitely, many economists are convinced that a substantial basic income scheme is not feasible in the long term. 50
In Search of the Double-Edged Sword Nevertheless, it might also be argued that the abolition of the poverty trap and the even spread of the marginal tax-rate over all income groups would be quite favourable for employment growth and for upward mobility of low income groups. This might offset the negative effects of the high average tax-rate under a basic-income scheme. However, even if my optimism is justified that a basic-income scheme comes closest to a double-edged sword in fighting both unemployment and poverty in the long term, the trouble is that it is certainly not the most effective means in the short term.This fact might explain why it is so hard to find popular and political support for introducing a basic-income scheme. Most people – and certainly most politicians – are not very interested in the possible favourable effects in five or ten years’ time. And it is, indeed, quite harsh to ask the present poor to wait another ten years until they can be drawn out of poverty. So, even if one is convinced of the favourable effects of a basic income in the long term, it might still be wise to propose a basic income disguised as a program that favours the poor and reduces unemployment in the short term. Fortunately, as Van Parijs et al. show in their contribution to this volume, different policy measures can be shaped in such a way that they are, in fact, equivalent. Hence, it seems perfectly possible to start, e.g., with an EITC and gradually transform it into a real basic income. In other words, perhaps one should first forge some ‘ordinary’ single-edged swords and later on try to fuse them into the double-edged Excalibur of a basic-income scheme.
Notes 1
2
3
4 5
The United Kingdom seemed, at least until quite recently, to perform particularly badly by combining the worst of both worlds: sharply increasing poverty and a high unemployment rate at the same time. The Scandinavian countries, however, seemed to have escaped the trade-off in the 1980s by keeping both unemployment levels and poverty rates quite low. The demise of the Swedish model in the 1990s, however, has cast doubt on the sustainability of this kind of policy in the long run. Although economic growth (change in real GDP per year) was higher in the US (2.5 percent) than in the EU (2.0 percent), this was fully compensated for by the higher population growth in the US (1.0 percent) as compared to Europe (0.3 percent, excluding the effect of the unification of Germany). Source: OECD (1995a and 1997). This applies from 1996 on only for households with at least two qualifying children. For households with one child and with no qualifying child the credit rate of the EITC is 34 percent and 7.65 percent respectively. Source: Scholz (1994). Hammermesh (1993: 117), considering a number of empirical studies, states that,‘... it seems fairly safe to conclude that additonal education (....) reduces the labor-demand elasticity.’ That is, the Temporary Assistance for Needy Families (TANF), which has replaced the Aid to Families with Dependent Children (AFDC). If one should choose a basic-income level comparable to the level of social benefits in Europe, it is clear that in the short run this would reduce the poverty rate substantially, since the social benefit recipients would receive at least as much as at present, while all people without income and most workers with a low income would get a higher income. The economic sustainability of such a generous and therefore very expensive basic-income scheme is, however, very shaky.The discussion would therefore be reduced to the question whether such a high basic income can be sustained in the long run.
51
Basic Income on the Agenda 6
52
Suppose that both the social benefit level and the basic income level amount to a fraction f of the average net labour income. Denote the share of the adult population that is employed by e and the share that is dependent on social benefit by s.Then, under the present system, the tax burden t on the employed population that is needed to finance the social benefits, can be calculated from: te=fs(1-t). Hence t=fs/(e+fs). Now, suppose a basic-income scheme is introduced in the form of a negative income tax. For employed people the basic income will then be deducted from their income tax and the basic income for people on social benefit will replace their social benefit.Then only the basic income for non-working people without social benefit is added to the government outlays. So the new tax rate t’ can be calculated from: t’e= f (1-e)(1-t’). Hence t’= f (1-e)/(e+ f (1-e)). Suppose both the social benefit and the basic income are equal to 40 percent of the average net labour income (f =0.4), half of the population is employed (e=0.5) and a quarter is receiving social benefit (s=0.25).Then, under the present system, the tax burden needed to finance the social benefits is 17 percent, while a tax burden of 29 percent is needed to finance a basic-income scheme, hence an increase by 12 percent-point. Similar changes in the tax rate result if other realistic figures are used.
Basic Income and its Cognates Partial Basic Income versus Earned Income Tax Credit and Reductions of Social Security Contributions as Alternative Ways of Addressing the ‘New Social Question’ Philippe Van Parijs, Laurence Jacquet and Claudio Caesar Salinas*
At least three types of transfer policies have been advocated as ways of fighting unemployment without worsening poverty: reductions of social security contributions, the earned income tax credit, and an unconditional basic income (possibly in the form of a negative income tax). Many proponents of some of these are passionate opponents of some of the others.Yet, in the institutional context of much of today’s Western Europe and within some broad limits, each of them can, in principle, be so calibrated as to generate exactly the same profile of tax rates and the same pattern of disposable incomes as the corresponding variant of each of the other two. So, despite all the heat, is there nothing to choose between? Not quite. For beyond the prima facie equivalence, a closer look reveals important, sometimes unexpected differences between the three policies. These differences concern, for example, the impact of the policies on the unemployment trap, on the development of self-employment and informal work, on the accumulation of human capital, on workers’ bargaining power, on Trade Union attitude and on political feasibility. Using a battery of simple graphs, the article spells out these differences and explores their significance.
Introduction: Full Employment without Poverty Europe’s new social question can be said to consist in an emerging dilemma between high unemployment and worsening poverty.This new social question arguably stems from the very solution that had been gradually developed, over the last century, for the old social question, the unsustainable inequality between capitalists and proletarians generated by the industrialization process.Along with public involvement in the accumulation of physical and human capital, the furthering of workers’ rights – most prominently in the form of collective bargaining, labour legislation and social insurance schemes – gradually turned full jobs from unavoidable toil into valuable assets. The resulting pattern of distribution seemed to be on the right track as long as * This paper was written within the framework of project PAI P4/32 ‘The new social question’ (Belgian Federal Government, Prime Minister’s Office, Federal Office for Scientific, Technical and Cultural Affairs). Earlier versions were presented at the Harvard Centre for European Studies (29 April 1998) the Oxford Centre for the Environment, Ethics and Society (14 May 1998) and the VIIth Congress of the Basic Income European Network (Amsterdam, September 1999). Useful comments by Anne Alstott, the editors of this volume and all members of the PAI project are gratefully acknowledged.
53
Basic Income on the Agenda access to a job and the entitlements associated with it – including, for example, extra child benefits in periods of involuntary unemployment or the right to a decent pension for a worker’s widow without any employment record – were secured to the overwhelming majority of households. For a variety of interacting reasons – including technical change, European economic integration, so-called globalization, privatizations, marital instability, educational homogamy, etc. – such a broad coverage can no longer be taken for granted.1 This is why a new social question arises. It consists in a growing proportion of households proving unable to secure access to adequate job assets, with cumulative consequences for both the monetary and non-monetary aspects of the welfare of all their members.This new social question may therefore be said to generate a new class divide, based on job endowments, characteristic of welfare-state capitalism and crucially different from the old class divide, itself based on the ownership of material means of production and rooted in industrial capitalism’s old social question.2 To investigate how the new social question might be solved, one first needs to further specify the underlying diagnosis. Under developed welfare-state capitalism, income redistribution within the population of working age operates mainly through the taxation of labour income (personal income tax, employers’ and workers’ social security contributions) and the distribution of the proceeds to people who are involuntarily unemployed (unemployment compensation, means-tested minimum income guarantee, disability allowances). However effective at reducing income poverty, this pattern of redistribution, if sufficiently developed, displays a strong tendency to generate persistently high levels of unemployment, as a growing number of households becomes unable, for the reasons listed above, to durably achieve through their labour a net income that exceeds the level of social protection.To reduce unemployment without worsening poverty – and to thereby tackle the dilemma in which the new social question expresses itself – one therefore needs to challenge the (near-) exclusive focus of redistribution on the involuntarily unemployed. In other words, one needs to channel more of the explicit or implicit transfers (1) towards low-paid workers (in-work benefits), and/or (2) towards people who choose to stop working or to work less (chosen-time subsidies). This distinction can help us map the landscape of policy proposals currently under discussion, and thereby structure the key socio-economic debate among people with both a sense of justice and a sense of reality.3 The introduction or expansion of in-work benefits aims to increase the total volume of employment by boosting, sometimes indistinguishably, either the demand for labour (the number of low-paid jobs that are profitable for potential employers) or the supply of labour (the number of low-paid jobs that are acceptable for potential employees). They can take the form of (a) reductions of employers’ social security contributions; (b) reductions of workers’ social security contributions; (c) direct employment subsidies or tax credits (or job voucher reimbursements) to firms on account of the number of workers they employ; (d) direct earnings subsidies or refundable tax credits restricted to workers; or (e) employment-motivated subsidies to public sector jobs. These reductions or transfers may be allocated either (1) only to low-paid jobs, or (2) indiscriminately to all jobs (but with a net benefit to low-paid jobs only, owing to the way the scheme is funded), or (3) only to jobs with a characteristic correlated with low pay (such as having an incumbent with a low level of education or a long period of unemployment). 54
Basic Income and its Cognates Unlike in-work benefits, chosen-time subsidies do not purport to boost the total volume of (profitable and acceptable) employment, but to distribute it differently. They include (a) compensation for voluntary early retirement (whether part-time or fulltime), (b) compensation for voluntary career interruption (whether part-time or fulltime, short-term or long-term, restricted to specific reasons, such as parental or educational leave, or unrestricted) and (c) reductions of income tax or (employers’ or workers’) social security contributions for those who choose, individually or collectively, to reduce their working time. These two types of policies seem to work in opposite directions. In-work benefits can be viewed as addressing the unemployment trap: they try to make it easier, more attractive, less costly, at least for those with a low earning power, to increase their paid working time by accepting low-productivity jobs. By making them acceptable, they aim to bring them into existence: the unemployment trap is also relevant to the demand side. Instead, chosen-time subsidies can be viewed as addressing the employment trap: they try to make it easier, more attractive, less costly, at least for those with a low earning power, to decrease their paid working time. Nonetheless, some policy proposals belong to both types. This is the case for any form of general lump-sum transfer or basic income scheme (henceforth BI), which provides transfers to all adults, whether or not in paid employment, either unconditionally (citizen’s income) or subject to their making some contribution in a sense that extends significantly beyond full-time waged employment (participation income): the narrower the interpretation of the contribution condition, the weaker the chosen-time-subsidy character of such proposals and the greater their in-work-benefit nature. Basic income schemes in this sense may or may not be integrated with a universal child benefit system. They may be sufficient to cover basic needs (full basic income) or they may not (partial basic income).They may take the form of ex ante payments to all (in the social dividend version) or rather of refundable income tax credits (in the negative income tax version, or NIT, whether of the linear or non-linear variety). Finally, the per capita level of the payment may be affected or not by the composition of the household.4 In-work-benefit policies tell the unemployed that they can keep some transfer if they work. Chosen-time-subsidy policies tell the employed that they can have some transfer if they work less. BI policies tell both the unemployed and the employed that they can have an (explicit or implicit) transfer whatever they do.
A Puzzling Equivalence In this light, the introduction of an unconditional BI can be viewed as the simplest and most radical among a whole range of proposals that attempt to tackle unemployment without worsening poverty, through changing the pattern of income redistribution under welfare-state capitalism.5 The purpose of this chapter is to contribute to the identification of the main differences between the consequences one can expect from the introduction of an unconditional BI6 and from its two most serious contenders, qua strategies for tackling the core of the new social question, namely the earned income tax credit, currently most popular in the US and the UK, and reductions in the social security contributions on low-paid work, currently most popular in continental countries. Identifying these differences with the help of the most appropriate analyti55
Basic Income on the Agenda Graph G1 Current situation K
Net Income
t’
45º
F D
M
E t = Rate social security contributions t’ = Rate of income taxation
t
O
A
B
C
Gross Income
cal tools and on the basis of the most relevant available evidence is essential to feed a well-informed and dispassionate debate on these issues.7 But, as we shall see, it is no straightforward matter, for much of the standard modelling of a BI and its alternatives is simply blind to the crucial differences between them. A stylized picture In order to bring these differences into focus, we shall start by comparing, on the background of a highly simplified picture of the present situation in continental Europe, the impacts of the three policies on disposable income and material work incentives. To represent in the simplest possible way the (purely arithmetic) relationship between net and gross income under the present tax and benefit system, we initially assume that all gross income is waged income earned in the formal sector and that each household consists of a single adult. Graph G1 offers a stylized picture of the lower range of the income distribution under this assumption.The 45° line represents what the situation would be in case there were no taxation and households would therefore receive the full amount of their gross earnings. Social security contributions are assumed to be paid at source at a proportional rate (t), starting from the very first Euro earned (O). Income taxation proper is also proportional (at rate t’), but only kicks in at a higher level (C): any gross income lower than OC is tax-exempt. Moreover, there exists a means-tested guaranteed minimum income scheme (henceforth GMI), in the form of transfers making up the difference between the net earnings of any household and some chosen minimum level (OM). In graph G1, the lightly shaded area represents the social security contributions. The darker area represents the linear income tax.Triangle MEO corresponds to the means56
Basic Income and its Cognates
Graph G2 Net average tax rates of taxation %
t+t” t+ t’ t
O
A
B
C
Gross income
tested GMI payments to households with pre-transfer incomes comprised between 0 and AB. Finally, the thicker line shows the resulting relation between net (post-taxand-transfer) and gross (pre-tax-and-transfer) income. In graph G2, the solid line shows the corresponding profile of the net average tax rate, defined as the ratio of net taxation (tax plus social security contributions minus benefits) to gross income. In graph G3, the solid line shows the corresponding profile of the effective marginal tax rate, defined as the ratio of the increase in net taxation (increase in tax and/or social securi57
Basic Income on the Agenda Graph G3 Marginal effective rates of taxation %
100
t+t” t+t’ t+t * t O
A
B
C
Gross income
ty payments plus decrease in benefits) to the increase in gross income which prompts it. Graphs G1 and G3 highlight the crucial fact that households with (potential) gross incomes lower than OB are stuck in the unemployment trap.The profile of net income is horizontal in this range, and the effective rate of taxation is 100 percent. If they are unable to earn a gross income higher than OB, households have no financial incentive whatever to earn anything through declared work and are in this sense trapped in a nowork situation. Nor do firms have any incentive to create any such job, even when they are not legally prevented from doing so, as they would find it hard attracting and retaining suitably motivated workers. As characterized above, the new social question can be very simply portrayed in our stylized graph: it consists in a steady increase in the proportion of households whose earning power falls in the OB range, as a result of the interaction of technological, economic and social factors. It is not obvious that such a 100 percent effective rate of taxation on the lowest earnings should be regarded as unfair and urgently abolished.To start with, this highly regressive profile of marginal rates (G3) is fully consistent with an even more highly progressive profile of average rates (G2): those who lose most marginally are also those who gain most overall.8 Moreover, under assumptions commonly made in the optimal taxation literature, the sustainable maximization of the lowest incomes requires the highest marginal rates to affect the lower layers of earned income.9 However, the observation of a steady upward trend in the numbers of the long-term unemployed or of the beneficiaries of GMI schemes has fed a strong suspicion that the lower (OB) range of potential earnings is getting more crowded. And this is a source of concern – precisely the very concern which defines the new social question –, in part because of the direct and indirect impact of this phenomenon on the sustainable maximization of the lowest incomes, but also because exclusion from paid work arguably matters as such, not only as a cause of low income.11 To deal with the problem, our stylized graphs provide 58
Basic Income and its Cognates unambiguous guidance: one must find a way of reducing the unemployment trap, i.e. of lengthening left-ward the lower part of the U-shaped curve of marginal rates (G3), so that it encompasses a larger share of the active population. Reduction of social security contributions (RSSC) One striking feature of the situation depicted in G1 is that some households with gross earnings higher than the income guarantee (OM) nonetheless fall into the trap because of social security contributions pushing their net earnings below OM.11 One obvious suggestion, depicted in G4, is to scrap social security contributions on all earnings below the minimum income (OA = OM), while lowering them to a decreasing degree in the next range (say, between A and C, the point from which income tax starts being paid) and collecting whatever is needed to achieve budget neutrality – in a purely arithmetic sense, i.e. abstracting for the moment from any behavioural effect – by raising the rate of taxation (from t’ to t’’) in the upper range (beyond C).The size of this adjustment will (arithmetically) depend on the number (and distribution) of households in range OC. Because of the unemployment trap mechanism, one has every reason to expect that the range OB will be practically empty.The required net funding should therefore reduce to what is needed to finance the relatively small discount on the social security contributions of households in the BC range. In graph G4, the lightly shaded areas represent the amount by which social security contributions are being reduced and the matching increase in income taxation. The triangle ODF represents the part of the social security contributions that has been scrapped. The darkly shaded area shows the amounts still payable as contributions. People with a gross income higher than C will pay exactly the same amount as before in social security contributions, even though the lower part of their earnings (OA) has also been exonerated.The reason is that the gradual phasing out of the reduction in the AC range amounts to imposing, compared to the initial situation, a far higher rate of social security contribution on each Euro earned in this range.This is reflected in the flattening of the slope of DF, relative to that of EF (45°–t), which has been calibrated to make the reform exactly neutral for someone earning gross income OC. The thick line in G4 shows the resulting relation between net and gross income. The dotted line in G2 shows the corresponding profile of the net average rate of taxation (inclusive of social security contributions and benefits). The dotted line in G3 shows the corresponding profile of the effective marginal tax rate.When compared to the thick lines in G1 and G3, which represent the current situation, this highlights the crucial fact that the unemployment trap, though far from abolished, has been reduced from OB to OA. Barring a reduction in the GMI level M, this reduction could only be achieved at the expense of a significantly increased marginal rate in the BC range and a milder increase in the marginal rate on higher incomes (see G3). In other words, if reductions of social security contributions are to significantly alleviate the unemployment trap without worsening poverty, it is (nearly) an arithmetic necessity that each Euro earned by some of the less well paid among the current workers will be effectively taxed (inclusive of social security contributions) at a significantly higher rate than before.12 Yet, by no means does it follow that they can be regarded as the victims of the operation. Quite to the contrary, as graph G2 shows, they are the main net beneficiaries of the reform in terms of net average tax rates, and hence disposable incomes. 59
Basic Income on the Agenda Graph G4 Reductions of social security contributions Net Income
K
t” 45º F
G D
M
E t = Rate social security contributions t’’ = Rate of income taxation
t
O
A
B
C
Gross Income
Earned income tax credit (EITC) Let us now turn to something (apparently) altogether different. First introduced under the Ford administration, massively expanded under the first Clinton administration, the so-called Earned Income Tax Credit (EITC) has now displaced Aid to Families with Dependent Children (AFDC) as the USA’s main federal transfer programme.13 The central idea of the programme is quite simple. In order to alleviate the poverty of poor workers without damaging their work incentives, let us supplement their earnings with a refundable tax credit the level of which grows proportionally with the level of earnings up to a point at which it stabilizes, before being gradually phased out. EITC itself does not give anything to households who do not work at all. In Europe at any rate, it could not therefore be considered as a complete alternative to the existing income support system. But EITC makes sense as a way of improving work incentives and reducing the unemployment trap even if the existing GMI is maintained.14 To understand this, let us take again as our point of departure a stylized picture of the current situation (graph G1). On this background (with social security contributions collected at source), we assume EITC to come into operation by giving all working households with gross incomes not exceeding OA (if there are any) a refundable tax credit that rises proportionally to their earnings. We want the chosen variant of EITC to be as comparable as possible to the RSSC scheme explored above, and therefore calibrate it in such a way that this rise occurs at a (constant) rate exactly equal to the rate (t) at which social security contributions are levied (graph G5). Beyond level OA of gross earnings, the tax credit is gradually phased out until it disappears altogether for gross earnings in excess of OC. Beyond C, income tax is paid at a somewhat higher rate in order to finance the cost of the reform.This cost is the sum of all the tax credits conceded to earners in the OC range (triangle DOF). But it essentially reduces 60
Basic Income and its Cognates
Graph G5 The Earned Income Tax Credit K
Net Income
t” 45º Q F
G S
M
D E t = Rate of social security contributions
t”=Rate of income taxation
t
O
R
A
W B
C
Gross Income
(arithmetically speaking) to the set of (shrinking) tax credits in the BC range (triangle DEF). For prior to the reform, there was no financial incentive to earn anything in the OB range, and the latter can therefore be expected to be practically empty. One may wonder how EITC’s positive effect on work incentives can survive its being combined with a GMI scheme. For in the range in which the tax credit grows with each Euro of earning (OA), the effective marginal rate remains 100 percent. The whole point, it would seem, is lost. But this inference is incorrect. For the tax credit on the lower layers of income does not only affect the pre-GMI incomes of those whose gross incomes entirely lie in range OA. Its key effect is that it makes it easier to reach a level of gross income (now lowered from OB to OA) above which working starts making financial sense. This can again be clearly seen by examining, on graph G5, the profile of the thick line that depicts the relationship between gross and net income after the reform.This profile, it turns out, is exactly the same as in the case of RSSC (graph G4), and so are the profiles of both average and marginal tax rates (G2 and G3). Because of the specific rates deliberately chosen for the tax credit and its phasing out, the effects of EITC and RSSC coincide exactly in the range OC. And the identity also holds in the range above C, since the net cost of modifying the profile of disposable income in the OC range is obviously the same in both cases and must therefore be reflected in an identical increase in the linear tax rate on the highest incomes. In both cases, therefore, the unemployment trap is reduced by the distance AB, the net (arithmetic) beneficiaries are in the AC range, and marginal rates increase on all gross incomes in excess of OB.
61
Basic Income on the Agenda Partial basic income (PBI) In order to get a large number of households out of the unemployment trap, another, again apparently quite different, idea is to give each of them a basic income (BI), or taxfree income floor, which they can keep whatever they earn.We might think of introducing this BI at level OM, which would enable us to get rid of the current GMI and the associated trap altogether. But let us suppose, for the time being, that we want to proceed cautiously and decide to start with a partial basic income (or PBI) at some lower level OP. In order to make comparison with the previous schemes as convenient as possible, let us simply choose P as the intersection of the DF line and the vertical axis.15 Handing out an income to all, instead of only to the poor, is of course a hugely expensive operation, which we assume to be funded by a massive linear increase (by t*) in the income tax as from the first Euro earned. Existing social security contributions are untouched, and the GMI is kept at the same level OM, with means-tested payments reduced by OP as a result of every household’s means being increased by the amount of the PBI. This reform is depicted in graph G6.A PBI is given to each household at level OP.This has the immediate consequence of shifting the 45° line upwards, as every household’s pre-tax income rises by amount OP. The lightly shaded area below the new 45° line represents the proportional social security contributions, the rate of which remains unchanged (t).Taxation proper, by contrast, needs to be massively expanded to fund the huge new outlays on the PBI.To secure this funding, a proportional tax is now raised from the first Euro earned, at a rate t* chosen in such a way that someone with a pretax-pre-transfer-income of OC ends up, as in the initial situation, with a net income of CF. In G6, the effect of this additional tax on net income is depicted by a straight line PF passing exactly through D because of the specific choice made for the level of OP. Whatever outlay is not paid for in this way has to be funded by an adjustment in the tax rate that applies beyond C. By how much taxation needs to rise in this range is given by the total cost of the PBI minus the taxes now raised in the OC range and the means-tested payments now no longer made in the AB range.16 The total cost of the new tax required to finance the PBI (minus the savings from the reduced cost of the means-tested GMI) is then represented by the massive expansion of the darkly shaded area, relative to what it was in the initial situation (graph G1).17 Once again, we can bring out the consequences of the reform by focusing on the resulting profiles of disposable incomes, average and marginal tax rates. Despite the very different intellectual gymnastics we have just gone through, we end up with the very same three after-reform profiles as in graphs G2 to G4. First, the level of OP and the implied linear tax rate were chosen in such a way as to achieve the same profile of disposable income in the OC range as with the previous two policies. Second, precisely because of these identical profiles in the OC range, the net cost to be picked up by increased taxation beyond C – the complex net result of the introduction of PBI payments, the increase of taxation and the decrease of means-tested payments in the OC range – is also necessarily identical to what it is under the other two policies. Hence, despite the massively larger tax revenues required under this third policy, the economically relevant marginal rates and the politically sensitive disposable incomes are exactly equal, at every level of gross income, under all three schemes. 62
Basic Income and its Cognates Graph G6 Partial Basic Income
45º
Net Income
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Gross Income
The challenge This simple exercise in graph-assisted elementary arithmetic yields the challenge that constitutes our point of departure. We have explored three tools for alleviating the unemployment trap which are commonly associated with very different approaches and certainly sound extremely different: scrapping social security contributions on low wages by exonerating the lower layer of everyone’s earnings, introducing a refundable tax credit reserved for the working poor, and paying all households, rich and poor, a uniform grant.Yet, in each case, we ended up with an identical net impact: all three tools reduced the unemployment trap to exactly the same extent; all three tools modified the distribution of disposable incomes in exactly the same way; all three tools generated an identical pattern of marginal taxation. Of course, this arithmetic exercise was rough and simplistic: it started from an oversimplified picture of the existing complex system of social insurance and assistance; it did not use any precise estimate of the distribution of households across the various ranges of earnings; and it did not incorporate any conjecture about the way in which economic agents would react to the new incentive structure. Bringing in each of these important considerations would of course affect the outcomes. But for the purpose of formulating our challenge, this does not matter in the least. For the changes brought about by using the three tools, as depicted in our graphs, are strictly equivalent, and can therefore be expected to be affected symmetrically by the introduction of each of the considerations just mentioned. In particular, it can no doubt be pointed out that it is only when the behavioural effects of the various reforms are taken into account – as 63
Basic Income on the Agenda households and firms adjust to the new pay-off structure – that the differences between the various policies can come to light. But how could any such difference emerge if the new payoff structures are identical in all three cases? Indeed, when scrutinized closely, most, if not all, existing attempts to formally model the behavioural impact of any of the three policies (in a context in which a GMI is and remains in place) would apply just as much to the corresponding variant of either of the other two policies. Such a formal equivalence constitutes at least prima facie a disturbing challenge for anyone who embraces (sometimes passionately) any one of the three policy proposals, while rejecting (sometimes no less passionately) some of the others. It might be tempting to object that the whole exercise from which the challenge emerged was rigged, since in each case levels and rates were selected so as to generate the equivalence. Some actual proposals of each type are quite remote to the particular one we have considered, and they may therefore generate very different effects.Actual RSSC proposals, for example, tend to recommend that one should scale down contributions on the lower layers of earnings without scrapping them altogether. EITC, as implemented in the United States, differs from the variant selected above because the level of the tax credit, after growing proportionally to earnings as these increase from zero, and before being gradually phased out, remains constant over some range. Some PBI proposals rely at least in part on the taxation of land, energy or consumption, rather than exclusively on an adjustment of the income tax. EITC as it exists and most NIT proposals make the amount of the benefit crucially dependent on the composition of the household. Countless more variations of this kind could be mentioned, sometimes implying massive departures from the profiles of marginal and average tax rates depicted in graphs G2 and G3. Such variations matter a great deal if the effects of specific proposals are to be assessed. But they are irrelevant to the challenge itself, at least within the broad limits within which the parameters of each of the three proposals can be adjusted to preserve the equivalence. What about a full basic income? It must, however, be acknowledged that there are such limits. In particular, the equivalence claim becomes rather far-fetched as one moves from the sort of substantial but partial BI depicted in G6 to a full BI (at level OM), one that could entirely replace the existing GMI without increasing poverty and would enable households to increase their net income as from the first Euro of gross earnings. True, the same net relation between gross and net income could still be achieved through a RSSC that would allow for negative social security contributions, i.e. net employment subsidies, in the OA range. It could also be achieved through an EITC with refundable tax credits making net income jumping all the way to OM as from the first Euro of earning. But these would hardly be natural ways of expanding either RSSC or EITC.18 Advocates of a full BI may therefore feel immune from the threat of the equivalence result. Except in a strained, administratively cumbersome way, what they propose and want cannot be achieved through some version of RSSC or EITC. This is true, but does not make the equivalence irrelevant, even to them. For as a measure designed for immediate implementation, there are two strong reasons for focusing on a partial rather than a full BI. One is that the sudden introduction of an individual BI at the current level of GMI for single people (inclusive of housing allowances, if such exist) would unavoidably create a massive upheaval in the distribu64
Basic Income and its Cognates tion of disposable income between various types of households, in particular at the expense of one-adult households and in favour of two- or more-adult households.The infliction of serious and sudden losses on a broad set of households is not desirable, not only for reasons of political feasibility, but also for reasons of intrinsic fairness which this is not the place to spell out.19 While decisive for short-term proposals of a strictly individual full BI, this objection is much weaker in the case of household-based variants of BI, which are able to mimic the current dependence of GMI levels on household composition and thereby to avoid these massive shifts.20 Compared with this strategy, however, a strictly individual but partial BI, combined with a residual household-based and means-tested GMI, has the symbolic advantage of asserting more clearly that this is not merely improved social assistance but the expression of equal citizenship, and it has above all the crucial practical advantage of making entitlements independent of living arrangements for the bulk of the population, which makes it both administratively cheaper and less intrusive of people’s privacy. Secondly, both an individual and a household-based full BI would naturally be designed to enable households to improve their net incomes as from the first Euro of gross earnings. However, compared to a PBI strategy, this would have the unavoidable consequence of increasing marginal rates of taxation higher up, in the much more crowded middle range of the distribution of potential gross earnings, and therefore of having an impact on economic activity (via weaker incentives to train, seek promotion, etc.) that is likely to be more negative than maintaining an unemployment trap for the least productive, at the very bottom of the distribution of earnings.21 This is no decisive argument at all against moving towards a full BI, especially as both the average gross earnings and their dispersion of gross earnings can be expected to keep growing. But it is definitely an argument for adopting a cautious approach, one which reduces significantly the depth of the trap without getting rid of it in one swoop. Combined with a residual GMI, an individual and universal PBI would do precisely that.22 In this light, the equivalence issue gains a different significance. For supporters of an (eventually) full BI, it offers a potential for converting to a PBI – the first stage of what they want – policymakers who have already travelled so far as to advocate RSSC or EITC.This potential is strengthened if a closer look at the equivalence comes up with some hidden advantages for PBI. It is weakened if closer scrutiny reveals instead some significant benefits of RSSC or EITC, to which the equivalence claim was blind. Of course, a supporter of a full BI is unlikely to regard these benefits as decisive. It is nonetheless in her interest to understand their nature.The most powerful plea is one that grasps the full strength of the opponents’ case. Even for those whom the equivalence claim leaves undisturbed, a close look at it is most likely to repay the trouble.
Unheeded Differences Perhaps the most obvious challenge to the validity of the equivalence claim is that its formulation completely overlooks the crucial distinction between social insurance contributions and redistributive taxation. Once this distinction is made, policies which scrap or reduce the contributions of the low-paid can no longer be viewed as equivalent to policies which provide tax credits or cash benefits without reducing these contributions. For in the latter case (EITC and PBI), the entitlements coupled to the 65
Basic Income on the Agenda insurance contributions remain intact, whereas they are curtailed in the former (RSSC).This asymmetry would stick if the insurance principle were seriously upheld by the advocates of RSSC. But it seldom is, if ever, and rightly so. If the aim is to fight unemployment without increasing poverty, it does not make sense to reduce the oldage pensions, unemployment benefits, health care entitlements or sick pay of people with low earnings, as a quid pro quo for an increase in their take home pay.The versions of RSSC which are relevant in the present context – and which are actually put forward – are therefore versions which do not affect social insurance entitlements any more than EITC or PBI.The putative equivalence still sticks.Yet, there are important differences that derive from the nature of the three reform schemes, rather than from the particular variants adopted.
Unearned Income, Self-Employment and the Informal Sector Actual proposals do not only vary in terms of the profiles they imply.They can also be more or less selective. For example, RSSC proposals are sometimes restricted to specific industrial sectors, or to newly created jobs, or to workers with a low level of education or a long record of unemployment. EITC was initially confined to families with children. In the form of a non-contributory and non-means-tested pension, a BI restricted to the over 65s already exists in some countries. Many of these features can be readily disqualified as potential responses to the equivalence claim, as they can easily be mimicked within the framework of the other two policies. But some of them – for example, a restriction to waged workers of the formal sector – cannot be so easily dismissed because of their link with intrinsic differences between the three schemes. This difference can only appear as one relaxes the simplifying assumption made so far that household incomes consist entirely of formal sector wages. Indeed, because of their constitutive features, RSSC, EITC and PBI do not relate in symmetric fashion to the distinctions between earned (or labour) and unearned (or non-labour) income, between waged employment and self-employment, and between formal and informal income.This can be brought to light, in the simplest possible way, as follows. PBI better for poor rentiers, pensioners and divorcees? Let us define unearned (or non-labour) income as any form of income that does not consist in direct compensation for the performance of labour, for example, interest on savings, capital gains, contributory pensions, invalidity allowances, or alimonies received from divorced partners. As a simplifying, but not too unrealistic, assumption, suppose that unearned income is not subjected to anything analogous to social security contributions, and hence is only taxed, in the initial situation, from level C, with net unearned income rising along the 45° line OK. Obviously, for someone with nothing but unearned income, RSSC and EITC leave the profile of disposable income unchanged (along MDK), except for the usual tax adjustment for gross incomes exceeding C. But PBI stands out. The new levy introduced to fund the PBI applies at the same rate (t*) and from the first Euro to both unearned and earned income. Hence, GMI aside, the net income of a household with nothing but unearned income will move along PK in graph G6.23 There will therefore be a net gain for households with an unearned income in the UA 66
Basic Income and its Cognates range, who can now combine the latter with the PBI in such a way that they reach a net income in excess of the GMI and hence escape the range in which they would qualify for means-tested payments.There will also be a net gain – represented by the distance between the old OK line and the new PK line – for households whose unearned income falls between OA and OC. Somewhat paradoxically, the PBI scheme is the only one that imposes a tax on low unearned income – at a sizeable rate and from the first Euro – and yet it makes some of the more modest recipients of this unearned income better off that they would be under the other two proposals and under the status quo. If unearned income were, for some reason, exempted from the new levy or subjected to a much lower rate, the profile of net unearned income (inclusive of PBI) would not be lifted from OK to PK, but from OK to PY, with the necessary consequence that even recipients of unearned incomes far in excess of OC would benefit. Since all are entitled to the PBI, there is of course no principled reason to exempt any income recipient from contributing to it. But there may be pragmatic reasons, for example when the cost of detection of major categories of unearned income is prohibitive or their responsiveness to taxation very high. Under such conditions – which quite plausibly apply to capital income – a PBI would seem to necessarily involve, relative to both the status quo and the other two policies, a large transfer towards the recipients of unearned income, including very affluent ones.This would count as a serious, indeed conceivably as a fatal objection to PBI (and, even more, to a full BI) if one could not rely on the existence of a strong positive correlation between capital income and other income. Most people with a sizeable capital income can be expected to also have either a more detectable form of unearned income (typically, retirement pensions) or labour income on which a levy can reliably be raised. In the terms of graph G6, few households with a total income above C, if any, will therefore be net beneficiaries of the proposal, as the additional levy on their labour or pension income will completely recapture their PBI, or nearly so, and increased taxation beyond C is likely to erase any remaining gain. Nonetheless, it is true that, compared to the status quo, EITC and RSSC, PBI is more favourable to modest rentiers, pensioners, recipients of alimonies and other forms of unearned income, even if the new levy applies equally to unearned and earned income. Not only does PBI shrink (from OA to OU) the savers’ poverty trap (i.e. the range in which there is no incentive to accumulate entitlements to such income at the lower end of the income distribution), but it also improves the net incomes of unearned and earned income recipients alike in the AC range, whereas EITC and RSSC restrict this improvement to earned income. Because of this difference, the net cost to be made up by higher taxation (on all incomes) above C is unavoidably higher under the PBI. How much higher depends on how much unearned income is being received by comparatively poor households. EITC and PBI better for small shopkeepers and freelance artists? Let us now leave unearned income aside and consider the asymmetry between waged and self-employed labour. If these are subjected to the same level of social security contributions, RSSC, EITC and PBI have strictly symmetric effects, assuming of course (as is reasonable under the stated condition) that RSSC is not restricted to waged labour. But take the other extreme case, in which self-employed labour is con67
Basic Income on the Agenda tribution-free.24 RSSC then applies exclusively to waged labour and achieves two things. It brings the marginal rewards of self-employed and waged labour in line with one another up to level A (in graph G4), thus bringing down the unemployment trap for waged employment (OB) to the same level as for self-employment (OA). At the same time, it steeply increases the gap between the marginal rewards for the two types of work in the AC range, with the self-employed moving from D to K, and the waged workers from D to F, as their gross earnings increase (see graph G4). EITC, under these conditions, has a very different impact, even if its level is determined (as assumed throughout) by a person’s post-contribution (as opposed to gross) income (see graph G5).While treating waged employment in the same way as RSSC, it lifts the net rewards for self-employment above the 45° line (to OSQ) over a range of gross (and hence net) income from self-employment OW, itself equal to CF, the net wage at which the tax credit for waged employment is completely phased out. Hence, while EITC reduces the unemployment trap from OB to OA for waged employment (like RSSC), it reduces this trap from OA to OR for self-employment (whereas RSSC leaves it unchanged). Under PBI, all earnings are subjected to the same increase in taxation from the first Euro, but being exempted from social security contributions, earnings from selfemployment can exceed the GMI level (PM) more quickly, with the unemployment trap for self-employment lowered from OA to OU, while the unemployment trap for waged employment drops, as usual, from OB to OA (graph G6). Consequently, in the extreme case in which self-employment escapes all social security contributions (and to a reduced extent in all cases in which it is subjected to a lower rate than waged labour), EITC and PBI can be viewed, relative to RSSC, as favouring self-employment by making it profitable from a lower level of gross earnings (OR in graph G5, OU in graph G6) than was previously the case. As usual, the net gain for the low-earning selfemployed (RW in graph G5, UC in G6) needs to be made up by higher taxation above C. How much higher depends on how high a share of total income is earned by selfemployed people in the relevant ranges. PBI better for LETS traders, volunteers and drug dealers, but worse for the tax base and moral guidance? Finally, consider a third possibility of asymmetry in the taxation of two types of income: labour income can be either formal – and hence subjected to discounting in the means-testing of benefits, to social security contributions and to taxation – or informal and escaping all of this. Informal work in this sense can consist of drug dealing and moonlighting at odd jobs, but also of producing one’s own food, looking after the household in exchange for a share in one’s partner’s purchasing power or performing volunteer work in exchange for a number of in-kind advantages (free meals and phone calls, computer use, and accommodation) or taking part in a network of (untaxed) exchange of services (the so-called LETS schemes). If a person’s labour income is entirely informal, obviously she could not, by definition, benefit from either RSSC or EITC, whereas she might, in principle, benefit from PBI. But given that there is a means-tested GMI in the background, to the full amount of which she is entitled (under the above assumptions) since she has no formal means, this does not make any difference.Whether or not any of the three schemes is in place, the person could be said to use her guaranteed income OM as a full BI. Her informal 68
Basic Income and its Cognates income can be fully combined with it, and her total income therefore rises from M along the top 45° line of graph G6. Suppose now, more realistically, that what income is taken into account for the sake of means-testing is considerably more comprehensive than what is taken into account for the sake of taxation (and social security contributions): it includes, for example, an estimate of the market value of one’s home and other belongings, or the claims one may be able to make on the help of close relatives, whether in cash or in kind, or some degree of self-production, or various black-market earnings far more likely to be detected by the social worker than by the tax controller. To make the contrast in the sharpest form, let us suppose that informal income is completely untaxed, but fully part of the means by reference to which means-tested benefits are being assessed.The profile for an informal worker then becomes MDK in the initial situation as well as under RSSC and EITC (see graphs G1, G4 and G5). But here again, and even more sharply than with unearned formal income, PBI stands out. For the informal worker receives the PBI at level OP and can start earning at a zero rate of tax as from that level (along the PY line in graph G6). Hence her disposable income profile is MXY rather than the less favourable MDK. Relative to the other two formulas, therefore, PBI can be seen as a subsidy to informal labour at all levels of earnings: someone with informal earnings at level CK, for example, will remain at that level after taxes and transfers under RSSC and EITC, while being promoted to CK+CI under PBI (see graph G6). How much of an advantage or a disadvantage this is heavily depends on the nature of the informal work thereby encouraged and on the way it is distributed among various levels of earning power. If poor people have little access to informal income sources and all the PBI does (in this respect) is top up the underground income of a handful of wealthy mafiosi, it constitutes, at best, wasted money. But suppose, perhaps more realistically, that the potential for informal earnings is not insignificant in the lower reaches of earning power.Whereas PBI has exactly the same impact on the formal unemployment trap as the other two schemes (down from OB to OA), it has a dramatically stronger impact, under the stated assumptions, on the informal unemployment trap, which it brings down from OA to OV (in graph G6), while the other two schemes leave it unaltered at OA. Owing to the PBI, people need to possess an informal earning power of only OV for them to have access to a total net income in excess of OM and hence find themselves beyond the maximum limits for means-tested benefits.25 Exiting the range in which the means test applies not only has the advantage of avoiding what may be regarded as unwelcome intrusions into the claimants’ privacy (on a scale that far exceeds what a tax controller could get away with). More important for our present concerns, it enables poor people in the VA range (graph G6) to get out of the trap and start earning in the informal sphere without being taxed at an effective rate of 100 percent. Moreover, the administrative costs of the means test can be expected to shrink significantly, at least if only a small proportion of those currently on means-tested benefits have earning powers in the very lowest range OV. On the other hand, this very reduction in the reliance on the means test may be considered a serious disadvantage by those who view transfer schemes as an opportunity for enforcing proper conduct.The very fact that a PBI would, relative to the other two schemes, reduce the scope for meddlesome casework from the OA range to the OV range of earning power then counts as an argument against it.26 So does, less controversially, the fact that the dramatic lowering of effective taxation on informal 69
Basic Income on the Agenda income in the VA range under PBI, may lead some people who would be earning a formal income beyond level OA under any of the other two schemes to substitute some informal for formal earnings, thereby reducing the tax base. This effect may or may not be offset by the fact that those in the VA range of earning power will have, relative to the other two schemes, a somewhat greater incentive to do some formal work too and, above all, to maintain their skills and sanity.
Underneath the GMI A second set of differences emerges – even if all income consisted of formal waged income – as soon as one allows for the possibility that some households’ incomes may fall below the GMI by virtue of their choosing to earn less than this amount. That some households may have an income below the GMI is an obvious possibility in those countries in which the GMI is restricted to certain categories of households (e.g. to families with children or to single parents). But even in those countries in which there is an effective and general GMI applying to all types of households, it is possible for people to find themselves under level OM because the right to GMI payments is usually subjected, not only to a means test, but also to some willingness-to-work test. Consequently, people who willingly reduce their working time in such a way that their gross income falls in the OA range are typically not entitled to having their disposable income lifted to level OM. If an income equal to OM were strictly necessary for survival, this would be an insignificant fact, as no one would make use of such an option. But in reality, even if the GMI does not exceed sheer survival requirements, account must be taken of the scope for intertemporal transfers (living off one’s savings or one’s loans) and interpersonal transfers (above all within households). Hence, finding oneself in the OA range as a result of choosing to give up, be it temporarily, part or all of one’s job, is far from inconceivable. PBI better for low-paid working-time reducers? For this reason, it is not irrelevant to look at the profile of disposable incomes, under the three policies, in the gross income range OA. Under RSSC and EITC, disposable income falls steeply along the 45° line (DO) as people voluntarily reduce their working time (see graphs G4 and G5). Under PBI, in sharp contrast, disposable income goes down far more mildly in the same circumstances (along DP in graph G6).27 This basic fact can easily be used to clarify and qualify our earlier suggestion that, unlike employment subsidies of any kind (such as RSSC and EITC), BI schemes can be advocated, not only as unemployment-trap-reducing in-work benefits, but also as employment-trap-reducing chosen-time subsidies. When displaying the apparently identical net outcomes of all three policies, the thick line that shows the profile of disposable incomes in graphs G4 to G6 is simply blind to the fact that if people choose to earn less than OA, RSSC and EITC send them down the DO track, whereas PBI keeps them on the DP line. Relative to RSSC and EITC, therefore, PBI cheapens, and hence encourages, working time reduction in the OA range. How much of an encouragement this proves to be depends on how many people find it feasible and sufficiently attractive to live below the GMI with voluntarily reduced working hours.28 70
Basic Income and its Cognates For those who believe that the expansion of individually chosen part-time jobs is desirable, this is an important argument in favour of PBI against RSSC and EITC. But others believe that such an expansion is undesirable – for example, because of the training or organizational costs it generates, because of the gender bias in its distribution, or because of the lesser involvement in the work atmosphere that may be associated with it.They can therefore use the very same difference to substantiate their preference for RSSC and EITC over PBI.They must, however, be careful not to overstate their case. For whereas the policies have sharply diverging relationships to working time reduction at sub-minimum levels of earnings (the OA range), all three of them favour it in a strictly symmetrical way in the probably more crucial BC range. For people whose earnings are in this range, the three policies decrease identically the cost of reducing gross income, and hence working time, since any voluntary move from C to A is now matched by a smaller decrease in disposable income than was the case in the initial situation (graph G1).29 PBI necessarily more expensive in an economically relevant sense? Like the asymmetries pointed out when different types of income are considered, the asymmetry just emphasized underneath the GMI level unavoidably upsets the net cost equivalence between the three schemes, and hence their impact on the tax adjustment required in the upper reaches (above C) to secure budget neutrality. But which way the resulting net cost difference will go is a complex and contingent empirical matter. Voluntary working time reducers in the infra-minimum range OA are entitled to higher net transfer payments under PBI than under RSSC and EITC.This justifies a strong prima facie expectation that the latter two schemes must be cheaper than the former two, not only because the people who happen to find themselves voluntarily in that range in the initial situation (graph G1) will cost more under PBI, but above all because PBI creates a greater incentive to give up some tax-paying working time and move into this range. But there are two countervailing effects which may more than offset this difference. Firstly, the financial sanction if one were to openly admit that one deliberately keeps one’s working hours down in the OA range is notably tougher under RSSC and EITC (it corresponds in both cases to the gap between MD and OD in graph G6) than under PBI (it corresponds in this to the gap between MD and PD). Given the choice between being fully and (allegedly) involuntarily unemployed and being partly and (openly) voluntarily unemployed, some people may choose the former option under RSSC and EITC (and hence cost the government the full amount OM), whereas they would choose the latter option under PBI (and hence cost the government the smaller amount OP, minus the tax and contributions, which rise from zero to DY=OP as gross earnings rise from zero the break-even level OA).This assumes (plausibly, it seems to us) that the inconvenience to the claimant of claiming the full means-tested, willingness-to-work-tested GMI (intrusiveness, dole queues, job applications, risk of being caught cheating, etc.) are neither so great that everyone would choose instead to work part-time under RSSC and EITC, nor so mild that no one would choose the parttime option even under PBI. PBI would then offer a potential for savings by dissuading people from relying on the full amount of the GMI and encouraging them instead to earn a (low) taxable income. Secondly, there is the work sharing aspect of the encouragement of voluntary working time reduction by PBI. As mentioned before, this encouragement – espe71
Basic Income on the Agenda cially the one which is specific to PBI (in the OA range), as opposed to the one common to all three schemes (in the BC range) – is only sizeable for those with a low earning power. But this is also the category of workers which is most significantly plagued by involuntary unemployment. The very fact that some voluntarily reduce their working time, be it temporarily – for example, in order to look after their children or acquire further education – frees slots for some of the others. This is of course at the core of the chosen-time-subsidy aspect of the PBI strategy. But it is also a potential source of savings, as the net transfers to these newly employed people shrinks from OM (or whatever higher level of unemployment benefit they are entitled to) to OP minus the taxes and social security contributions on their earnings. Suppose for example that two workers with gross earnings OB decide to halve their working time under PBI whereas they would not have done so under RSSC or EITC (because their disposable income would then have fallen too steeply along GDO, rather than GDP, in graph G6). Suppose further that both halves of their jobs are taken up by an unemployed previously claiming benefits at level PM (in addition to her PBI at level OP). PBI payments are obviously unchanged. So are taxes and social security contributions, with the third person now paying what the first two no longer pay. But a net saving of PM (or more) is booked by virtue of the unemployment benefit no longer needing to be paid. This is the dividend from work sharing, from the mutually beneficial redistribution of leisure. Added to the dissuasive effect on GMI claimants mentioned before, it is bound to offset at least in part the direct net cost that stems from PBI, giving a better deal to the low-paid voluntarily underemployed.What the net balance is – and hence whether the tax rate beyond C needs to be readjusted upward or downward relative to RSSC and EITC – depends on such factors as the availability, among the involuntarily unemployed, of suitable substitutes (qua location and skills) for the voluntary timereducers, and can therefore not be told a priori. PBI better for low-paid quitters and strikers? The same difference in what happens below A is also most relevant to assess the difference between the three policies in terms of the redistribution of bargaining power they bring about. If a worker chooses to quit because (s)he is fed up with her working conditions or pay level, the immediate cost (s)he has to bear is smaller by amount OP under PBI than under the other two policies. Similarly, workers on strike would keep receiving their PBI (which could therefore be regarded, among many other things, as a systematic collective subsidy to strike funds), while they would obviously lose all benefits from EITC or RSSC. 30 For highly paid workers, this is of little significance, partly because the PBI corresponds to only a small fraction of their earnings, and partly because, for most of them, their bargaining power derives mainly from the alternative job opportunities they have. But for poorly-paid, low-skilled workers, even a low PBI can make a significant difference to their bargaining power, with noticeable consequences for both the working conditions and the pay of the jobs in which employers will want to keep them. It does not follow from this difference that the quit rate can be expected to be higher or strikes to be more frequent under PBI. Simply, the fact that the threat of quitting or striking needs to be taken more or less seriously, depending on the scheme adopted, will systematically lead to different deals. This argument, again, is two-edged, as some may 72
Basic Income and its Cognates regard this equalization of bargaining power (however modest) as a major danger: for those concerned that there should be enough people to do cheaply the dirty jobs, EITC and RSSC offer, for this reason, a better promise. PBI better for human capital accumulation? In the discussion on BI or NIT, it is sometimes pointed out that the incentive to improve one’s skills and thereby one’s earning power will be reduced. This can be attributed in part to the rise in marginal tax rates upward of gross income OB (in graph G6): the return to skill acquisition, and productive effort generally, is significantly reduced in the BC range, in which many people start their working careers, and to a lesser extent also beyond C.The negative impact on incentives can also be attributed in part to the fact that some young people will be satisfied to supplement their PBI with the income from a low-skilled more or less regular job in the AB range, whereas in the absence of a PBI they would have bothered to acquire further skills so as to fit into a more productive job in the BC range.31 The overall result would be a less educated labour force and a less productive economy than could be, and would otherwise be, the case. This is a potentially important argument, which applies in exactly the same extent to RSSC and EITC as it does to PBI, since in the AC range all three policies amount to straightening DEF into DGF (see graphs G4 to G6). How weighty this argument is against the family formed by all three policies needs to be assessed bearing in mind, among other considerations, the following three. First, intra-organizational promotion provides non-monetary incentives (power, titles, non-taxable privileges) no less than monetary ones, and the former are left unaffected by the change. Second, rises in marginal tax rates may go hand in hand with rises in marginal returns, if it operates on the background of a growing inequality in gross earning power – which is precisely one central aspect of the trends which are creating the problem in which the new social question consists.Third, the human capital of the people stuck in the unemployment trap is getting quickly eroded, owing to a powerful positive feedback process of skill obsolescence and motivational adjustment, which the three policies, by reducing the unemployment trap, are helping to keep in check. All these considerations apply symmetrically to all three policies. If there is a significant difference between them, as regards human capital accumulation, it must again be due to differences arising below the GMI level. One possibility is that some people may be happy to combine their PBI not only with a low-paying job in the AB range, but also with an even lower-paying job in the OA range, one which would yield them a far lower disposable income under RSSC and EITC (see the gap between PD and OD in graph G6).Would some people really choose to durably stick to such a modest standard of living by voluntarily refraining from upgrading their skills? Perhaps. But this difference is quite likely to be more than offset by the following three countervailing differences. First, one standard reason for voluntarily and substantially reducing one’s working time in such a way that one’s disposable income temporarily falls below M, is precisely that one may wish to invest in further education and training so as to boost one’s future earning power. In this fashion, a PBI can work as a permanently available study grant, whereas RSSC and EITC cannot. Second, more speculatively, another major reason for choosing to temporarily reduce one’s earnings below the (permanent) subsistence level is one’s desire to spend 73
Basic Income on the Agenda more time with one’s children at the time they need it most. Given some striking standard empirical facts about the determinants of educational achievement – such as the strong predictive power of one’s mother’s educational level – freeing poor households from a compelling pressure to work full time at the expense of bringing up their children as they would like to can be a major contribution to the productively usable human capital of the next generation. Thirdly, the impact on bargaining power associated, as pointed out above, with the differential cost of quitting and striking is likely to show up in the training content of the low-productivity jobs (in the AB range) which the reform aims to make viable: workers with a higher bargaining power will be less willing to put up with low pay unless the job provides them with a useful experience or training which could help them move up.The heavier the cost to them of quitting or striking, on the other hand, the less discriminating they can afford to be and the more likely the low-skilled are to be stuck in dead-end jobs.32 Whether directly or indirectly, therefore, the improvement of the lot of those who choose to find themselves in the OA range would seem to enable PBI to foster a better educated work force than RSSC and EITC.
Universality PBI more effective as an instrument against poverty? Finally, the most striking difference between PBI and the other two instruments is that it is given ex ante to all, rich and poor.33 In terms of the fight against income poverty, this has the obvious advantage of making sure that at least some purchasing power reaches the poorest. The rate of take up for universal benefits is systematically higher than for means-tested ones, owing both to the difficulty of providing the information to those entitled to claim them and to the stigmatization that tends to accompany any benefit scheme restricted to the poor. Of course, a PBI does not lift people out of poverty and therefore does not make the GMI dispensable. But for those people in the OA range for whom the GMI scheme does not do what it is supposed to do, whether permanently (because of the inhibition generated by intimidating or humiliating procedures) or temporarily (because of information failures or file-processing delays), it makes a big difference whether they can move along the PD curve, as the PBI regime enables them to, rather than along the much lower OD curve, as the other two policies restrict them to in the most favourable case, or even along the even lower OZ curve if tax credits take a while to reach their beneficiaries under EITC (see graph G6). How much of a difference this makes clearly depends on the relative effectiveness of GMI and PBI at honouring the entitlements of people in the OA range.The greater the gap, the greater the additional net cost of PBI (to be offset again by tax adjustments beyond C), but also the stronger the prima facie case in its favour as an incentive-friendly but nonetheless effective tool against income poverty. On the other hand, it may be argued that it is precisely this administratively straightforward nature of the transfer, the fact that it does not rely on means-tested transfers, that makes PBI less effective as a strategy for tackling those aspects of poverty which do not reduce to income poverty. Desperate isolation, the inability to manage one’s income or a shaky mental health may often be no less crippling than the lack of adequate purchasing power. Against this background, the social workers’ implementation 74
Basic Income and its Cognates of the means test, while sometimes perhaps unpleasantly intrusive, provides precious opportunities for them to effectively identify and tackle these further problems. This argument would definitely be worth a close look if we were here talking about a full BI. But a PBI is coupled with a residual GMI which gives social workers the opportunity and power to help as aptly as they can in those cases in which non-income aspects of poverty require it. Indeed, by automatically softening the blow of sudden adversity (by virtue of its dispensing with the need for any claiming procedure) and by lifting more people out of the means test than the alternative schemes (at least if there is something to the informal work argument and the working-time-reduction argument) a PBI might enable social workers to do a better job by concentrating, in a less emergency-dominated way, on the people who really need their professional help. PBI better at handling the uncertainty side of the unemployment trap? Field researchers have pointed out that what keeps many of the excluded from accepting a job or actively looking for one is often less the lack of an income differential between no-work and work than the fear of leaving the relative safety of a regular flow of benefits for the uncertainty of a job that may pay late or prove too demanding. For the risk of a period without any income is something households at the margin of solvency cannot responsibly afford.34 If this is the case, the trap may not be suppressed for someone with a gross earning power of OB for example, by the sole virtue of the corresponding net income being lifted by the reform from BE to BG (for example in graph G5). People may therefore stick to joblessness with the lower income level OM, because of the feeling that the higher income BG is less safe: the job can be lost, and in case it is lost, going back to OM is often far from automatic. Hence, it may prove of far more than marginal importance to point out that under PBI, not under the other two policies, part of BG is made totally safe, because people keep it no matter what.With a PBI, the net income BG of someone with gross income OB is neither less nor more than under the other two policies, and the income-differential aspect of the alleviation of the poverty trap is therefore identical (as reflected in graph G3, or in the thick lines of graphs G4 to G6). But under PBI, jumping from earning nothing to earning OB is less of a risk than under EITC or RSSC because only the difference HG (in graph G6) is affected by uncertainty, while the firm flow BH is unaffected. The importance of this difference can vary from the trivial to the crucial, depending on (1) how large a share of net income the PBI represents, (2) how insecure the relevant jobs and earnings are (private sector precarious jobs, self-employment, workers’ co-operatives, etc.)35 and (3) how complicated, lengthy, humiliating and in other ways difficult it is to get the flow of means-tested benefits running again once the job has vanished, or has been taken away by the employer or been given up by the worker. PBI less appealing to Trade Unions ? The fact that PBI is paid ex ante to all may be better, for the reason just explained, for the sake of fighting unemployment. It might also provide a reason for expecting PBI to be less popular with the Trade Union movement than the other two policies.36 That this should be the case is not obvious from the considerations explored so far.True, PBI is comparatively more favourable to informal labour than the other two schemes, which makes it unlikely to be a vote catcher among organized formal workers. But 75
Basic Income on the Agenda compared to RSSC, it has the advantage of leaving untouched the level of social security contributions – which, unlike tax revenues, are often to a notable extent under Union control. Moreover, PBI can be seen as a massive contribution to strike funds. Of course, unlike strike funds of the standard form, PBI is not Union-controlled. It gives a power to strike without the Union’s consent and may therefore prove a mixed blessing from the standpoint of the Union’s leadership and its ability to effectively mobilize working people. Nonetheless it should, all in all, strengthen the bargaining power of organized labour. So, why are the Unions not more enthusiastic? If a Union’s objective can be reduced to the interest of its median member and if the latter can be depicted as earning a gross wage in excess of OC – and hence having nothing to gain from the reform – then the Union’s being at best lukewarm should come as no surprise. But this would apply symmetrically to all three policies and would therefore do nothing to predict a specific reluctance to embrace PBI. The PBI’s ex ante payment may be the key. For even if a worker’s net income, her effective marginal tax rate, her comprehensive average tax rate and the income difference between her income at work and out of work (whether social assistance or unemployment benefit) are exactly the same in all three cases, her take-home pay is significantly lower under PBI than under the other two schemes (in graph G6, IF instead of CF for a worker with level CK of gross earnings).The difference is exactly the amount of the PBI, which the worker’s household receives independently of the worker’s pay package.The household should not care, but the Union will, as the fraction of the worker’s material welfare which it is perceived to control, or at least affect, will be significantly curtailed.This perception, no doubt, rests on an illusion, since in all three cases the public tax-and-benefit system modifies the distribution of gross incomes in exactly the same way. But this is an illusion of a particularly credible and possibly powerful kind. If take-home pay is a far smaller proportion of a household’s income under one scheme than under another, how can this fail to affect the degree of unionization or the ease with which the Union leadership can mobilize the rank and file?37 To the extent that Union support is important to secure the adoption of one of the policies, this effect, if significant, provides a tactical case for EITC, RSSC and the NIT version of PBI against the latter’s universal, ex ante version. But there may be more at stake than political feasibility. The Unions’ concern with the non-decrease of takehome pay may generate a different dynamics of labour costs depending on which of the policies is adopted. For if such a concern is of decisive importance, the introduction of a universal PBI and any increase in its level would affect collective bargaining very differently from corresponding advances with EITC, RSSC or NIT. As organized workers insist on protecting their net wages, not only their net incomes, they would trigger off a wage-inflationary process, with detrimental effects on the achievable trade-off between unemployment and non-accelerating inflation. PBI politically less attainable but more stable? A final asymmetry that stems from the same fundamental difference between the ex ante PBI and the other schemes concerns their political chances in the democratic process. There is bound to be a tremendous difference in perception between an income that suddenly starts being paid separately to every citizen (PBI), and such more localized and less visible changes as a modification in the schedule of social security 76
Basic Income and its Cognates contributions which will remain unmentioned in any document routinely received by workers and citizens (RSSC), or a tax reimbursement to the working poor (EITC). In all likelihood, workers in the BC range will soon notice, under each of the three policies, that they have become better off, though possibly only with some delay, owing to the length of the tax procedure (especially with EITC). Gradually, people will hopefully also start discovering the increased potential in the AB range or indeed, as far as voluntary underemployment is concerned, in the OA range. Moreover, the tax adjustment above C, if significant, is also going to be felt by some. But all this is relatively minor and local, compared to the highly visible introduction of an income henceforth paid from the same source to every citizen, coupled with a dramatic increase in the apparent rate of taxation. There are at least three reasons why this feature may make the introduction of PBI more difficult than equivalent variants of the other two alternative policies – and indeed the much closer NIT – even assuming that there is no difference whatever in their economic consequences and in their impact on the material fates of all categories of households. One reason is simply that, being less conspicuous, the other policies can be phased in more swiftly by politicians clever enough to alert the likely beneficiaries without attracting too much attention from those likely to lose out (those with incomes above C). A second reason is that opponents can easily exhibit the (alleged) absurdity of handing out benefits to scores of people who do not need them in the least, namely with a gross income in excess of OC. 38 It would not be very hard for them to be persuasive, as their audience may well fail to see the equivalence between PBI and the corresponding NIT (with all transfers on graph G6 netted out) and be eluded by the subtle superiority of giving to the rich in terms of the interests of the poor (whether because of higher take-up rates or the trap aspects discussed earlier in the present section). A third reason is the scare of high apparent tax rates. Whereas RSSC and EITC (and NIT) can be sold as tax cuts (admittedly compensated by a somewhat higher taxation in the range above C), PBI cannot but be perceived as a massive increase in government expenditure and taxation. One can no doubt devote some energy to explaining that what matters is the profile of effective tax rates and disposable incomes, which happens to be exactly the same as in the tax-cut alternatives, and that one should think about the cost of redistributive programmes quite differently from the way one thinks about the cost of substantive expenditure programmes.39 But, in some countries at any rate, it is nonetheless likely that opponents to the proposal (whether in good or bad faith) will manage to focus public attention so intensely on this huge cost to the tax payer that, for a mainstream politician, defending it will look tantamount to political death. PBI, therefore, does not fare too well in terms of political attainability. On the other hand, it may fare better in terms of political stability.The experience with the Alaskan Dividend Scheme provides some evidence in support of this conjecture. Despite occasional observations that the money would be better spent if it were more targeted or if it were used for public investment, the scheme is proving a political sacred cow.40 By contrast, being less visible, tinkering with contribution rates and tax rebates to the lowpaid may for this reason be easier, not only to introduce, but also to roll back. Further indirect support for this claim can be gathered from the discussion on family allowances.True, there has been a wave of reforms subjecting previously universal child benefits to a means-test of varying severity on the grounds that a universal payment to 77
Basic Income on the Agenda all mothers regardless of a family’s means was wasteful (as Thatcher’s government put it). But the first two countries to travel this road have since returned to a universal system (Denmark in 1981 and Japan in 1985) and similarly motivated government meanstesting plans were successfully resisted in several other countries, including the UK in 1987, Ireland in 1991, Sweden in 1995 and France in 1998. Moreover, comparative evidence seems to support the view that the level of the transfer is more secure when everyone receives it than when only the poor do. For example, the level of child benefits as a proportion of average wages is systematically higher in countries which have stuck to a universal system.41 Greater political irreversibility is a precious advantage if one is certain that reducing the unemployment trap, as done by each of the three policies, is the way to go. Otherwise, it may be regarded as a serious defect.What if, for example, the disincentives to work or train in the BC range – which are, as we have seen, a necessary corollary of the stronger incentives to work in the AB range – are so strong that a dramatic net loss in economic efficiency results, once the full effects of having a more laid back, less skilled labour-forced (drifting leftward on our graphs as worker cohorts succeed each other) make themselves felt? In this case the very superior political robustness of the PBI scheme (if established) would prove a handicap, as it would prevent swift readjustment once the negative effects of the policy were detected and their full size assessed.
Conclusion: Partial Basic Income on the Agenda? Underneath the prima facie equivalence between matching variants of the three policies, our very stylized graphical analysis has thus enabled us to highlight a number of potentially important differences. Once we laid aside the distinction between taxes as pure levies and social contributions as insurance premiums, we were left with three basic sources of differences: how the three policies relate to different types of income; how they treat those who voluntarily find themselves under the GMI level; and whether they rely on ex ante payments.This systematic inventory of what we believe to be the main relevant differences is obviously inconclusive on many counts. For most of the differences we explored, it was possible to state a priori, if there was an advantage, which way it would go. But our assessment of the significance of this advantage has always been rather vague and tentative, based on casual or indirect evidence – if any. In many cases, a far more serious empirical evaluation of the differential impact would be useful, as would, in some cases, more complex theoretical modelling. However tentative, our exploration should force supporters of each of the three policies to qualify a number of arguments they routinely make in favour of their favourite.This holds, in particular, for those who support a universal PBI. If they do so out of a basic concern for improving the options open to the worst off – a plausible normative foundation for the objective of fighting unemployment without worsening poverty – they will no doubt have been pleased to see their case upheld in connection with the impact of universal payments on take-up and traps and the importance of unconditional support under the poverty line for bargaining power and human capital formation. But there are at least two important differences between PBI and its alternatives which present supporters of PBI with serious challenges. 78
Basic Income and its Cognates One concerns PBI’s political feasibility. Owing to its ex ante nature and the implied height of the apparent rates of taxation it requires, we have seen that there are reasons to expect a universal PBI to be comparatively less popular with organized workers and public opinion.True, much of this unpopularity can be traced to variants of an illusion – basically the failure to perceive the sense in which a tax expenditure and a benefit are equivalent. But this illusion may well be so resilient as to block any direct introduction of a PBI. One can no doubt endeavour to undermine it through effective pedagogical efforts. But this is likely to prove a Sisyphus task. Alternatively, one can try to use opportunities to introduce a universal PBI as a uniform dividend on a commonly owned asset (royalties on oil extraction, for example), or as uniform compensation for a commonly suffered nuisance (energy consumption, for example), or even out of non-inflationary money creation.42 But this is unlikely to provide more than a very low floor. Beyond this, the most promising way forward for shrewd politicians who believe in PBI’s substantive preferability is probably to first introduce an appropriately calibrated uniform refundable tax credit (or NIT), soon to be inconspicuously turned into a tax-creditable benefit (or PBI).43 The second challenge may be viewed as more serious still, as it does not concern PBI’s achievability, but its very desirability in a context in which informal (i.e. legally or illegally untaxed) income represents a major option. Providing one can (plausibly) assume that the assessment of GMI entitlements is more sensitive to informal income than taxation is, we have seen that PBI is unquestionably more favourable to informalincome earners than the other two policies. It is not altogether absurd to regard some boosting of the informal sphere as a meaningful objective in itself. In one interpretation, for example, political ecology can be defined by this objective and contrasted on this basis with liberalism and socialism.44 However, this assumes an unrealistically benign perception of what is bound to be a very heterogeneous bundle. It might be good, not just for the quality of human relations but also for the long-term performance of the economy, if people are less hooked on monetary rewards and spend more time with their families, their vegetable gardens, their neighbourhoods and their voluntary associations. But some informal work is ruled by no less strong a cash nexus than formal work, or is performed within the framework of a barter relationship with no intrinsic virtue compared to monetary exchange. Indeed, much informal work, precisely because it escapes the standard controls of formal activities, may be more degrading, unsafe and in other ways unpleasant than had it been performed formally. If this is the typical case, there is not much of a case left for promoting informal activities. Moreover, the PBI will be wasted on some high-income people from whom little or nothing will be clawed back in taxes. And by increasing the relative attraction of untaxed activities, it may jeopardize the sustainability of the GMI, and hence of the level of poverty alleviation already reached. How much of a threat this really is depends, for example, on how much a country’s economy relies on non-monetary exchange, on how weak or corrupt its tax authorities are, and on how much dishonesty its citizens feel comfortable with. Under such circumstances, PBI is unlikely to be better than EITC, for example, as way of tackling unemployment without worsening poverty, even if political feasibility were no problem. Or at least it will not become superior until the background institutions have changed in such a way that the bulk of sizeable market incomes has become sufficiently visible to a sufficiently effective tax administration. 79
Basic Income on the Agenda These two challenges do not really overturn the fundamental presumption in favour of a PBI – and, beyond it, in favour of a full individual BI – for those whose ultimate objective is neither maximal output nor maximal employment, but is captured in a conception of justice that gives priority to the real freedom of the worst off.45 But they do invite them to shed any dogmatism in terms of immediate political agendas. If the cosmetic-didactic dimension of politics is taken into account, if the administrative background conditions are given the attention they deserve, the most direct route is not always likely to be the best one. Under certain circumstances, some of the other strategies for fighting unemployment without increasing poverty may be either more feasible or more appropriate. Under certain circumstances, BI may need to step aside and give way to one of its cognates.This is a concession, but no sacrifice of principles to expediency.To best serve one’s principles, one must not stubbornly advocate, under all circumstances, the immediate implementation of their most straightforward expression.To wish that one day, everywhere, an individual and universal BI should belong to the acta, does not prevent one from believing that sometimes, in some places, it is better that one of its cognates should be on the agenda.
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On the shape and causes of the growing dispersion of (potential) earnings in OECD countries, see e.g.Atkinson (1993a), Gottschalk and Joyce (1993),Wood (1994),Atkinson (1998), etc. See Van Parijs (1987). One can conceive of other characterizations of the new social question and the corresponding new class divide, for example by emphasizing the unprecedented importance of one’s generational location, as a result again of a set of interacting factors such as rising life expectancy, rising potential cost of health care, development of the old age pension system and increasing ability to knowingly cause (and avoid) long-term environmental damage. This belief is consistent with our awareness that several relevant policy proposals are being left out of the picture, in particular (1) policies which are ethically unacceptable (for example, lowering the general level of income protection or sending working women back home); (2) policies which, however well intended, would be counterproductive (for example, protectionism or across-the-board reduction in the maximum working time); (3) policies which do not constitute substitutes but (arguably) complements to the sort of socio-economic reform we want to focus on (for example, macroeconomic co-ordination or continued education). The notion of basic income, as used here, is therefore broader than the definition standardly used by BIEN in three important respects: it is not necessarily paid to all on an individual basis (even if the entitlement is individual, its level may depend on household composition), nor quite without means test (in the sense in which even a uniform refundable tax credit is means-tested), nor quite without work requirement (in the sense in which even a broadly characterized participation condition can be construed as a work requirement). See e.g.Atkinson (1995),Van Parijs (1996), Schokkaert,Van der Linden and Van Parijs (1997), Van der Linden (1996; 1999) and Standing (1999) for a set of arguments in favour of basic income as an attempt to tackle (what is here described as) the new social question. See also Fitzpatrick (1999) for a recent overview of arguments for and against.And see the web site of the Basic Income European Network (BIEN) for a comprehensive, regularly updated, annotated bibliography (http://www.econ.ucl.ac.be/etes/bien/bien.html).
Basic Income and its Cognates 6
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In this chapter, we shall focus on the social-dividend version. But much of what will be said about it also applies to the NIT version, with the level of the lump-sum refundable tax credit pitched at the same level as the social dividend. However, there are important differences (see Van Parijs, 1995: 35-37), some of which will be pointed out as we go along but which are not the focus of this essay. With a number of specific features to be presented shortly, our inquiry fits therefore into a long sequence of attempts to assess the merits of alternative transfer schemes on the basis of a careful comparison of their differential consequences, from Zeckhauser (1971) and Garfinkel (1973) to Phelps (1994) and Besley and Coate (1995), for example. In the OA range, people lose everything they earn, since each Euro earned is cancelled by an equal reduction in the benefit. But it is precisely people whose income is in the OA range who are the net beneficiaries of the scheme. The intuitive ideas behind these results are lucidly explained, for example, in Piketty (1997). If the aim is to maximize the tax yield, raising the rate of tax on a particular slice of income has both a positive effect because it increases what is collected from anyone with an income at least as high as the income levels concerned, and a negative effect because it reduces the incentive to generate income (through work, saving, effort, etc.) for anyone whose income level falls within the range concerned. Obviously, the positive (or distribution) effect is the higher, the lower the income slice concerned: when taxing a low slice, one taxes the income of nearly everyone, when taxing a high slice, one collects income from only a few.The negative (or incentive) effect, on the other hand, will depend both on the number of people whose income level happens to fall within the slice considered and on how responsive they are to a lowering of what they can gain from an increase of their working time, effort level, etc. If there are relatively few people with very low (potential) earnings, one would therefore need them to have an extremely high level of responsiveness (or tax elasticity), compared to people with a higher income, to justify a lower, or even an equal rate of taxation on the lowest slice of income. See Van Parijs (1995: chapters 2 and 4) and, more briefly, the discussion between Scharpf and Van Parijs in this volume. To make the comparison more straightforward, we shall generally write as if we were talking exclusively about workers’ social security contributions. Under the received wisdom among economists, however, it does not make much of a difference whether the social security contributions are levied on the workers’ or on the firm’s side. Whether under perfect competition or under reasonable non-competitive assumptions, whatever balance of forces leads the workers’ net compensation (and hence their share in the burden of the levy) to settle at a certain level under one administrative arrangement will lead it to settle at the same level under the other. See, however, Rasmussen (1994) and Muysken and Van Veen (1996) for attempts to come up with a significant discrepancy. This necessity holds under the assumption that the income of the better-paid workers is not to be taxed at a rate approaching 100 percent either. Only nearly, because it is imaginable, if there are sufficiently few workers, not only in AB, but in the AC range as a whole (in graph G4), that the lifting of DE to DG and the upward shift of EF (henceforth starting from G, while keeping the slope unchanged) will cost so little that the marginal tax rate on gross income above C, while unavoidably much higher than before, will still fall short of 100 percent. In 1998, the federal share in the cost of TANF (Temporary Assistance to Needy Families), the programme that replaced AFDC in 1996, was a shrinking US$ 20 billion, compared to a growing US$ 22 billion for EITC (Figures from the Budget of the US Government kindly pro-
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Basic Income on the Agenda
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vided by Anne Alstott). For illuminating critical discussions of EITC, see Alstott (1995) and Shaviro (1997). Keeping this GMI in the background is essential to the arguments below. These, therefore, hardly apply (even in highly stylized fashion) to the US, since (1) the main assistance programme for able-bodied working-age people (earlier AFDC, now TANF) provides aid only to poor single mothers with children and a very small number of poor married couples with children, while all others have to rely on local and state general assistance programmes which provide very little cash aid, if any; (2) even for those covered by TANF there is now a time limit of five years. At this stage, the PBI can be interpreted either as a citizen’s income (if it is granted without any activity condition) or a participation income (if it is subjected to a broad condition of participation). It can also be interpreted as either a social dividend or a negative income tax. Because of the PBI’s effect on lower incomes prior to the means test, less households qualify for means-tested payments (only those in the OA range, no longer all those in the OB range), and those who qualify are entitled to lower payments (a maximum of PM, instead of a maximum of OM). In some proposals, for example Pelzer’s (1996; 1999) Ulm Modell, the BI is supposed to be funded by a specific proportional Bürgergeldabgabe (citizen’s income levy) with a broader income base than both social security contributions and the ordinary personal income tax (no exemptions allowed). The equivalence of PBI and EITC with RSSC becomes far-fetched as soon as they enable (irrespective of the GMI) households with gross earnings of less than OA (=OM) to reach a net income of OM or more. Even if regressive tax schedules are ruled out (if explicit marginal taxation in the OA range is not higher than beyond A), these limits should encompass, in the Western European context, quite substantial PBI levels. See Van Parijs (1995: section 4.6) on the importance of predictable taxation to avoid negative employment rents. Even the introduction of a partial BI could not avoid significant shifts, however astutely the various available tax instruments are used to minimize sudden downward shocks on some categories of (not very well off) households. (See Gilain and Van Parijs (1995) and Terraz and Joyeux (1998) for micro-simulations of various scenarios in the case of Belgium.) See, for example, the versions of NIT advocated by Mitschke (1985; 1995), Haveman (1988), Brittan and Webb (1991), Bourguignon and Chiappori (1997), Godino (1999), and endorsed by Castel (1999), etc. In Graph G6, net earnings would no longer fall on the PF line, but, for example, on a straight line MF, with a bigger tax adjustment beyond C. Just as a flattening of the net gains in the BC range was a price to pay for getting the AB range out of the trap, a flattening of the gains in the BC range is a price to pay for getting everyone out of the trap. In principle, a full BI could do it too, simply by imposing, somewhat oddly, a 100 percent tax rate on the lower layer of income (as in a variant studied e.g. by Salverda, 1984). But given that a full BI is not needed to achieve such a profile – whereas it would be to abolish the trap –, the first argument in favour of a PBI becomes decisive. The measure is therefore neutral for someone with an unearned income of OC.The difference FK between the net income of a household with unearned income OC and that of a household with earned income OC corresponds to the amount of social security contributions to be paid by the latter.
Basic Income and its Cognates 24 While not yielding any less entitlements to benefits than waged labour.As mentioned earlier, we are treating taxes and contributions as equivalent in this respect. 25 The difference also holds, in a gradually attenuated form, when the earning power accessible to the poor is a combination of formal and informal earning power.As the formal component increases, the extent of the reduction of the trap gradually shifts and shrinks from VA to AB (in graph G6), whereas for the other two schemes it expands from nothing to AB. Needless to say, the difference is also reduced as informal income is treated less differently from formal income by the tax system (at the limit, they are taxed at the same rate and with the same probability) and more differently by the means-tested GMI (at the limit, any level and kind of informal income can be combined with the GMI, just as with the PBI). 26 On this disadvantage of any variety of BI relative to NIT (as interpreted), see e.g. Petersen (1997: 58): whereas the means which determine the level of the NIT transfer take the right to support payments by spouses and relatives into account, the introduction of a nontested transfer program would destroy the important role of self-responsibility in the family. 27 For NIT, two interpretations are possible. Either the payment of the negative tax is subjected to exactly the same (willingness-to-)full-time-work requirements as the payment of the GMI, in which case the disposable income of a willing working-time reducer follows the sharp DO slope. Or it is kept distinct as an unconditionally refundable tax credit, in which case the relevant slope is the milder one DP, the same as under PBI. Under the latter interpretation, people with a gross income below A could claim some amount even if they are not job seekers as an advance on their NIT, and a further amount only if they are job seekers.This can easily become confusing for both the public officials in charge and, even more, for the ordinary claimant. As long as a residual conditional GMI remains in place, therefore, the strict, PBI-equivalent NIT is quite tricky to implement. I shall nonetheless assume that such implementation is possible. 28 To judge by the experience of Belgium’s voluntary career interruption benefit scheme, this number may well be considerable.The scheme was started in 1986 by the then Employment Minister (and later Director General of the ILO) Michel Hansenne.The number of beneficiaries at any single time has risen from less than 10,000 in 1987 to around 50,000 in 1996 (about 2 percent of total employment), most of them women (86.5 percent) and most of them retaining a part-time job (69 percent). See Szabo (1997: 16-18) for further data. 29 This is one of the central reasons why Phelps (1997) rejects EITC as badly designed, in favour of his own hourly wage subsidy restricted to full-time workers. 30 Under a sufficiently broad specification of the participation condition (part-time work, education, child care, etc.) most of what applies to PBI in this section also applies to Atkinson’s (1993b; 1996) participation income. One exception concerns the power to strike, as it would be hard to construe strikers as fulfilling the participation condition. 31 These two facets of the human capital argument against BI are being presented as the central objection against it, respectively, by Bovenberg and Van der Ploeg (1995) and by KrauseJunk (1996). 32 The first argument (educational grant) is closely related to Standing’s (1986; 1992; 1999) case for BI as a strategy for facilitating the back-and-forth between work and education which our flexible economies require. The second argument is related to Mayhew’s (1991) cautious claim that the introduction of a BI should lower the relative attraction of low-skill poor-training full-time jobs from both the employers’ and the employees’ standpoint, and thereby help a country such as Britain out of a low quality/low skills equilibrium.
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Basic Income on the Agenda 33 Contrary to the features of PBI discussed in the previous two sections, universality is not shared by NIT, which will therefore side, in the discussion to follow, with EITC and RSSC. 34 See Delvaux and Cappi (1990), Jordan et al. (1992). 35 This ties up with the old theme, developed by Nooteboom (1986) and Meade (1989) among others, that a BI would be a way of spreading entrepreneurship in the population, and also with the idea that there is a natural complementarity between a BI and both a co-operative economy and a share economy (see Van Parijs, 1995: section 6.4). 36 By no means do we want to imply that there are no voices in the Trade Union movement that support the BI approach (see, for example,Van Berkel and Hindriks, 1991; De Henau, 1996). But with the remarkable and partly enigmatic exception of the Voedingsbond FNV in the Netherlands (Van Berkel et al., 1993), there is to our knowledge no single Union leadership which has openly and systematically advocated it (which cannot be said for RSSC, employment subsidies or even forms of NIT). 37 In some countries, this effect may be reinforced by another, which derives from the differential impact of the various schemes on unemployment compensation. Under both EITC and RSSC, the level of unemployment benefits should be hardly affected, if at all. But under PBI, their (post-tax) level needs to be reduced by an amount about equal to the PBI. In some countries (such as Belgium), the distribution of a large proportion of the unemployment benefits is managed by the Unions and a significant fraction of the Unions’ revenues takes the form of a share in the amount distributed by way of compensation for the expenses incurred in the provision of this service. If the latter is dramatically reduced, the Unions may fear that a significant part of their funding will become less secure. Even if this is not the case, the material importance of the Union’s role in the (unemployed and potentially unemployed) workers’ eyes may be notably reduced. 38 James Tobin remembers, for example, that, in the 1972 democratic primaries, George Mc Govern’s demogrant proposal (which Tobin, as his chief economic adviser, had managed to squeeze into his platform) was ridiculed by his rival Hubert Humphrey on precisely this ground (see Van Parijs, 1998: 8). 39 This point is neatly made by Shaviro (1997). 40 See Olson and O’Brian (1990), Brown and Thomas (1994). 41 See Gauthier (1996: 164-166) on the back and forth between universality and means-testing since 1976, and on the putative effect of universality on benefit levels. See also Bezat (1998) on the recent U-turn in France. 42 An old and suspicious idea recently rehabilitated by Huber (1998; 1999). 43 If the strength of illusions makes a NIT version the best strategy, part of the case for an individual PBI (versus a household-sensitive full basic income) delineated at the end of the first section becomes shaky. 44 Each of the three main ideologies of industrial and post-industrial society can then be represented in a triangle whose angles correspond to a fully market-ruled, a fully state-governed and a fully autonomous society: liberals, socialists and greens are interpreted as claiming that the optimal mix of activities can be reached by moving somewhat closer to one of these angles from where our societies currently are. See Van Parijs (1991). 45 Very little has been said here to establish such a presumption, which is vindicated at length in chapters 2-4 of Van Parijs (1995).
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Activation and the Burden of Working On Instrument Choice by a Responsibility-Sensitive Egalitarian Government Frank Vandenbroucke and Tom Van Puyenbroeck*
Introduction With regard to employment policy and welfare reform, there is a large degree of consensus among policymakers and scholars that taxes and benefits must not lead to a situation in which poor individuals (or their families) face very high marginal tax rates when they take up a job or when their hours of work increase. Benefit systems that are too selective are beset by inactivity traps: they discourage the labour market participation of low-skilled workers. In academic research, various proposals, related to basic income or negative income taxation, are put forward to remedy such inactivity traps. Obviously, other approaches to the incentive problem for low-wage earners are possible, such as (a) topping up lowskilled workers’ purchasing power by selective tax credits, (b) increasing their net pay by lowering personal social security contributions on low earnings, or (c) supporting sufficiently high minimum wages for low-skilled workers by selectively subsidizing employers.These alternative instruments reflect not only technical differences, but also more fundamental differences in approach.Therefore, it is useful first to assess alternative instruments from a normative vantage point, that is, by examining the conceptions of distributive justice underpinning their use, before assessing them with more explicit reference to the particular problems created by tax and benefit systems in economies plagued with involuntary unemployment. In this paper we focus on this normative issue.Yet we start with a broader question, namely, why the problem of inactivity traps has gained heightened attention in debates on social policy over the last years.We present the idea of an active welfare state, which adopts increased participation as a central goal of social policy. In our view, this idea should also be based upon a responsibility-sensitive egalitarian conception of social justice.The active welfare state and responsibility-sensitive egalitarianism will act as the general background for our discussion of the relationship between a government’s normative conceptions and its eventual choice of instruments. Subsequently, we explain why defining a government as responsibility-sensitive egalitarian does not suffice to determine which distributive instruments it is supposed to choose. Making specific choices depends on the collective decision rule which is used and on normative positions taken by a government that do not reduce to responsibility-sensitive egalitarianism.We look at each of these in turn. Next we present and discuss a collective decision rule that is based on the work of John Roemer.We pro*
We are grateful to Alan Chipp, Loek Groot, Jeroen Knijff, Erik Schokkaert, Dirk Van de Gaer, Robert J. van der Veen, and Philippe Van Parijs for comments on earlier versions of this paper.
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Basic Income on the Agenda ceed by discussing the impact of a government’s normative stance with regard to its conception of personal responsibility. In the remainder of the paper we emphasize the impact of a government’s conception of individual well-being on the eventual outcome of using this decision rule.While we keep the level of formal analysis to a strict minimum, we point out that a formal model can be constructed allowing for a more general analysis of the issue (Vandenbroucke, 1999a: chapter 3; 2000).We will refer to some of the results of this model insofar as they indicate how optimal policy design, with regard to the use of instruments such as labour subsidies or a basic income, is influenced by a government’s conception of individual well-being. The primary aim of such a model is to make clear how differences in a government’s normative conception lead to differences in policy choices. Such a highly simplified representation of reality is valuable, if only because it shows that, other things being equal (e.g. the economic environment), the way a government publicly values an individual’s well-being has a profound impact on the choice of instruments.We briefly discuss whether one can go further and identify criteria for choosing between the different optimal policies established by this model. Yet we also point out that such a discussion may overlook some essential elements in current debates on social policy. This point is developed more fully in the last but final section, where we return to the idea of the active welfare state and indicate in which respect the model falls short of capturing some of the active welfare state’s essential constitutive elements.We provide a short summary and conclusion at the end.
Remedying Economic Inactivity in an Active Welfare State A fruitful discussion of inactivity traps requires a broader perspective relating to social policy at large. In various countries, the very functioning of the traditional welfare state has been increasingly criticized. Briefly, doubts have been raised about the feasibility of sustaining the welfare state, not only in view of demographic changes, but also because new kinds of social risks have emerged (such as long-term unemployment for the lowskilled) and social needs (such as the need to combine work with family life), which tend to increase even further the demand for social policy intervention. Hence, current political thinking about the future of the welfare state is also characterized, not surprisingly in view of the sustainability problem, by increased emphasis on ‘getting people back to work’.This explains why the fight against inactivity traps is high on the social policy agenda. Combating inactivity traps is not the only – indeed, not even the most important – hallmark of a renewed social policy. To safeguard the welfare state, one must alter its working methods, for example, by gearing social policy intervention more towards preventive actions, by complementing social spending with social investment in human and social capital, etc.This new kind of welfare state can be characterized as an active welfare state (Vandenbroucke, 1999b), to express both the change of methods (‘an intelligently active state’) and the change of goals (‘a state of active people’, i.e. a state combining social protection with citizens’ active participation in society). Arguably, the potential sustainability problem of the current welfare state has served as an impetus to the debate on the re-orientation of social policy. However, this problem in itself cannot be taken as an ethical underpinning of the plea for increased partic86
Activation and the Burden of Working ipation.The fundamental argument should start from the recognition that participating in society can be regarded as an individual ‘functioning’, in the terminology of Amartya Sen. If one advocates genuine equality of opportunity, active participation in society should be included in any individual’s option set. Cohen states that pursuing equality of opportunity is tantamount to removing ‘obstacles to opportunity from which some people suffer and others don’t’ (1999: 354). He distinguishes socialist equality of opportunity from right-liberal and left-liberal alternatives in that ‘it seeks to correct for all unchosen disadvantages, disadvantages, that is, for which the agent cannot herself reasonably be held responsible, whether they be disadvantages that reflect social misfortune or disadvantages that reflect natural misfortune’. We believe this maxim should apply to a social-democratic, that is, an egalitarian active welfare state. Hence, the egalitarian active welfare state, so conceived, is bound to address questions of individual responsibility.Thinking about distributive justice on egalitarian lines compels us to distinguish personal ‘luck’ from personal ‘choice’. It is not surprising that the notion of individual responsibility emerged on the social agenda at the same time as the call for a new kind of activating social policy. Some of the new social risks are more predictable than their traditional counterparts, and more easily linked with personal behaviour. For example, being long-term unemployed is closely associated with having a lower level of educational achievement. Achievement in education obviously depends on circumstances, such as family background and innate talents, but also on personal effort and choice. Hence, socio-economic developments in themselves already explain why questions regarding one’s personal responsibility are showing up more than they used to do in discussions about welfare. But, as we have just indicated, these questions also arise if one limits the discussion – as we do in this paper – to more abstract thinking about normative issues. In this paper we will confine our discussion to the case where government is committed to the idea of responsibility-sensitive egalitarianism.
The Idea of Responsibility-Sensitive Egalitarianism and the Practice of Policy Making On the most general conceptual level, egalitarians sensitive to the idea of responsibility consider it unjust for individuals to be disadvantaged relative to others because of personal characteristics for which they are not held responsible.1 Justice requires ‘equal access to advantage’: if everybody has such equal access, differential advantage must reflect genuine choices for which people are responsible.2 When phrased in such a general manner, this responsibility-sensitive conception of equality provides little guidance to a government in the actual design of its distributive policies. More specific substantive questions have to be answered if one wants to understand why and to what extent a responsibility-sensitive egalitarian government would actually prefer particular instruments to achieve particular goals.What is the government’s actual conception of personal responsibility, that is, which individual characteristics does the government take the citizens to be personally responsible for? What is the government’s conception of the individual well-being of citizens, or, what constitutes an advantage according to this government? In addition, there is an operational question to be answered: how will an egalitarian government actually choose between 87
Basic Income on the Agenda alternative policies? These questions are examined in the following sections. We shall handle the operational question first.
Responsibility-Sensitive Egalitarian Policy Choices How will a responsibility-sensitive government actually choose between different policies? Let us start from the preliminary observation that the idea that distributive justice should distinguish between luck and choice fits in naturally with the idea that true equality is equality of option sets. Le Grand (1991: 87), for instance, writes: ‘(O)ur judgements concerning the degree of inequity inherent in a given distribution depend on the extent to which we see that distribution as the outcome of individual choice. If one individual receives less than another owing to her own choice, then the disparity is not considered inequitable; if it arises for reasons beyond her control, then it is inequitable’. Le Grand concludes: ‘(A) distribution is equitable if it is the outcome of informed individuals choosing over equal choice sets’.We propose taking as our point of departure the view that ‘equality of option sets’ provides a definition of equality tout court. Admittedly, our broad phrasing of what responsibility-sensitive egalitarianism amounts to, does not refer to equal option sets, but rather to equal access to advantage, where ‘advantage’ refers to a government’s evaluation of an individual’s well-being (whereby we take it that well-being can be measured in a cardinal and interpersonally comparable way).To explain the relationship between the general idea of ‘equal option sets’ and ‘equal access to advantage’, we propose to focus immediately on the issue of participation in the labour market. A group of people has identical option sets in the labour market when everybody in that group has access to everybody else’s job, for the same salary, in similar circumstances, etc. Calling this situation ‘equal access to all jobs’, one thus assumes that it holds if the only reason why individual A has a different job to individual B is because she genuinely chooses to have a different job.There are a variety of reasons why this situation is not the same as ‘equal access to advantage’. For example, people’s well-being in distinct jobs may be evaluated by a government in the same way, so that two individuals may have equal access to advantage even when their option sets are not identical. Conversely, different people may not be able to convert identical jobs into the same level of personal advantage. Nevertheless, if a government values the advantage of a job independently of the person who holds the job, then ‘equal access to all jobs’ is a sufficient condition for ‘equal access to advantage’. Throughout we will assume that a government does indeed value advantage in such a way.We will use in our numerical examples the (highly unreal) situation of equal access to all jobs (hence, equality) as a useful counterfactual, serving as a benchmark for judgements on justice. Consider then a situation in which only two jobs are on offer, fully described by the following data: job F: full-time, salary 10; job P: part-time, salary 5; zero option Z: not working, income 0. 88
Activation and the Burden of Working Call this option set I. Consider then option set II: job F: full-time, salary 9; job P: part-time, salary 6; zero option Z: not working, income 3. Let us further assume that alternative policies can give all people access to all the options in option set I (by using a policy I), or to all the options in option set II (by choosing a policy II). Hence, both policies admit equality as a result. Note that, while both admit equality, they are clearly different. For example, policy II is naturally associated with the establishment of an unconditional basic income, whereas policy I rules it out. We now want to indicate how a responsibility-sensitive egalitarian government would actually decide which option set is best for the collectivity. There is a natural way to proceed here. We could, first, determine for option set I the choice each individual would effectively make when confronted with that option set.3 Second, the government would proceed to value the benefits and burdens of this choice for each individual using an objective, synthetic measure of advantage. Third, one could average over all individuals, counting each individual for one in the weighting procedure. This last step clearly has a utilitarian flavour. More precisely, it can be seen as expressing a utilitarian conception of impartiality.The same exercise could be performed with regard to option set II, and the government would choose that policy which yields the highest average advantage. It should be noted that this ‘natural way to proceed’ builds into the conceptual framework of responsibility-sensitive egalitarianism an additional idea. That is, when making choices between policies, one should be impartial between the individuals with whom one is concerned, and simply aggregate the advantage those individuals choose to obtain.This feature captures an essential aspect of a methodology developed by John Roemer (1994; 1996a: 279; 1996b) to implement responsibility-sensitive egalitarian justice. Let us provide a more detailed account of this implementation procedure. Consider a world in which individuals differ from each other with regard to their economic productivity and with regard to their preferences over income and time for non-market activity (i.e. their propensity to work). Accordingly, one can subdivide the population into ‘productivity types’ (people having a certain level of productivity in common) and ‘preference tranches’ (people having a certain preference ordering in common). Let us represent citizens by indexed capital letters, the letter indicating a preference tranche and the subscript indicating a productivity level. So, A1 is a person belonging to preference tranche A and productivity type 1. Productivity type 1 comprises a range of citizens {A1, B1, C1,...}, preference tranche A consists of citizens {A1,A2,A3,...}. Next, we state explicitly which individual characteristics are assumed to be the subject of personal responsibility and which are not. Except for the following section, we will assume in this paper that implementing responsibility-sensitive egalitarian justice requires choosing an allocation rule that satisfies the principle ‘no individual should be put at a disadvantage relative to his fellows because of his lower productivity level; if such a disadvantage is the result of his preferences, we do not consider that unjust’. (Any model simplifies reality, of course. One may also consider productivity as a metaphor for productive talents and preferences for working time as representing economic choice.) 89
Basic Income on the Agenda Roemer then proposes to reason as follows. Ideally, what the responsibility-sensitive egalitarian would like to do is choose the policy which equalizes advantage across productivity types, but allows it to differ within the productivity types according to the choices people make concerning their working time. Or, put another way, two people with different productivity levels that have the same propensity to work should end up with the same advantage, whereas two people with the same productivity level but different propensities to work should not have the same advantage. Of course, full equality is not always feasible. In such cases, the responsibility-sensitive egalitarian has to satisfy herself with an allocation rule that maximins advantage across productivity types for each preference tranche. In other words, she must look for the policy that yields, for each tranche of preferences, maximal advantage for the worst-off productivity type. In terms of our notation, what the egalitarian government would like to do is to maximize the advantage of the worst-off productivity type within tranche {A1, A2, A3,...}, do the same within preference tranche B={B1, B2, B3,...}, etc. Now, as such a series of maximizations cannot be performed simultaneously, Roemer proposes to choose the policy that maximizes a weighted average of the minimum advantages across productivity types, where the weight assigned to a given preference tranche is its frequency in the population. Hence, if, for example, the ‘productivity 1 type’-individuals are the worst-off in terms of advantage in each of the preference tranches A, B, C, ..., N, Roemer proposes a method which maximizes a weighted average of the advantage of A1, B1, C1, ..., N1. In his own words, this position can be described as one where, when looking at a preference tranche, it is Rawlsian; among tranches, it is utilitarian, in giving equal consideration to each tranche.4 Roemer justifies this method by appealing to the fact that egalitarians who hold people responsible for their preferences must, for that reason, be impartial to variations in individual preferences in the population. Responsibility-sensitive egalitarians have to count ‘each preference for one’. We now state two basic assumptions that serve to simplify the setting. First, we assume that it is indeed the case that the worst-off citizens belong to a single productivity type (e.g. type 1, as in our examples above). This is not, of course, a trivial assumption; it depends not only on empirical facts, but also on the way one measures individual advantage. Second, it is assumed that productivity levels and preferences are distributed independently from each other.Within every productivity type one finds the same distribution of preferences; within every preference tranche one finds the same distribution of productivity types. Under these assumptions, Roemer’s procedure is straightforward and proceeds as we indicated in our examples above. First, identify the (unique) worst-off productivity type.5 Then, select the option set that maximizes average advantage for the worst-off group. Since by assumption the distribution of preferences within these worst-off groups corresponds to the population-wide distribution of preferences, impartiality between the preferences of the worst-off is equivalent to impartiality between the preferences of all individuals.6 At this point, we stress two things. First, a collective choice rule such as the one just presented is needed to guide choices between states of affairs, i.e. to turn from a situation in which a responsibility-sensitive egalitarian could only distinguish equal states from unequal states, into one where actual policy choices (between option sets) can be 90
Activation and the Burden of Working made. This need for guidance appears both in situations where different allocation rules can achieve equality (as in option sets I and II), as well as in situations where only maximin can be satisfied (where some individuals would enjoy better option sets, but where the policy that maximizes the position of the worst-off is chosen). Second, when calling this collective choice rule ‘impartial’, we actually refer to the impartial way of aggregating interindividual differences in ‘responsible traits’. Clearly, the very fact of using an objective evaluation of personal well-being,‘independently of the person who holds the job’, will introduce a bias in favour of those individual preferences most in fitting with the publicly affirmed normative valuation.
The Government’s Conception of Personal Responsibility Given that individuals have multiple characteristics, policy decisions in a framework such as the one just presented also depend on the question of which of these characteristics people are held responsible for, and which they are not. Recall that in the very simple world we consider, people have two characteristics: their level of productivity and their preferences for non-market activity. The responsibility-sensitive egalitarian way of choosing between policies can be contrasted with a case in which an egalitarian government does not consider individuals to be responsible for their preferences (next to considering them not responsible for their productivity).7 The profound difference between these two conceptions of responsibility can be illustrated starting from our option set example. Whereas both option sets depict an equal state if one holds people responsible for their propensity to work, neither of them does so if the government thinks people are not responsible for their preferences. Indeed, since the government then thinks people do not genuinely choose the number of hours they work, equality would only be obtained in our simple setting if the reward is the same for everybody. More generally, if we still take the maximin rule as expressing egalitarianism, such a government would not look at averages across preference tranches. It would choose a policy that maximizes advantage for the worst-off individual across both preference tranches and productivity types. Clearly, such a government would opt for a policy that differs from the one chosen by its responsibility-sensitive counterpart. Since such a government holds people responsible for fewer characteristics, it will in general redistribute more (referring to the example, it would prefer an option set in which one receives the same ‘salary’, whether one chooses job F, job P, or the zero option).This does not imply that it is ‘more egalitarian’ than a responsibility-sensitive government.They simply have a different conception of what equality (and compensation) implies. Before we proceed, we should emphasize that the conception of individual responsibility and the conception of advantage are two distinct normative issues that each bear on the ultimate choice of instruments. The first bears on how the government aggregates ‘something’, whereas the second determines what it aggregates. In fact, the conception of advantage would also be important if the government is responsibilityinsensitive or even non-egalitarian if its aggregation method is merely to add up advantages.Yet, it is clear that both questions are pertinent when linking responsibilitysensitive egalitarianism with government decision-making. 91
Basic Income on the Agenda To keep our exposition brief, we will focus in the remainder of the paper on the impact of the conception of advantage on the choices of a responsibility-sensitive egalitarian government. (We refer the reader to an appendix for an additional discussion about the influence of the conception of personal responsibility.) Hence, we now return to the setting in which people are held responsible for their preferences but not for their productivity.
The Impact of the Metric of Advantage on Policy Choices The two different option sets in our example instantiate a difference with regard to the underlying ‘principle of reward’. In option set I, a full-time job yields twice the income of a part-time job, whereas in option set II a full-time worker holds an income that is only one third higher than that of a part-time worker. Moreover, not working implies no income in option set I, whereas a work-independent basic income of 3 is available in option set II.We have nonetheless indicated that, if people are held responsible for their preferences, the two option sets result in equality (i.e. equal access to all jobs is assumed to be fulfilled in both cases). The question arises of whether responsibilitysensitive egalitarianism would force a choice between the two underlying principles of reward. Some have claimed that responsibility-sensitive egalitarianism entails a principle of natural reward.Thus, according to Fleurbaey (1995: 685), an ethic of responsibility conveys the ideal that a society ‘should let the agents exercise their responsibility and bear the consequences of such exercise, without trying to distort their outcomes in a particular way and with particular incentives. If there is some ‘natural reward scheme’, it should, according to this view, operate as freely as possible’.The differentials in individuals’ responsible characteristics should operate fully. One can formulate various axioms specifying a principle of natural reward. Such an axiom could be constituted by the following requirement: if all individuals are identical with regard to the traits for which the government does not hold them responsible, there must be no difference between the pre- and post-transfer distribution of resources in society. Hence, in the setting we discuss, this axiom demands that there be no redistribution when all individuals have the same level of productivity. In Vandenbroucke (1999a) it is argued that responsibility-sensitive egalitarianism by itself does not lead to the imposition of natural reward, but we will not develop this issue here.We do want to show a related point, however. On the basis of what has been said previously, we want to highlight the interconnection between principles of rewards and metrics of advantage.This interconnection is most visible when, starting from given specific assumptions, one establishes a highly simplified optimization model. Given specific assumptions, it can be shown that with the use of a Roemerian ‘impartial’ collective choice rule, principles of reward and metrics of advantage completely determine each other. Or, stated differently, if decision making by a responsibility-sensitive (egalitarian) government is based on this collective choice rule, the actual government’s conception of individual well-being will drive the choice between various ways of framing the option sets (and hence between their associated principles of reward).8 This can be illustrated by some simple calculations on the basis of our earlier example. Recall that the two option sets allowed for equality, and recall the three-step pro92
Activation and the Burden of Working cedure we indicated for choosing between them. First, we determine the choices people would effectively make in each of the option sets. Then, we assess the level of advantage associated with these choices. Finally, we average advantage over all individuals, counting each individual for one in the weighting procedure, after which the two option sets can be compared. It can already be seen that ‘valuing advantage’, which comes in at the second step, will thus be quite crucial in determining the eventual outcome. To illustrate this, we need assumptions about people’s effective choices. Hence, we assume the following responses: Given option set I, 50 percent of the population choose job F; 50 percent of the population choose job P; no one chooses the zero-option. Given option set II, 40 percent of the population choose job F; 55 percent of the population choose job P; 5 percent of the population choose the zero-option. Consider, next, some alternative public systems of metric to calculate the individual advantage associated with particular choices. In each alternative system we count the advantage of income as being equal to 1 per unit of income.The difference between the metrics is based on different conceptions of the burden of paid labour. More precisely, the government thinks that, when one does not take into account the monetary reward, paid work is on balance a burden for people.Work may be a mixed blessing: paid work brings some benefits (developing human capital, structuring one’s life,…) and some burdens (having less time for the family, less leisure, etc.).We will use ‘the burden of working’ as shorthand for the non-monetary advantages and disadvantages of labour market participation, where we assume that, on balance, the former are outweighed by the latter. We measure the burden of working in a particular job as a disadvantage expressed in numbers:9 Metric M1: disadvantage job F=0; disadvantage job P=0; Metric M2: disadvantage job F=5.5; disadvantage job P=2.5; Metric M3: disadvantage job F=7; disadvantage job P=3. Metric M1 implies that the government measures advantage only in terms of the income people have. Metric M2 implies that government conceives individual well-being as being negatively influenced by working and metric M3 associates an even higher disadvantage with the burden of working. A lower level of disadvantage can be connected with a government that attaches relatively more weight to the (positive) value of nonmonetary rewards associated with participation in economic activity.Admittedly, this is a very rough and even somewhat ambiguous way of incorporating the value of participation in society.We return to the complexity of the issue under review later on. 93
Basic Income on the Agenda Given our assumptions, calculations of average advantage yield the following result:10 Option set I
Metric M1 Metric M2 Metric M3
7.5 3.5 2.5
Option set II
7.05 3.475 2.6
Clearly, if government measures people’s well-being only in terms of money, option set I is preferable as it yields a higher average advantage in comparison to option set II. But if we increasingly value time for non-market activity (i.e. if we attach growing disadvantage to working time), there comes a point at which option set II is preferable (e.g. given metric M3), because policy I’s strong work incentives lead people to overwork on advantage-maximizing standards. Broadening the perspective to a case where more option sets are available, the example suggests that to each metric corresponds a best option set. Since each metric describes a definition of advantage, we may summarize this by saying that, given the Roemerian collective choice rule, to each governmental conception of individual well-being, i.e. to each public metric of individual advantage, corresponds a collective choice of the ‘best’ option set, and hence, a ‘best’ policy, (and a ‘best’ principle of reward). This implies that no further philosophical arguments are required within the framework of this model to explain differences in policy choices. For example, choosing option set I, characterized by the absence of a basic income, is not justified by appealing to a principle of ‘reciprocity’ (no productive contribution, no income). Conversely, if in the above setting the government chooses option set II, this is not because it appeals to deeper philosophical foundations justifying an unconditional basic income. Of course, this last remark should be put into the right perspective. It should by no means be considered as a proof of the superfluous character of such foundations per se. For instance, White (1997) appeals to a principle of reciprocity to reject basic income; following White, we may supplement the principle of equal access to advantage by a principle of reciprocity.The approach presented here does not rely on such a principle; in a sense, it boils down to ‘advantage-maximizing’ among equal-access-toadvantage structures.
A more General Assessment of the Influence of Different Normative Vantage Points on Policy Choice The conceptual apparatus presented in the previous sections can be generalized into a formal model in which government has different policy instruments at its disposal. Unless explicitly indicated, we assume in this and the following section that government uses earned-income taxation and a labour subsidy as instruments. More specifically, we consider a simple case in which government taxes labour income at a constant rate t (where we assume t £ 1).To this income tax scheme is added the possibility that government taxes or subsidizes individuals in a uniform way (independently of earned income).That is, we allow for the possibility that individuals must, next to their earned 94
Activation and the Burden of Working
Figure 1: An optimal policy track
s a1
1
a0 0
1
t
income taxes, all pay the same tax or receive the same benefit. Denoting this fixed amount as a transfer B, it follows that the complete income tax scheme studied here can take the form of a negative income tax, thus creating an unconditional universal basic income (in casu when the transfer B>0). The government can also use a labour subsidy, with the subsidy rate s proportional to the time spent in paid work.The choice between different policies therefore boils down to a choice between different instrument vectors (B, t, s). Such a model allows for a more general systematic assessment of alternative instruments from a normative vantage point than in the previous sections. It can be used to check how optimal policies – i.e. optimal choices of instruments (B, t, s) – are influenced by differences in the metric of advantage. It is not our intention to present and discuss such a formal model here (see Vandenbroucke, 1999a: chapter 3; 2000). Nevertheless, it has a clear conceptual similarity with the examples hitherto provided, and we can therefore repeat and discuss here some of the findings that can be obtained from such a model. As in the previous section, a key variable in this model is the government’s conception of individual well-being. Income enters positively into the public advantage metric; working time – or more precisely the burden of working time – enters negatively. If one scales the impact of working time on an individual’s overall advantage by a (variable) policy parameter, thereby effectively allowing for different metrics of advantage, one can construct a figure such as Figure 1.This figure displays the ‘optimal policy track’, i.e. the locus combining optimal values of the instruments s and t for different metrics of advantage. 95
Basic Income on the Agenda The horizontal axis of Figure 1 measures the earned-income tax rate t, the vertical axis measures the subsidy rate s.The bold line is the optimal policy track for these instruments: each point on the track between a0 and a1 is an optimal combination of income tax rates and labour subsidy rates, maximizing the position of the worst-off productivity type among all preference tranches. In other words, each point on this track represents the ‘best choice’ a government would make. Now each point on the track also corresponds to a different metric of advantage.At the starting point a0 the government considers paid work a heavy burden, giving it a heavy weight in its measurement of people’s advantage. At the other end of the track, at a1, the government thinks paid work is not a burden at all.At that point it only considers people’s income when measuring their advantage. In other words, at a1, maximizing a citizen’s advantage amounts to maximising that citizen’s income. Hence, on the basis of such a model, one can draw the following conclusion regarding the relationship between the normative stance of a government (in casu the way it values time for non-market activity) and its eventual instrument choices: a. The optimal earned-income tax and labour subsidy rate increase as labour counts less as a burden in the government’s conception of people’s individual advantage. It follows that if a government’s conception of individual well-being narrows down to a ‘money’s all that matters’ stance, then it will induce people to spend as much time as possible on the shop floor. Let us next consider by way of example those cases where the tax rate is at its (assumed) maximal value of 1. The optimal policy track still prescribes higher labour subsidy rates for increasing values of a.11 In view of the observation that a higher a can be interpreted as capturing a government with a more outspoken emphasis on the positive value of participation in economic activity, the fact that such a government continues to subsidize a working individual, even if t is fixed, does not come as a surprise. To understand conclusion a intuitively, it is important to note that it is indeed plausible that a government with a higher a would choose to subsidize labour at a higher rate, since this ceteris paribus leads to higher advantage (the underlying model takes it that people will work more if they earn more). Both an individual’s disposable income and her hours worked increase with a higher subsidy, and the amount of work performed yields less disadvantage when a increases. Of course, granting more subsidies requires the government to increase its revenues, in order to keep its budget balanced. Increasing revenues implies raising t, or lowering B, or both. Suppose that government would then finance the increased subsidy entirely by increasing the uniform tax (or, if this transfer has the opposite sign, by lowering the unconditional basic income) B.This would run counter to the idea that the earned income tax instrument allows us to compensate for differences in individuals’ productivity, which, to recall, is a characteristic that is not considered as being within the realm of individual responsibility. For that reason, the rise in s that follows from a higher a will be accompanied by a rise in t. The fact that earned-income taxation rises as the burden of working becomes less important may seem a bit odd by itself. But, as just indicated, this feature follows from the fact that the government has more instruments at its disposal.To see this, note that 96
Activation and the Burden of Working Figure 2: 2:An an optimal optimal policy policy track track when when only only taxes taxes are are available available Figure
s 1
0
a0
a1
t
1
Figure 2: 3: An an optimal policy track with constrained subsidy level
s 1
a
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a0 0
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Basic Income on the Agenda there would not be a rise in the earned-income tax rate if the government could not observe an individual’s working time and could therefore not use the subsidy instrument. Indeed, in such a setting, it can be shown that the optimal tax rate decreases as a increases.That is, when no subsidies can be used it is optimal to let the net reward for working increase – hence, let the tax rate decrease –, as the burden of working becomes less important in the public metric of advantage. This case is illustrated in Figure 2. (Intuitively, this can be compared with our earlier numerical example: metric M3 considers the burden of work relatively more important than metrics M1 and M2. On the basis of metric M3 the government selects an option set with a lower net reward for working). Finally, Figure 3 displays the result for an intermediate case in which there is a constraint of the type s £ s* (covering for example a setting in which a government pays a limited wage subsidy – which benefits low-paid workers relatively more, but which is universal qua technique – to avoid training disincentives).The outcome is a mixture of the unconstrained case considered in Figure 1 and the regime without labour subsidies as captured by Figure 2.
Basic Income And what about B, the constant term in the labour income tax scheme, which represents a universal unconditional basic income in those cases where B > 0? A balanced budget requirement allows one to consider B as a ‘residual’ instrument, the value of which could be retrieved by solving B(t,s) once the other optimal values for the instruments have been found. It must be noted that, in principle, a policy can be devised that would keep a given basic income level unaffected. That is, a policy can be designed which fulfils the requirement that any rise in government outlays for labour subsidies is exactly offset by a rise in earned-income taxes, so that B neither decreases nor increases. The crucial question is whether such a B-preserving policy would be compatible with the optimal policy track as displayed in Figure 1, which already links the level and movement of the two instruments s and t. Stated otherwise, if s is required to increase with t along the optimal policy track at a more rapid rate than necessary to keep B at a given level, then basic income will fall, given an upward move along the optimal policy track. Or to put it in yet another way, basic income will then decrease as the normative policy parameter a rises. It can be proven that this will indeed always be the case. In the neighbourhood of the optimal policy track – which depicts an optimal relationship between s and t – an increase in the subsidy leads to a lower level of B (which still is, given the government’s objective, an optimal level).Two conclusions can thus be drawn as regards the relationship between basic income and the responsibility-sensitive egalitarian government depicted in this paper: b. The government will, for a given set of instruments and constraints, propose a lower basic income level as the burden of work in the government’s conception of individual well-being becomes less important (in other words, the more exclusive the importance the government attaches to income, the lower the basic income will be). 98
Activation and the Burden of Working Figures 4a,b: The conception of well-being and optimal instrument values (a: no constraint on s, b: constraint s £ 0.25)
0,9 0,7 0,5
t s B
0,3 0,1
a
-0,1 -0,3
M -0,5
0,9 0,7 0,5 0,3 0,1
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-0,1 -0,3 -0,5
c. Given a set of instruments and constraints (particularly given the balanced budgetrelationship between B, t, and s), there is an irreducible conflict between the level of the labour subsidy and the basic income level. An alternative statement of conclusion b is that a lower basic income level is associated with a government valuing more highly the non-monetary rewards associated with 99
Basic Income on the Agenda participation in economic activity. Referring to our discussion in the previous section, conclusion b implies that, in general, a rise in s will not be exclusively financed by a rise in t.What underlies this result is the fact that a change in the metric of advantage entails a change in the overall reward structure for paid labour, which can be achieved by shifting the balance between income taxation and the unconditional transfer B. Finally, we point out that conclusion b also holds when the model operates with an additional constraint on the level of s.12 A fortiori, it also holds for the restricted model without labour subsidies (i.e. where s is restricted to the value zero, as in Figure 2). Again, the underlying reason for this result is that one seeks to increase the net reward for working when the burden of work is regarded as less important. To conclude the discussion of this more general model of optimal instrument choice, we offer an alternative graphical representation of the conclusions identified in this and the previous section. In Figures 4a and 4b, the value of a Î [0, 1] is measured on the horizontal axis: from left to right, the weight of the burden of working declines in the normative conception of people’s individual well-being. The optimal values of the three distributive instruments as identified by the model (conditional on the parameter values we used for this specific simulation) are given for the case that was previously considered in Figure 1, as well as for a mixed scenario as depicted in Figure 3. Comparing the optimal policy track of Figure 1 with its counterpart in Figure 4a, note that the labour subsidy rate s, indeed, keeps rising (initially) even when the earned-income tax rate t is at its upper bound.The fact that the optimal policy track in the unconstrained regions of Figures 1 and 3 is a straight line is mirrored in Figures 4a and 4b, since in such regions the t- and s-curves are related through a linear transformation. Our conclusion a can be inferred directly from the alternative representation in Figure 4a, whereas Figure 4b shows the reversal in the movement of t as soon as s is constrained. Focusing on the work-independent transfer B, one sees that, initially, we have a basic income, but as a increases the unconditional transfer decreases.This provides an illustration of conclusion b.As we have stated earlier, and as is shown in Figure 4a, B can even become negative, that is, a poll-tax. Overall, the two figures also reveal the ‘residual’, budget-balancing character of B, thus providing a graphical illustration of conclusion c.
An Optimum Optimorum? A model such as the one outlined produces a systematic ‘catalogue’ linking different distributive policies with different public conceptions of advantage and/or with different conceptions of personal responsibility. It thus adds flesh and bone to the generic concept of a responsibility-sensitive egalitarian government.To repeat, for the simple setting outlined above, a government that gives little weight to time for non-market activity will, other things being equal, opt for a policy with higher labour subsidies and a lower basic income. Or, as stated earlier, it is the government’s stance towards the nonmonetary advantages and disadvantages of labour market participation that can ceteris paribus be considered as the driving force between different policy choices. Some may ask whether there exists something like an optimum optimorum on the optimal policy track.That is, whether the different optimal policies are not merely different per se, but differ in offering greater or lesser justice. In other words, one could 100
Activation and the Burden of Working take the findings of the model as a point of departure and then ask whether a policy favouring labour subsidies over basic income offers greater or lesser justice than its opposite. Within the framework of the model, this requires one to focus on choices between different metrics of advantage. In this respect, we first point at a negative result that follows from conclusion c identified above. Conclusion c is important with respect to the operational value of the real freedom inclusion rule discussed by Van der Veen (1997; 1998) in the context of the broader debate on basic income.Van Parijs (1995) defines real freedom as the ability to do what one might want to do (irrespective from what one actually does).Van der Veen (1997; 1998) suggests an ordering of option sets on the basis of this concept:‘a person’s real freedom is said to improve from one regime to another if and only if his choice set unambiguously expands…If someone’s choice sets in two regimes contain non-overlapping income-leisure combinations, it follows that the extent of his real freedom in this regimes cannot be compared’. (1997: 276-277) The irreducible conflict between s and B when the metric of advantage changes results in any pair of alternative option sets (defined by t,s, and B) not being comparable on the basis of the real freedom metric.The real freedom inclusion rule has consequently no operational value as a means to help someone choose between alternative definitions of advantage.13 An alternative approach starts from the observation that metrics of advantage and principles of reward determine each other, given the adoption of a Roemerian ‘impartial’ collective choice procedure and specific assumptions of the model under review. If one accepts the argument stated earlier that a principle of natural reward is intimately linked to responsibility-sensitive egalitarianism, then one can use such an (axiomatic) principle to identify its associated advantage metric, which we may then call the ‘neutral conception of advantage’.This would evidently amount to the identification of a specific point on the optimal policy track, given the parameter values in the complete model. While we have indicated above that one may raise fundamental doubts about the fact that responsibility-sensitive egalitarianism necessarily entails such a principle of natural reward, it is still true that someone could wish to rely on it to select a specific policy. When this is the case, the following result becomes highly relevant (see Vandenbroucke, 1999a). If government opts for a neutral conception of advantage – by adhering to the axiom that there should be no redistribution when all individuals have the same productivity level –, and if it can achieve equality by using earned-income taxes and labour subsidies, then it will not cash out a basic income. In other words, it follows from a model such as the one outlined above that a neutral government that can achieve equality (as its optimal policy), will use earned-income taxation exclusively to fund labour subsidies.14,15 Of course, it is clear that if one introduces an external argument for choosing a metric of advantage, a particular point on the policy track may be ‘justified’. But, to engage in such an exercise against the background of real-life debates on social policy carries the danger of missing another, more important point.To wit, that the underlying model is extremely simple. We limited our analysis to redistribution via a (Walrasian) labour market in this paper.The only individual endowment that was considered is ‘internal’, namely, the individual’s productivity level. Obviously, individuals 101
Basic Income on the Agenda also have external endowments, such as houses or capital, yielding an income that can also be redistributed in a welfare state. Moreover, active participation in society is not limited to participation in the labour market.With specific reference to the idea of the active welfare state mentioned in the introduction, it is therefore essential to consider what this model does not capture.
Beyond the Model: Policy Choices in the Active Welfare State Let us return to the idea of the active welfare state and its ethical foundations as they were identified in the first section, and confront them with the set-up of the model. It is important to point out that the model reduces the discussion on participation to a simple dichotomous choice. ‘Increasing participation’ in the model only refers to participation in the labour market. Of course, such an interpretation is appropriate if one wants to study inactivity traps.Yet the perspective should be broader in current discussions on social policy. Our goal should refer to participation in society, rather than to a narrower interpretation confined to labour market participation. Indeed, one should recall that the ethical justification of the active welfare state considers participation in society as one of the social bases of respect and self-respect, thereby making clear that one should not merely look at participation in the labour market. For, evidently, the social bases of respect and self-respect can also be strengthened through other, non-market activities such as taking care of a child, a parent, a friend, voluntary social or cultural work, etc. One could claim that such activities are nevertheless subsumed in the model, more specifically through the individual advantage associated with time for non-market activity. Still, this is a rough and indirect manner to treat them. It is a rough manner because it does not allow us to distinguish between various forms of non-market activities – e.g. ‘pure leisure’ versus voluntary social work, versus taking refresher courses, etc. – which could be valued differently by the government. Moreover, such valuations would then again be dependent on normative choices (relating to the question of to what extent such activities are considered as bases for respect and self-respect), which in this instance could be captured in principle by some multidimensional metric of advantage. It is an indirect manner because the advantage of time for non-market activity appears in the model only as the mirror image of the disadvantage associated with the burden of paid labour (which turns the model into a simple dichotomous model). More generally, the model lacks an explicit valuation of participation in social activity, be it in or out of the formal labour market. Indeed, also with regard to participation on the labour market, there is no direct reference to its capacity as a social basis of respect and self-respect. In short, it would be erroneous to consider the model as one that describes how different conceptions of participation would influence policy design. Put into the right perspective, it is a model which is suited to capture the influence of public valuations of some specific qualitative aspects of paid labour (such as stress, or its opportunity cost in terms of time for other activities), but it does not address the importance of participation per se. Finally, the model is very much a simplification because it has no intertemporal dimension and, therefore, can only incorporate a limited set of distributive instruments. The broader conception of participation in society requires one to think about the 102
Activation and the Burden of Working most appropriate combination of work and non-market activities over the entire life cycle (e.g. should we not design policies such that, as compared to the current situation, people work less between ages 25 and 40, and more between ages 55 en 65?). A ‘relaxed labour market’ would allow people to leave and re-enter the labour market easily (e.g., in order to care for someone, to update their qualifications, or simply to replenish their reserves; see Vandenbroucke, 1999b). The model we have presented cannot capture this conception of a relaxed labour market. Assuming that it could capture it, and neglecting the other problems we have just discussed, it is not at all clear whether a government granting a high value to an individual’s time for non-market activity would still opt for a high basic income, or whether it would instead favour other policies such as attaching to every job a right to full-time or part-time sabbatical leave, which acts as a more direct (qualitative) supplement to the monetary reward of paid labour.
Summary and Conclusion ‘Getting (poor) people back to work’ is an important concern in many of today’s welfare states, although opinions differ on why and how one should achieve this goal. It is precisely this matter of differing opinions which we wanted to focus on in this paper. We have shown how the publicly affirmed relative valuation of income and time for non-market activity drives the choice of a responsibility-sensitive egalitarian government between earned income taxes, labour subsidies, and an unconditional basic income. The model, we believe, can illuminate the choice between the instruments it considers. For example, it highlights the irreducible conflict between the level of the labour subsidy and the basic income level, or points out the absence of basic income if the government is committed to a neutral conception of advantage and can achieve equality.Yet, it is still a limited model. It is, in particular, too limited to offer an adequate description of an active welfare state, which is also founded upon the notion of responsibility-sensitive egalitarianism, but rests on a broader interpretation of participation as a goal for society and allows for a larger set of policy instruments. Hence, one should avoid extensive optimum optimorum-debates within the confines of a limited model.We nevertheless think it is worthwhile to convey the basic message that a discussion about how to get rid of inactivity traps is not merely a matter of choosing the most appropriate instrument given economic circumstances.We have to make a complex political choice on at least two issues: a conception of responsibility, and, as we stressed in this paper, a conception of individual well-being. As we have mentioned in the previous section, if a richer model were to be constructed, it would ultimately need to address the same kind of issues in a multidimensional way. Therefore, even if one constructs a model that directly addresses the broader idea of participation and/or allows for more instruments, one still faces the issue that the way in which one measures the quality of life or the level of advantage – in particular that of the worst-off – co-determines policy choices with regard to distributive instruments. ‘Being a responsibility-sensitive egalitarian’ is no sufficient basis for guiding policy choices. Implementing policies presupposes that one makes choices concerning the metric used to evaluate the quality of life; a choice that can only emerge from democratic debate in general and from the political process in particular. 103
Basic Income on the Agenda Finally, it serves to note that such choices are implicitly made in daily practice, such as through the use of poverty and inequality measures that serve as benchmarks for social policy.To the extent that these benchmarks are exclusively based on the distribution of income or wealth, they presuppose an extremely biased conception of individual well-being. Indeed, just as it has become generally acknowledged that GDP is not a very adequate indicator of economic development, this model carries the message that monetary inequality measures are at best only partial indicators of distributive justice.
Appendix The Government’s Conception of Individual Responsibility The model in Vandenbroucke (1999a; 2000) also systematically compares different normative conceptions of individual responsibility. With reference to the figures in the main text, the difference between a government that holds people responsible for their preferences and a government that considers individual preferences as non-responsible traits can be equally captured by a difference in the parameter a. Specifically, except for some limiting cases, a government that does not hold people responsible for their preferences will have a lower a. Hence, the results that were identified above mutatis mutandis carry over to a case in which one analyses differences in normative conceptions regarding personal responsibility.We can consequently state the following conclusions: a’. All things being equal, a government that considers people responsible for their preferences concerning time for non-market activity will propose a higher earnedincome tax rate and labour subsidy rate than a government that does not hold people responsible for their preferences.16 b’. For a given conception of advantage, and given a set of instruments and constraints, a government that considers people responsible for their preferences will propose a lower basic income level than a government that neither holds people responsible for their productivity nor for their preferences for working. Obviously, the choice of instruments is not exclusively driven by normative conceptions, but by the economic environment as well.To illustrate this, we reproduce here a simple formal expression for the optimal earned-income tax rate in a regime without labour subsidies.The optimal t in this case depends on two variables, the policy parameter a, and a factor J that captures pre-tax inequality: t=
0.5 - a J 1-aJ
where
J=
(wL / w) 2 s w2 / w 2+1
with w denoting the citizens’ individual productivity. Hence, J is a factor that decreases with two measures of inequality: (i) the productivity level of the worst-off, wL, divided by average productivity, and (ii) the coefficient of variation of the productivity levels. In line with our previous discussion, this expression shows that t decreases as the policy parameter a rises. But it also shows that, in a regime without labour subsidies, earned income taxes will decrease when inequality (as measured by J) decreases. 104
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Notes 1
2 3
4
5
6
7
8
9 10
11
12 13 14
We are well aware that behind this phrase lies the difficult debate as to what ‘responsibility’ means, i.e. whether one is responsible for a certain characteristic because one is actually ‘in control’ of it, or whether one is held responsible for that characteristic on the basis of a mutual agreement. This succinct statement is inspired by Cohen (1993: 28; 1989: 916). This first step is the ‘natural way’ for economists to proceed: they traditionally assume that the real value of an option set lies in the best use that can be made of it, which is under their usual assumptions the use that is actually made. This can be criticized from a freedom perspective, i.e. it can be said to neglect the importance of flexibility for individuals (the importance of having options which are not actually taken up, but which might be taken up given some change in preferences). The expression ‘utilitarian’ may be somewhat misleading in this context since we are not comparing utilities, but a publicly affirmed objective notion of advantage. Nevertheless, it clearly reveals the similarity with the utilitarian conception of impartiality. Note that the simple example deals with a case in which two equal states are compared. Therefore, in this example everybody belongs to the worst-off (or best-off) type, implying that we will have take into account the effective choices of the entire population to calculate average advantage. This is notably the way we proceed when choosing between the two option sets of the example (as can be seen in more detail in note 10). Moreover, if these basic assumptions hold true, Roemer’s approach yields the same results as those obtained through a slightly different implementation procedure proposed by Van de Gaer (1993) and Van de Gaer, Martinez, and Schokkaert (1998). On this, see Vandenbroucke (1999a). At the risk of introducing some confusion in terminology, such a government could be labelled ‘Rawlsian’, since Rawls in his mainstream exposition rules out individual responsibility for ‘work effort’ (Rawls, 1971: 312). Of course, as we mentioned at the end of the previous section, the conception of advantage will influence the choice between policies as soon as ‘advantage’ is an argument in the social objective function of a government. This implies that we allow for the inclusion of ‘time for non-market activity’ in the Rawlsian bundle of social primary goods. For instance, for the entry combining option set I with metric M2, the average advantage is found using the formula 0.5 x (10-5.5) + 0.5 x (5-2.5) = 3.5. Or, given option set II and metric M1, using (0.4 x 9) + (0.55 x 6) + (0.05 x 3) = 7.05, etc. It can be seen on the figure that the track eventually stops at the point where s=t=1. This feature follows from the assumption that t can be at most 1, and from a labour supply constraint in the complete model ensuring that an individual cannot work more than a certain maximum number of hours.The latter requirement is fulfilled if the subsidy is not set higher than the income tax rate. Cf.Vandenbroucke (1999a). Referring to the appendix, it also cannot help to choose between different conceptions of personal responsibility. As the model in Vandenbroucke (1999a) allows for another revenue source, viz capital income taxation, and for spending on education, the result as identified there states that, under the conditions identified in the main text, there will be no positive basic income
105
Basic Income on the Agenda unless there is a positive residual left after having funded educational expenditures generated by the capital income tax. In other words, if this residual were negative, B<0, and one ends up with a uniform poll tax to co-fund education. 15 Moreover, given the specialized setting identified in the main text, it can be shown that this result is essentially the Egalitarian Earnings Subsidy Scheme as proposed by White (1999). Recalling our remark at the end of section entitled ‘The Impact…’,White’s underlying idea of reciprocity (no paid work, no subsidy) is thus vindicated in this setting, without having to appeal to other philosophical foundations than those presumed in the maximin rule and ‘neutrality’. 16 Again, the relationship between the value of a and the level of t has the opposite sign if one considers a regime without labour subsidies. In this case, a responsibility-sensitive government will propose a lower earned-income tax rate than a government that does not hold people responsible for their preferences concerning time for non-market activity.
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Arguing for a Negative Income Tax in Germany Joachim Mitschke*
Introduction At the 1998 Amsterdam Congress of BIEN, three alternatives of providing basic security consistently with raising employment were discussed: 1. a tax-financed, institutionally independent and unconditionally granted basic income, 2. a negative income tax and 3. a permanent wage subsidy. As I shall argue, I am in favour of a negative income tax (henceforth NIT). However, my arguments are not meant to claim comprehensive validity independently of national or historical conditions. My position is more modest. It is based upon the contemporary institutions of the tax and transfer system in Germany, which is marked by a historic dualism of tax-financed social benefits and contribution-financed social insurance entitlements of wage-earners. My plea for NIT, in the form of the Citizens Income Plan ‘Bürgergeld’ addresses the experiences, debates and expectations surrounding policies of income taxation, social security and the labour market as they exist in Germany. My argument in favour of Bürgergeld thus rests on a specifically German evaluation of current social problems and worthwhile social goals. In general, I take the view that each country has to find its own ways and means to achieve a social optimum, even though the different alternatives of providing basic security have general advantages and disadvantages not limited to either a specific location or time period. While my ranking of these alternatives in terms of their problemsolving capacities is addressed to the German case, it may offer insights that are useful in other countries, to the extent that similar problems and similar goals exist in those.
Diagnoses of the German Labour Market Policy and Social Policy The necessity for a new social and employment policy framework For decades now, the level of hard-core unemployment has risen whenever the economy has shown signs of recovery.And the (timid) economic upturn at the turn of 1999 is passing the labour market by as companies cut jobs and further automated their production during the previous recession. Also, companies hesitated in hiring new employees, with the experience of the recession fresh on their minds, and they hesitate even when more orders start coming in again. Economy and society can take the rise * Translated by Tina Haux and Anna Klinkner.
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Basic Income on the Agenda of unemployment, despite all the bitterness for those affected by it, as long as the volume of the redundancies is not too high and as long as it can be absorbed in traditional ways through unemployment benefit, unemployment assistance, employment promotion schemes, and social assistance in order to prevent the worst damage. Now, however, the social net is beginning to be torn apart because a level of unemployment has been reached which no longer allows us to ignore the doubts about the functionality of the traditional economic and social policy framework. The German Council of Experts on Economic Development calculated in their annual report of 1997/1998 that the total of open (registered) and hidden unemployment in Germany amounted to 6.3 million people who are both able and willing to be in paid employment given a rate of 11.4 percent of registered unemployed (4.3 million unemployed).1 There is no doubt that neither quantitative nor qualitative growth of production can reduce the lack of jobs to a bearable level. Growth of production on a national or supranational level – encouraged through measures such as investment- or demand-oriented tax policy, through money supply or adaptation of interest rates as well as through deregulation of employment organization – may be effective in the fight against unemployment due to the business cycle. However, it cannot be of any use where the employment and social political framework has created wage levels which prevent the creation of jobs.There we do not have a temporary business cycle problem but a structural shortfall of employment opportunities. According to the official labour market statistics, about half of the registered unemployed do not have any completed professional training.2 Hence, it is above all the unskilled or low-skilled workers in lower wage brackets who are affected by unemployment.The steady reduction of low-paid jobs can firstly be explained by the basicwage policy which the unions have pursued for decades.This wage policy has levelled off wage differentials without taking into consideration qualificational differences, and has thus raised labour costs, including non-wage labour costs, above their productivity, particularly in the low-skill and low wage bracket. Secondly, the German treasury has increased non-wage labour costs by using not only tax-financed but also increasingly contribution-financed benefits for social policy. According to the original ideas of Bismarck’s social legislation, the purpose of the latter is to provide a contribution-equivalent inter-temporal reallocation of the individual’s purchasing power, instead of a comprehensive interpersonal redistribution. Due to the lack of a universal tax-financed basic security, social policy has increasingly relied on compulsory work-related social insurance (for health, pensions and unemployment) in guaranteeing a minimum standard of living.The insurance funds have had to raise their contribution levels. Interpersonal redistribution in pension insurance has been estimated to range from 25 percent to 40 percent of the pension volume, and was calculated by the Association of German Insurance Funds for 1995 to have been 101.8 billion DM.3 What was originally meant to be the subject of a society-wide contract, has thus become a cost-increasing part of the individual contract of employment. The unions are reluctant to agree to lower wage brackets in collective bargaining, because they are concerned about the minimum living wages of low-paid workers. The basic income function of wages cannot be performed by any of the transfers of the present system. Unemployment benefit and one type of unemployment assistance are paid for within a limited amount of time anyway. Moreover, it is often necessary to top up the insufficient unemployment assistance benefit with social assistance. German 108
Arguing for a Negative Income Tax in Germany social assistance was originally conceived to alleviate the individual situation of members of social fringe groups, rather than being conceived as a transfer for absorbing extensive unemployment. According to the latest statistics, about 40 percent of social assistance recipients are registered as unemployed.4 These numbers do not yet include the potential social assistance recipients who have been made redundant in the course of the mass dismissals of the past few years, and who are currently receiving either unemployment benefit or unemployment assistance. The share of social assistance recipients in Germany seeking employment will be likely to rise to more than half. Social assistance, however, is only able to repair the financial consequences of unemployment in a meagre way. Substantial psychological and social burdens also remain. Firstly, apart from small exemptions, earned income is fully deducted from social assistance.Thus, monetary incentives to re-enter the labour market are being undermined to a great extent. Secondly, even if the recipient of social assistance is willing to work, he is faced by means-tests which extend to members of the family.Thirdly, social assistance administration involves large material powers of discretion, giving rise to insecurity of entitlement. Finally, being the recipient of social assistance is typically accompanied by a social stigma. The sheer size of funds which have to be raised by the communities to finance social assistance expenditures make it obvious that social assistance in Germany cannot replace the basic security function of wages. For these reasons, it is understandable that the unions, for the time being, refuse to open up the clauses in existing wage agreements so as to re-employ workers with insufficient training or experience. The result may be that employers will continue to reduce low-skilled jobs, or transfer them abroad. Within the existing framework of labour market policy and social policy, trade unions and firms behave quite rationally, though they do so to the detriment of society. Employers behave rationally when cutting unprofitable jobs with high wages and low productivity; organized workers behave rationally when they insist on preserving decent minimum wages in the lower wage brackets. Low-paid workers are thus faced with a dilemma: if they claim a living wage, then they jeopardize their jobs; but if they agree to lower wages to safeguard their jobs, then – even worse – they jeopardize their subsistence level. Consequently, employees fight together with unionists to protect minimal living wages, with the predictable result of job losses. However, the party in the labour market process which does not act rationally is the government. In setting an action framework which cannot be utilized by market participants to preserve low-qualification jobs, it is mainly financing unemployment instead of employment, at a tremendous cost to the tax payer and those paying social security. In addition, as noted above, the government is applying the wrong (contribution-financed) instruments for basic security and interpersonal redistribution, with the result that it further accelerates the demographically caused increase of non-wage labour costs. Given this perverse set of institutions, it is hard to feel sympathy for politicians who complain that German politics is being held responsible for the disastrous employment results of collective bargaining, on which politics is said to have no influence. The reduction of low productivity jobs is by no means an inevitable tribute to technical progress. Firms are not driving technology forward as an end in itself, but because the replacement of manpower by automation is paying off. In the increasingly 109
Basic Income on the Agenda important service sector, there are inherent boundaries to rationalization. But new, simple jobs are also being created by automation in industrial production. It is an issue, however, whether these jobs will remain viable due to the cost of labour. Unsuitable cures following traditional recipes The weaknesses of the employment- and socio-political framework have not gone unnoticed by parliament and government.Yet legislation and administration have stuck to more or less marginal corrections of the outdated employment policies. Apparently, a more radical change of ideas would be uncomfortable for ideological, party political and bureaucratic reasons. The current series of employment promotion measures5 is based on the assumption that the wage level cannot be controlled by the state.Thus the attempt is made to reduce the disparity between work productivity and wage level by raising the level of qualifications. But this approach has serious limitations.Years of experience of state-subsidized training, for increased professional and employment qualifications, and of private retraining and job-creation companies, show that these qualifications can only be improved within narrow talent- milieu- and age-specific boundaries. Such programs cannot compensate for the thrust of dismissals on the regular labour market, and become more difficult to sustain as the requirements of productivity grow faster and faster through international competition in labour and goods. It is well known that East-Asian developing countries now possess production technology which until quite recently was thought to be exclusively in German possession. Either the cheaper daylabourers are coming from the neighbouring states (Poland, the Czech republic), or the cheaper import products from afar. There are also politics of state support for the secondary labour market through wage subsidy and other job creation schemes. Unfortunately, these are only a drop in the ocean.There are not that many fallow lands of industry to rehabilitate, and there is not that much communal child care, care for the elderly or upkeep of public amenities to go around to even out the unemployment balance sheet after the redundancy waves in private industry. However, efficiency objections to such schemes of market interference weigh more heavily than these limitations of scope.The jobs which are created by the public sector in the secondary labour market are lost to the regular labour market, for example in redevelopment companies, garden shops and private homes for the elderly. Consequently, these practices do not bring about an increase in the number of job vacancies. If money from taxes and social security contributions is available for such work, then local authorities should place the orders with private companies, who, experience shows, are better able to place workers than authorities and national companies. It does not make sense to establish a secondary labour market with public funds, apart from exceptions such as workshops for the handicapped. Lately, the state has also started to financially support the regular labour market in order to preserve or create jobs. This is done through temporary wage subsidies. However, this kind of policy is largely ineffective as it only enables local government to pass on the cost of supporting the unemployed.Treasurers of cities are subsidizing private firms who employ social assistance recipients. These wage subsidies usually run for six months up to a year, and sum up to DM 1,500 per month, which often exceeds the social assistance payments, and amounts to more than half of the worker’s gross pay. The result is predictable. To obtain an unsubsidized job at the same 110
Arguing for a Negative Income Tax in Germany wage rate, after the subsidy ceases, the former social assistance recipient would have to double his productivity within (less than) one year. With a few exceptions, this does not succeed and most workers will be unemployed again. However, neither the budget of the city, nor that of the subsidized firms will have suffered from the operation.The tax payer picks up the bill as long as the subsidy lasts. Moreover, the cost of supporting the dismissed workers is financed by the Federal Employment Service, as they are now entitled to social insurance benefits, rather than locally financed social assistance.Thus the buck is being passed, as it were, between state institutions, with hardly any gain in employment. Requirements for an employment-friendly basic transfer From these insights and experiences, five requirements can be deduced for a new basic transfer which creates and preserves employment: On the one hand, the basic transfer has to be preventive, and set wage-induced incentives for employers to preserve or create low-qualification jobs. Free-rider behaviour has to be avoided. On the other hand, the basic transfer must enable employees and potential employees to stay in work or to find a job, at a lower wage. This makes it necessary to conceive the transfer as a wage-supplementing income, which must be reliable, indiscretionary, easy to administer, needs-oriented, and without time limits. The wage supplementing transfer should aim first and foremost to supplement wages earned in the regular labour market. The basic transfer has to be tax-financed. It should ease the financial burden of social insurance caused by elements of interpersonal redistribution, so that the demographically caused increase of social security contributions and non-wage labour costs will be slowed down, if not exactly halted. Proposals (such as Biedenkopf and Miegel, 1997) which integrate social insurance in a comprehensive tax-financed basic security with additional voluntary private provisions throw the baby out with the bathwater. Apart from constitutional problems, it is to be expected that insufficient voluntary private provisions would lead either to mass poverty in old age, or to pressure to increase the level of basic security payments, which would then become too expensive. Taking into account all needs-oriented benefits, the basic transfer has to be worthy of a welfare state, but it must not reach a level of comfortable living. In particular, it has to be ensured that the disposable income of those in employment is always sufficiently above the income of those receiving only the basic transfer to act as a work incentive. In view of the federal debt and the negative effects of a tax increase on employment, the reform of basic security can only be designed within budget neutrality.
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The Bürgergeld-Plan as a Negative Income Tax Approach: Stability of Social Security and a Flexible Labour Market Aims and design A reform of social security which can fulfil the five requirements just listed, and which enables the search for acceptable compromises in labour market and social policy, is the Bürgergeld-Plan. It has been suggested by me, as a specific variant of a NIT (see Mitschke 1985; 1993; 1994; 1995). Listed in order of priority, the aims of the Bürgergeld-Plan are threefold. Firstly, to combat structural unemployment in the low-wage sector of workers with poor qualifications. This aim follows the maxim that a successful employment policy is the best social policy. (Note, however, that Bürgergeld is not an instrument to deal with unemployment in the high-wage sector of employees with competitive qualifications.) Secondly, to establish general prevention of income poverty for whatever reason; whether in times of education and training, in cases of disability, sickness, pregnancy, child care or insufficient retirement benefits, Bürgergeld recognizes that in the future, changes of work biographies will leave more and more income gaps to be filled. And thirdly, Bürgergeld minimizes the redistributive apparatus of the state and reduces dispensable social bureaucracy. In this section, it will be shown how these aims are interlinked in the design of Bürgergeld. Unlike social assistance, which is a palliative, Bürgergeld is conceived to be preventive, designed to prevent the emergence of unemployment. It creates the conditions under which unskilled or low-qualified employees can take jobs with lower wages without having to fear for their material existence. It thus aims to tap the potential of employment, which is estimated to be 4.7 million net jobs by the Cologne Institute of the German Economy.6 Other research7 and my own approximate calculations show a similar figure. New jobs for the low-qualified can be opened up in Germany especially in the retail trade, repair and maintenance service, catering, tourism and many social services. The main emphasis of job-creation is on small business and middle-sized companies, which already provide more than three quarters of the jobs in Germany today . As with all negative income concepts, the basic idea of Bürgergeld is to incorporate welfare benefits and income taxation into one system. All tax-financed social benefits will be combined into a universal transfer, the Bürgergeld, applying uniform social and means-tested criteria. The level of this universal transfer determines the amount to be deducted in the calculations for tax allowances, especially that of child and basic tax allowances. Thus, social assistance and related benefits can be smoothly transferred into the tax system without the unbearable and unintended jumps of the current tax and social law. The following benefits could all be integrated: – child benefit, parental allowance, housing and training allowances; – unemployment assistance (which is tax financed, unlike unemployment benefit which is financed through contributions); – both regular and supplementary forms of social assistance; – means-tested and individually assessed subsidies in social housing, farming,public transport, y outh work and communal activities; – redistributive elements in social insurance, which can be detached fr om existing social insurance entitlements. 112
Arguing for a Negative Income Tax in Germany .As will be explained below, the Bürgergeld system requires that income from employment or property be taxed by 50 percent after taking account of social insurance contributions. For example, an unskilled worker, single, working half-time, without any wealth, would be entitled to DM 1,100 Bürgergeld after allowing for family status, work ability, etc. Suppose that this worker earns DM 900, net of social insurance contributions.Then DM 450 would be deducted from his Bürgergeld, and he would end up with DM 900 net pay (tax free) and DM 650 Bürgergeld, which sums up to DM 1,550. He would then receive DM 450 more than if he did not work, and received only the Bürgergeld. But DM 450 less than if he would earn at full-time work.There would always be a wage gap due to the arithmetic of the system.Thus, the Bürgergeld does not lock people into low paid employment, as the transition to better paid or fulltime employment is smooth, and financially rewarding. To integrate tax revenue and tax-financed welfare benefits, while at the same time retaining the contribution financed social insurance, seems sensible.The reason is that socially motivated tax allowances and needs-oriented elements in wage bargaining apply the same or similar grounds of entitlement as social minimum benefits.A further advantage of integration is that the tax and transfer claims would be netted for all employees, so that the public tax and welfare budgets would not be inflated without redistributive effects, as is the case today. The income, tax and welfare systems would thus become better adjusted to each other in an administratively much simpler framework. This is particularly necessary in Germany, where 38 different authorities and semi-authorities administer 155 different tax- and contribution financed policies.8 The Bürgergeld-concept represents a way to top-up wages below the subsistence line which is acceptable for both employees and trade unions. It frees workers with low wages from the dilemma of having to choose between a high wage which threatens to eliminate their jobs and a low wage which jeopardizes their material existence. It also makes it easier to create part-time jobs, which many employees want, or which are the only jobs offered to them anyway. In this respect, Bürgergeld avoids some problems of negotiated labour time reduction under present conditions.A shortening of the working week from five to four days would need to be followed by a 20 percent cut in gross wages in order to be neutral with regard to wage costs. Most companies are unable to compensate for such a cut in wages by reducing elements of remuneration beyond the wage agreement, as Volkswagen has done. On the other hand, workers on low wages would come dangerously close to the subsistence level if their wages were to be cut by 20 percent. Under Bürgergeld, the effect of a 20 percent wage cut would be reduced to only a 10 percent reduction in disposable income.This would enable a cost-neutral reduction of working hours to take place in a socially acceptable way. To go without a compensatory wage increase does not necessarily mean to go without the respective amount of income. A clear majority of employees prefer an acceptable reduction of income to the loss of their jobs. After decades of experience of collective wage increases, it is hardly to be feared that trade unions will be unable to prevent individual employers from pressing through wage reductions unrelated to productivity, if collective bargaining agreements in the low wage sector were to be opened up, after introduction of Bürgergeld. Bürgergeld is not a wage subsidy in the traditional sense anyhow.The employee is the recipient, not the employer. It is based on comprehensive individual needs (other jobs, income through property, family status, ability to be in employment, etc.) instead of 113
Basic Income on the Agenda being linked to the insufficiency of one particular type of income. Because of its comprehensive nature, Bürgergeld is better when it comes to targeting, and it therefore requires less money than wage subsidies. Social partners would not agree to lower wages paid for by the volume of subsidies and the tax payer, without having good reasons to do so. However, such apprehension is justified for traditional wage subsidies. The interest of the employee to watch the level of his income remains, as his Bürgergeld is only compensating for half of the wage reduction. This prevents firms from taking advantage of the Bürgergeld-system. Incentives for clandestine work will continue to exist, as long as earned income is not completely free from contributions and charges. To exempt the low wage sector entirely from such charges would be indefensible, both from a social policy and fiscal point of view. Yet, it takes two to arrange clandestine work, an employer and an employee. Bürgergeld, by enabling social partners to agree on lower wages, may reduce the incentives of employers to avoid negotiated wage costs, including social insurance contributions, through unrecorded employment – the more so since this practice is always penalized. Thus, the decisive impulse for the reduction of clandestine employment through Bürgergeld is likely to be coming more from the side of the employers, rather than from the employees. To summarize, Bürgergeld is an integrated tool for meeting subsistence needs from a multiplicity of causes, without having to rely on the traditional system of fragmented and badly co-ordinated means-tests. It is more amenable to stimulate market incentives in the relatively inflexible German system of wage-bargaining, and less reliant upon the bureaucracy of social assistance, since its entitlements are independent of wage or income status. As has been argued above, unlike present-day German social assistance, the administratively simple, reliable, sufficient, permanent and non-stigmatizing basic income of the Bürgergeld can coexist with a relieved system of social insurance in Germany. It is basically a form of minimum income guarantee which underwrites needs through mobilizing employment. In particular, Bürgergeld: 1. preserves and create jobs in the low-wage sector, 2. makes it easier to set-up and fill part-time jobs, and 3. to absorb negotiated wage cuts and reductions in working hours, thus avoiding unnecessary dismissals. In short, Bürgergeld may help in the adjustment towards a more flexible labour market, and more flexible circumstances of lifetime work, without far-reaching social conflicts. Financing Politicians dealing with taxes have the habit of not paying much attention to the social and economic conditions of getting the revenue; politicians dealing with social policy have a tendency of not thinking through how their favours can be financed.This brings us to the topic of financing.The very first proposal of Bürgergeld (even though it was designed in times of economic growth) was determined to respect the conditions of fiscal neutrality (Mitschke, 1985).This is because it is neither reasonable nor honest to burden other parts of the national budget, or the tax payers, with the financing of a structural reform of basic security, even in times of a growing economy and high tax revenue. 114
Arguing for a Negative Income Tax in Germany For any size of Bürgergeld, the break-even level of earned income which marks the transition from transfers to taxes, with a tax rate of 50 percent, will be at twice the size of the Bürgergeld. According to my own calculations (Mitschke, 1993) of the first order effects on the basis of 1992 figures, the notional average size of Bürgergeld for 1992 would have to be at DM 9,200, when adjusting the average subsistence level for adults and children according to the rulings of the constitutional court. This would mean a break-even level of DM 18,400.Taking into account the average tax allowance in this year, the consequent loss of income and wage tax receipts would be 25.5 billion DM. This loss would be entirely compensated by the reduction of legal and illegal cumulation of benefits, as well as the abolition of object-centred subsidies to those in need.Thus, the introduction of Bürgergeld could be achieved under budget neutrality without reducing the level of basic social security and without tax increases. In this calculation, moreover, the savings on administrative costs, as well as the abolition of minimum income guarantee provisions in the existing social insurance laws, have not been taken into account. These results have been contested in alternative calculations of the financing required by Bürgergeld, which arrive at higher estimates of the amount of foregone tax receipt to be covered, and also envisage lesser savings from the abolition of existing basic security provisions.9 After reviewing the evidence, a recent report of the General Secretary of the German Council of Experts on Economic Development (Hüther, 1997) has confirmed that a budget neutral introduction of Bürgergeld, along the lines I have sketched, is feasible after all. According to the report, the financing needs of Bürgergeld (as estimated by the costing method of the Institute for World Economy in Kiel, for 1996) would in the worst case scenario be as high as 24 billion DM. However, the reduction of benefit claims as a result of Bürgergeld’s positive employment effects have not been included in this calculation.And according to the report, every 100,000 persons taken off the benefit rolls would reduce the total of social security outlays – including social insurance – by about 4 billion DM. Thus, if 600,000 of the unemployed were re-employed under Bürgergeld, then its budget neutrality would be achieved.This figure is not implausible, given that the employment potential for those with low qualifications is estimated to be as high as 4.7 million jobs, if collective wage agreements are opened up. To be sure, there are limits on a viable way of financing basic security of the kind I have outlined above.These limits, as demanded by both politics and society, lead us to reject casting basic security in the form of an entirely unconditional basic income. In theory, an unconditional basic income might correspond to the same configuration of effective marginal tax rate and benefit (Van Parijs, 1995: 57). The crucial difference, however, would be that the basic income (of the same size as the entitlement of Bürgergeld for a person without any earned income) is paid out unconditionally to every adult, independently of taxation. As a result, the volume of taxes needed to cover this huge amount of social benefits would have to increase drastically, and the perceived burden of taxation on each person’s earned income would increase correspondingly, even though most of the tax would of course flow back as basic income. For example, a persons earning 4,000 DM a month (net of social insurance) would have to pay a virtually confiscatory amount of 2,000 DM to the tax authorities, and receive DM 1,000 from a different channel, the basic income distribution authority. 115
Basic Income on the Agenda This way of financing the system would be politically disastrous. It would increase resistance against distribution, due to the sheer size of the tax budgets and benefit expenditure volumes. It would also surely overstretch the solidarity with those in need: the poor would be blamed for the confiscatory tax burden on the wage earners. Hence, even though the incentive effects of unconditional basic income might be exactly the same as those of Bürgergeld (being based in the same effective tax schedule), the chances of basic income achieving social integration through increasing labour participation would be utterly ruined.10
Political Response to the Bürgergeld-Plan in Germany The Bürgergeld-Plan which I elaborated (Mitschke, 1985) was adopted about six years ago by the Christian-Democratic Employees of Germany, the Business Association North Rhine-Westphalia within the Conservatives and by the Free Democratic Party FDP of the liberal wing.11 As a result of this, a close examination of my proposal has been incorporated into the coalition agreement between the Christian Democratic and Social Union CDU/CSU and the FDP for the thirteenth term of German parliament (CDU/CSU/FDP, 1994) which ended in autumn 1997.12 The commission of experts for ‘Alternative Tax and Transfer Systems’, of which I was member just up to the passing of the commission report, was set up by the then Chancellor following the coalition agreement. It rejected the integration of personal income tax and tax-financed social benefits which I proposed, but it nevertheless recommended the co-ordination of numerous benefits in a new department for social transfers.13 In spite of the commission result which had been pre-programmed by the then Chancellor and party leader of the CSU, both the CDU of the Länder Hessen and Saar included the option of my Bürgergeld-concept in their employment programmes of 1996. Similarly, the federal CDU decided to aim for an integration of the tax and transfer system under clause 76 of its manifesto in Hamburg in 1994.14 The FDP explicitly wrote the Bürgergeld-Plan into its manifesto in Wiesbaden in 1997 and in its election programme of 1998.15 Even though the heads of the German trade union council (DGB) and the powerful metal union (IG Metall) show themselves willing to consider a new form of basic security in the face of increasing unemployment, especially in the low-wage sector,16 the majority of unions are still opposed to opening clauses of wage agreements for lower wage brackets, and they also oppose a tax-financed basic income.This stance of the unions has led to a divided attitude towards issues of basic income within the Social Democratic Party SPD of Germany. Whereas the left-wingers reject a tax-integrated basic income, both the leadership of the party and the parliamentary wing have declared the concept to be worth considering. The political-economic hypotheses which have been presented by the candidate for Chancellor call for wage subsidies in the low-wage sector through NIT.17 In addition, the commission on the future sponsored by the social democratic Friedrich-Ebert-Foundation, in which I was a nonparty member, is looking at my basic income concept as ‘the best proposal to overcome the negative effects of the German welfare state on employment’, even though it has pointed at the considerable obstacles involved in a transition from the existing arrangements (Zükünftskommission der Friedrich Ebert Stiftung, 1998: 262). 116
Arguing for a Negative Income Tax in Germany Finally, the green party (Bündnis 90/Die Grünen) has abandoned its idea of a standard basic income, put forward during the last federal election campaign in 1994. It has now included in its program a ‘needs-orientated basic income’,18 which contains some elements of my Bürgergeld concept. Nevertheless, the party is not in favour of integrating basic security in the tax system.According to the coalition agreement between the SPD and the Greens, the new coalition should develop a concept of a needs-oriented social basic income, and introduce it step by step.19
Summary in the Form of Seven Hypotheses 1. A basic security which is complete, reliable, transparent and permanent facilitates the use of human labour. It does so by supporting the person in the increasingly frequent phases of life in which little or no income is earned: training, retraining, parttime employment, change of career, illness, pregnancy, child-raising, and also in the initial stages of setting up one’s own business. 2. Unlike the present welfare benefit system, a basic income of the Bürgergeld-type acts to prevent the formation of unemployment in the particularly hard hit low wage sector (of the low qualified and those for whom it is difficult to obtain further qualifications) by permitting the opening of collective agreements without hurting the subsistence requirements of the workers.This increases the possibilities of lowering wage costs, and is particularly important since unemployment is not due to a lack of supply but rather to insufficient demand for labour in this sector.With basic income security, new jobs can be formed which pay off for the employer, even if the employee has little training or qualifications, and needs of the employee would be covered in a reliable, permanent way with little bureaucracy involved. Society finances employment instead of unemployment. 3. Basic security through NIT increases the incentive to work due to the more favourable rate at which earned income is effectively taxed, in comparison with the current system of welfare benefits. On the other hand, the limited compensation of the wage reductions provided by Bürgergeld prevents employers from taking advantage of the subsidization effect in wage negotiations. Furthermore, the incentives to accept clandestine work diminish for both employers and employees. The arithmetic of the system ensures that those in employment will always be better off than those solely relying on basic security. 4. Basic security through NIT decreases the volume of state redistribution substantially as it balances tax and transfer claims: citizens are no longer financing their own transfers through taxes. Both the tax and the social expenditure budget shrink. 5. Basic security through NIT can be financed without a general increase in taxes, while maintaining the level of benefit entitlement.The costs are mainly to be met through replaced social transfers, the abolition of unnecessary object-subsidies, as well as superfluous provisions of minimum security within the social insurance sys117
Basic Income on the Agenda tem. In the long run, the positive employment effects which can be expected will also reduce the financing burden of social insurance more generally. 6. The NIT serves to co-ordinate tax and social legislation, and to simplify its respective administrative requirements. By combining the different tax-financed social benefits that presently exist in one system, it facilitates mutual adjustment of their purposes.Thus, the bureaucracy of social policy will be cut back, as the same or similar social and economic data will no longer have to be collected several times. 7. The integration of social benefits in the tax system reduces the stigmatization of those in need of basic security.This will counteract the tendency of society to split into a class of state supporting tax payers and a class of state burdening social claimants.
Notes 1
2
3
4 5
Announcement of the federal government: Annual Report of the German Council of Experts on Economic Development. German Parliament, 13th legislation period, Drucksache 13/9090, 18.11.97, p. 91 ff. There were 4,308,094 registered unemployed, 1,629,537 without completed professional qualifications, summing up to 37.8 percent at the end of September 1997. In the old Länder the rate of the unemployed without professional qualifications was 45.7 percent, in the new Länder it was only 21.1 percent: Bundesanstalt für Arbeit, Strukturanalyse 1997. Bestände sowie Zu- und Abgänge an Arbeitslosen und offenene Stellen. Sondernummer der amtlichen Nachrichten der Bundesanstalt für Arbeit, Nürnberg 1998, p. 8, 48 and 136. The formally lower rate in the new Länder is giving the wrong picture of the whole of Germany. In the former GDR a duty to enter some form of training or eduction programme existed and many of the qualifications do not meet the requirements of the market. See also: Transfer-Enquête Kommission: Das Transfersystem in der Bundesrepublik Deutschland. Bericht der Sachverständigenkommission zur Ermittlung des Einflusses staatlicher Transfereinkommen auf das verfügbare Einkommen privater Haushalte. Stuttgart, 1981, p. 247-9; Wagner, G: Umverteilung in der gesetzlichen Rentenversicherung. Frankfurt/New York, 1984; Schmähl, W: Finanzierung sozialer Sicherung, in Deutsche Rentenversicherung, 9-10/9186, p. 541-570; Andel, N: Finanzwissenschaft, 4th edition, Tübingen 1998, p. 468-471; Ruhland, F: Versicherungsfremde Leistungen in der gesetzlichen Rentenversicherung, in: Deutsche Rentenversicherung, 1/1995, p. 29-31 for doubts related to the constitution; Schlenger, M: Versicherungsfremde Leistungen in der Gesetzlichen Rentenversicherung – Einsparungen anstreben. Schriften des Karl-BräürInstituts des Bundes der Steuerzahler,Volume 86.Wiesbaden 1998, p. 12. Statistisches Bundesamt; Statistik der Sozialhilfe. Empfänger/-innen von laufender Hilfe zum Lebensunterhalt am 31.12.1997.Arbeitsunterlage,Wiesbaden 1998, p. 14-15. In addition to advice and placement these include the special measures for employees, employers and the providers of training and employment according to the third book (Arbeitsförderung) of the Sozialgesetzbuch, such as the support measures of the Bundessozialhilfegesetz (especially §§18, 19 and 20 BSHG).
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Arguing for a Negative Income Tax in Germany 6
7
8
9
10
11
12 13
Klös, H.-P.: Analyse: Dienstleistungslücke und Niedriglohnsektor in Deutschland, in iwtrends, 3/1997, p. 33-59; Klös, H.-P.: Dienstleistungslücke, Niedriglohnsektor und transferpolitischer Reformbedarf. Paper presented at the second meeting of the circle of experts ‘Dienstleistungsbeschäftigung im 21. Jahrhundert‘ in the Soziologisches Forschungsinstitut, 20/21 February in Göttingen. Institut der deutschen Wirtschaft, Köln 1998 (to be published). Sesselmeier, W., Klopfleisch, R., Setzer, M.: Mehr Beschäftigung durch eine negative Einkommenssteuer: Zur beschäftigungspolitischen Effektivität und Effizienz eines integrierten Steuer- und Transfersystems. Sozialökonomische Schriften, Volume 10 (ed. Rürup, B.), Frankfurt am Main, 1996; Klopfleisch, R., Sesselmeier, W., Setzer, M.: Beschäftigungspolitische Möglichkeiten einer negativen Einkommenssteuer, in Konjunkturpolitik, 43 Jg. (1997), p. 224-247. Mitschke, J., Schildbach, S.: Enumeration der wichtigsten in der Bundesrepublik Deutschland existierenden steuer- und beitragsfinanzierten Geldleistungen sowie der sie verwaltenden Behörden und Körperschaften des Öffentlichen Rechts. Frankfurt am Main, 1996 (Umdruck). Becker, I.: Das Bürgergeld als alternatives Grundsicherungssystem: Darstellung und kritische Würdigung einiger empirischer Kostenschätzungen, in: Finanzarchiv, N.F. 52, 1995, p. 306338; Deutsches Institut für Wirtschaftsforschung (DIW): Fiskalische Auswirkungen der Einführung eines Bürgergeldes, Report for the Chancellor, revised by Meinhardt,V. et al., Berlin 1996; Institut für Weltwirtschaft at the University of Kiel: Das Bürgergeld – ein sinnvolles Konzept? Abschlussbericht zum Forschungsauftrag der Friedrich Naumann Stiftung (authors: Boss,A. and Gern, K.-J.), Kiel 1996; Rürup, B., Sesselmeier,W.: Möglichkeiten und Grenzen der Entkopplung von Erwerbsarbeit und sozialer Sicherung. Report for the Zukunftskommission der Länder Bayern und Sachsen, Darmstadt 1996. In my advisory report on basic income for Austria (Mitschke, 1997), I have calculated how much taxes would need to be raised in order to finance an unconditional basic income. Basic income for the year 1995 would cost 619,585 billion Schilling, if it is differentiated by age, as has been considered by parties and welfare organizations, and set at a monthly rate excluding benefits which are contribution financed of 4,000 Schilling (under 15 years), 6,000 Schilling (between 15 and 20 years) and 7,000 Schilling (over 20 years). The social expenditure which is tax financed was 253,638 billion Schilling that year which means that about 366 billion Schilling would have to be found in addition to pay for a universal basic income in Austria. This does not include costs caused by the transition. Note that the tax revenue through income and wage tax of that year was 180.2 billion, not even half of the additional cost. Christlich Demokratische Arbeitnehmerschaft Deutschlands (CDA): Press conference CDA and WIV on the topic: Negative tax – Bürgergeld, Informationen CDA 22.11.1993, Königswinter 1993; Freie Demokratische Partei F.D.P.: Sozial- und Gesellschaftspolitik. To the Bürgergeld-system: Excerpt from the draft for discussion of the manifesto for the general election 1994, Resolution of the BHA in Madgeburg from 15 and 16.03.1993 as well as the manifesto of the F.D.P. for the general election 1994, Part VII, Social policy, Health policy and Societal policy, p. 36-38. CDU/Christlich Soziale Union CSU/Freie Demokratische Partei F.D.P. (1994), Koalitionsvereinbarung für die 13. Legislaturperiode des Deutschen Bundestages. Bonn, 11.11.1994. Expert-commission Alternative Steuer-Transfer Systeme: Probleme einer Integration von Einkommensbesteuerung und steuerfinanzierten Sozialleistungen. Report, Schriftenreihe des Bundesministeriums für Finanzen,Volume 59, Bonn 1996, particularly p. 103 ff.
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Basic Income on the Agenda 14 Christlich Demokratische Union CDU Hessen:Arbeit in Deutschland – Programmentwurf zum Landesparteitag. Kassel 1996, p. 11-12; Christlich Demokratische Union CDU Saar; Arbeit für alle – Programmentwurf zum Landesparteitag. Neunkirchen 1996; p. 5; Christlich Demokratische Union CDU: Grundsatzprogramm. Freiheit in Verantwortung. Resolution of the fifth party conference of the CDU from 23 February 1994 in Hamburg. CDU Dokumentation 7/1994, Bonn 1994. See also Christlich Demokratische Union CDU North Rhine-Westphalia: Mehr Gerechtigkeit und weniger Bürokratie durch ein neues Steuersystem (Negativsteuer/Bürgergeld).Application of the CDU-party in the Länder parliament of North Rhine-Westphalia, Drucksache 11./13.1.1994. 15 Freie Demokratische Partei F.D.P.: Wiesbadener Grundsätze: Für die liberale Bürgergesellschaft. Grundsatzprogramm der F.D.P. Resolution from the 48. Regular Party Conference of the F.D.P. on 24 May 1997 in Wiesbaden, Wiesbaden 1997, Section 11: Der liberale Sozialstaat, p. 37-39. 16 Statements by the DGB-leader Schulte in the Frankfurter Allgemeine Zeitung no. 179, 5.8.1997, p. 11 and of the head of the IG-Metall Zwickel in Der Spiegel no. 50/1994, p. 96. 17 See also statements by the then head of the SPD Rudolph Scharping in the Frankfurter Allgemeine Zeitung no. 54, 4.3.1995, p. 15 and by Lafontaine in Der Spiegel no 41/1997, p. 32 as well as Sozialdemokratische Partei Deutschlands/Wirtschaftspolitischer Diskussionskreis: Eine echte Renaissance der Sozialen Marktwirtschaft. Eckpunkte einer sozialdemokratischen Modernisierungs- und Reformpolitik – Thesenpapier des wirtschaftlichen Diskussionskreises, published in: Die Zeit, ‘Gerhard Schröder, die SPD und die Ökonomie: Ein Plädoyer für mehr Wettbewerb, unternehmerische Tatkraft, Innovationen’, no. 39, 19.9.1997, p. 28-29 (hypothesis 9). 18 Bündnis 90/Die Grünen-Bundestagsfraktion (1998), Die Grüne Grundsicherung. Ein soziales Netz gegen die Armut, Bonn. 19 Sozialdemokratische Partei Deutschlands SPD/Bündnis 90/Die Grünen (1998), Aufbruch und Erneuerung – Deutschlands Weg ins 21. Jahrhundert. Koalitionsvereinbarung vom 20.10.98, published in: Handelsblatt, Dokumentation (I), (II), (III) und (IV), no. 203, 21.10.1998, 63.
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Hush Money or Emancipation Fee? A Gender Analysis of Basic Income* Ingrid Robeyns
One of the major attractions of the basic income debate is its genuine interdisciplinary and multi-dimensional character. This diversity of the discussion is reflected in the publications on basic income. These include philosophical theories (e.g.Van Parijs, 1995), economic studies providing a theoretical analysis of implementation proposals and labour market effects (e.g. Atkinson, 1995), microsimulation models predicting labour market effects and testing budgetary feasibility (Atkinson, 1995; Gilain and Van Parijs, 1995; Nelissen and Polk, 1996) and socio-economic analyses studying a basic income in the context of welfare state reforms (e.g. Schokkaert,Van der Linden and Van Parijs, 1997;Van Parijs, 1990;Walter, 1989). However, most of this research is gender blind in the sense that it does not tackle the question of whether a basic income would have different effects on men and women. Moreover, when gender aspects are occasionally discussed, the claims on the desirability of a basic income for women are quite contradictory. Proponents of a basic income argue that unpaid work would get some recognition (Miller, 1986;Walter, 1989;Withorn, 1990), that the autonomy of poor women (McKay and VanEvery, 1995) or all women (Walter, 1989) would increase, that it would help to achieve greater gender equality in the labour market by improving women’s bargaining position and by encouraging men to work part-time, thus allowing them to share more in domestic work (Standing, 1992) and that it would be possible to choose for unpaid labour (Miller, 1986;Walter, 1989). Jordan (1998: 93) argues that a basic income would be a compensation that does not confine women to their homes, but recognizes unpaid work as an essential element in the reproduction of the national social system. Additionally, it would offer some income to men and women willing to forego labourmarket opportunities in order to do it. Jordan evaluates a basic income for women very positively, and argues that a basic income will lead to a maximum of the population having basic autonomy so that they can participate on chosen terms in the household, the informal public sphere and the labour market (ibid.: 173, my italics). Jordan further believes that a basic income might ensure that a couple negotiates over paid and unpaid work roles from positions of relative autonomy (ibid.: 194). Parker (1993) is the only author whose positive evaluation is explicitly conditional. She argues that a basic income holds more advantages for women than the British social security system, not because a basic income favours women, but because the current British social security system benefits men more. However, according to Parker a basic income is not enough to change *
A related article on gender and basic income but focusing on the moral problems and related justice considerations, called ‘Will a basic income do justice to women?’ is published in a special issue on basic income of Analyse und Kritik. I would like to thank Mieko Bond, Sarah Bracke, Loek Groot, Roland Pierik, Erik Schokkaert, Holly Sutherland, Guy Van Camp, Robert-Jan van der Veen and Walter Van Trier for comments on earlier versions of this text.
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Basic Income on the Agenda the current situation, and equal opportunities and equal wages are crucially important. In conclusion, proponents see basic income as a kind of emancipation fee for women, as it will make it possible for women to get financial recognition and support for a way of living that values unpaid care work, hence enhancing her autonomy. Implicitly, this view uses a concept of emancipation that does not focus exclusively on paid work, but also on more societal recognition for unpaid work that is typically performed by women, i.e. child care and household work. These positive evaluations stand in sharp contrast with the belief among some feminists that a basic income will be a kind of housewives’ wage, sending women back home and tempering emancipation. Basic income is seen as hush money, providing a financial reward for household and care labour, so that women are expected to be grateful (or at least contented) instead of advocating more profound changes in their societal position and gender roles. Emancipation is here inextricably linked with paid work and financial independence through labour market activities. According to Orloff (1990), a basic income is not a good strategy to reach gender equality and justice. She claims that the unequal division of household responsibilities is crucial in the explanation of the disadvantageous position of women in society and that other elements of social policy, which alter the structure of both paid and unpaid work, can be much more effective to reach gender justice. Although there are very few academic articles arguing for this point of view, it has often been raised by audiences of academic or public debates on basic income. Some feminist pamphlets and articles in popular magazines also strongly oppose a basic income. However, it is important to stress that not all feminists share this belief – there are also feminist advocates of a basic income. I want to address the question of whether a basic income is favourable for women, and if so, under what conditions and to what extent. What are the gender-related effects of a basic income, and how will the introduction of a basic income interact with several gender-related aspects of society, such as gender roles? First, I provide a positive gender analysis of a basic income by distinguishing the first order effects and the second order effects. Second, some normative arguments are presented. Next, I focus on the conflicting claims of the desirability of a basic income for women. In the last but final section I discuss some brief suggestions on how a basic income could be integrated in a broader packet of social policy measures, in order to evade its undesirable gender effects.The last section draws some conclusions.
A Positive Analysis: First Order Effects First order effects are the direct effects taking place in the short run.They are more visible, easier to recognize, and individuals are more aware of these effects than the second order effects, which only take place in the long run.There are three relevant first order effects: changes in labour market supply and participation, changes in incomes, and changes in direct well-being derived from (professional) activities as people have more possibilities to do the work they like most.1 Labour supply effects If a basic income were introduced, what would be the expected labour supply reaction of men and women? Neoclassical economic analysis concludes it to be theoretically 122
Hush Money or Emancipation Fee? impossible to predict these labour supply effects (Atkinson, 1995; Nelissen and Polk, 1996). Do empirical studies perform better? In general, most empirical research on labour supply and participation agrees that the labour market participation of women is positively influenced by the educational degree and the net wage, whereas the number of children, the age of women, the nonlabour income of the household and the income of the husband all have a negative effect on women’s labour market participation. Concerning the number of hours women work, a consensus only exists with regard to the negative effect of the number of children.Atkinson (1995) reviews the relevant literature and stresses the complexity of estimates on female labour supply. Empirical labour economists agree rather unanimously on the highly inelastic character of male labour supply.The change in female labour supply is much harder to predict, and depending on the estimation specifications, wage elasticities vary from close to zero to two. As far as I know, there are only two studies estimating women’s labour supply changes after the implementation of a basic income, both concluding women’s labour supply will decrease. Késenne (1990) modelled the introduction of a basic income of 15,000 BF (about Û 360) on a small-scale representative Belgian sample, financed by a constant marginal tax rate of 42 percent.This change in the tax system would decrease the labour supply of women with about 20 percent, but Késenne argues that there would hardly be a decrease of the female participation rate. However, this is only possible if there is a large increase in part-time jobs. Nelissen and Polk (1996) find on the basis of Dutch data a wage elasticity of the labour supply of 0.79 for women, compared to 0.10 for men.The elasticity of the nonlabour income is -0.20 for women, while there is as good as no effect for men. The authors simulate a basic income amounting 900 Guilders (about Û 390).They simulate the situation in 1990 compared to 2015, and find an increase in the labour market participation of men from 77 to 84 percent, whereas for women it would decrease from 49 to 40 percent. An important finding is the large differentiation among women: for low skilled women, this decrease would be around 30 percent, compared to only three percent for female graduates. Finally, we can point at the labour supply effects after a recent policy reform in Belgium, which gives workers a premium for a career interruption.The Belgian federal government pays monthly 12,066 BF (about Û 287) for a full-time interruption,2 and the Flemish government adds to this a premium of 2,670 BF (about Û 64) for a part-time interruption or 4,450 BF (about Û 106) for a full-time interruption. It turns out that 85 percent of the employees making use of this system are women.The motivation for taking a career interruption equally differs: women leave their job to raise small children, whereas men try to start an independent business, or use it as a transitional stage to early retirement (Szabo, 1997). Summarizing these labour market effects, we can expect that the labour supply of women will decrease, though probably not en masse. It is very difficult to give an idea of the magnitude of this effect. Microsimulations use information on the behaviour of women actually in the work force, but a basic income could lead to such drastic cultural and socio-economic changes that we do not know how reliable this information is. Furthermore, the labour supply of men and women differs drastically over generations. Hence, information on the labour supply of the working-age women could be of limited predictive use for new generations. Social experiments might therefore be a 123
Basic Income on the Agenda better source of information on expected changes in the labour market. However, the current career interruption premia can serve as an approximation of such a real-life experiment, and it does show a strong gender effect. We should also note that it is not clear whether predominantly low-educated or high-educated women will change their labour supply.The results of Nelissen and Polk for the Netherlands are contradictory to recent experiences with career interruption premiums in Belgium, which are used more by highly educated women. A hypothesis might be that a small basic income has a negative effect on the labour supply of highly skilled women, whereas low skilled women will only redraw from the labour market when the basic income is high enough.A possible explanation could be that low skilled women are often more income insecure and poor, and therefore it would be impossible to withdraw from the labour market when there is only a small basic income. Total income effects It is very difficult, if not impossible, to predict the changes in total income for households, and for women’s income expressed in absolute levels and expressed relative to their husband’s income.Therefore, I give only some general remarks. Those women who had no income from labour or unemployment benefits, will experience a pure income improvement.These are mainly housewives, women not eligible (yet or anymore) for unemployment benefits and students. For married or cohabiting women, it is impossible to predict whether their income share relative to their partner will increase or not.To judge this effect, one has to take into account all the details of the basic income proposal that would be implemented, and of the particularities of the fiscal system of the country under consideration. For example, in a country with a progressive tax on labour earnings, a basic income proposal financed by a flat tax on wages will on average lead to a larger decrease in net wages for wives compared to husbands.This is because wives on average earn less then their husband, and therefore are less taxed under a progressive tax system. If then a basic income is introduced, and neither husband nor wife change their labour supply, the wife will have a greater labour income loss compared to her husband. The amount of a basic income will be of crucial importance when we ask whether the basic income will compensate the labour income loss of those women previously working and who decrease their labour supply. It is obvious that a monthly basic income of, say, Û 500 will, in this respect, do a far better job than a basic income of Û 100. For lone mothers, a basic income appears to be an improvement. If social security allowances are paid for the amount exceeding the basic income, as proposed in e.g. Gilain and Van Parijs (1996), single mothers can only improve their financial situation. The major positive effect will be a (partial) elimination of the poverty and the unemployment trap. Jane Lewis (1998) claims that single mothers need incomes from all possible sources: fathers, the state, and labour. Single mothers experience great difficulties with decisions concerning paid labour, due to the responsibilities they bear both as primary care taker as well as breadwinner. Flexibility, therefore, has to be central when developing a social policy for single mothers. If a basic income is seen as a pedestal upon which other social policy rules can build, this will definitely be an improvement for single mothers. 124
Hush Money or Emancipation Fee? Effects on the choice of labour and job The last first-order effect of a basic income is the higher subjective well-being that individuals can gain when they are able to choose the job they like better but which is worse paid, or when they can choose for unpaid care labour instead of wage labour. Many young mothers want to withdraw (temporarily) from the labour market to raise their children themselves. If these women have to choose between a badly paid job, or the possibility to stay at home, the second option is much more attractive to many of them.
Second Order Effects In this section, I discuss the second-order effects which appear the most important for judging the desirability of a basic income for women. A revaluation of unpaid and care work We can expect that a basic income will lead to some revaluation of unpaid work. In Western societies, there is a societal tendency to undervalue unpaid work, especially household work and care labour. European societies often value the job one has as the most important source of status and integration into society.A basic income will in an indirect way contribute to a financial revaluation of unpaid work, which might also help to increase the respect people show for this kind of work. However, it is not sure and even impossible to predict whether a basic income will lead to a substantial revaluation of unpaid work. Gender-related effects of a basic income for children An important gender-related effect will be the different effects a basic income for children will have on their father and mother. I see two direct ways in which a basic income for children has a beneficial effect for mothers. First, the child’s basic income can serve as a financial benefit or wage for the care taking parent, which is almost always the mother. Moreover, parents will receive the basic income for their children irrespective of whether they take care of the children themselves at home, or bring them to child care. It has been argued extensively, and shown by empirical studies (e.g.Ward, Dale and Joshi, 1996), that child care is of paramount importance for women in their decision to join the labour market or work at home.The basic income for children thus serves as a financial compensation for child care, independently of whether the mother or the father does this care, or whether they wish to pay a child minder to take care of their child. Second, female-headed households are over-represented among poor people.The poverty and unemployment trap many single mothers face will thus not only be weakened by their own basic income, but also by the basic income of their children. Hence, the basic income for children has two positive effects for women. It is an (indirect) financial reward for people who are responsible for the day-to-day care of their children, independently of whether they look after their children themselves or whether they prefer to pay others to do so.And it is particularly helpful for single parents.This should be taken into account when the level of the basic income for children is fixed. Many basic income proposals entail lower levels of basic income for children, 125
Basic Income on the Agenda often 50 percent of the basic income of adults, or only provide a basic income from the age of 18 onwards. This choice is probably due to household economies of scale and the lower material needs of children. However, the immaterial needs of children, more precisely, their need for care, offer us a quite different perspective.To sum up, if we want a basic income to be beneficial for carers, we might need a basic income for children covering the cost of direct material needs plus the (opportunity) costs of child care. A basic income pitched at this level would allow carers the freedom to do the care themselves or to buy child care services on the market. Psychological effects on housewives One can expect a basic income, even when it is small, to be positively valued by housewives or househusbands. It gives them a feeling of contributing to the incomes of their families, and a feeling of getting more recognition for the care and household work that they do. Pahl (1989) notices that for British housewives the child allowances they receive are very important, even though they are very small. Bargaining position and power in the household Basic income proposals often have an (implicit) concept of the household that is an idealization of how most households in Western Europe function in reality. Many social scientists recognize both conflicts and co-operation within households. As Sen (1990) argues, households can best be seen as ‘co-operative conflicts’. In principle, all family members gain by the formation of a household, but how the gains from this co-operation are divided depends, among other things, on the bargaining position of the individuals. It appears that the partner with the highest income is more dominant in decisionmaking, and women with paid employment have on average more power than women working unpaid at home (Pahl, 1989). Ott (1995) shows with the help of game theory that specialization in unpaid labour weakens the bargaining position of housewives and that education and non-labour income increase the power of housewives in the household. Although these studies are limited in number and most of them are small-scale and thus difficult to generalize from, there is growing evidence that personal income increases power.This implies that the introduction of a basic income will increase the bargaining power of housewives. However, for women working on the labour market, everything depends on the first order effects of the labour supply and total net income change. Non-pecuniary advantages of paid labour Women who quit the labour market not only lose their labour income, but also some non-pecuniary advantages. For Orloff (1990) these advantages are the construction of a network of colleagues, a place where one can demonstrate one’s competence, and a feeling of self-respect. Steil (1997) adds to this list increased self-esteem, affirmation, enhanced contacts and more independent children. Kildal (1998) argues that paid work structures everyday life, is a source of social relations and an escape from social isolation, a means to self-realization and an important source of self-respect. However, she also points out that these can also be attained through alternative activities, like voluntary work. 126
Hush Money or Emancipation Fee? Decrease of human capital and expected income in the long run Studies of the division of labour between partners do not always fully recognizes the long-term effects of this specialization. Specialization can indeed be optimal in the short run, but it can lead to unwanted dependencies in the long run (Wunderink-Van Veen, 1997). Human capital depreciates when it is not used.As a consequence, when re-entering after some years out of the labour market, the potential wage will have decreased (Joshi and Davies, 1993; Wunderink-Van Veen, 1997). The total expected income over the lifetime cycle will therefore decrease in three ways: the lack of income during the period that no paid labour is done, a decrease of the expected wage in case of an eventual return to the labour market and smaller personal pension rights. If the human capital of a woman erodes because she doesn’t have a job for some years, the probability of financial distress in case of divorce or decease of the husband increases (Joshi and Davies, 1994). Spillover effects on all women due to statistical discrimination A last second order effect is the spillover effect on all women due to the changed labour market behaviour of some women, through the process of statistical discrimination. Statistical discrimination is a form of indirect discrimination based on the fact that a person belongs to a group that fits certain characteristics. These characteristics are then used as proxies for the average productivity of that group.3 Women on average bear one or two children, take maternity leave, work less hours than men on the labour market, bear more responsibility for the household and care of the elderly and children, have more career interruptions and are more absent from the workplace. Employers have a possibly biased perception of this and conclude that women are on average less productive on the labour market than men. For an employer, it is rational to believe that an individual woman will share these (perceived) characteristics, because he has no information on her future behaviour and commitments. Thus, an employer will discriminate against a woman (by not hiring her or giving her a lower wage) because he has no exact information on her productivity and therefore looks at the average productivity of the group she belongs to, i.e. women. In other words, their perception of the average productivity of the group counts. A woman who does not want children, who wants to pursue a career or has a husband who undertakes half of the household responsibilities, will thus have to bear the consequences of the fact that other women are ‘child and household oriented’.4 This implies that if a basic income is introduced, and a group of women withdraws from the labour market, it will also be expected that other women will be less labour market attached and they will be statistically discriminated against. Hence, a basic income will probably worsen the statistical discrimination against women.5
Some Normative Arguments Pro and Contra In this section, I will discuss four arguments which appear crucial in this normative evaluation, and indicate how they are used by proponents and opponents of a basic income. 127
Basic Income on the Agenda Basic income and economic independence Economic independence is the key-concept of most second-wave western feminists in their arguments against a basic income. However, dependency has many different meanings (Lister, 1990). Absolute economic independence is the degree to which a person can take care of herself and eventually dependent others, now as well as in the future.This is what counts if a woman or a man wants to leave an unhappy or violent marriage: without the potential of absolute economic independence, one has the choice of staying in the unhappy marriage, or moving into (deeper) poverty. Relative economic independence concerns the income of one spouse relative to the income of the other, for example, the income of one spouse should not be below 45 percent of total household income. Ward, Dale and Joshi (1996) argue that paid employment is the only way for women to avoid economic dependence, either on their partner, or on the state. Absolute economic dependence on the husband can have negative consequences in the case of marital breakdown. This has been shown by Jarvis and Jenkins (1999), who studied the financial consequences of divorce or separation in the UK. The mean net income of men after divorce increased with two percent, whereas for women and children it decreased dramatically (-14 percent and -18 percent respectively). Can the opponents’ claim that a basic income will worsen women’s economic independence be supported? Whatever the level of the basic income, women (and men) who did not receive any income before would experience an improvement both in the level of their absolute as well as relative economic independence.The level of the basic income determines whether this improvement is limited to the psychological effects. If a basic income does not replace other social security allowances, but is made complementary to them, women on the bottom of the income and employment distribution will benefit from it. Again, the problematic evaluation concerns, in particular, the women who decrease their labour supply. It is very difficult to judge how their incomes would change. When one addresses the importance of the social security system for women’s economic independence, child care appears to be of great importance. Joshi and Davies (1993) argue that child care provisions have to be seen as an investment in the human capital of women.They demonstrate for Britain that the resources generated are larger than the costs of child care, and that the revenue gain to the exchequer might even exceed the cost of a 100 percent subsidy.Ward, Dale and Joshi (1996) show that child care facilities are crucial in the decision for women to work full time. Basic income: more real freedom to choose – or less? Parker (1993) claims that a basic income will give each individual more real choice between paid and unpaid work. Schokkaert,Van der Linden and Van Parijs (1997) also regard one of the advantages of a basic income as being that it would give everybody more opportunities for temps choisi, referring to the need to have more time for children or to interrupt paid work for other reasons. Feminist critiques often question the concept of individual choice. This is not different in the basic income debate. From a household point of view, and in the short run, it could be a rational choice of a husband and wife to introduce gender specific labour specialization.The moment they have to decide which one of the partners works less or withdraws from the labour market, the choice is often rather obvious, and the 128
Hush Money or Emancipation Fee? framework in which this choice is made may have a strong influence. In other words, gender related structures and constraints convert this choice from an individual autonomous choice under perfect information into a collective choice under socially constructed constraints with imperfect information and risks. This totally different nature of choice appears not to be fully acknowledged in most of the basic income literature.6 Advocates of a basic income want to extend the opportunity to choose to everybody, so that a real choice between paid and unpaid labour becomes possible (Van Parijs, 1995). However, this real choice, to be possible at all, needs more than only a basic income. First, spouses have to be aware of the expected consequences of a (temporary) withdrawal from the labour market, and women should not have the expectation that those they are taking care of now will necessarily take care of them later.The low percentage of women who get alimony for themselves and their children after divorce, together with the fact that not all fathers actually pay alimony, brings carers de facto into an insecure situation. Second, men and women should have equal opportunies, which requires the end of all kinds of gender discrimination. It might also require a labour market organized around the basic assumption that every breadwinner is also a homemaker.This again points to the importance of child care facilities, as has been stressed by Joshi and Davies (1993), Parker (1993), and Ward, Dale and Joshi (1996). The fact that these two conditions are not fulfilled yet, mean that these choices are not real choices, but choices taken under the existing constraints on the opportunity sets which are different for men and women. Basic income between unemployment benefits and housewife wages In the strict sense, a housewife’s wage is a wage or benefit for individuals working in the home, who are paid for their household and care labour. It could be made explicitly conditional upon taking care of small children. Organizations of housewives in Europe advocate such a housewife’s allowance. They refer to the unjust situation occurring as some women who are now receiving unemployment benefit use it in an improper way (as they are de facto not available for the labour market).This also happens when working parents can apply for career interruption premia if they withdraw temporarily from the labour market, mostly to take care of small children. It is obvious that housewives are being treated unjustly as they perform the same care labour, but are not paid for it. It is not certain, however, whether a housewife’s wage would not create other injustices amongst women. It would have to be financed by general tax revenues. A working wife doing household chores after work and in weekends would hence have to pay taxes for women who do the same household chores in a paid fashion.With a housewife’s wage, working women would face a triple disincentive: working outside the home increases their workburden, they are taxed extra to pay for the housewife’s wage, and they do not receive any allowance for the household work they perform. A basic income would resolve part of these problems. It is nondiscriminatory because housewives would get it, and would not feel treated unjustly especially with regard to career interruption premia and the improper use of unemployment benefits. For unemployed women, a basic income has the advantage that everyone receives it unconditionally, so that it cannot be denied for one reason or another.The fact that the unemployment benefits are conditional on the willingness to work and limited in 129
Basic Income on the Agenda duration, mean that women especially are denied benefits (Schokkaert,Van der Linden and Van Parijs, 1997). Further, contrary to the housewife’s wage as defended by Krebs (1998), there is no need for a bureaucracy to handle the applications of carers with dependent children or parents. The importance of the individual character of a basic income The second wave women’s movement in Europe wants individualization of social security entitlements.The women’s movement is opposed to derived entitlements claiming that it increases the dependency of women on their husbands. It has also been argued that an independent benefit entitlement for women in the social security system is necessary for a full exercise of their social and political rights as citizens (Lister, 1990). A basic income is an individual right par excellence. However, it is not at all obvious that individual social security rights will work to the financial advantage of women. If these rights are implemented in a society with persistent wage differences between men and women, partly because women bear more family responsibilities, and especially with a large part of women working part-time, a complete individualization of pension rights will in any case work to the disadvantage of women (Joshi and Davies, 1994). It has been argued that the individualization of entitlements may be part of a long-term strategy for gender equality, but in the short term it may worsen the social security position of women (MacDonald, 1998). If a basic income is introduced, it might be better implemented together with a credit split system, where individual entitlements are determined based on the entitlements partners build up together during the period of marriage or cohabitation. In other words, all social security entitlements accumulated during the marriage would be divided if the spouses split up.A basic income appears perfectly complementary to such a credit split system, and it could soften the hard financial consequences of divorce for women who made choices under gender-specific constraints.
Can We Untangle the Different Claims? Thus far I have presented two different views regarding the desirability of a basic income from a gender perspective. One view claims that a basic income will provide a financial appreciation for women’s unpaid work, and will make it easier for them to take care of children. Authors taking this view evaluate a basic income positively: it is seen as an emancipation fee, because men and women performing typical female work will be financially supported, and a certain level of economic independence will be provided for the carer. The other view argues that a basic income would send women back into the home and make it less attractive for them to enter the labour market, hence supporting the backlash against women’s emancipation and independence.A basic income would then function as a kind of hush money: women would get a financial reward for the work they do at home, which would refrain them from advocating profound and fundamental changes in the gender relations which these critics regard as necessary to achieve gender justice. The main reasons why a basic income is beneficial for women is the value it indirectly attaches to unpaid care work, and the unemployment and poverty traps it eliminates. In European welfare states most women are penalized in terms of income and 130
Hush Money or Emancipation Fee? Table 1: Effects of a basic income on women according to their labour market attachment and their earnings generating capacities strong labour market attachment
weak labour market attachment
high earnings
No major first order effects. Statistical
The problematic concept of the ÔrealÕ free-
generating
discrimination will hurt these women more. dom to choose is especially relevant.
capacities
A reinforcement of the traditional gender
Decrease in their human capital. A poten-
roles affects these women.
tially considerable inefficient allocation of talent and hence loss of productivity for society. Ambiguous evaluation.
low earnings
In the short run: higher well-being and
Only positive effects of a basic income,
generating
loss of non-pecuniary advantages of
although it will not make them totally eco-
capacities
paid labour.
nomically independent.
In the long run: decrease in human capital, expected income and bargaining position, all increasing the risk for material deprivation after divorce. Ambiguous evaluation.
social security because of the gender division of labour, which gives them a major share in household and care work. The challenge for them is to find a welfare state reform that re-values household and care work without reinforcing women’s responsibilities for it and hence penalizing them in the market (Folbre, 1995; MacDonald, 1998). This is exactly what makes a basic income an interesting policy for those women whose reproductive work is at last valued, but at the same time, a dangerous policy as the negative effects of the reinforcing of their home responsibilities might make them more dependent within marriage and more vulnerable at marital breakdown. Is it possible to sketch how a basic income affects different groups of women? To do so, I divide women in groups along two dimensions: earnings generating capacities and labour-market attachment, which is in many cases closely related to the presence of children (see Table 1). Women with low earnings generating capacities and (as good as) no labour market attachment, appear to gain the most from a basic income.These women are primarily housewives and most single mothers. But to this group also belong permanently ill or handicapped women and other vulnerable women such as refugees and some groups of non-Western immigrant women.They have no labour income, and have little or no prospect of earning a decent income of their own in the future.There is only one relevant first order effect, i.e. an increase in net personal income. Concerning the second order effects, they profit from the psychological effect for non-earners and a stronger bargaining position in the household. They do not lose any of the non-pecuniary advantages of paid labour nor experience a decrease in human capital, as these problematic second order effects were already fully affecting them before.They are not hurt by statistical discrimination either, and their relative economic independence increases. The removal of the injustices existing between different kinds of social security arrangements will only be to the advantage of these women. In short, they have only to gain from a basic income. 131
Basic Income on the Agenda For women with high earnings generating capacities and a strong labour market attachment, the analysis is also rather straightforward. These are women who have a career, often without children, or who rely heavily on child care facilities. These women are, according to the norms of second wave feminism, highly emancipated and both absolutely as well as relatively economically independent. They will not leave their jobs, as they place a large part of their self-worth and personal development in it. For them, there are no major first order effects. However, they might suffer from an increase in statistical discrimination against women in general.When these women are young, it will be difficult for an employer to distinguish whether one of these women belongs to this category, or to the category of the women with high earnings capacities but lower labour market attachment.This group of women has a lot to gain from the removal of traditional gender roles, whereas it appears that a basic income as such implemented in the current European welfare states will rather confirm these roles instead of challenging and changing them. For the remaining two groups, a basic income will produce a mixture of positive and negative effects, leading to ambiguous results.Women with a (temporary) weak labour market attachment but high earning potentials would probably, given the gender related constraints they face, favour a basic income.The women in this group are students, young mothers taking parental leave or women taking care of dependent elderly or ill persons.These women have been or are potentially economically independent, but are temporarily in a situation of dependence on others, be it parents, partners or the state. They might use a basic income as a means to withdraw from the labour market only selectively in periods when they have young children or dependent or ill relatives.They profit especially from the first order effect that one can choose more freely the kind of work one does. However, it is possible that a basic income can be used as a tool to exercise social or individual pressure on these women to withdraw from the labour market. It is likely that they would be the first to choose for options which they would not have chosen in a situation without a basic income, and therefore the problematic nature of the concept of choice in a gender setting is highly relevant for these women. From the point of view of society, there is a potential loss in human capital for high-skilled women who decide to withdraw from the labour market. The last category of women has a strong labour market attachment, but has low earnings generating capacities.This is the large group of women who need to work to keep the welfare of themselves and their families at a decent level. For this group, it appears important to make a distinction between an evaluation in the short and the long run.These women are now unable to withdraw from the labour market, as they need the money to make ends meet in their households.They would experience an increased well-being by choosing for other work or unpaid labour. However, with the current divorce legislation as it exists in most European countries, the risk of material deprivation after divorce increases for these women.This group would, perhaps without anticipating it, experience three second order effects: a possible decrease in their bargaining position, a loss of the non-pecuniary advantages of paid labour, and a decrease of human capital and expected income in the long run. For these women, a basic income would in the short run be a good thing, if their choice were better covered by a change in the divorce legislation, for example, by a credit split system. 132
Hush Money or Emancipation Fee? Basic income as part of a broader package of social policy measures It is a major challenge to meet women’s practical needs in their day-to-day responsibilities, without undermining their strategic interest in changing unequal gender relations (MacDonald, 1998). A basic income seems to focus especially on the first part of this challenge. If we want a basic income to be part of a package of social security reforms that meets the whole challenge, it is necessary to find out which other complementary measures are needed. First, child care facilities are indispensable if mothers are to be given a real opportunity to participate in the labour market and thus given a real choice between work inside or outside their homes. I have argued that a basic income for children should ideally be at a level which also covers the (opportunity) costs of child care, and that such a basic income for children has beneficial effects on the mothers. However, a financial contribution is not enough; government should also have an active child care policy, where quality and a sufficient supply of child care are central concerns. Second, contrary to popular belief, we still need an active policy to combat gender discrimination in the labour market. Recent studies continue to show persistent discrimination of women in the labour market. Obviously, it is not evident how a government can eliminate this. However, more systematic research is certainly needed, and the proposal of some women groups to have the authority to sue discriminating employers on behalf of the employees also needs consideration. Reality nowadays is too often that women who are discriminated against are either not aware of their situation, are resigned to their situation, or change jobs. Women who are discriminated against are afraid to sue their employers as this could bring them difficulties in finding another job. Thirdly, the culture of the labour market should move into a direction where the norm is that every worker is also a carer, instead of the worker who has no care responsibilities, as is nowadays too often the case. Employees have a social life outside their workplace, be it in their families, their community or with other people. Employers should give more consideration to this aspect of human life. For example, it is easily avoidable that professional meetings take place after 5 p.m. Planning meetings after 5 p.m. assumes that either employees have no children, or that they have a partner (wife) working at home, or at least a partner or relative who will pick up the children from the child care centre or school.The Dutch ‘combination scenario’, a proposal to redistribute unpaid work, can serve as an example here (Bruyn-Hundt, 1996).This proposal would reform social policy around the assumption that all parents work 30 hours on the labour market, so that both of them could spend more time on care labour or other unpaid activities. Fourth, government and other societal agents have to find ways to challenge gender roles. I am not saying that government should develop a policy which scraps gender division of labour forever. Rather, if such a division remains gender-specific, then this should be the result of real free individual choice, and not the result of subtle societal expectations and pressures.This is extremely difficult. However, there are ways to challenge gender roles. Two examples illustrate how gender roles can be challenged.The first example concerns paternal leave. Parental leave can be constructed in such a way that the probability that fathers take part in child care and household work is maximized.This can be done through a non-transferable individual right, preferably with substantial payment. 133
Basic Income on the Agenda Both personal experiences published in popular press, as well as the results of a social experiment in Iceland (Einarsdóttir, 1998) indicate that fathers taking paternal leave discover how demanding care and household work is, and as a result, respect it much more.The Iceland experiment also showed that the gender division of labour would be more equal if fathers took paternal leave than if they did not take it. Furthermore, paternal leave creates an opportunity for mothers who are reluctant to share the household and child care responsibility with their partners to learn to share this responsibility. In short, paternal leave offers a unique space to experiment with alternative gender arrangements. The second example concerns images of women in the labour market in advertisements in Belgium. In the mid-nineties, the government promoted career interruption premia. One of these newspaper advertisements showed a female executive carrying a crying child under one arm, and a briefcase under the other. In September 1999, the Flemish government employment agency launched a spot on television showing a young girl who is dreaming of becoming an elf when she grows up, while turning around with a burning sulphur stick. As the image becomes fuzzy, the stick changes into a welder stick, and we see this young girl (now grown up) happily working as a welder.While the first advertisement suggests that women in the labour market have a hard time (and are bad mothers), the second spot shows us a happy energetic young woman who has chosen a non-traditional job.To sum up, it is certainly true that governments are much more aware these days of the implicit messages regarding gender roles which they are sending out, but permanent attention is needed. Fifth, varying from country to country, several changes in the current labour market legislation and fiscal system can be made to give more incentives to share paid and unpaid work and to make paid work and care work easier to combine. For example, all workers could be given the legal right to part-time work, and employers who create 20 to 32 hour jobs could be given a government subsidy.The cost of paid care could be deductible from income taxes, breadwinners’ subsidies in income tax and social security could be abolished, and leaves for ill dependants could become legal rights (BruynHundt, 1996). Finally, if women, or men, still wish to choose for the carer’s role, a basic income is probably not enough to protect them from risks.Therefore, a basic income should be supplemented with fair settlements at divorce and better legal protection against parents who refuse to pay alimony (and use their children as objects of psychological oppression). Furthermore, it can be argued that in order to provide a more just society, a credit split system has to be introduced.
Conclusion There exist two main evaluations of a basic income for women’s well-being.The negative evaluation claims that a basic income will send women back home and will function as hush money to prevent them from making more important claims for gender justice. The positive evaluation sees basic income as a financial valuation for unpaid work that is typically done by women. In this view, basic income is an emancipation fee, making it possible for women to choose for unpaid work (which liberates them from the financial constraints that force them to work in the labour market). I have 134
Hush Money or Emancipation Fee? argued that both views contain some truth for some groups of women. Distinguishing between groups of women with different degrees of labour market attachments and earnings generating capacities is crucial in this regard. I have also argued that there are some processes and issues that are insufficiently taken into account in the current basic income literature and that lead to its gender blind character. First, statistical discrimination shows us that individual choices affect other individuals’ chances and societal treatment.This discrimination is relevant for the impact a basic income can have on women’s discrimination in the labour market. Second, the gender division of labour is much more problematic than most authors are willing to admit, and a basic income has an influence on the gender division of labour. Thirdly, whether a basic income will ultimately be positive or negative for women and whether it will improve gender justice, will depend on other measures that are simultaneously implemented. The difference between the positive and negative evaluation of a basic income for women and gender justice boils down to the different underlying concepts of emancipation. People critical about basic income regard the gender division of labour as the core of gender injustice, and argue that changing the gender division of labour should therefore be the priority of any policy to reach gender justice. In contrast, authors who conclude that a basic income is a good social policy for women tend to see the gender division of labour as unproblematic. They argue that this is the choice of individuals, whereas the opponents stress the different constraints on choices men and women face.Although I have provided support for this latter point this did not make me conclude that a basic income is a priori bad for all women. I argued that it is beneficial for some women, bad for others, and ambiguous for most. Furthermore, a definite evaluation can only be made when the interaction with other measures are taken into account. There are some limits and shortcomings which should be taken up in further work. Among the issues that deserve more attention are a detailed analysis of the effects of a basic income on the division of paid and unpaid work in households, and a comparison of a large basic income for children with other child-care-subsidizing policies. Furthermore, we should also investigate other policies that should be considered as additional measures next to a basic income. This is an inviting path for future research.
Notes 1 There are many more first and second order effects thinkable. I have tried to list all effects relevant for a gender analysis. 2 This allowance increases if one has small children: for two children under three years old, one receives 13,215 BF (about Û 315) per month, and for three children or more 14,363 BF (about Û 342). For part-time career interruption, the amount depends on the number of hours one continues to work. 3 Productive is here used in a very narrow meaning i.e. the degree in which a person creates additive value in the market production process. 4 Goldin and Rouse (1997: 22) give some evidence of the (biased) perception of women’s productivity and reliability in orchestras. While the difference between the average leave of a
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Basic Income on the Agenda female musician and a male musician is very small and statistically insignificant, the alleged shorter tenure by women justifies a preference to hire males above females. 5 I have discussed some moral questions concerning statistical discrimination in Robeyns (2000). 6 I have given an explanation for this gender division of labour and why this is arguably unjust in Robeyns (2000).
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Prospects for Basic Income in an Age of Inactivity?* Anton Hemerijck
The Rise of Structural Inactivity One of the paradoxes of contemporary European welfare states is that while today practically every adult male and female seeks gainful employment, jobs are hard to come by. There is a growing number of (economically) inactive citizens, people of working age who are structurally dependent on social policy for their livelihood.The predicament of inactivity is concentrated among the low-skilled, ethnic minorities and the long-term unemployed. A comparison of ten countries, considering unemployment, sickness, occupational disability, maternity, general need and early retirement, in the age group between 15 years and the retirement age, reveals that levels of inactivity have dramatically increased over the past decade, except in the United States, where there has been a substantial decline (see Figure 1).1 How do we explain the rise of structural inactivity in contemporary European welfare states? Are we living in a world of jobless growth? Do the citizens no longer wish to work? Do they, pampered by generous standards of social protection, prefer leisure? Or, are they sick or otherwise unable to work? In this paper, I wish to explore the rise of structural inactivity from two contrasting sets of arguments, both revolving around the ‘unintended’ or ‘perverse’ effects of postwar social policy. The first argument, rooted in cultural sociology, centres around the alleged decline of the traditional work ethic in the welfare state. By having dissolved the ‘sacred’ link between work and income, the welfare state has come to undermine the motivation to seek gainful employment.The lack of immediate feedback between work and income, conservative critics of social policy contend, weakens the moral fibre of welfare recipients. The resultant rise in inactivity contributes to the emergence of a ‘dependency culture’ of benefit claimants. While the causal chain of the decline of the work ethic argument runs from the behaviour of citizens to the rise of inactivity, the second argument, rooted in comparative political economy, suggests that the institutional characteristics of national labour markets and social security systems structure the level of inactivity.The crisis of inactivity, following this line of reasoning, is not the result of crippling norms and values, but rather the consequence of accumulated institutional rigidities and historically perverse policy choices. * This chapter is to a large extent based on the paper, published under the title of ‘Prospects for Inclusive Social Citizenship in an Age of Structural Inactivity’, in the series of MPIfg Working Papers, no. 99/1, Cologne, Germany. I am most thankful to Colin Crouch, Bernhard Ebbinghaus, Werner Eichhorst, David Peritz, Fritz W. Scharpf and Martin Schludi for their inspired comments and critical observations on earlier drafts of this paper, and to Cynthia Lehmann for her editing assistance.
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Basic Income on the Agenda
Figure 1: Benefit dependency (I/A-) ratios*
0,7
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* I = Total benefit years: the total volume of social security benefits expressed in years (until 65 years) A = Total labour years: the total volume of labour expressed in years, from which is subtracted sickness and maternity absence (15-65 years) û without Japan Source: Ministerie van Soziale Zaken en Werkgelegenheid
Although I treat the above explanation of the inactivity problem as disconnected approaches, I am fully aware of the fact that in the messy world of concrete empirical experience, values and institutions are inherently linked. To be sure, institutions 138
Prospects for Basic Income in an Age of Inactivity? embody values, and changing values can lead to policy adjustment. By the same token, both institutions and values structure incentives. I would like to approach the arguments of the decline of the work ethic and the proposition of deficient welfare state institutions from the perspective of citizenship. By so doing, I wish to relate T.H. Marshall’s classic portrayal of the extension of citizenship and the struggle for ‘equal social worth’ to contemporary conceptions of citizenship (Marshall, 1963). Next, I will empirically scrutinize the predicament of inactivity on the basis of evidence from the Netherlands. I concentrate on the Dutch experience for three reasons. First, the Dutch welfare state is one of the most advanced welfare states in Europe. Second, the Netherlands experienced a severe crisis of inactivity in the 1980s.Third, the recent Dutch employment miracle presents a case history of a social policy regime that has adapted relatively successfully to processes of demographic change, economic restructuring, international competition, labour market flexibilization and individualization, by way of social policy reform bent on reversing the cycle of declining activity and rising inactivity. The final normative section considers policy. What are the prospects for effective social policy in an age of structural inactivity, adapting as it were Marshall’s principle of ‘equal social worth’ to the new realities of diversified labour market conditions and heterogeneous household patterns? I will explore two broadly debated policy alternatives which are often pitted against each other in debates about the future of the welfare state.These are, first, ‘workfare’ policies, designed to repair the direct link between the obligation to work and right to welfare.Alternatively, there is the proposal of the introduction of a universal ‘citizen’s income’, which, by contrast, is directed towards a radical decoupling of the conditional connection between work and income in social policy.
From T.H. Marshall to Novel Conceptions of Citizenship The resurgence of the concept of citizenship in contemporary political and social science discourse has invited a critical rereading of T.H. Marshall’s famous 1949 lectures, published together in 1963 under the title of Citizenship and Social Class (Bulmer and Rees, 1995). In these lectures, Marshall portrayed the extension of citizenship rights in terms of a progressive tale of democratization and class-abatement. Based on the British experience, Marshall locates the origins of the struggle for citizenship with the affirmation of civil or legal rights in the eighteenth century. The nineteenth century gave rise to the inauguration of political rights.The struggle for citizenship reached its completion in the second half of the twentieth century with the attribution of the social rights, which Marshall defined as: ... the whole range from the right to a modicum of economic welfare and security to share to the full in the social heritage and to live the life of a civilized being according to the standard prevailing in the society. (Marshall, 1963: 74)
Protecting the vulnerable and preventing the disadvantaged from becoming vulnerable lies at the heart of Marshall’s social ethic of ‘equal social worth’. As such, the welfare state held out a promise of the enlargement, enrichment and equalization of people’s ‘life chances’ (ibid.: 107). Most important, the introduction of a universal right to real 139
Basic Income on the Agenda income, ‘not proportionate to the market value of the claimant’ (ibid.: 100), for Marshall, was the key institutional innovation of the postwar welfare state. Marshall’s conception of citizenship revolves around three constitutive elements. First, citizenship is about the membership in a nation-state and a relationship between the state and its citizens. Second, it delineates a bundle of universal rights. Third, it refers to a particular collective identity of a political community, within which citizenship rights can be exercised. As a bundle of rights, according to Marshall, citizenship is inspired by and in turn can strengthen: a (...) direct sense of community membership based on loyalty to a civilization which is a common possession. It is a loyalty of free men endowed with rights and protected by a common law. Its growth is stimulated both by the struggle to win those rights and by their enjoyment when won. (ibid.: 96)
In other words, social rights not only provide individuals with a sense of material security against the adverse effects of poverty, illness, disability, unemployment and old age in a territorially bound state. They also encourage a sense of belonging and commitment to a kind of society, i.e. the welfare state, within which citizens live. Marshall was not silent on the obligations for effective social citizenship. He writes: ‘If citizenship is invoked in the defense of rights, the corresponding duties cannot be ignored’ (ibid.: 123). Nevertheless, Marshall was fully aware of a ‘changing balance between rights and duties’ in the postwar welfare; whereas precisely defined ‘rights have multiplied’, there are only a few citizenship obligations that are really compulsory, such as the duty to pay taxes for welfare benefits and social services, pursue an education, and serve in the military. Many citizenship obligations have turned into informal, noncommittal and rather vague responsibilities (ibid.: 129). Contemporary students of social policy have criticized Marshall’s rather ‘whiggish’ portrayal of the progressive extension of citizenship.While perhaps aptly capturing the British experience, Marshall’s logic of social progress has been found wanting when applied to other national experiences. In Germany, for instance, social policy innovation came first, so as to compensate for deficient political rights (Esping-Andersen, 1990). Feminists have criticized Marshall for the absence of gender from his exposition.To be sure, a theory of ‘social citizenship’ that is merely applicable to male breadwinners as right-bearing citizens, cannot claim universality (Pedersen, 1993; Pateman, 1988; Vogel, 1991). In defence of Marshall, I would like to emphasize that today there is much crossnational congruity in terms of citizenship rights. All the advanced democracies of the European Union are fully committed to the rule of law, parliamentary democracy, gender equality and the welfare state. Over the last two decades, the European Commission in particular has actively pursued regulation in the area of equal pay and equal treatment at work and in matters arising from pregnancy (Meehan, 1993). More importantly, Marshall, writing at the apex of the ‘Golden Age’ of postwar prosperity and full (male-breadwinner) employment, did not fully appreciate the immanent tension between ‘negatively’ defined civil rights and ‘positively’ defined social rights (Offe, 1993). Civil rights, by virtue of being defined in negative terms of government non-interference, are operationally precise and can, as such, more easily be enforced. By contrast, social rights, defined in substantive terms of need, imply affirmative state action of meeting the needs of the vulnerable. By their very nature, social needs can 140
Prospects for Basic Income in an Age of Inactivity? never be precisely demarcated. Social rights, designed to foster an equalization of ‘life chances’, oblige the political community to interfere in and modify the distributive consequences of market processes. Offe rightly states that any standard of social rights is inherently subject to potential upward as well as downward adjustment depending, not only on changes in political commitment towards redistribution and state capacities to administer and implement social policy legislation, but also on aggregate economic performance. Consequently, the question of ‘how much’ is good enough, and ‘what kind’ of social services are required, on behalf of ‘what categories of people’, and at ‘whose expense’ can never be unambiguously settled.
The Decline of the Work Ethic? The breakdown of the Bretton Woods monetary system in 1973 and the steep rise in oil prices between 1973 and 1979 brought an end to the ‘Golden Age’ of postwar prosperity and full employment and stalled the progressive expansion of social rights.While the advanced industrial societies employed remarkably divergent national strategies of crisis management during the late 1970s, cutbacks in social security were introduced practically everywhere during the 1980s.Access to welfare state programmes was made more selective, levels of benefits were reduced, and periods of coverage curtailed. Many conservative governments that came to power in the early 1980s were elected on their promise to scale back the welfare state. The rhetoric of neo-liberalism and conservatism, touting the superiority of ‘negative’ economic over ‘positive’ social rights, appeared very convincing against the background of the rise of mass unemployment, failing Keynesian macroeconomics, and accumulated deficiencies in social policy implementation. Social policy, following the prevalent sociological critique, had not lived up to the promise of the fulfilment of citizenship because it perversely weakened the moral fibre of citizens. This critique is echoed in the thought-provoking argument portraying the decline of the work ethic in the welfare state advanced by Daniel Bell in the late 1970s. In The Cultural Contradictions of Capitalism (1979), recently republished with a new afterword (1997), he argues that welfare capitalism has – unintentionally – fallen victim to its own success, because the principles of the economic realm and those of the cultural domain have led people in contrary directions. The spectre of individualism, released by the Reformation and the Enlightenment, activated the values of industriousness, hard work, thrift, entrepreneurship, and ‘deferred gratification’ in early-modern capitalism. Under the welfare state, ironically, individualism has encouraged the development of an alternative ‘hedonist’ ethos, which is fundamentally at odds with the original sober mentality of early-modern capitalism. Having dissolved the ‘sacred’ link between work and income, the welfare state contributed to the erosion of the traditional work ethic as a central point of moral reference. This constitutes, according to Bell, the cultural contradiction of capitalism: Capitalism has lost its traditional legitimacy, which was based on a moral system of reward rooted in the Protestant sanctification of work. It has substituted a hedonism which promises material ease and luxury, yet shies away from all the historic implications of a ‘voluptuary system’, with all its social permissiveness and libertinism. Hedonism, as a way of life
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Basic Income on the Agenda promoted by the marketing system of business, constitutes the cultural contradiction of capitalism. (ibid.: 84)
Bell’s cultural critique of the welfare state is based upon the presupposition that, at an earlier stage, bourgeois capitalism was supported by a strongly entrenched, morally obliging work ethic, like the one portrayed by Max Weber in his classical study The Protestant Ethic and the Spirit of Capitalism (1930). Following Bell, there is a paradoxical elective affinity operative between the institutions of the welfare state and its ethos of hedonism, which runs counter to the Wahlverwandtschaft Weber found between Calvinist doctrines and the spirit of early-modern capitalism. To paraphrase Weber: it seems that the consumerist Gesinnungsethik of the welfare state has driven out the original Verantwortungsethik of early-modern bourgeois capitalism. It should be emphasized that the thesis of the decline of the work ethic is not only popular among conservative sociologists like Bell, but also in progressive academic circles, where there was and still is much agreement that the welfare state is no longer able to reproduce the cultural resources and economic sanctions that are necessary for stabilizing the moral obligation to seek gainful employment. This, however, for altogether different reasons than the ones suggested by Bell. Claus Offe, and more recently Jeremy Rifkin, maintain that the work ethic fails as an important function of social integration, because jobs are being ‘rationalized away’ by economic restructuring. Technological change and international competition increasingly put a premium on capital-intensive production, resulting in the structural elimination of work. Moreover, the time in which people partake in gainful employment throughout their lives has drastically decreased over the past fifty years.And as levels of unemployment continue to rise, Offe believes that the moral stigmatization of living off welfare will wear off. Beyond a certain threshold paid non-work or inactivity can no longer be plausibly accounted for in terms of moral default (Offe, 1985; 1996; Rifkin, 1996). Is the work ethic dead or alive, or has it changed? To what extent have industrial restructuring and welfare reform contributed to a weakening of the work ethic? Or are we to observe, contrary to the imaginative sociological reasoning of Bell and others, a strengthening of the work ethic over the past decade? On the basis of four empirical research efforts I will now chart changing value orientations with respect to work and unemployment in Dutch society. On the basis of survey and panel research on value change in Dutch society, we are able to assess and interpret changes with respect to the appreciation of work as a moral obligation, on the one hand, and the norm of the work experience as a central life interest.The conviction that work is a moral obligation is operationalized on the basis of survey statements like:‘If someone wishes to enjoy life, he or she has to be prepared to work hard for it’, or: ‘Everybody who is able to work should do so’. Findings from the period from 1977 to 1985 display a relative decline in the appreciation of work as a moral obligation (Ester and Halman, 1994). Interestingly, the more drastic decline in the work ethic of the late 1970s and early 1980s – a negative trend of 2.25 percent per year until 1985 – is followed by a marked slowdown, stabilizing at 0.8 percent from 1985 to 1990. Additional panel research reveals inter-temporal changes in the work ethic as a moral obligation, which are far from consistent with the hypotheses of unilinear decline (ibid.: 128). In large part, the variation can be explained in terms of personal and group characteristics. Elderly respondents endorse a stronger work ethic than 142
Prospects for Basic Income in an Age of Inactivity? younger people, and more educated respondents embrace a weaker, less obliging work ethic than low-skilled workers. On the whole, male breadwinners endorse a stronger work ethic than housewives and mothers. The evidence of the strong endorsement of paid work as a central life interest in survey research concurs with the findings of numerous opinion studies of the Dutch Social and Cultural Planning Bureau (SCP, 1986; 1992; 1994; 1996).According to SCP research, the wish to partake in the world of gainful employment may, if anything, actually be growing rather than weakening. The growing appreciation of gainful employment as a central life interest in Dutch society is, in part, the result of the increased orientation of women towards labour market participation. This in turn reflects higher levels of education, values of economic independence and the conviction that labour market participation demonstrates gender equality. Today, 50 percent of non-working women and mothers with small children aspire to a job in the future. By contrast, for a majority of elderly men (i.e. above the age of 55), while they endorse a strong, morally obliging work ethic, the appreciation of work as a central life interest seems to be receding.This does not necessarily constitute a contradiction. Older men, apparently, judge that they have worked hard long enough (SCP, 1994: 166-167). The resilience of the appreciation of work as a central life interest does not imply that work-related values and aspirations have not changed.The SCP identifies an ever greater variety of work-related values underlying the general opinion that participation in the labour market remains of central importance. There is much diversity with respect to the type of jobs and particular work experiences that people seek, as is revealed in the significant drop in the number of people who aspire to a traditional, regular, full-time nine-to-five job, five days a week, 48 weeks per year, for 40 years.An ever growing share of the population are looking for ‘large’ part-time jobs, ranging from 20 to 30 hours a week. On average, more that one third of the women currently holding full-time jobs would prefer to work part-time. Of the number of women who are in ‘small’ part-time jobs of less than twenty hours, over a quarter aspires to a ‘larger’ parttime job. Among men too, there is a growing interest in part-time jobs. Next to the popular preference for part-time work, there is a growing interest in different forms of leave, temporarily allowing adult citizens to work shorter hours or interrupt the working career for a short break to care for children or parents or to go to university. Qualitative research on the experience of long-term unemployment and welfare dependency enables us to assess the relative strength and weakness of the work ethic ex negativo. A study of three depressed neighbourhoods in Amsterdam, Rotterdam and Enschede (Kroft et al., 1989; Engbersen, 1990), modelled on the famous study of the experience of unemployment in the early 1930s in the Austrian industrial town of Marienthal (Jahoda et al., 1933), found not dissimilar symptoms of social-psychological strain, despite far better levels of economic support: a loss of time structure, purposelessness, self-blame, strain on mental and physical health, a decline of interest in hobbies and in regular social contacts, loss of identity, a gradual loss of employability, and a distinct decline in involvement in political affairs and civic activities. Next to a dominant traditional culture of unemployment, Kroft et al. found a minority of about 30 percent of the respondents who displayed a novel, more active way of coping with unemployment. For those adhering to this modern culture of unemployment, mostly younger and better educated welfare recipients, gainful employment is not an end in itself: it is a means, a gateway to a certain standard of consumption and life style. 143
Basic Income on the Agenda Most recently the Social and Cultural Planning Bureau (1998) has updated earlier studies so as to allow for a comparison over time among different categories of active and inactive citizens (the unemployed and disabled workers) between 1974, 1982 and 1995.This study reveals, first, that inactive citizens feel less stigmatized in 1995 than in 1982, which seems to reflect an increased acceptance and tolerance of inactivity in its multi-faceted forms of structural, part-time and temporary non-participation in Dutch society.The authors of the SCP study take the increased acceptance of inactivity as evidence for the continuing decline of the work ethic.This is only true for the work ethic, narrowly understood in terms of the moral obligation to work. By contrast, in terms of the appreciation of work as a central life interest, the study shows that the inactive of the 1990s are far less resigned to losing their job than their counterparts in 1982.They are much more prepared to make efforts and concessions in order to find a job. By the same token, inactive citizens appreciate social security less as a self-evident right. On average, the SCP study suggests that inactive citizens seem to accept the new image of an ‘activating’ welfare state.To be sure, the disadvantages of inactivity are more keenly felt in 1995 than in 1974 and 1982. Inactive citizens feel locked out of society, suffering from feelings of uselessness, aimlessness, health problems and social isolation. One of the most striking findings is that, despite numerous reductions of benefits and restrictions in terms of eligibility, the unemployed and disabled workers report that they are equally satisfied with their financial situation in 1995 as they were in 1982. Although women continue to appreciate work and inactivity differently from men, the study reveals that the gender gap is closing. Single women without children virtually have the same attitudes towards work and inactivity as men. The overall conclusion that emerges from the above research efforts confirms that paid work continues to occupy a prominent place in the lives of most adult citizens. The dynamic of contrary value reorientations over time cannot be considered as evidence for an overall across-the-board decline of the work ethic. If anything, it could be argued that the paid job is the only ‘sacred cow’ that has outlived the cultural revolution of the 1960s.To say that the work ethic is alive and kicking is not the same as saying that work-related values and behaviour have not changed. Increasingly, more expressive values of self-realization, and hedonistic elements such as paid vacation and a company car, are sought after in the work experience.While Dutch society at large seems to have grown accustomed to a significant degree of inactivity, a younger generation of welfare recipients have come to adhere to a more relaxed, instrumental, work ethic.
Welfare without Work? If high levels of structural inactivity cannot be explained by a decline of the work ethic, under conditions of welfare state generosity and industrial restructuring, it is germane to concentrate on the interactive effect of the operation of the institutions of the labour market and the system of social security. Prima facie, persistent divergences in national experiences of reducing labour supply and facilitating labour market exit since the late 1970s indeed suggest that structural inactivity may be highly contingent on the design of national patterns of labour market regulation and social security legislation. The structure of the link between the labour market and the welfare state is central 144
Prospects for Basic Income in an Age of Inactivity? to the path-breaking work of Gøsta Esping-Andersen (1990). Esping-Andersen highlights how social rights serve to protect the inactive – the aged, sick, and the unemployed – by providing them with social security and public assistance, so as to enable them to make ends meet without necessarily relying on their (deflated) labour market value. Esping-Andersen has coined this measure of social protection ‘decommodification’ (1990: 37).The degree and scope of decommodification mitigates the immediate feedback between work and income. In the language of neoclassical economics, decommodification translates into structural disincentives to seek employment, undermining the proper functioning of the labour market. Esping-Andersen’s comparative study, however, reveals that any exhaustive decoupling of work and income in various welfare state regimes is the exception rather than the rule in postwar social policy. Levels of social security benefit levels are largely tied to previous work experience and are generally set below the level of last earned wages. In addition, welfare recipients are obliged by law to look for work. Sanctions, in terms of benefit cuts, can be forced upon claimants who reject job offers or refuse to partake in job-training programmes. The only welfare state regime that comes close to a fully decommodifying system is the ‘social democratic’ welfare state regime, of which the Swedish model is exemplary.The social democratic regime type executes a universal system of highly generous and universally redistributive benefits. Esping-Andersen’s research reveals that the Scandinavian welfare state is not fraught with excessive levels of inactivity and sub-optimal levels of labour market participation. Paradoxically, it is the continental welfare state, in which the conditional tie between work and income has remained far more intimate, that is confronted with a crisis of spiralling inactivity, falling levels of labour force participation, and jobless growth. The ‘compensatory’ – transfer based – welfare states of France, Germany, Belgium, Italy, Spain and the Netherlands are, according to Esping-Andersen, trapped in a pathological vicious cycle of ‘welfare without work’ (Esping-Andersen, 1996). Because social security benefits are predominantly financed out of payroll contributions from workers and employers, a complicated pattern of mutual interaction between investments, productivity, labour participation, wage costs and (non-wage) social security arrangements is operative under the continental welfare regime. Under increased competitive pressure, firms in high-wage economies can only survive if they are able to increase productivity.This is most commonly achieved through labour-saving investment strategies, raising productivity levels of workers through high-quality vocational training and education, and/or by laying off less productive or ‘too expensive’, mostly older, workers. High minimum wages and substantial non-wage labour serve here as a productivity whip. However, they can also engender an ‘inactivity trap’, whereby a virtuous cycle of productivity growth runs into a vicious cycle of high wage costs, the exit of less productive workers and rising social security contributions, requiring further productivity increases on competitive firms, eliciting another round of reductions in the work force. Employment disappears in sectors where productivity increases stagnate and the prices of goods and services cannot be easily raised. Moreover, if service-sector salaries are linked to exposed-sector wage developments, this logic frustrates job-growth in the labour-intensive public and private service sectors, especially at the low end of the labour market.The particular interplay between competitive adjustment and social protection in the continental welfare state has clear labour market effects: overall low employment and high levels of structural inactivity; 145
Basic Income on the Agenda low female participation rates; declining participation of older workers; underdevelopment of part-time jobs; and a below-average job growth in the service sector. At the low end of the labour market this engenders on the demand side a shortage of jobs for the low skilled and on the supply side a lack incentives to enter the labour market. Moreover, the inactivity trap of the continental welfare state reinforces existing ‘insider-outsider’ cleavages. Existing privileges of a diminishing group of ‘insiders’ – highly productive workers with high wages and expansive social rights – will be safeguarded at the expense of a growing population of inactive ‘outsiders’ (elderly workers, women and youngsters), who remain financially dependent upon either the welfare state or traditional breadwinners. To what extent has the proverbial continental welfare state regime of the Netherlands followed Esping-Andersen’s scenario of ‘welfare without work’? Dutch labour market performance seems to contradict the continental pathology of declining activity and rising inactivity (Visser and Hemerijck, 1997). At a rate of 1.8 percent per year on average since 1983, Dutch job growth is four times the average for the European Union. Unemployment has come down from an all-time record in 1984 to just over 3 percent in 1999, while the EU average remained at over 10 percent (OECD, 1999). In contrast to the American jobs machine, Dutch job growth is less associated with a sharp increase in earnings inequality. A number of interrelated developments stand out in the Dutch response to the continental crisis of inactivity (Visser and Hemerijck, 1997).These are: (1) protracted wage moderation under the shadow of a non-accommodating monetary policy; (2) labour time reduction; (3) social security reform; (4) the growth of part-time jobs; (5) the popularity of temporary jobs; and (6), a record increase of female labour market participation. Real wage moderation, agreed in collective bargaining at the sectoral level by trade union and employers’ representatives, has contributed to curbing wage costs over the past fifteen years. Inaugurated by a major Social Accord concluded between the central union and employers federations in 1982, the sustained policy of wage moderation has helped to preserve and create jobs. It seems that especially Dutch trade unions, operating in a highly open economy with a high degree of trade dependence recognized at an early stage that there was a trade-off operative between wages and work.Wage moderation has had an especially favourable impact on employment in sectors that produce mainly for the domestic market, making low-wage, labour intensive production profitable again.Wage moderation has also helped to improve the price competitiveness of Dutch industry. The experience of high growth in the second half of the 1980s and after 1993 suggests that sustained economic growth has a very strong impact on employment growth and unemployment decline. Because of continued appreciations of the Guilder, the level of inflation has been suppressed, which, in turn, has had a favourable effect on domestic wage trends, contributing to employment and output growth. The concerted strategy of wage moderation entailed two political exchanges which followed each other in time and importance: one between workers and employers, the other with the government. In the first exchange, wage moderation was traded against a modest reduction in annual and weekly working hours. In the second exchange, between the social partners and the government, which gained more prominence in the late 1980s, wage restraint was compensated for by lower taxes and social security 146
Prospects for Basic Income in an Age of Inactivity? contributions, made possible by improved public finances and a broader tax base as a result of record job growth. In the wake of the ‘foundational’ Wassenaar Accord, the Dutch system of industrial relations moved in the direction towards an ‘dual bargaining’ system, whereby ‘frame’ agreements set the pace for bargaining at the level of sectors and firms. Hard won social security reform and the revived confidence in negotiated adjustment, endorsed by unions and employers, gradually concurred with a general shift in the problem definition of the alleged crisis of the Dutch welfare state. Policymakers came to realize that the low level of labour market participation was the Achilles heel of the continental system of social protection. Gradually, the central policy objective of fighting unemployment by subsidizing easy-exit and reducing entry was replaced by maximizing the rate of labour participation. There is a clear relationship between the prevalence of part-time work (opportunities) and low levels of unemployment.This seems to hold true for Denmark, Sweden, the United Kingdom, Finland, and the Netherlands.The extraordinary growth of parttime jobs has contributed to the massive entry of women in the labour force, and the replacement of older workers by younger, cheaper and possibly more flexible and skilled workers.With some delay, the Dutch trade unions have come around in support of these changes and taken a positive attitude towards part-time employment and flexibility.The share of part-time work has surged from less than 15 percent in 1975 to 35 percent in 1994, a share well above that of any other OECD country. Of all part-time employment, 75 percent of part-time jobs are held by women: 63 percent of all female workers are employed part-time.The incidence of part-time work among men is at 16 percent the highest among OECD countries. The EU 15 average of male part-time employment is only 5 percent. The Netherlands has the highest rate of part-timers among young people in Europe at 25 percent (OECD, 1998).This suggests that entry into the labour market is commonly channelled through part-time work. Following protracted wage moderation, labour time reduction, increase in part-time and temporary work, and the surge of female market participation, average annual working hours per worker have come down significantly since 1973. However, net labour market participation increased from 52 percent to 64 percent from 1983 to 1994. To be sure, it should be emphasized that in terms of participation in full-time equivalents the Netherlands is, at 50 percent, still lower than neighbouring countries (OECD, 1998). The Dutch job miracle, currently praised by many observers, does represent a significant departure from the scenario of ‘welfare without work’ so typical of the continental welfare state. Sustained wage restraint, welfare reform, and the expansion of more flexible work and part-time employment, has fueled exceptional job growth in 1980s and 1990s, which has helped to bring the rate of unemployment down to just over 3 percent. However, all that glistens is not gold. The present state of nearly full part-time employment may be judged a second-best solution only. The current low unemployment rate of under 6 percent does not reflect the true state of slack in the Dutch labour market. The level of structural inactivity, including all unemployed and inactive persons of working age receiving a social security benefit and persons enrolled in special job creation programmes, remains high at 20 percent of the current labour force. New jobs have gone predominantly to younger and better skilled recruits to the labour market, and many are part-time, sometimes for a limited number of hours only. 147
Basic Income on the Agenda Inactivity is concentrated among the low skilled, older workers, immigrants and women. The participation rate of older males has dropped to one of the lowest in Europe. The share of long-term unemployment has started to decrease but is still at about 50 percent extremely high by international standards (OECD, 1998).
Between Workfare and a Basic Income As the twentieth century draws to a close, there is much anxiety over the future of the advanced welfare state based on the conception of social citizenship, as formulated by T.H. Marshall fifty years ago. Critics point out that postwar social policy has accumulated a vast array of rigidities which impede flexible adjustment, block technological innovation and hamper necessary economic and employment growth. From this kind of diagnosis, the obvious recipe is to scale down the ambitions of social policy by way of curtailing the extent and coverage of social rights. Encouraged by the American jobmachine miracle, the OECD is recommending to European policymakers that they de-regulate their labour markets, abolish or lower minimum wages, scale back social security, and give up progressive taxation (OECD, 1994c). European policymakers, however, are reluctant to follow the American example of recommodifying labour, as the unparalleled expansion of jobs in the US economy has been accompanied by the emergence of an underclass of ‘working poor’, who are unable to acquire a decent standard of living through regular earnings. The challenge of social policy lies in the need to find novel ways of translating Marshall’s rights-based conception of social citizenship into effective policies and institutions which are able to respond to the new rules of global competition, deal with the new shape of working life and take into account the new realities of family life and the predicament of demographic aging. One constraint remains highly relevant: the ‘right to work’ as a right of social citizenship cannot be effectively guaranteed in a market economy (Elster, 1988).The right to work may be anchored in a qualified public commitment to help provide the opportunities to earn a living wage for citizens who need and demand it, which can be underpinned by an ‘active labour market policy’, but in a capitalist economy the right to work is overwhelmingly dependent for its implementation upon the voluntary co-operation of autonomously employing firms. In the academic debate over the prospects for effective social citizenship in an age of structural inactivity, two diametrically opposed policy proposals are often advocated. ‘Workfare’ programmes and a ‘citizen’s income’. Workfare policies are designed to strengthen and repair the conditional links between work and income which have been lost with the expansion of the welfare state.The underlying philosophy of workfare is one of mutual obligations: welfare recipients must be obliged to accept ‘employment as a duty’ in order to receive benefits, while the state has the obligation to provide the services that make employment possible. For Lawrence Mead, an ardent defender of workfare, forced labour and/or community care in exchange for public assistance and welfare services serves the purpose of ‘remoralizing’ the welfare state (Mead, 1986). Those who refuse to take part in job-training programmes should have their social benefits taken away from them.As such, workfare programmes engender an ideology of ‘blaming the victim’: the inability to find and hold regular jobs is blamed on ‘undeserving’ recipients, who lack an appropriate work ethic. For the protagonists of workfare 148
Prospects for Basic Income in an Age of Inactivity? the problem at hand, the overall decline in the demand of low skilled labour, is unrelated to changes in the economy. In practical terms, workfare programmes, as they mostly involve additional public sector employment initiatives, are rather expensive. They require intensive efforts of supervision and implementation. Most successful are policies of vocational training and education that focus on marketable skills, along the lines of Swedish active labour market policies. In the United States, mandatory job programmes, based on a workfare philosophy, have not been all that successful in achieving lasting integration of low-skilled groups into the regular labour market (Blank, 1997; Handler and Hasenfeld, 1997). Many workfare initiatives fail to meet citizenship criteria of rights and universalism. In fact, the citizenship content is completely absent in Mead’s proposal to selectively put the deserving poor to work for the sake of remoralizing society. This is less true for workfarist social policy intiatives in Denmark and the Netherlands. In Denmark, the activation content of labour market policy is increased by extending job and education offers for long-term and youth unemployed and making participation obligatory after a certain duration of unemployment, while the level of unemployment benefits remained generous. However, the maximum duration period of and eligibility criteria for unemployment benefits have been restricted so as to strengthen work incentives. In addition, schemes for sabbatical, educational, and parental leave can be regarded as a ‘transitional labour market state’ serving partly as ‘buffer zones’ around the regular labour market while containing hysterisis effects and tendencies towards social exclusion caused by long-term unemployment (Schmid, 1996; Hemerijck and Schludi, 2000). In the Netherlands, selective product and labor market deregulation and the promotion of part-time employment have all been achieved as part of a broad social pact covering sustained, co-ordinated wage bargaining and minimizing any impact on real income disparities. The Dutch agreement on ‘Flexibility and Security’ in 1966, relaxation of high levels of security for full-time core workers was exchanged against greater protection for peripheral (although increasingly critical) temporary and part-time workers. The compromise whereby statutory dismissal protection for regular employment contracts, including more opportunities for negotiating termination of employment, is exchanged for improving the rights of temporary workers and introducing the presumption of an employment relation in the case of freelance work. Temporary employment agencies no longer need a license, but the law assumes that temp agencies take on the responsibilities of employers. The social partners are also in agreement that employers should honour workers’ requests to work part-time unless there are compelling firm-related reasons for rejection. Many basic income proponents defend a basic income policy on the presupposition of jobless growth (Offe, 1996; 1997; Rifkin, 1996).A basic income should make it possible for people to participate more in voluntary activities beyond the sphere of regular employment, such as community care and learning. The foremost advocate of an unconditional citizen’s income, in line with the principles of individual liberty and equal treatment, is Philippe Van Parijs (Parijs, 1991a; 1992b; 1995; Parijs et al., 2000).A basic right to real income, granted to all citizens, represents a fully-fledged form of citizenship in terms of a universal right to real income,‘not proportionate to the market value of the claimant’ (Marshall, 1963: 100). A basic income fundamentally recasts the role of the welfare state. Central to a citizen’s income is the fundamental disengagement of real income entitlements from employment status, wage-earning conditions, 149
Basic Income on the Agenda and the readiness to accept job offers. Instead of providing income support for inactive workers and their families, social protection takes place outside the labour market. By endowing every person with wealth, basic income protagonists argue that government could quit the business of providing social welfare, since individual citizens would be able to take care of themselves (Van der Veen and Pels, 1995; De Beer, 2000). For radical policy alternatives, like an unconditional basic income, to be adopted, they not only have to be functional to the problem at hand; they also have to be normatively acceptable to the citizenry at large. It remains difficult to translate Van Parijs’ ideal of the ‘right to surf ’ for everyone in a normatively convincing way to a world in which people’s real-life moral understanding of work and social justice is rooted in conditional social policy. Large majorities in advanced welfare states of the European Union repudiate the ‘something for nothing’ philosophy that a basic income policy seems to endorse. In the Netherlands, 65 percent of the population reject an unconditional basic income scheme (SCP, 1994: 230). Still, a basic income helps to reduce the costs of social policy administration and implementation. But despite these cost reductions, an unconditional basic income, given to all adult citizens, at the level of the present standards of the social minimum, is extremely expensive. A less expensive alternative is the negative income tax (NIT) alternative, which is more narrowly targeted at the needy, and which is gradually withdrawn as incomes rise. Like the basic income, the NIT requires far-reaching restructuring of present systems of taxation, social assistance, social insurance, pensions, and wage setting, incurring massive transformation costs of regime-change. While a fundamental overhaul of the contemporary welfare state may seem too daunting a task, many of the financial and institutional constraints and moral scepticism with respect to a basic income policy could be avoided by a modest, less costly, and more economically feasible and politically viable policy option. For the continental welfare state of Germany, Fritz Scharpf has, in a number of recent publications, suggested employing the logic of a negative income tax, in the form of regressive employment subsidies, to create a low-wage job-intensive sector in the fight against inactivity (Scharpf, 1995; 1997a; 1997b; 1997c). Employment subsidies for low-earning workers, Scharpf believes, are likely to improve the position of the low skilled by way of reducing gross wage costs for employers and increasing the take-home pay of low skilled workers. Scharpf ’s scheme is fully compatible with citizenship, since it is made available as a matter of right. Scharpf believes that in Germany and other continental welfare states there is a considerable potential for an expansion of low-skilled jobs in services like wholesale and retail trade, personal services, personal and public safety, house improvements, environmental protection, tourism and cultural recreation. In North America, where wages are comparatively flexible, there has been a considerable increase in low-skilled jobs since the 1980s.The North American social policy predicament is the rising class of the ‘working poor’. The European dilemma is welfaredependent inactivity – jobs rather than income. Banking on the large reservoir of social and political support for a comprehensive welfare state in Europe, Scharpf maintains that targeted wage subsidies, following a negative income tax logic, could permit a scenario of ‘labour-cheapening’ and job growth, without an American-style surge in poverty and inequality. This could open up a wide range of additional, economically viable employment opportunities at the lower end of the labour market. As employment subsidies are likely to increase labour demand, Scharpf believes that, if successful, 150
Prospects for Basic Income in an Age of Inactivity? subsidies could pay for themselves in terms of reduced outlays for full-time unemployment. Moreover, normatively, Scharpf ’s proposal of targeted employment subsidies is consistent with the prevailing work ethic and the moral integrity of an ‘employmentfriendly’ welfare state to which ordinary citizens are willing to contribute through contributions or taxes. In reply to the kinds of objections raised by Offe, it should be emphasized that the new jobs that would be created in domestic services would neither be confronted with the kind of productivity whip prevalent in the exposed sector, nor would they create environmental problems. Unlike workfare policies, which require additional public sector employment programmes, the negative income tax logic in Scharpf ’s proposal has the advantage of mobilizing private resources. Job creation and hiring decisions remain in the hands of private firms in the regular economy. Employment subsidies can be provided to workers or employers.A tax credit could be given to individual workers or, alternatively, social security charges for employers could be reduced. For the Anglo-American welfare states, where guaranteed minimum income arrangements at subsistence level are generally not available and unemployment benefits are low and of short duration, individual tax credits and social services to support workers and their families who work for wages below the poverty line would be most appropriate. Earnings-related subsidies to working families, the so-called ‘Earned Income Tax Credit’, are currently the largest assistance programme for low income American citizens (Haveman, 1996; Blank, 1997). For the advanced welfare states of continental Europe, which guarantee levels of minimum income protection above the subsistence level, it is more appropriate to subsidize employers who are willing to hire low-skilled workers. Here the reduction of non-wage labour costs should be part and parcel of the solution to the predicament of structural inactivity. Perhaps Australia has gone farthest, following the logic of a negative income tax, in offering subsidies in the form of tax credits to workers who work in low-paid jobs, with the aim of avoiding the strong work disincentives associated with poverty traps typical of Anglo-Saxon welfare states with their strong reliance on means-tested benefits. The Australian success has inspired the Blair government in the UK, under the so-called ‘New Contract for Welfare’ (1998) to expand tax credits to mitigate unemployment traps. Some observers argue that as more low income groups become eligible for tax credits, the logic of tax-benefit reforms inevitably pushes New Labour towards an integrated negative income tax system, and ultimately towards the establishment of a universal basic income, more or less through the backdoor ( Jordan, 2000). I think, however, that in the context of Blair’s moralist emphasis on ‘welfare to work’ as the core ground of legitimizing tax credits, this will remain wishful thinking for some time to come. A policy of tax credits is of minor importance in mainly tax-financed welfare states such as Denmark, where the tax wedge at the lower end of the income scale is already rather low. For the continental welfare state, strategies to subsidize employers hiring low-skilled workers by way of exempting social contributions are gaining ground. In the Netherlands, the third Lubbers administration and the first Kok administration introduced several kinds of employment subsidy schemes (Opstal, Roodenburg and Welters, 1998).The first programme, the Work Replacement Version (KRAP-RAP) was targeted at long-term unemployed women, ethnic minorities and low skilled groups (without a job for more than two years). Despite a subsidy of 20 percent of wage costs for a four-year period together with an initial subsidy of 4,000 guilders, the take-up 151
Basic Income on the Agenda was disappointing. Under the Melkert (2) programme, named after the Minister of Social Affairs and Employment of the first Kok administration (1994-1998), employers receive a wage-cost subsidy in the order of about half the wage costs for a two-year period.The most recent scheme, the Low Wage Reduction scheme, also known as Specific Social Security Contributions Concession (SPAK), covers all jobs that pay an hourly wage of up to 115 percent of the minimum wage.According to wage surveys of the Ministry of Social Affairs and Employment, SPAK jobs are indeed taken up by low-skilled workers. However, the majority of these jobs were occupied by new entrants, young people and partners of breadwinners, and not by already unemployed workers. In 1998, the SPAK scheme was reformed in order to raise the number of unemployment benefit recipients in the programme. All in all, the Dutch employment subsidy schemes have significantly reduced employers’ wage costs, through reductions in taxes and social security contributions, instigating a decline in the tax wedge for employers who hire long-term unemployed. Employment subsidies can add up to as much as 25 percent of the annual wage. Notwithstanding the favourable verdict on employment subsidies following a NIT logic, it is important to mention a number of practical difficulties. Policymakers should be aware of abuse by employers who can simply lower their wage rate without necessarily creating new jobs. As many of the Dutch programmes have been targeted at unemployed people who have been out of work between one and three years, employers are tempted to substitute long-term unemployed for short-term unemployed, or delay hiring until the subsidy can be collected. Where new jobs are created, it is vital that policymakers address the quality of working conditions. It is also important to emphasize that a policy of lowering social security contributions for employers hiring low-skilled workers takes the productivity whip out of the old equation between competitive adjustment and social protection. This could harm the incentives to upgrade skills and thus raises the danger that the employment subsidies lock up low-skilled workers in a secondary low-wage economy from which they cannot escape. Hereby, the ‘inactivity trap’ is replaced by a ‘skill trap’.To be sure, in a graduated scheme modeled after the negative income tax there remain clear incentives to get a better education and a better paid job. In the Netherlands it seems that this risk is relatively small for young people, who view a subsidized low-paid job as an investment in their future labour market position. A more serious social policy question is whether cuts in employers’ social security contributions, as they lead to reductions in public spending, will have an effect on the overall quality of social services. For reasons of economic internationalization there has in recent years been a gradual shift in the burden of taxation away from capital onto labour.This tendency to increase the tax burden on workers could lead to tax-resistance, which in turn could incite mainstream political parties to compete on the basis of their ambitions to cut taxes, with the result of reducing public spending at the expense of the quality of welfare citizenship. It is possible to consider raising consumption taxes (VAT, excise duties, and green taxes on consumption) and taxing firms, not on the basis of employees they hire, but in terms of their capital, equipment and the energy they use and the kinds of environmental damages they incur.
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Prospects for Basic Income in an Age of Inactivity?
Conclusion The postwar welfare state is founded on the normative principle of protecting the vulnerable citizens – the aged, the sick, the unemployed – from poverty and from social and political marginalization.While Marshall could assume stable families and properly functioning male labour markets, today’s social policymakers have to deal with demographic aging, the new shape of working life and the new realities of doubleincome households and the new rules of global competition.The Dutch experience, highlighted above, gives reason for moderate optimism. Despite some continuing weaknesses, it has contradicted the scenarios of ‘welfare without work’ and of jobless growth through its combination of sustained economic growth, low inflation, responsible wage moderation, extraordinary full-time, part-time and temporary job creation together with a revolutionary increase in female labour force participation, accompanied by important social policy reform. The Dutch experience also challenges the intuitively appealing cultural thesis of the erosion of the work ethic as a consequence of the decoupling of work and income by way of social policy. Gainful employment remains an important source of social integration and economic independence. Both men and women wish to partake in regular employment, not merely to earn a living, but also for reasons of security, social status, prestige, companionship and engagement in collective action. At present, therefore, there is no cultural support basis for the introduction of an unconditional basic income in the majority of economically advanced welfare states. Moreover, structurally, in terms of social policy design, there is also no need to introduce a basic income at present levels of the social minimum, as the pathology of ‘welfare without work’ can be resolved through a mix of less expensive policy measures. In order to maintain the universal and rights-based conception of social citizenship, changes are necessary in the design of social security. In particular, the paradigmatic shift in the world of work and the world at home in a globalizing economy implies a refocusing on achieving a new balance between flexibility and security. On both sides of the Atlantic, social policy has to respond to a universal downward shift in the demand for low-skilled work, especially in the internationally exposed sectors, as a consequence of economic internationalization and technological change. Two policy options which may help to increase the employment opportunities for low-skilled groups are relevant. First, policies geared towards improving the quality of the workforce, through vocational training and education, are likely to reduce the number of less-skilled workers (Crouch et al., 1999). However, increasing the employability of disadvantaged groups through training and education is not a solution for everyone. A truly positive-sum solution also requires a concerted policy effort to increase the chances of low-skilled workers in the regular labour market by making less productive work, especially in the domestic service sector, economically viable. The proposals of Fritz Scharpf for the use of targeted employment subsidies through the tax and social security system could play a major role here.Although gainful employment is no guarantee for a good life, targeted employment subsidies, modeled after the negative income tax, do constitute a significant step towards economic independence, selfrespect, and the social integration of low-skilled groups. The current predicament of structural inactivity not only adds to the fiscal crisis of the welfare state, it reinforces labour market segmentation. By contrast, ‘employment153
Basic Income on the Agenda friendly’ welfare policies that provide men and women with job opportunities, help households to harmonize work and family obligations and train the population in the kinds of skills that the modern economy demands, strengthen, in the words of Marshall, the ‘loyalty to a civilization which is a common possession’ (Marshall, 1963: 101). If the underlying normative criterion is to counter involuntary inactivity and poverty, there is every reason to support rights-based policies which are likely to result in an increase of labour force participation in persons and a decrease in hours worked, which in due course could foster a more generalized, less gendered and more nuanced work ethic.This, in turn, could help to reconfigure the moral integrity of the welfare state – in short, citizenship.
Notes 1 Inactivity is defined as the relative volume of people in the population in the age group between 15 and 64 who receive earning-replacing social benefits for the risks of old age, survivors, disability, sickness, unemployment, and social assistance, relative to the workforce. Activity is defined as the relative volume of labour expressed in labour years, relative to the working age population, from which the total benefit years due to sickness and maternity are subtracted because these risks are already included in the inactivity ratio. Next to inactive and active people in the population older than 15 years, there is a remaining group of people who are neither active nor inactive.These are people still attending school or university and people who are dependent upon other active or inactive people.
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Basic Income and Social Europe Fritz W. Scharpf
Before I turn to my assigned topic, let me say that I have great sympathy for the Basic Income European Network that presented itself so impressively at its Seventh Congress in Amsterdam. However, being an empirically oriented political scientist, rather than a moral philosopher, I should also confess that I am doubtful of the political viability of the proposed right to a basic income without means-testing and without a concomitant obligation to do work that is useful to, and appreciated by, other members of one’s society. In political discourses, it will not be enough to persuade potential recipients of the desirability of ‘a right to be lazy’, but it will also be necessary to make others believe that they have a moral duty to work harder or longer in order to pay for this program. Personally, moreover, I consider mass unemployment, forced inactivity, and the exclusion from the processes of social production, a much greater challenge to the moral integrity of Western European societies than the frustration of leisure preferences. For these reasons, I would accord normative priority to variants of basic income schemes that have the explicit purpose of increasing the incentives and the opportunities for gainful employment, rather than for financially secured inactivity.This implies that quite apart from any questions of financial feasibility, I would prefer the negative income tax over proposals for an unconditional basic income,1 and I would prefer both over presently existing forms of means-tested social assistance with their strong work disincentives. Moreover, if for political, institutional, or financial reasons the negative income tax should not be a feasible option, I would much rather see social insurance contributions for low-wage jobs being reduced than an attempt to increase the generosity of social assistance in its present forms (Scharpf, 1999b). But all this is by way of background information since I have not been asked to discuss my comparative evaluation of basic income proposals. My assigned theme, as I understand it, is to discuss the implications of European integration on the chances of success of basic income proposals in general, regardless of the differences among its several variants.
Economic Integration Constrains National Welfare States The connection between European integration and basic income proposals is not obvious. So far, at any rate, there appears to be wide agreement that social policy choices should remain a national prerogative under the ‘principle of subsidiarity’. National welfare states are too diverse, economically and institutionally, to make policy harmonization a realistic goal; moreover, if harmonization were attempted, basic income schemes – which are not realized at the national level, or even on the political agenda in any of the Member States – would be among the least likely candidates for European-wide policy co-ordination. Nevertheless, there are good reasons for advocates of basic income proposals to reflect on the implications of European integration 155
Basic Income on the Agenda on their chances of success at the national level. Unfortunately, however, these implications are largely negative. Regulatory competition undermines economic viability Even though social policy choices must remain at the national level, they are affected by the consequences of European economic integration. National social policy is severely constrained if consumers are able to buy goods and services produced anywhere within the Union; if capital owners can invest, and firms produce, anywhere in the Union; and if labour moves freely throughout the Union. For one, the competition in product markets severely restricts all national solutions that would add to the cost of production.This affects most directly those countries that are financing their welfare state through social security contributions defined as a surcharge on wages. But it also constrains current proposals to shift from payroll taxes to ‘green’ taxes on energy input or on pollution – unless care is taken to exempt enterprises from such taxes which, however, will defeat or at least weaken the environmental-protection purposes of such shifts.2 At the same time, the mobility of capital investments and of firms constrains national policy choices, which would have the effect of reducing after-tax profits and the net return on invested capital, even if these did not affect the cost of production and hence the competitiveness of national products. Hence, countries that are financing their welfare state through taxes on personal and corporate income are under pressure to reduce taxes on business profits and capital incomes, or otherwise risk the out-migration of corporate headquarters and of job-creating investments. Welfare migration undermines political viability Regardless of the mode of financing, however, countries that provide generous minimum income support have become vulnerable to welfare migration under the EU’s freedom-of-mobility rules which do not allow a country to discriminate against the nationals of another EU Member State.These rules, it is true, are so far applicable only to workers seeking employment. But they continue to apply after workers become unemployed, and they apply to their dependent family members.To illustrate, in a case that is presently much discussed in Germany, social assistance is being claimed by the large family of a recently immigrated and now unemployed manual worker from Sicily. By implication, the fear of welfare migration is weakening the potential political support for basic income programs which – if they are tax financed, rather than insurance financed – could no longer be restricted to citizens or long-term residents under EU rules. As I said before, from the point of view of taxpayers, all redistributive programs depend on normative arguments that could justify a duty to transfer parts of their own income to others. I have learned to my surprise that the Basic Income Movement tends to rely on negative, rather than positive, justifications based explicitly (Schutz, 1998: 2) or implicitly on the logic of Proudhon’s dictum that ‘Property is theft’.The argument, in other words, is that much of the current income of the betteroff is ‘unearned’, depending on accidents of birth, of genetic endowment, of inheritance, or of ‘brute luck’ in obtaining valuable and scarce ‘external assets’ (Van Parijs, 1995;Widerquist, 1998), including attractive jobs (Gamel, 1998; De Wispelaere, 1998).3 The normative implication is that since these incomes are undeserved nobody could rightly object if they are being taxed away. 156
Basic Income and Social Europe At the level of practical politics, however, it may be difficult to persuade most tax payers of the sinfulness of their possessions. Instead, the justification of real-world welfare states seems to depend on positive arguments implying a duty of mutual help among the members of a solidaristic community.4 And while universalist moral philosophy may find it logical to extend solidarity to all of mankind,5 real-world solidaristic communities depend on historically grounded, and emotionally salient collective identities that are defined more narrowly.6 The largest unit that so far has been able to achieve this status is the nation state – and even national solidarity is currently being challenged by the assertion of subnational identities: Padanian in Italy, Flemish in Belgium, Bavarian in Germany.The European Union, at any rate, has not yet achieved the status of a solidaristic community in the eyes of the citizens of individual Member States. Hence, one cannot presume broad political support for the postulate of a moral duty to include citizens of other Member States in national programs of basic income support.As a consequence, not only proposals for new welfare programs, but also existing programs are now increasingly scrutinized with a view to their likely incentive effects on welfare migration, especially under the perspective of the Eastern enlargement of the European Union.
National Solutions? National welfare states are everywhere under fiscal stress because of exceptionally high levels of unemployment and because of demographic changes that increase the size of the inactive population that must be supported by the active population. Quite apart from that, however, European economic integration has created additional constraints which also tend to reduce the capacity for generous welfare policies. If economic competition discriminates against taxes that will either add to the cost of production or that will reduce the post-tax return on capital investments, welfare finance will increasingly be raised from taxes on the possession of immobile and non-business property, from taxes on income from labour, from taxes on consumption, and from user charges. Since property taxes play only a minor, and generally declining, role in most advanced welfare states, the main burden has generally fallen on the incomes from work and on the consumption expenditures of the less mobile majority of the population.The welfare state, in other words, has come to depend mainly on what one might describe as ‘solidarity within one class’ (Scharpf, 1991). But while such shifts may be economically plausible, they are also quite unattractive politically.Thus, if tax payer resistance is compounded by fears of welfare migration, it is not unreasonable to conclude that European economic integration and the guarantees of free mobility throughout the Union have greatly increased the political and fiscal difficulties that must be overcome by basic income proposals. The question is whether there are solutions that could avoid these difficulties. If they exist, they must require a major restructuring of both welfare financing and spending patterns with a view to making them more robust against international economic competition as well as against tax payer opposition. In other words, international economic competition forces national welfare states to transform themselves into ‘competitive welfare states’ if they wish to remain true to their solidaristic commitments. One consequence is the apparently general shift ‘from welfare to workfare’ and 157
Basic Income on the Agenda toward stricter mean testing that is reflected in the country reports presented in Part II of this volume. In my view, this has probably less to do with an ideological shift back to the ‘work ethic’ than with an attempt to reduce expenditures either by deterring ‘welfare chiselers’ through more stringent controls or by getting welfare recipients back into regular employment, preferably in the private sector of the economy. Another direction that restructuring may take is toward a separation of ‘individualistic’ and ‘solidaristic’ programs – the former providing protection against insurable risks over the life course of the individual, and the latter providing for interpersonal redistribution. Examples of individualistic programs are health insurance and funded pension insurance schemes in which the equivalence between individual contributions and expected individual benefits is emphasized. Even if contributions are made compulsory in order to compensate for a presumed lack of individual foresight, they can be plausibly justified as being in the interest of the contributing individuals. Hence they should be relatively immune to tax payer resistance. Economically, they should be considered as individual savings or consumption expenditures that do not create competitive disadvantages for the national economy; and obviously there are also no problems of welfare migration. It is my impression that countries like Switzerland or the Netherlands that have traditionally tended to separate the individualistic and the redistributive components of their welfare states – for instance by establishing different ‘pillars’ of their pension systems – are presently less under pressure than countries like Germany that have integrated individualistic and redistributive elements in single, contributions-based systems of health insurance, pension insurance and unemployment insurance. Another indication are recent reforms in Sweden that have strengthened the individualistic insurance elements of the pension system, and I would expect that other countries will be moving in the same direction. The main advantage of the separation strategy is, of course, that it reduces the apparent size of the redistributive welfare state that is considered a disadvantage in international competition, and that must be legitimated by appeals to solidaristic motivations. Moves in the same direction can be seen in the introduction of means-tested user charges – such as student fees in Dutch and British universities or co-payments in the German health care system – which emphasize the value-for-money element of public services while at the same time targeting tax-financed expenditures on lowerincome clients that could not afford to pay the full cost of these services.An even simpler model is provided by the Swiss system of compulsory health insurance which requires cost-covering individual premia from all inhabitants, and which achieves redistribution by public subsidies to reduce contributions of low-income individuals and large families. To the extent that such strategies succeed, they will reduce the quantitative dimension of the problems created for the welfare state by European economic integration. At the same time, however, they have the disadvantage of making redistribution much more visible and thus increasing the need for explicit political justification, and the vulnerability to political criticism and opposition. In a democracy, this is as it should be. I would expect, however, that under such conditions proposals for unconditional basic income support would have a hard time in mobilizing political support, and that even means-tested social-assistance programs would remain at relatively low levels of support for recipients who are able to work. By contrast, proposals for subsidizing low 158
Basic Income and Social Europe incomes from work – in the form of a negative income tax, of the American ‘Earned Income Tax Credit’, or of subsidies that directly reduce the cost of certain types of work to the employer – are likely to fare better in public debates. The question is whether the basic income movement should therefore concentrate its efforts on such proposals.
European Support for National Solutions? European integration, I have argued, forces national welfare states to become competitive.The danger is, of course, that this competition could turn into a ruinous ‘race to the bottom’ in which the British deregulation of the labour market induces France to cut employers’ social contributions, which in turn provides justification for cutting sick pay in Germany and Sweden, and so on. In the end, all countries could end up with lower levels of social security than would be preferred domestically, without having improved their relative competitiveness at all. If this scenario is considered undesirable, the obvious solution would seem to be harmonization. However, as I suggested at the outset, uniform European rules are out of the question because of existing differences in the economic capacity of EU Member States. Among the present Member States, per capita incomes differ at the ratio of 1:2 or 1:3, and with the Eastern enlargement the difference between the richest and the poorest Member States would increase further by a factor of two or three.As a consequence, welfare expenditures at a level that is acceptable in the rich states would simply destroy the less advanced economies. But even if the economic obstacles were less steep, present differences in the spending patterns of European welfare states, and even more so, differences in the institutional structures of welfare financing and welfare provision, would surely prevent the adoption of uniform European rules (Scharpf, 1997a). What might be possible, however, are agreements and rules that would avert the dangers of ruinous competition among the European welfare states (Scharpf, 1999b). One such possibility arises from the fact that in spite of their structural and institutional diversity, EU Member States are remarkably similar in their overall commitment to social welfare. More specifically, since the share of total social spending in GDP increases in direct proportion to the wealth of Member States, it might be possible to translate this latent consensus into an explicit agreement among EU Member States to avoid welfare cutbacks that would significantly reduce their overall spending position. This would leave all countries free to pursue structural and institutional reforms, but it would eliminate welfare cutbacks from the tool set of economic competition. Beyond that, there is now some hope that some forms of tax competition will be constrained by political agreement on common ground rules for the taxation of foreign firms, whereas similar agreements on the taxation of capital interest seem to remain more difficult. By contrast, there seems to be no progress at all on the more important issue of establishing a Europe-wide social minimum. For the countries that already have relatively generous schemes of minimum income support and social assistance, harmonization would again run into difficulty because of structural and institutional differences – which could be overcome through agreement on purely quantitative standards of minimum support, defined again in relation to a country’s average-income position. For the Southern countries, however, that do not yet have 159
Basic Income on the Agenda such programs, and even more so for the future Member States in Central and Eastern Europe, the implementation of Europe-wide minimum-income standards would require major additional expenditures, that would not be feasible without financial support from the Union. However, if such support were forthcoming – perhaps through a redirection of the cohesion funds – it might be necessary and possible to avoid the work disincentives inherent in the present social assistance programs of the richer Member States. In that case, basic income programs, most likely in the form of the negative income tax, might indeed provide the most effective and efficient solution to the twin problems of poverty and unemployment, and European policy makers might well be persuaded to promote this strategy.
Notes 1 I realize that Basic Income and Its Cognates can be made to generate similar incentive structures through the appropriate manipulation of parameters (Van Parijs et al., 2000). But the different versions emphasize different justifications and are designed to optimize the achievement of different purposes. 2 The most plausible solution would be to raise the value-added tax on energy or material inputs into production which would shift the entire cost to the ultimate consumers of energy-intensive products, and which would not affect export competitiveness as long as the EU regime still operates under the ‘country-of-destination’ principle. But in view of the regressive distributional consequences of VAT increases, this solution would have high political costs. 3 In addition, there seems to be a second line of argument that attempts to avoid the need to justify redistribution by proposing sources of revenue that seemingly belong to no one – such as a ‘Land Trust’ collected from commercial uses of the national territory (Lehmann, 1998), a ‘European Eco-dividend’ created by taxing the use of the environment (Quilley, 2000), or a ‘Tobin tax’ on speculative transactions (Standing, 1998). It is clear that none of these ideas could produce the ‘free lunch’ that they seem to promise.At best they would direct redistributive efforts at particularly unpopular target populations. 4 Civil and criminal law seem to rely on the same assumption when they impose a universal duty to refrain from positive action that would injure another’s life, liberty or property, whereas the duty to engage in positive action in order to prevent, or compensate for, damages caused by external forces arises only from specific (familial, contractual or situational) relationships between the parties. 5 Interestingly, basic income articles that begin by asserting ‘that the income from the resources of the planet and the universe should be divided equally among us because that is the only way that is fair, that is moral, that is right’ (Schutz, 1998: 1) continue by calculating basic income payments to inhabitants of the United States on the basis of unearned American wealth (ibid.: 7). In fact, I did not come across one contribution at the 1998 BIEN Congress that advocated basic income payments based on an equal distribution of unearned incomes among the population of the planet. In practical terms, therefore, basic income advocates also seem to assume that entitlements will be nationally circumscribed. 6 Moreover, since solidarity is based on assumptions of reciprocity, it creates, not only a duty to assist other members in case of need, but also a duty of recipients to make use of opportunities to help themselves. This would morally justify means testing as well as a duty to accept available and suitable work opportunities.
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Basic Income at the Heart of Social Europe? Reply to Fritz Scharpf Philippe Van Parijs*
No nonsense. This is the tone of Fritz Scharpf ’s contribution. This is the language which basic income supporters must be able to grasp – and willing to hear – at least if they are not to degenerate into a motley assembly of soft-minded do-gooders; if they are not to be ruthlessly driven into the margins by a harsh, uncompromising reality, but instead to help shape the future in accordance with their visions of freedom and equality. Not through relentless, repetitive preaching, but by means of the resolute and astute action which they must aim to inspire and guide, but will never successfully steer unless they adopt the no-nonsense attitude advocated and practised by Fritz Scharpf.
Goals: Moral Integrity No nonsense, first of all, about goals. Fritz Scharpf ‘consider[s] mass unemployment, forced inactivity, and the exclusion from the processes of social production, a much greater challenge to the moral integrity of Western European societies than the frustration of leisure preferences’. So do I. Indeed, it is the plight of the excluded Scharpf has in mind, not the whims of Malibu surfers, which has been driving me all along, first in my interest in, and second in my advocacy of, an unconditional basic income.1 But beware: the implied conception of the ‘moral integrity of Western European societies’ need not grant any intrinsic superiority to paid work over so-called ‘leisure’. Nor does it need to be inconsistent with formulating the ultimate objective in terms of freedom. For exclusion from paid employment and all associated material and nonmaterial advantages is clearly a major impediment to many people’s real freedom to do whatever they might wish to do with their lives. However, if ‘real freedom for all’ is, as I believe, the best interpretation of ‘moral integrity’ as an overarching aim – rather than, say, enlisting people into labour as much as reasonably possible – then the way in which access to a job is meant to be secured to all is of utmost importance. For if freedom is what matters, a strong presumption directly follows in favour of ways of helping people into jobs that give the least well equipped among them (or the least well connected or lucky) the widest possible range of choice among the jobs – full-time and part-time, waged and self-employed – they might want to take up.This presumption does not quite amount to an endorsement of an unconditional basic income, but it makes the latter a strong candidate as a component of the optimal package. * This paper was written within the framework of the PAI project ‘The new social question’ (Belgian Federal Government, Prime Minister’s Office, Federal Office for Scientific, Technical and Cultural Affairs).
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Basic Income on the Agenda All things considered, to sort out the exact place one feels compelled to give to freedom in one’s overall conception of social justice, or of a society’s ‘moral integrity’, one cannot avoid entering explicitly the realm of ethics and political philosophy. It does not follow that anyone claiming to express a competent opinion on the shape social policy should take – or indeed, more generally, on the direction public policy should go – should be required to be a professional political philosopher. But there are a number of policy issues for which some normative thinking is indispensable, and one of them is employment policy. An apt choice of the means requires a clear mind about the goals. To choose the most appropriate strategy against unemployment it is not enough to know that employment is important, but also to sort out why it is. Far from excluding it, a sound ‘no-nonsense’ attitude towards goals requires that one should pause to reflect on them. And once this is done, once ‘reflective equilibrium’ is reached, I am not sure much would remain, at this level, to mark off Fritz Scharpf ’s views from mine.
Instruments: Incentives and Opportunities No nonsense, next, about the choice of instruments. For a mixture of factual and normative reasons, Fritz Scharpf leaves out of consideration a large set of common proposals for fighting unemployment – lowering the level of unemployment benefits, for example, expanding aggregate demand, or reducing maximum legal working time. Rightly so. I have no serious issue with this exclusion, nor therefore with Scharpf ’s nononsense focus on the remaining short list of instruments, the use of each of which he regards as a potential improvement upon the status quo and definitely as a more adequate measure than an expansion of means-tested social protection: (1) a negative income tax, (2) a universal basic income, (3) a (US- or UK-type) earned-income tax credit, and (4) a reduction of employers’ social security contributions on low wages (or a direct subsidy to the employers of low-wage workers). Leaving aside, for the moment, the question of political feasibility, which of these instruments should be preferred? Either (1) or (2), Scharpf replies, with a likely preference for (1) over (2): ‘basic income programs, most likely in the form of the negative income tax, might indeed provide the most effective and efficient solution to the twin problems of poverty and unemployment’. Why (1) or (2), rather than (3) or (4)? Presumably because (1) and (2) incorporate the basic income guarantee in the absence of which poverty cannot be seriously tackled, whereas (3) and (4) need to be combined with the usual means-tested social assistance.Why (1) rather than (2)? Because a negative income tax has ‘the explicit purpose of increasing the incentives and the opportunities for gainful employment, rather than for financially secured inactivity’. Fritz Scharpf does recognize (fn1) that, through an appropriate choice of parameters, (1) and (2) ‘can be made to generate similar incentive structures’. But a difference remains, in his eyes, sufficient to vindicate the superiority of (1) over (2): the two proposals ‘emphasize different justifications and are designed to optimize the achievement of different purposes’. From the viewpoint of a no-nonsense assessment of instruments, these are somewhat perplexing remarks. Why should we care about the ‘explicit purposes’ of various measures, what they are ‘designed’ to do or what justifications they ‘emphasize’? The relevant no-nonsense question is simply whether or not one of the 162
Basic Income at the Heart of Social Europe? schemes, whatever its stated purposes, can actually be expected to ‘increas[e] the incentives and the opportunities for gainful employment’ more than comparable variants of other schemes would. If this is the key question, a preference for (1) over (2) might still be justified. But it is unclear why it would.The potential formal equivalence between a negative income tax – understood, as it usually is, as a refundable lump-sum tax credit – and a universal basic income (or demogrant) has been pointed out from the very beginning of the academic discussion on the subject. For example, in their classic 1967 article, James Tobin and his co-authors note this equivalence between the demogrant version (with the option of waiving the automatic payment for those who do not expect to be net beneficiaries) and the tax credit version (with an advanced payment on request to those who expect to be net beneficiaries).They next express their own preference for the former over the latter, on the grounds that the former is likely to be better at effectively reaching the poor:‘The declaration method imposes the burden of initiative on those who need payments; the automatic payment method places the burden on those who do not want them. It may be argued that the latter are more likely to have the needed financial literacy and paperwork sophistication’.2 But even as regards the incentive to look for and take up jobs, the demogrant version arguably possesses the decisive advantage of reducing the uncertainty to which vulnerable people expose themselves when taking up a paid activity. For under the demogrant’s ‘automatic method’ – unlike the negative income tax’s ‘declaration method’, part of a claimant’s income will keep flowing from the same source whatever happens, with near-total certainty.3 Even for the specific group concerned, this potential advantage may de facto prove insignificant. Or it may be more than offset, for example, by collective bargaining responding less stiffly to redistribution by means of a negative income tax than by means of a demogrant.4 Possibly. But these are surely the terms in which the no-nonsense approach needs to be phrased, not in terms of the purposes explicitly assigned to each policy by its proponents.To compare rival proposals, one will have to use the most relevant data and the most appropriate analytical tools available in order to make the best possible guesses about their respective likely consequences if they were to be implemented or about their respective actual consequences once they have been. A harder task, no doubt, but – I am sure Fritz Scharpf will agree – the right task for the debate to take on, of course in the background of reflectively chosen goals.
Political Feasibility: National Solutions Or at least part of the task. A no-nonsense approach does not only need to think hard about goals and instruments, but also about what conditions need to be fulfilled for the best instruments to be politically feasible, or indeed what the best remaining instrument might be once the politically unfeasible ones have been filtered out. Here we enter the specifically European dimension of the social policy debate, regarding which I have found Fritz Scharpf ’s earlier writings particularly illuminating and congenial.5 The no-nonsense news, in this area, is not good. Here it is. All proposals in the set which Scharpf (rightly) favours over the status quo have one important feature in common: they all imply an increase in the progressiveness of the 163
Basic Income on the Agenda overall transfer system in such a way that low earners end up with a higher income than before.6 But what if one of the Member States of the EU introduces such a policy in the context of a single market with a growing mobility of capital, consumer demand and skilled workers? True, for the time being, mobility is still low enough for the economic feasibility of such national moves not to be in doubt. A sufficiently resolute government should be able to take advantage of this slack, and to credibly dismiss as part of a dishonest scare campaign, the claim that any major increase in net transfers towards low earners would dangerously rock the boat.A no-nonsense view of political feasibility, therefore, should not preclude advocating a vigorous use of one or more of the instruments mentioned above. But it does require one to look ahead, to anticipate in time, without exaggerating its immediate relevance, a growing tension, whose irresistible political exploitation could soon become a painfully binding constraint. For a higher net taxation of high earners (or their employers) will tend to put off the carriers of increasingly crucial human capital.7 The lower net taxation of low earners, on the other hand, will not only make double sure the country keeps its least productive workers, but will also make the country more attractive for low-skilled immigrants, whether from other EU countries or from the outside world, in search of a better place to settle.The very success of the various policies considered in fostering the expansion of permanent low paid jobs (many of which may well enjoy a net subsidy, taking all aspects of collective consumption into account) will thus create a sucking effect on poorly productive workers.8 Combined with the deterrent effect on net contributors, this pressure, if sizeable enough, will make it unwise for any member state to try it alone.9 Or at the very least, it will make it irresistibly easy for people opposed to it for any reason to brandish so effectively the risk of unsustainability that those advocating significant steps in this direction, indeed even those who will want to do no worse than now in this respect, will be in for a tough political ride.10 How can the rise of these predictable constraints be halted? I cannot see how this could be, as elliptically suggested by Fritz Scharpf, through the introduction – arguably desirable for other reasons – of a clearer institutional separation between redistributive and social insurance schemes (on the Dutch, as opposed to German, pattern). Nor can I see how this could be through the reduction of the visible tax burden that would result from introducing, on the Swiss pattern, means-tested user charges (for education, for example) or means-tested public contributions to a compulsory health insurance package. For either the phasing out of the benefit operates steeply at the bottom of the wage scale, in which case the unemployment trap of standard means-tested assistance is deepened, and the objective of fighting unemployment is sacrificed. Or the phasing out operates more smoothly and reaches higher earners, in which case it amounts again (compared to a more universalistic status quo) to an increase in the effective net taxation of the high-earners, through the withdrawal of benefits they previously enjoyed, and the constraint of ‘tolerable’ taxation is presumably not better met.11
Political Feasibility: Harmonization Any serious hope of loosening the constraints that stem from fiscal and social competition in a single market must lie in a co-ordinated action on a higher scale, i.e. in ‘social Europe’. Harmonization in a strong sense is not very promising, if only because, as 164
Basic Income at the Heart of Social Europe? Scharpf emphasizes here and elsewhere, the structures and levels of social protection are too different in the various Member States. One could, however, envisage something very general and supple, but nonetheless firm enough, such as Scharpf ’s interesting suggestion of a requirement that no country should be allowed to deviate (by too much) from a ratio of social spending to GDP which would increase as GDP per capita increases. But apart from technical difficulties, there are two fundamental stumbling blocks that undermine the political chances of such a proposal. First of all, think of two countries with family support schemes which affect identically the disposable incomes of identically situated families, one through cash benefits and the other through (refundable) tax credits.This plainly illustrates how arbitrary it would be to only take explicit expenditures into account. Some tax reductions and exemptions will also have to count. But clearly not all: not a tax reduction conceded, for example, to expatriates or to innovating businessmen. But if such discrimination is made among tax expenditures, why not also among explicit public expenditures? Can family allowances to affluent households count, for example, or expenditure on higher education, which more than proportionally benefit people who are likely to come from, and are even more likely to move into, comparatively affluent income categories? Though convenient, because of the relative ease with which it can be measured, the ratio of social spending to GDP is therefore far too crude an indicator of a country’s redistributive performance for it to perform the job assigned to it. Something more sophisticated – and complicated – could conceivably be designed to provide a better proxy for this redistributive performance. One might think, for example, of some measure of the gap between pre-tax-and-transfer and post-tax-andtransfer lifetime income inequality. But both the cruder indicator and the more sophisticated one meet a second obstacle. Both the level of social spending of one country and its redistributive performance, as measured by such an index, may be higher than those of another, despite the fact that, for any given distribution of income, its tax-andtransfer institutions would redistribute less than those of the other country. This can easily happen simply because the pre-tax-and-transfer income distribution can be more equal in the former country than in the latter. And since the level of pre-taxand-transfer inequality is at least partly under the control of a country’s institutions – its educational system, industrial relations, inheritance laws, etc. – it would seem wrong to castigate a country whose redistributive performance is comparatively poor because its primary incomes are comparatively equal. Something more sophisticated still could be thought up, but we would then have moved a very long way from the simple, easily intelligible, readily verifiable, uncontroversial index which would have had some chance of being accepted by Member States as the basis for a binding, firmly enforceable rule.
Political Feasibility: The Euro-Dividend If this path is no good, then perhaps it is not too early to start thinking about something that sounds more radical, but may in the end prove more realistic. Instead of trying to harmonize the various national systems, be it only in order to block a race to the bottom, should one not start building a EU-wide interpersonal transfer system? The ambition cannot and must not be to erect a EU welfare state that would replicate the 165
Basic Income on the Agenda structure of national welfare states.There are good reasons, not only for regarding this as unfeasible, but also as undesirable.12 Being far less under pressure, the insurance component of the national welfare states does not require urgent protective action. The focus should rather be on ‘the more important issue of establishing a Europe-wide social minimum’ (Scharpf, last al.). Especially if the EU expands into Central and Eastern Europe, this will require ‘major additional expenditures, that would not be feasible without financial support from the Union’ (ibid.). What form should this income guarantee take? According to Fritz Scharpf (ibid.),‘it might be necessary and possible to avoid the work disincentives inherent in the present social-assistance programs of the richer Member States’. A.B. Atkinson (1998: 146) emphatically agrees.A means-tested minimum income guarantee, he argues, is definitely not the way forward for social Europe. Not only for the general reason that it unfairly penalizes the work of poor households more than anyone else’s, but also for the specific reason that a European-wide minimum ‘has to be based on a benefit that is simpler than means-tested social assistance’.13 The alternative, which Atkinson favours, is a universal basic income that would replace all income tax allowances, but not social insurance benefits. After conceding that, ‘despite finding supporters in all political parties, the scheme has not got close to being introduced’, he expresses his conviction ‘that, in order to secure political support, it may be necessary for the proponents of basic income to compromise – not on the principle of no test of means, nor on the principle of independence, but on the unconditional payment.’ (ibid., 148). He therefore proposes, also at the European level, a ‘participation income’, a universal basic income for all those who satisfy some minimal participation condition (not just full- or part-time paid work, but also education, care and voluntary work). He is aware that the question of how to interpret this broad participation condition may prove even trickier at the European than at the national level.14 Nonetheless, he believes ‘that such a Participation Income offers a realistic way in which European governments may be persuaded that a basic income offers a better route forward than the dead end of means-tested assistance.’ (ibid.: 149). I have no problem with such a strategy. Nor should, I believe, Fritz Scharpf, given his concern to work out a compromise around which like-minded people could gather.As argued above, once goals are suitably clarified, I doubt much disagreement will remain at that level. Once instruments are evaluated in terms of their actual or likely consequences for the achievement of these goals, the universal floor favoured by Atkinson and others (including myself) dominates negative income tax schemes, or the combination of earned income tax credit (or a fortiori other forms of employment subsidy) and existing means-tested assistance.15 Finally, once the new European context is taken into account, Fritz Scharpf ’s insightful analysis of political constraints itself leads, step by step, to the radical idea of a EU-wide universal basic income.There is no reason to expect this path, to which the exploration of dead ends has led us, to be easy to tread. And there will need to be compromises at every stage. One of them is on the so-called ‘counterpart’, on the idea of subjecting the right to basic income to the fulfilment of some socially useful activity. For reasons stated by both Atkinson and Scharpf, there is no doubt that subjecting a universal basic income to such a condition would increase its immediate political chances. Hence, without neglecting the potential that still exists and must keep existing at national levels, let us pay serious attention to this Euro-dividend for all ‘active’ 166
Basic Income at the Heart of Social Europe? European citizens. Let us work out a precise scheme that credibly offers, at the same time, a strong brake on fiscal and social competition between Member States and a decisive contribution to solving Europe’s unemployment problem. Let us find ways of persuasively presenting it for what it is: not a mega-welfare state, not a substitute for national welfare policies, but rather a floor under them all that will enable them to survive more easily and to do a better job. Let us map in detail the transition path, how the adjustments will most smoothly be done in the EU budget and in national tax and benefit structures. Let us get ready for when the strains created by the co-existence of a single currency and separate governments will make themselves felt; for when the need to stabilize populations will become more acute; for when European decisionmakers will be looking for a realistic way of preserving and developing, under unprecedented conditions, something they claim to be a central component of the European project:‘social solidarity’ . Wishful thinking? Perhaps not, if goals are lucidly stated, if instruments are appropriately assessed, and if political constraints are properly understood. Not, in other words, if Fritz Scharpf ’s welcome invitation is taken seriously, if his no-nonsense approach is consistently, tirelessly practised.
Notes 1
2 3 4
5 6
See, for example, the final words of my Why surfers should be fed:‘As often happens, the conclusions reached for the hard cases really matter only because of the a fortiori claims they warrant.While futile if it had no implication beyond Malibu surfers and their likes, the argument of this article, if correct, derives its practical importance from its direct relevance to the fate of an affluent society’s unskilled workers, its excluded youth, its dependent housewives, its double-shift parents, its long-term unemployed. By challenging their resignation, by providing their revolt with intellectual backing, by immunising their demands against a number of misguided or ill-intentioned objections, it may effectively help them to successfully stake their legitimate claims.’ (Van Parijs, 1991a: 131). Tobin et al. (1967: 23). As repeatedly pointed out, for example, by Bill Jordan et al. (1992) and Thomas Piketty (1997). It may not be ludicrous to suppose that visible take-home pay, rather than the workers’ disposable incomes, is what Trade Unions are most concerned about in wage negotiations. But if some negative income tax and some demogrant scheme perform identically in terms of disposable incomes, the latter is bound to perform far worse than the former in terms of visible take-home pay. For unlike the tax credit, the demogrant is not incorporated in the pay check, but paid separately. If this is the case, wage moderation is likely to be harder to achieve, and employment may accordingly suffer.There are of course many ‘ifs’ in this argument, but their critical evaluation is the sort of stuff the no-nonsense approach must consist of. See e.g. Scharpf (1994; 1996a; 1996b; 1996c). This fits in with Scharpf ’s (1999a: section 3.2) most striking conclusion from a systematic comparative analysis between a country’s employment performance and the structure of its transfer system: there appears to be a significantly negative impact of proportional forms of taxation (consumption tax and social contributions) on employment levels, while there is little effect of progressive taxation (in particular the income tax).
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Basic Income on the Agenda 7
8
9
10
11
12 13
14
This is not a matter of increasing compulsory contributions yielding corresponding insurance-based benefits, in the form of pensions, sick leave or unemployment benefits. Growing mobility may put somewhat greater pressure on such transfers (because of enhanced adverse selection), but there is no comparison, as Atkinson (1998: 143-44), for example, emphasizes and as Scharpf is well aware, with the increased pressure on the non-insurance-based, ex ante redistributive aspects of Europe’s welfare states. See, for example, what Krause-Junk (1996) regards as the most crucial objection to negative income tax proposals of the type advocated by Joachim Mitschke (1985; 1995b): As wages would no longer need to cover subsistence, neither employers nor Unions will be under the same pressure to keep jobs productive, and Germany will become a low-productivity country, with a combination of low wages and Bürgergeld that will be particularly attractive for poorly skilled immigrants from Southern (and soon Eastern) Europe. For those who dread this inflow of poorly productive labour power, the threat should be worse if the attraction is the prospect of (henceforth profitable) low-productivity jobs, rather than that of benefits. For claimants can, more easily than workers, be kept away by ad hoc rules or by the social assistance administration’s unwelcoming attitude. There may perhaps be some hope of hiding the net subsidies to low-paid work, probably greater in the case of NIT, EITC or reduced social security contributions than in the case of a universal basic income. Hence, presumably, one source of Scharpf ’s lower assessment of the latter’s feasibility. Two provisos are in order. Firstly, if the phasing out for higher earners affects selectively those provisions which disproportionately benefit households with children (family allowances, child care, education), sustainability may be hardly affected. For households with children arguably tend to be less mobile than childless households (and the less mobile, the greater the loss from the phasing out of these benefits) and hence less able to issue credible threats of leaving, in the emerging globalized context. Secondly, political feasibility may not only be affected by the political use of the risk of economic unsustainability caused by excessive net taxation, but also by the political use of the perception of gross taxation. In this respect, the phasing out of a benefit may be less damaging than a higher explicit marginal rate, just as a funding of the basic income by the value added tax (e.g. Duchatelet, 1994; 1998), by energy taxation (e.g. Genet, 1991; Robertson ed., 1998), or indeed by (non-inflationary and de-privatized) money creation (e.g. Huber, 1998; 1999) would have an advantage, in this respect, over the income tax, even though it also essentially amounts to reducing the purchasing power of relatively high income earners. I develop the reasons behind this normative undesirability in Van Parijs (1999). See Schmitter (1999) for a radical proposal of a means-tested European minimal income. See Van Parijs (1996a) for an argument against it along lines similar to the one taken by Atkinson (1998). Note, however, that, even if the implementation of the condition is pretty much left to the discretion of national governments, there would be no perverse incentives of the sort generated by a centrally funded but locally administered means-test.With a means-tested guaranteed income funded at the European level, national or local governments would systematically find it in their political interest to disregard some potential recipients’ means (and hence to compete with each other in terms of how lax an interpretation they give to an insufficient-means condition). But with a counterpart-tested guaranteed income, they would not have a similar incentive to disregard the failure to perform some socially useful activity (nor
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Basic Income at the Heart of Social Europe? therefore to compete with each other in terms of how lax an interpretation they give to a participation condition). 15 Even if, as in all reasonable short-term variants, the universal basic income or negative income tax is not a full substitute for social assistance, it always implies a significant reduction in its level, whereas EITC does not, since by itself (unlike universal basic income and negative income tax) it grants no benefit whatever to non-workers.
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European Basic Income or the Race to the Bottom Why Politicians Might Come to Think the Unthinkable Steve Quilley
Introduction Over the last fifteen years the debate around basic income has been organized around abstract blueprints for wholesale reform of the fiscal-welfare system.This is reflected in the radical-utopian discourse of the post-industrial and post-Keynesian left (e.g. Fitzpatrick, 1996). But it is also evident in the self-consciously ‘feasible’ scenarios modelled by liberal economists (e.g. Parker, 1989). The latter work has involved close scrutiny of the possible impact of institutional and administrative details of such models on incentives, labour participation rates, redistributive effects and the various poverty traps associated with existing welfare regimes.‘Feasible’ here refers to technical-institutional changes centring on the integration of taxation and welfare, which though radical could, with enough political will, be adopted and integrated as the public sector platform for the wider market economy without major disruption and without necessarily altering the fundamentals of this wider socio-economy. For this reason such modelling invariably adopts the yardstick of revenue-neutrality, emphasizing the technical nature of proposed changes and distancing them from any intrinsic relationship with wider political projects relating to social justice or environmental sustainability. In consequence, basic income research within academia has produced a steady flow of economic models and policy scenarios which re-shuffle parameters such as territorial scale, unit of assessment and entitlement, generosity and conditionality, to useful effect. Combined with the parallel discussion around the philosophical and ethical implications of basic income (e.g.Van Parijs, 1992a), this debate has brought much needed intellectual clarity and specificity.1 However, perhaps unsurprisingly, this growing conceptual sophistication has had little impact on politicians and the wider policymaking community. Intellectual clarity does not flow naturally into a plausible political project. Protagonists have been very good at envisioning arrivals and destinations.The debate has offered few clues to the points of departure and the politics of transition. How then can basic income be made relevant? How can the basic income paradigm engage with contemporary socio-economic dynamics, and perhaps more importantly, political perceptions of those dynamics? In what circumstances might basic income become a common sense – or at least a mainstream – representation of both a set of social problems and an orientation towards resolving them? If basic income politics is to move forward, we need a more opportunistic and pragmatic approach vis-à-vis important questions relating to funding, conditionality and the political-institutional context. The basic income paradigm would shift the emphasis away from means-testing, away from the normative commitment to labour market participation (the ‘work ethic’) and away from the isolation and targeting of particular groups of recipients – and towards universal entitlements based on citizenship. 170
European Basic Income or the Race to the Bottom Unfortunately a combination of politics and labour market trends appears to be moving European taxation-welfare systems in the opposite direction. Sailing against the wind must surely involve tacking. For advocates of basic income, ‘tacking’ implies a willingness to take opportunities, and make alliances as they arise – even if that means going temporarily ‘off-course’. In the language of Gramsci, such a trajectory could be described as a long ‘war of position’, of institutional and political jockeying, rather than the ‘war of movement’ implied when basic income is invoked as a self-contained panacea and a straightforward societal choice. This contribution surveys the European political landscape with a view to elucidating any salient features that might offer such points of departure. The emphasis is on political and social dynamics which derive from a Europe in the (re-)making. On this basis it is argued that the immediate priority should be to position basic income at the centre of both environmental politics and the need for sustainability, and as a useful lever and policy response in relation to the democratic deficit and associated legitimation problems which are likely to undermine progress towards European economic integration. At the same time we need to take seriously the continuing and pervasive commitment to conditionality and the ‘work ethic’ – however perverse and irrational such perspectives appear given the labour market realities of late capitalism. It is argued that these factors point towards combining the idea for European eco-dividends funded from a range of hypothecated eco-taxes (Genet and Van Parijs, 1992) with the participation income, which has been put forward by Atkinson (1993b). A Trajectory for Basic Income Politics In order for a basic income trajectory to gain any purchase on politics, it will be necessary to put to one side any abstract models of a ‘basic income society’ and to develop a more opportunistic and pragmatic understanding of where the fruitful points of engagement actually are or might be created. Firstly, a real opportunity for a social dividend will develop as a function of the tensions involved in European integration.The institutional challenge of integrating welfare and taxation systems is such that autonomous reform of embedded national systems, with all the associated inertia and institutional resistance, is highly unlikely even in those few countries where basic income has fleetingly crept onto the mainstream agenda. The new structures which will need to be developed in order to further harmonization at a European level offer a much more favourable landscape of political opportunity.2 This argument is likely to be contentious, and will be elaborated below. Secondly, we need to be more openminded and flexible in relation to the defining parameters of basic income.Whilst continuing to oppose means-testing and targeting, the principle of conditionality should be open to negotiation in so far as the notion of participation can be broadened away from the narrow emphasis on insertion into the labour market towards more inclusive civic concerns with involvement in the wider community.We should move away from an exclusive emphasis on income taxes and consider alternative sources of funding, such as eco-taxes – also recognizing that this is not simply a matter of costs, tax burdens and revenues, but relates to the symbolic value of certain kinds of hypothecated taxation which, by extension, can offer points of connection with different kinds of social movements and political agendas. At the same time, it should also be noted that other aspects of the basic income agenda should remain sacrosanct – namely the commitment towards universality and the individual unit of assessment.The notion of univer171
Basic Income on the Agenda sality is grounded in ideas of (European) citizenship, community and commonwealth, which go to the heart of the re-awakened middle ground between liberalism and socialism, of which the green parties are a part. The commitment to individualism in assessment underlines the necessary recognition and embrace of irreversible social and demographic shifts, which are a fundamental condition of late modernity. In what follows I argue for a basic income trajectory which is unequivocally European in scale, and linked to the economics and politics of sustainability. For tactical reasons the priority attached to unconditionality (technically a sine qua non for basic income) is modified in order to take account of, whilst at the same time subverting, the culturallyembedded preoccupation with labour participation and the work ethic.A modified sense of participation draws upon the pervasive communitarian rhetoric of rights linked to responsibilities. Clearly there is little original in this package as in many ways it simply draws together social dividend ideas which have been in circulation for many years (and in particular the Eurogrant proposed by Genet and Van Parijs (1992) on the one hand, and the participation income advocated by Atkinson (1993b) and also Purdy (1997). My intention in bringing these ideas together is to demarcate what I believe to be the real opportunities and possible points of departure for a basic income trajectory in Europe. Points of Departure and Opportunities There are six factors that make a combination of eco-dividend and participation income within a European framework the most convincing point of departure for a basic income trajectory: i. geo-political tensions which will inevitably accompany further European integration, particularly in relation to EMU and the consequent need for some harmonization of social security. ii. the legitimation crisis in relation to European institutions and the pressing need for the development of a sense of European citizenship which might underwrite the common destiny already pre-figured in the field of economic integration. iii. the emphatic re-affirmation of conditionality as a principle governing welfare reform and the importance of (labour market) participation and the work ethic – whether in terms of experiments with workfare or a commitment to the principles of social insurance as the main plank of any future welfare regime. iv. Generally: a growing appreciation that the left-right spectrum is increasingly insufficient to express the combinations of radical and conservative, ecological, redistributive, libertarian and interventionist perspectives which are available to underwrite ‘liberal’, ‘social democratic’ and ‘green’ political projects; Specifically: rhetoric about the possibilities of a ‘third way’ underpinned by communitarian social philosophy. v. a growing consensus around the notion of sustainability and the need to bring in environmental (and social) costs as an integral dimension of economic calculus; the growing acceptance of hypothecated eco-taxes as market drivers of this process. vi. anxiety over instability in global financial markets and a growing recognition of the dangers involved in unregulated capital mobility. These can be discussed under three headings: European integration; the politics of work and community; taxing social and environmental ‘bads’. 172
European Basic Income or the Race to the Bottom
European Integration Monetary union represents the near-completion of the economic project represented by the idea of the single market. But the process of integration will not and cannot stop there. There is some evidence that economic integration has already created a strong momentum in the direction of further political and institutional fusion and the Europeanization of social policy (Wessels, 1997). However, at present, European social legislation remains restricted and the continuing diversity of welfare regimes would imply the possibility of differing national responses to the related pressures of European integration and global liberalization (Cochrane and Doogan, 1993; Daly, 1997;Taylor Gooby, 1997; although see Rhodes, 1995). For this reason a rapid and uniform process of convergence in the wake of EMU is unlikely. These obstacles notwithstanding, the single market has forged ahead and overcome a series of political hurdles, which have often looked insurmountable. In essence, the economic project of the single market has been driven by a logic of competition. However the spatial and functional re-organization of economic activity in this way has profound implications for social and political cohesion (Quilley et al., 1996). For instance, the logic of competition might enhance and consolidate functional divisions of labour in terms of the distribution of different types of economic activity and labour markets. The impacts of corporate relocation and rationalization go far beyond any simple calculation of unemployment and job creation. It is not difficult to envisage a situation in which high value-added, knowledge-intensive, control and co-ordinating functions cluster around core locations in the wealthy Northern states, whilst lower value-added, branch plant operations are distributed around the peripheral regions. Does BMW’s acquisition of Rover cast a shadow over the long-term viability of the independent research, development and design functions in Britain? Clearly such spatial divisions of labour and inequalities have always existed within nation states – witness the North South divide in both Britain and Italy. However, the deconstruction of ‘national champions’, and the acceptance of pan-European rationalization, raises the uncomfortable probability of such hierarchies and inequalities emerging and being consolidated between nation states.This is dangerous, and if uncontained such tensions could fatally undermine the European project for the simple reason that as yet, unlike nation-states, Europe does not have the social, cultural and political legitimacy to sustain such inequalities. Enlargement can only exacerbate such problems, not least because it increases the gulf between levels of regulation and social provision between core and peripheral regions. In this way, the politics of European integration will unfold between the polarities of economic competition on the one hand, and the political necessity for at least some degree of pan-European social cohesion, on the other.This will manifest itself in political choices relating to: i. state-building and the creation of new European institutions (or not), ii. the emergence (or not) of a European political identity as the basis of new forms of organic solidarity, iii. the harmonization of fiscal and welfare arrangements across the Member States (or not). 173
Basic Income on the Agenda In evaluating these problems, Fritz Scharpf (this volume) makes two explicit assumptions which are also accepted by the majority of commentators analyzing the dynamics of European integration: (1) that, in accordance with the principle of subsidiarity, social policy will remain entirely within the remit of national governments; (2) that the nation-state represents the primary and overriding ‘solidaristic community’ which should be taken as an essential and unshakeable given. If we accept these guiding premises, then the future for social Europe must surely be as bleak as Scharpf ’s analysis would imply. Economic competition will engender socialregulatory competition (the ‘race to the bottom’), with the result that national welfare policy is increasingly constrained to reduce the scale and scope of social transfers.The new mobility of both investment capital and firms in European economic space will engender punitive sanctions against countries which seek to sustain more redistributive regimes. Similarly welfare migration will further undermine political support for all redistributive programmes, particularly those which are means-tested and tax-financed. As Scharpf makes plain, the logic of superimposing national social-regulatory units onto a deregulated pan-European economic space, is likely to mitigate against any kind of welfare project, particularly basic income. And if his two guiding assumptions hold true, we might as well give up now and embrace a world of workfare and punitive deregulation as ‘international competition forces national welfare regimes to transform themselves into ‘competitive welfare states’’. Fortunately, although certainly a possibility, we don’t have to accept this scenario as a given.The premises, which Scharpf and others take for granted, are simply descriptions of how the world is today. If we are thinking about the likely political developments over the next five years, then the negative appraisal is probably correct.The logic of competition will undermine social cohesion both within and between Member States. However, over the longer term it would be rash to dismiss any possibility of a countervailing movement, because without new forms of political and social cohesion the new economic architecture of the Union will become highly vulnerable. Over a 10 to 20 year time frame, this vulnerability is likely to transform the political landscape. Specifically, it is not implausible to imagine a combination of progressive business and political interests, seeking to find ways of elaborating and consolidating the cultural–political, ‘experiential’ dimensions of the Union: to underwrite a panEuropean sense of belonging and solidarity. In such circumstances, some variation around the theme of a European basic income, or eco-dividend, might look both attractive and pragmatic. Faced with comparable regulatory dilemmas, 19th century nation-builders embarked on political projects which combined the creation of new national institutions (e.g. Bismarck’s pioneering programme of social insurance), the harmonization of monetary, fiscal and welfare systems (e.g. the creation of national currencies and national banks) with the construction and articulation of new (national) political identities.The fictional narratives which established the latter, elided the arbitrary membership of an often newly-designated, territorial unit (a ‘category-status’ – Calhoun, 1999) with an essentialist understanding of community (‘face to face’, gemeinschaft, oral tradition, originating ‘in the mists of time’ etc.).This provided the basis for the ‘nationalfolk’ tradition that lies at the heart of national identity. In relation to our present dilemma, the point is that it would be a mistake to accept ‘emotionally salient’ national identities as the only conceivable arbiters of solidarity (cf. Scharpf, 2000). Such identi174
European Basic Income or the Race to the Bottom ties are indeed ‘historically grounded’ which means they were and are actively and discursively constructed, within a particular time-frame and in response to identifiable cultural, political and economic processes.Alternative and/or supplementary solidaristic identities are at least conceivable. The tacit assumption underlying modern constructions of identity, is that individuals ought to, and will naturally, gravitate to maximally-integrated identities, organized around self-consistent, unitary life-worlds; i.e.) that the natural condition is for people to speak one language; espouse one set of values; adhere to one polity. But why? As Calhoun (1999: 19) points out, for much of human history, multilingualism was a common condition: We find people moved simultaneously by different visions of the world (not least science and religion); we find people able to understand themselves as members of very differently organized collectivities at local and more inclusive levels, or at different times or stages of life… Consider the extent to which nationalist visions of internally uniform and sharply bounded cultural and political identities have had to be produced by struggle against a richer, more diverse and more promiscuously cross cutting play of differences and similarities.
The disjunction between European economic space and national regulatory regimes may yet provide the motive force for a loosening up of the national-identity straitjacket. Scharpf gives an example in Germany, of the moral panic engendered by case of a recently immigrated and now unemployed manual worker from Sicily, claiming social assistance not only for himself, but for a large family. It is precisely such examples which underline the irreconcilable tension between an essentialist, moral vision of entitlements rooted in membership of a national ‘community’, and the reality of crosscutting identities and multiple memberships which follows in the wake of the single currency. In the long run, if Europe fails to generate a multi-polar conception of identity and community, allowing for overlapping membership and – in relation to Social Europe – multiple and cross-cutting points of entitlement, then it is difficult to see how it can sustain as an economic unit. In short, Scharpf poses the question of what is and is not possible from an immediate and short-term analytical point of departure, extrapolating the principle of subsidiarity into the future, without any discussion of how Europe could, should and probably must respond culturally and politically over the long term. Certainly, as an immediate prospect social convergence looks unlikely, but no more so than monetary union must have appeared in the early 1970s. Over the long term the tension between the imperatives of cohesion and competition will necessitate regulation of European economic space in a manner which, as critics have rightly argued, amounts to the emergence of a federal state. Regulation will develop along overlapping social, economic, political and environmental axes. Precisely because EMU undermines the possibility of autonomous national regulatory strategies, it represents the first step in the long march towards harmonization and a federal social compact (Kosonen, 1994). In addition, there is no reason why national and European scales of regulation should be posed in terms of mutually incompatible alternatives. Existing national regimes could clearly continue indefinitely under the rubric of subsidiarity. But this would not rule out an additional, European tier of social redistribution. Nor would the initial ration175
Basic Income on the Agenda alization and justification for such an innovation have to exhaust its potential for future development. A small eco-dividend might start life as a token mechanism to underwrite at least a commitment to a sustainable developmental trajectory for the European economy, whilst consolidating a pan-European sense of citizenship and co-solidarity. But gradually, over time such a mechanism could be expanded to become genuine plank in a European welfare regime. The main point is that Europe is not a fait accompli. Integration is an open-ended process.The very plausibility of the scenarios which emphasize the ‘race to the bottom’ or tax payer resistance, and the institutional/economic diversity which militates against harmonization – are exactly the political vistas which will (and are – Delors, 1997 cited in Vandenbroucke, 1999b) forcing politicians to think seriously and creatively as to how political and social Europe can be consolidated to accommodate the single market. In summary, this federal regulatory project is likely to have two immediate points of departure. – Firstly, that European institutions will come under great pressures to intervene and regulate the emerging pan-European space-economy in such a way as to ameliorate such tensions and introduce an element of fairness and even-handedness into the process of corporate restructuring and relocation.Whether any such quid pro quo will be able to reconcile the imperatives of cohesion and competition remains to be seen. Given the scale of the problem, such supra-national transfers will need to be considerably greater than those which currently take place under the rubric of the structural funds. – Secondly, that the process of economic unification is likely to engender a political project aimed at increasing and sustaining the legitimacy of Europe as a political and cultural entity in its own right. Essentially this project revolves around the articulation of a sense of shared belonging and common citizenship – a European ‘we’ which is at least as strong and encompassing as the constituent national identities. A sense of European citizenship will be an essential if the likely inter-regional/national inequalities are to be sustained and at least partially legitimated. The latent tensions between competition and cohesion which threaten to undermine the wider European project will inevitably require redistribution, between core and peripheral nations, between regions and individuals. As one possible vehicle for the harmonization of social security and the creation of an effective mechanism for redistribution on a pan-European basis, a Euro-dividend funded through a battery of hypothecated eco-taxes on a Europe-wide basis can be seen to have many advantages. Kosonen (1994) emphasizes the likelihood of tax competition creating a strong downward pressure on tax rates across Europe – which in itself suggests that approaches predicated on such hypothecated eco-taxes are likely to provide a level playing field and a more stable revenue platform for European social expenditure than transfers from nationally based general taxation. In addition the individual and universal basis of entitlement could do a great deal to underwrite a sense of European citizenship, going some way to mitigating the incipient legitimation crisis and so underpinning the economic project with the consolidation of an embryonic European civil society. As a point of departure, the Euro-dividend would not initially have to confront existing 176
European Basic Income or the Race to the Bottom national welfare systems as an alternative. But once established, it would provide a constant point of reference for the ongoing debate over harmonization, illuminating one distinctive European welfare future which would be compatible with the basic income trajectory.
The Politics of Work, Welfare and Community There is a widespread appreciation that the world of full employment and Keynesian demand management has disappeared and is unlikely to return. The new flexible labour markets, exposed to regional and global markets, are marked by higher levels of underlying structural unemployment, pervasive patterns of temporary and part-time (and ‘self ’) employment, increasing female participation and the increasing likelihood of disrupted work careers.The underlying sectoral shifts have been associated with the shedding of relatively high-wage semi-skilled manual jobs in the manufacturing sectors, which has given rise to particularly intense problems of male youth unemployment, in turn exacerbated by spatial concentration in the old industrial city-regions. Likewise the new labour markets are associated with a sharp polarization in terms of both income and the skills which determine employability. Such processes have been associated with patterns of social exclusion and informalization affecting whole communities, and often referred to in terms of the emergence of social underclasses. The broad outlines of this picture are accepted by many mainstream academics and commentators. The idea of ‘turning the clock back’ and recreating the world of full employment is a ‘societal delusion’ (Macarov, 1996) shared by very few. But as Dore (1994) argues, in the absence of the political will to deal with the underlying inequalities, incurable unemployment affecting a sizeable minority of unskilled workers will inevitably be seen as a progressive disease of modern societies. And yet in the current climate, such political will seems an unlikely and distant dream. As we have seen in Britain, the medicine offered by New Labour seems as unpalatable and unlikely an antidote as anything offered by previous conservative administrations and, at least in broad outline, not too dissimilar. As Jamie Peck (1998: 7) has argued the bitter pill of mandatory participation under the Welfare to Work programme is premised on a shift in the understanding of the problem away from the structural dynamics of unemployment and flexible labour markets and towards a discourse of dependency and benefit culture. The employment problem has been recast in terms of full employability (Gordon Brown, FT, 30th September 1997: 12 – quoted in Peck, ibid.: 39). the welfare policy problem is no longer framed in terms of a shortage of jobs, but instead has been reformulated as a shortfall in job-readiness. Likewise the solution … is no longer seen to be about creating work but instead is concerned with recreating the work ethic.
In summary, the crisis of welfare relates to the underlying social and spatial distribution of work (and different kinds of work) and a related polarization in the distribution of income. Whilst there is a pervasive common sense understanding that the world has changed, there appears to be a deep-seated reluctance on the part of the political class to face up to this problem and re-engineer the institutional platform 177
Basic Income on the Agenda through which these labour market and income inequalities are regulated. The substantial consensus over the broad contours of the problem suggests no self-evident political project. Over the last decade, it has become a commonplace observation that the left-right distinction no longer provides an obvious and unproblematic map of the political landscape (Giddens, 1994: see also Bobbio, 1996). In a most egregious sense, socialism no longer offers an alternative model of economic management. Political choices are limited to the manner and extent of market regulation. Planning is no longer the lingua franca of economic management, and in this sense we are all liberals now (cf. Durbin, 1949: 41). As Giddens points out, there is no longer any automatic affinity between progressive radicalism per se, and socialism.Where modern conservative forces now embrace a dynamic capitalist order with all that entails in terms of ‘creative destruction’, the left has become synonymous with a conservative resistance to change – defending embattled welfare institutions from the encroachments of the global market. Elsewhere, in the green movement an extreme conservatism in the form of a root and branch critique of modernization, rubs shoulders with a new incarnation of the progressive radicalism in the form of social environmentalism (ecological modernization). In this new political landscape, there is no given set of connections linking the politics of work and welfare with those of community and citizenship. Connections are, however, being made. In the 1990s, communitarianism, given impetus by the work of Etzioni (1988; 1994) and political currency in the Anglophone world by the Third Way rhetoric of the Blair and Clinton administrations, has undoubtedly struck a chord.The response of European social democrats to such ideas has been luke-warm. Sceptics, focusing on an underlying supply-side orthodoxy and the abandonment of macro-economic regulation, see the Third Way as a thinly veiled version of neo-liberalism. But at the same time, there are clusters of dominant perceptions and preoccupations which demarcate a common ground for the social democrats on either side of the channel. Within the European debate, the emphasis on a wider (social-civic) definition of participation within the context of a responsibility-sensitive social democracy (Vandenbroucke, 1999a) echo core concerns within communitarianism. On this basis, a basic income trajectory could be positioned to most effectively marry the rhetoric of the Anglophone communitarian perspective with the flexible, ‘intelligent’ welfarism sought by European social democrats. The Communitarian Scripting of Participation In a cogent and suggestive reflection on its relevance to radical agenda for social policy Jordan and Jones (1998: 2) argue convincingly that the emergence of communitarianism reflects the weakening of ‘those forms of collective action and solidarity sponsored by governments in the ‘golden age’ of welfare states.’3 As the expanding reach of global market forces has undermined and disintegrated such forms of solidarity, the resulting vacuum leaves a desperate desire and necessity to (re-)discover some ‘cement’ for society. A communitarian agenda of community and social responsibility might appear to fit the bill. However, often such ideas have been imported into the social policy debate in a quite inappropriate way, which lends itself to authoritarianism and coercion.As the authors point out, ‘notions of reciprocity and moral obligation belong to a sphere of face to face relations and voluntary associations’ (ibid.: 3). Any attempt to re-moralize society within the institutional frameworks of the existing welfare state will necessarily 178
European Basic Income or the Race to the Bottom be coercive and punitive, reinforcing patriarchal relations in the domestic sphere and relations of brutal economic compulsion in the economy. This notwithstanding, communitarianism does hold out the possibility of a progressive agenda. However, this depends critically upon the modification of liberal institutions of welfare and taxation so as to leave ‘a larger space for the reciprocal relations and mutual obligations of community…[an agenda whose intuitive appeal] is strongest when we consider the welfare state’s most spectacular and universal failures – those neighbourhoods where the stability of family and communal life have collapsed, along with the collectivised measures for providing secure employment and decent wages for unskilled and semi-skilled workers and a healthy and convenient living environment through modern housing schemes’(ibid.: 9). A radical agenda for community development could be built around facilitating organic links between income generation and social support.The critical institutional barriers blocking such an agenda relate to the nature of compulsion, the definition of work and the notion of being ‘available for work’ (ibid.: 12). The strictures of labour market conditionality require claimants to restrict or conceal their informal activities and earnings on pain of losing benefit. ‘In order to sustain such organized informal co-operation, the rules would have to be changed to recognize community development work as a legitimate economic activity, and to allow a higher level of informal earnings to be retained’ (ibid.: 13). At the same time informal paid activity is more often than not embedded in wider reciprocity, social interaction and mutual support. Of course, at this point we are back into the familiar territory of basic income and tax/benefit reform. However, the communitarian scripting of community and participation as a point of departure for dealing with problems of poverty and social exclusion do provide a point of connection with the dominant agenda for welfare reform, particularly as it unfolds in the UK under the auspices of ‘welfare to work’. Likewise, institutional innovations such as credit unions and LETS schemes which have exercised the imaginations of those involved in community development could provide a bridge between welfare to work and the world of social dividends and basic income. Work,Welfare, Citizenship.The Discursive Space for Basic Income In an era of ‘competitive welfare states’ the political debate increasingly foregrounds the relative cost of social transfers. One result of this is a shift in focus from poverty to dependency. In line with this, the rationale for the welfare state is reconstructed: from a concern with the creation of a social order in which resources are distributed differently, to one in which people behave differently.The welfare state can operate in three ways in order to achieve such behavioural changes (see Deacon, 1998: 306). It can operate as: – a channel for self-interest: incentives to make people act in ways that promote the social well being; – an exercise in authority, looking primarily towards compulsion to make people act in such ways; – a mechanism for moral regeneration, to persuade people to act in such ways. These orientations are not necessarily mutually exclusive, even if they embody different views of human nature and the relationship between welfare provision, individual 179
Basic Income on the Agenda behaviour and personal character. In Britain, the New Deal is seen to embody a ‘new social contract’ in which labour market participation (incentives + coercion) is wrapped up in a discourse of rights and responsibilities (moral regeneration).The ‘new contract for welfare’ ‘rejects both the residual welfare state and the benefits-based approach of the past’ (Deacon, op cit: 306), and invokes Tony Blair’s vision of a Third Way: A modern form of welfare that believes in empowerment not dependency.We believe that work is the best route out of poverty for those who can work.We believe in ensuring dignity and security for those who are unable to work because of disability of because of caring responsibilities, as well as those who have retired.This system is about combining public and private provision in a new partnership for the age (A New Contract for Welfare, Cm. London HMSO, 1998: 9; 71.)
Whilst the emphasis on labour market participation is clear, the third, communitarian strand focusing on welfare as moral regeneration is open to re-scripting in the directions intimated by Jordan and Jones.The agenda of moral regeneration hints at the creation of a social order regulated by inclusive normative codes and a community based system of moral authority, and rather less by recourse to economic incentives or coercion. Such an agenda is ambitious not least because it depends on a shared sense of commitment to a set of core values. Differences notwithstanding, elements of the social democratic renewal both in Britain and on the continent, seem to point unambiguously in the direction of a revitalized civic society rooted in community and bound by an inclusive social morality. What is of course ambiguous is how this agenda for moral regeneration relates to the more dominant discourse which focuses on authority and compulsion on the one hand and economic incentives on the other. The key perhaps lies in redirecting and softening the element of compulsion and tying it to an expanded understanding of civic participation.Tony Atkinson has argued for a version of basic income which recognizes the political problems associated with an unconditional basic income. However, he does not retreat into the cul-de-sac of workfare. In his Participation Income suggestions for activities which could count as participation include: – – – – – –
work as employee or in self-employment (taxpayer); absence from work due to sickness or injury; unemployment but availability for work; participation in approved forms of training or education; caring; approved forms of voluntary work.
This is a far cry from the mandatory participation in labour markets which provides the premise for workfare. However it is compatible with the agenda for moral regeneration underlying the rhetoric of a Third Way and it could provide the material underpinning for a participatory civic society. A participation income constituted along these lines could go some way towards reconstructing the liberal institutions of welfare and taxation which is a prerequisite for the radical agenda of community development outlined by Jordan and Jones. Moreover, a political space for such an agenda might open up as 180
European Basic Income or the Race to the Bottom tensions in the welfare-to-work programme become more apparent in a period of economic recession. In the U.K. the New Deal is premised on mandatory active involvement. For the young unemployed, there are four options.‘There will be no fifth option – to stay at home on full benefit. So when they sign on for benefit they will be signing up for work. Benefits will be cut if young people refuse to take up the opportunities’ (Gordon Brown, Budget Speech – quoted in Peck, 1998: 4).These options are organized around a hierarchy of placements: subsidized private sector employment; full time education and training for a much smaller group with basic skills needs; voluntary sector work; and placements with an environmental task force.Together, these are conceived in terms of a first step on the ‘employment ladder’. Of course, as the critics have been quick to point out, this ‘employment ladder’ does not necessarily lead anywhere if there are no jobs. Private sector placements are likely to be fewest where unemployment, poverty and social exclusion are most severe. As a result, the New Deal is likely to work best in buoyant local economies where it is least needed, and worst in areas such as Liverpool where the combination of economic decline with an inappropriate welfare and taxation system is most pronounced. In such areas, such placements as there are, are likely to be concentrated on the latter two options: voluntary work and the environmental task force. Because welfare-to-work focuses on a human resources supply-side problematic of ‘employability’ in a global market, and does not even acknowledge the underlying problems relating to the distribution of work and income, it is difficult to see how it can succeed in depressed areas. But at the same time, if the definition of participation can be opened up and the institutional rules governing the relationship between the informal and formal economies can be changed, the emphasis on an individual right to quality placements in the voluntary sector and the community could provide the starting point for a serious political debate pointing in the direction of universality, citizenship and community development. In this context, there might well be a discursive space for Euro/eco-dividend, basic income and sustainability.
Taxing Social and Environmental ‘Bads’ The Kyoto and Rio summits underlined the increasing importance of environmental concerns as drivers of social and economic change.The dominant discourse of sustainability reflects the fact that purist environmental agendas have become imbued with social concerns. Environmentalists have recognized that in order for ecological concerns to be carried forward politically they needed to reflect concomitant social priorities as well. In this way, the notion of ‘sustainability’ is seen to refer to an economic trajectory which brings into the accounts, both social and environmental externalities. The growing weight and political significance of ‘sustainability’ as a criterion of economic evaluation reflects a backdrop of growing social and cultural strength on the part of the green parties and to a much greater extent, environmental campaigning groups such as Greenpeace and Friends of the Earth. Over the last twenty years, these social movements have managed to promulgate a ‘common sense’ understanding of the ‘environmental-economic problem’ which makes the concepts like eco-taxation or an ‘environmentally friendly economic growth trajectory’ both understandable and even uncontroversial as political goals.This is a very long way from the doom-laden prog181
Basic Income on the Agenda noses of absolute resource-bound ‘limits to growth’.The pervasive rhetoric of sustainability is more than a pre-millennial Zeitgeist. It could be argued that moving into the 21st century, the environment is becoming the pivotal mobilizing framework for any kind of progressive agenda.The emergence of a space for a green and socially responsible capitalism, is perhaps the nearest thing to the ‘big economic idea’ for the Left since Keynesianism. It is in this vein that Hudson and Weaver (1997) have recently charted a possible eco-Keynesian future for Europe involving a new regulatory trajectory based around the idea of a ‘sustainable mode of accumulation’ which simultaneously addresses both job creation and environmental valorization. And within basic income circles, James Robertson (1989) sketches a similar vision in which hypothecated eco-taxation (including a Georgist tax on land) replaces income taxes becoming the ‘driver’, and basic income the social pay-off . As a result of these changes, eco-taxes have become almost mainstream, gaining serious consideration from across the political spectrum. A variety of such charges have already been implemented, especially in Northern Europe (see OECD, 1995). Recently a more comprehensive evaluation of ‘ecological tax reform’ (ETR) for the UK modelled the effect of a combined package of seven eco-taxes, including a carbon/nuclear tax on industry, a higher road fuel escalator and taxes on car-parking and company cars (Cambridge Econometrics/Elkins, 1998).The total additional revenue in 2010 came to £28bn, the largest share of which came from the road fuel escalator (£14bn by 2010). Adopting the yardstick of revenue neutrality, these revenues are recycled into reductions in employers’ contribution rates applied across the board, significantly reducing the cost of labour.The package produces an overall drop in unemployment of 166,000 and a rise in employment of 400,000 by 2010.The largest absolute increase is in male full-time employment. Studies of this sort have been repeated around Europe providing an increasing weight of evidence in favour of restructuring the fiscal system along these lines. Where such measures are in place (e.g. the Swedish Nox charge), their effects are generally beneficial. Such evidence as there is suggests that environmental regulation has a negligible impact on competitiveness (OECD, 1996: 45). Bearing this in mind, it is hardly surprising that the idea of funding a European basic income through ETR has begun to get serious consideration. Genet and Van Parijs (1992) suggested a basic income or Eurogrant of 100 ECUs financed by a uniform tax on all types of energy.Whilst their model is largely illustrative it raised important points in relation to the distributional impact of such measures in a European as opposed to national context. Obviously the countries and regions standing to gain are those with lower per capita energy usage. Whilst the net contributor and recipient countries remained the same as under the present arrangements, the international transfers increased by a factor of 14 leading the authors to conclude that ‘even with a basic income as low as 100 ECU per month, European solidarity would therefore be fourteen times stronger than at present via the structural funds – apart from the fact that being individualized, the Eurogrant would be far more likely to reach the poorest people in the poorest areas than current subsidies’ (ibid., 1992: 6).As they point out, such an arrangement would transfer tax revenues and some public expenditure from the national to the EU level – since governments would presumably give up their own energy taxes. However, there is certainly a degree of flexibility in how national governments can restructure other aspects of the fiscal system to accommodate the effects of ETR and the social dividend. Clearly, in the interests of revenue neutrality there would 182
European Basic Income or the Race to the Bottom be great pressure for government to reduce the private sector tax burden to balance out the effects of the new taxes – and taxes on labour would be an obvious target, given the positive effects with respect to jobs. Individual tax allowances, pensions and other welfare benefits would no doubt be top-sliced in order to pay for such tax cuts. It can be seen that combining a social dividend with ETR in this way, whilst maintaining revenue neutrality, involves an extended fiscal-welfare circuit. One point which does not emerge so clearly from Genet and Van Parijs’ discussion relates to the dynamic effects of these kinds of tax measures. The idea that eco-taxes could be the drivers of a fundamental economic shift in the direction of sustainability is predicated on such dynamic effects. But it should be recognized that in so far as ETR changes behaviour on the part of individuals and firms and actually secures the primary environmental objectives, the tax base, revenues and presumably the value of any social dividend will fall (e.g. as energy efficiency increases, renewable resources come online etc.). Any basic income trajectory based on ETR would necessarily involve a constant process of refinement of the tax base and periodic shifts to new sources of revenue. One possibility, in line with the broader social understanding of sustainability, would be to extend the hypothecated tax base to cover other kinds of negative externalities. Given the rising panic over stock market instability, the possibility of ‘contagion’ from Russia or South East Asia and the Soros factor – the idea of taxing speculative capital transfers as a way of introducing a buffer into global capital markets – is perhaps less implausible than a few years ago (Haq, 1996;Tobin et al., 1995).4
Conclusion: European Eco-Dividend (Eureco) and Participation Income The basic income debate has been organized around abstract blueprints for wholesale reform of the fiscal-welfare system.The stream of both radical-utopian but also moderate ‘feasible’ (revenue neutral) basic income models which have been put up for discussion, have brought much needed intellectual clarity and specificity to the debate. However, such intellectual clarity does not flow naturally into a plausible political project. Protagonists have been very good at envisioning arrivals and destinations. But the debate has offered few clues as to possible points of departure and the politics of transition. This contribution has sought to outline salient features of the European political landscape that might offer such points of departure.The emphasis is on political and social dynamics which derive from a Europe in the (re)making. Rather than weighing up the merits of particular national or European models, proponents would be better advised to think in terms of a ‘basic income trajectory’, i.e. the kind of political engagements and policy innovations that might progressively consolidate and enlarge the space for the principles of universalism, unconditionality and individual assessment in (the European) welfare system(s). One possible point of entry relates to the language of responsibility and participation which increasingly frames the debates around the future of welfare – both in relation to Anglo-American communitarianism and the ‘Third Way’ – but also debates on the future of European social democracy. For reasons of economic coherence, some degree of harmonization of European 183
Basic Income on the Agenda social security arrangements must certainly become a priority in the wake of EMU. A social dividend scheme operating at a flat rate across the whole of Europe is by far the simplest option and the easiest to accommodate with existing national provisions without distortions arising from different wages and levels of social protection between countries. There are also strong political arguments which relate to the democratic deficit and the potential for a legitimation crisis as economic rationalization inevitably exacerbates tensions and inequalities between the different regions and Member States. This is not simply a question of economics and the need for compensation. It is about giving a material underpinning to the sense of European citizenship and common destiny which are a prerequisite for the New Europe to stabilize and prosper. Hypothecated eco-taxes are rapidly becoming standard items in the fiscal tool kit. Many studies have demonstrated their potential to raise large revenues which could be channelled through an eco-dividend scheme.The use of such taxes could provide the basis for the kind of political coalition which is essential for any basic income trajectory. For environmentalists, linking eco-taxes with a social dividend could provide a useful way of ensuring their popularity. From a basic income perspective, linking a small dividend to green taxes and implicitly to the idea of an environmental commonwealth might be useful in mitigating common sense objections to unearned ‘handouts’.At the same time, there would be conflicts. From the environmentalist perspective one of the rationales of the taxes would be to raise revenues which could provide the capital investment necessary to overcome structural and technological barriers to the entry of renewable sources of energy into the market. Clearly, diverting such revenues into ecodividends would reduce the funds available for such capital investment. Like the advocates of basic income, green supporters of eco-taxes have drawn attention to the job creating possibilities of reducing taxes on labour. It is clearly possible to stick with the assumption of revenue neutrality whilst introducing eco-dividends. However, in extending the fiscal-welfare circuit through which this neutrality is achieved, the national governments will be faced with important political choices as to how they rebalance the tax burden on companies. Clearly there is potential for different countries to recoup the cost of this ‘re-balancing’ in different ways. The continuing salience of the work ethic and the commitment of governments to focus on labour market participation as the solution to social exclusion and poverty make it very difficult to continue arguing in favour of a completely unconditional basic income. In the light of this, a participation income has much to offer. A broader equation of participation with civic involvement and the duties of citizenship would in effect subvert the logic of workfare and the narrow emphasis on paid work.At the same time, an inclusive engagement with the voluntary sector, community development and unpaid work could in effect rationalize how programmes like welfare-to-work are likely to operate anyway, particularly in economically traumatized regions and in periods of recession.Whilst the social transfers effected by an eco-dividend would be co-ordinated through European institutions, the nature of conditionality and the definition of what counts as ‘participation’ could easily be decided at the level of the nation-state. This would allow the dividend to be linked to national traditions, institutions and the trajectory of particular welfare regimes in ways which made sense. In this way, a degree of welfare harmonization could be made compatible with national diversity. A minimum requirement for recipients could be voting in European elections. This would firmly link the ‘Eurogrant’ to an active sense of European citizenship. 184
European Basic Income or the Race to the Bottom In general, the idea of a basic income trajectory helps to focus on the dynamics of political process. Certainly basic income will get nowhere if we insist on conceptualizing political choices in terms of an either/or framework. The relevant questions are not: European welfare harmonization or national sovereignty? Selectivity or univeralism? Basic income or means-testing? If we pose the questions like this, politics will always work against basic income.The either/or question invariably demands a leap of faith and perception too great for the average politician. However there are windows of opportunity. For example, a small Euro-dividend, introduced as an exercise in European citizenship, could create the conditions for its own metamorphosis into a more substantive redistributive mechanism. A dividend funded through eco-taxes might play an important role in embedding a greater understanding of the benefits and simplicity of unconditional dividend-style social transfers. Alternatively, a dividend attached to the principle of civic participation could conceivably create a useful bridge between the dominant (but anachronistic) common sense work ethic, the realities of contemporary labour markets and the need for a rebuilding of links between individuals and the communities in which they live (as opposed to the abstract ‘community = society’). In the latter case, the principle of subsidiarity could be retained allowing countries or city regions to define participation as they liked.The important point is that basic income and social dividend innovations can be made relevant to a wide variety of political movements and interests.The significance of any one proposal or innovation will depend to a great extent on the size of the payments envisaged, the relationship to existing welfare mechanisms (alternative, supplement, etc.), the political scale of administration and entitlement and the wider political context. This significance can of course change over time. The notion of a basic income trajectory is to anticipate such dynamics and take advantage of them.
Notes 1 2
3 4
For instance, the critical distinction between basic income and negative income tax models are now widely appreciated. In Britain this can be compared with the politics of electoral reform. Advocates of Proportional Representation have had almost no success in forcing reform past the monopolist instincts of an incumbent government of either party – at least not as far as the Westminster parliament is concerned. For the new and additional elections required by the Scottish Parliament, the Welsh Assembly and European elections, however, PR has been accepted almost without a dissenting voice. I gratefully acknowledge that my own take on this debate draws heavily on discussions with Bill Jordan. However, there would be enormous obstacles – not least the fact that it would need to be introduced simultaneously in all of the world’s major markets with a large degree of harmonization in terms of the rules and norms governing such markets (to prevent foreign exchange trading shifting geographically).The tax would have to apply not only to standard foreign exchange trading but also to various derivatives (as financial institutions have a long history of responding creatively to such forms of regulation).
185
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Part Two Political Chances
Clues and Leads in the Debate on Basic Income in the Netherlands Loek Groot and Robert van der Veen
Introduction This is an account of the political significance of twenty years’ worth of discussions around the theme of unconditional basic income in the Netherlands. In the Introduction, the question was raised of whether basic income has ever been on the ‘political agenda’, and what the chances are of its eventual introduction.We start out by briefly summarizing our findings. Basic income entered the arena of public debate as an ethically inspired reform proposal, to make available the social minimum income unconditionally to all Dutch citizens, for emancipatory reasons in a climate of relative abundance. Political interest in the idea, however, has proved to have been largely dependent on the rate of unemployment.The basic income idea gained a broad social appeal as an alternative socio-economic strategy, when major unemployment hit the country in the early eighties. But the literature we reviewed shows that the fate of basic income has also been determined by a lack of acceptance of its most radical feature: strict unconditionality with respect to work. Public discussions have always strongly focused on this aspect (‘the decoupling of work and income’). Thus, proposals for a basic income openly defended in this radical form have never been able to mobilize any lasting political support in the Netherlands. Less far reaching versions of partial basic income (meant to replace only part of the social minimum in unconditional form) have fared somewhat better in terms of political acceptance, but have been rejected in the end as well, probably due to their association with the radical thesis of ‘decoupling’. After the Dutch economy began to pick up from 1987 onwards, and unemployment decreased just as spectacularly as it rose four years earlier, public discussions of basic income underwent a major change of context. Instead of being put forward as a full-fledged institutional alternative, basic income specifically came to address the exclusion of marginalized people, where ‘exclusion’ was understood as income poverty and lack of employment chances. In this context, the argument for unconditional subsidies was mainly located in its inclusion effects, both by boosting employment at levels under the minimum wage, and by allowing precarious workers to share at least minimally in the benefits of an affluent society.This change in emphasis meant that basic income was now discussed as an instrument for re-inserting the lowly productive members of the labour force, rather than making everybody independent from toil. The change followed the main tunes in the socio-economic debate: firstly, during high unemployment, the scaling down of previously generous Dutch benefits in the no-nonsense retrenchment of the eighties, and secondly, as the employment situation drastically improved (the ‘Dutch miracle’ of the nineties), the recognition of long-term exclusion at the bottom end of the labour market, as a result of the poverty trap. 197
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Basic Income on the Agenda
Clues and Leads in the Debate on Basic Income in the Netherlands What needs to be shown in our story, is how proponents of basic income have had to adapt their arguments to changing circumstances and new climates of opinion.As a first step, Figure 1 records the numbers of almost 900 publications from 1970 to 1994 onwards, distinguished in three categories: political, scientific and press documents.1 From Figure 1, it appears that the basic income theme is discussed since 1975. The intensity of the debate reached its all-time high in 1985. At face value, the number of press and political documents show a strong positive correlation with the development of the unemployment rate, although both were at a rather low level in 1983-84, when unemployment was at its peak level of almost 12 percent. However, the peak in 1985 in both series reflects the discussion following the publication of the WRR government advisory report Safeguarding Social Security in 1985. Likewise, the second peak in the series of press documents, in 1993, reflects the response to the launching of another government advisory document by the Central Planning Bureau, Scanning the Future, at the end of 1992. Reviewing the large number of publications in these three categories, one can safely say that between 1985 and 1994, basic income has been prominently on the political agenda in a broad sense. That is, the idea regularly figures in platforms, seminars, journals and other fora and is regularly discussed. However, for basic income to be on the political agenda in a narrow sense requires more than being an item of public discussion. It would require at least that basic income be included in the program of a major political party, or that government advisory boards officially consider basic income to be a possible avenue of reform. In such cases, being on the political agenda means that other political actors are obliged to take a position on the issue. Using this criterion, basic income has figured on the political agenda in the narrow sense only three times: first, as mentioned above, in 1985, following Safeguarding Social Security; secondly, in 1992, when the idea was taken up in one of the scenarios of Scanning the Future; and finally, in 1999, basic income entered the political agenda as a component of the Ministry of Finance’s Tax Reform 2001, without, however, being mentioned as such. Nevertheless, hidden away in a major overhaul of the Dutch tax system, a refundable tax credit equivalent to a small partial basic income was proposed and passed by parliament in February 2000. Pending the definitive stage in the Upper Chamber, then, this small basic income will probably be implemented in 2001.The general tax allowance will be substituted by an individualized negative income tax amounting to one eighth of the net minimum wage, or one quarter of the assistance benefit of a single person. As a result, every person who is eligible for tax (all adults except students) is entitled to a refundable tax credit of Û 1507 annually.The lesson to be drawn from this silent implementation will be discussed later on, after our chronicle of the main lines of the Dutch debate. Before presenting this chronicle, however, it is helpful to know what the introduction of a full basic income would require in the Dutch context. Basically, this is rather less of a major operation than it might be in other countries. From the mid-seventies onwards, the Dutch system of social security is two tiered.The first tier covers universal provisions of general assistance and flat-rate social insurance, up to a wage indexed social minimum (defined as the income covering the basic needs of a family, exclusive of child benefit, at the level of the net minimum wage). The second tier consists of wage-related worker insurance against unemployment, sickness and disability.The old 199
Basic Income on the Agenda age pension, which is part of the first tier, is made available to every Dutch citizen, on sole condition of residency, while child benefits are granted to all families with children under 18 years of age, without means testing.The introduction of a ‘full’ basic income – at social minimum level – would thus involve replacing the provisions of general assistance, social insurance and child benefit with a basic income. Given the unconditional nature of old age and children’s entitlements, this would not change very much for the old, but it would raise child benefit. For adults before retirement age, it would mean getting rid of the means- and work-tests in the law of general assistance. Even though institutionally a full basic income could perhaps be fitted into the first tier of Dutch social security rather easily, the economic cost and the political repercussions would obviously be quite considerable.
1975-1985. Emergence of the Debate: from Utopia to Piecemeal Engineering Although the idea of a state-financed income guarantee had been sporadically discussed in socio-economic circles during the post-war reconstruction, the major impulse for the Dutch debate can be ascribed to J.P. Kuiper, a professor of social medicine at the protestant Free University of Amsterdam. Kuiper’s studies of re-validation and the humanization of work led him to consider the merits of ‘disconnecting productive labour and income’.After reading Robert Theobald’s Free Man and Free Market (1963), Kuiper developed a morally inspired argument for an entirely unconditional income, in a series of lectures and articles which attracted wide attention from 1975 onwards.2 From his protestant vantage point, Kuiper presented a clear picture of the emancipatory advantages of unconditional grants, without bothering to discuss its costing or implementation. Kuiper’s ideas were endorsed only by intellectuals within the Christian radical Left, in connection with the zero-growth perspective, in which basic income was considered to be a stimulus for ‘alternative’ forms of production and work in an ecologically sustainable society. More reservedly, religious organizations such as the Council of Churches were prepared to accept a selective version, combined with forms of social conscription – a possibility tentatively raised by Kuiper. However, reviewing the catalogue of reactions between 1975 and 1980 to these ideas on the radical Left, one sees unions and employers’ representatives dismissing the idea as utopian, social-democrats rejecting it as a far too radical departure from the labour contribution principle, and feminists preferring a direct attack on the male role of family provider, through an enforced reduction of the working week. So in this first stage, basic income figured as a utopian symbol of social criticism, directed against the reality of productivist market society, rather than as a concrete proposal. It was only under the pressure of a severe recession that the idea took shape as a strategy of social policy. Basic income now entered into the realm of institutional alternatives, though still being strongly inspired by Kuiper’s emancipatory viewpoint. The economic crisis was becoming the dominant framework of discussion. Between 1981 and 1983, with unemployment rising from 6 to almost 12 percent (see Figure 1), the radical union of food workers (Voedingsbond FNV) launched the universal grant in the socio-economic arena. Echoing Kuiper’s moral slogan: ‘A guaranteed income is a basic right’ and sounding the unemployment alarm ‘The robots are coming’, the 200
Clues and Leads in the Debate on Basic Income in the Netherlands Voedingsbond proposed a basic income system, financed ‘at source’, and designed to replace major parts of the existing social security laws. This was presented as a longterm working class strategy for the re-distribution of paid work between men and women. In addition, small parties on the Left of the political spectrum spoke out: the evangelical radicals and liberal-democrats D66 were in favour, but did not really believe in the argument that a basic income would automatically bring about a substantive redistribution of paid labour. Most of the Dutch basic income proponents thus insisted on combining unconditional income guarantees with separate legislative programs for labour-time reduction.3 The political response to these new moves in the early eighties was detailed, and stated at important occasions.The central labour unions (FNV and CNV) reacted with a considered, but firm rejection of the Voedingsbond proposal, on ethical and economic grounds, while expressing extreme scepticism about the alleged improvements for organized labour and the bargaining position of women on the labour market. After intensive discussions in the Labour Party (PvdA), the position of its allied union (FNV) was adopted by the party congress in April 1983, together with a resolution to aim at reducing the 40-hour working week to 25 hours, within one decade.The specific reasons for rejecting basic income can be summarized as follows: it would be incapable of reducing unemployment, and amount to buying off the right to work with a right to free income, which, moreover, would have to be so low in comparison to current social insurance payments that the hard-won rights of unemployed and disabled workers would be unjustly eroded in favour of groups not in need of additional transfers.As the party chairman summed up the position:‘With a basic income, you’ll end up at the Right’. Moreover, social-democratic and trade union economists expected a basic income to produce economic disaster.This fear was also voiced in a 1981 report by the government-sponsored Scientific Council for Government Policy (WRR).4 In a separate chapter devoted to basic income, the WRR predicted negative effects on exports and employment, because the additional tax burdens to finance basic income would be passed on into wages and prices. It concluded that even a modest basic income would remain unfeasible for the Dutch economy, except, possibly, if continued increases in labour productivity were to usher in a long period of jobless growth, and so cause persistent unemployment. Consequently, two years later, in its 1983 overview of socioeconomic trends – after the unemployment rate had almost doubled – the WRR upgraded its plausibility estimate, now regarding a basic income, or a negative income tax system, as a key ingredient of a ‘liberal anti-etatist’ scenario. Although this gradual progress of basic income to the status of a serious policy alternative was hardly remarked on in the press, the proponents did not fail to notice.The scientific publications show that they redoubled their energy to question the privileged treatment of wage labour, and criticize the unjust insistence on the ‘reciprocal duties’ of welfare recipients in the face of insufficient opportunities to fulfil them. A theme also much discussed was the need to simplify the complex and overburdened social security system, with its widespread feelings of insecurity, and its tendency to generate a large ‘black’ informal sector in the economy. In contrast to the social democratic and trade union stance, proponents argued that compared to paid work, unpaid domestic work and voluntary activities in associations are equally valuable means of individual self-realization and support of others.Thus, an unconditional income for all would not be a buy-off, but actively uphold the right to labour of a decent quality, 201
Basic Income on the Agenda while at the same time providing security for performing valuable services outside the labour market, without the stigma and administrative humiliation of means-testing. Meanwhile, the ruling coalition of Christian democrats (CDA) and Liberals (VVD) remained outside of this debate.The Liberals entirely ignored the issue.The Christian democrats at least showed some recognition of unconditional income as a stimulus for voluntary work, but opposed it as being incompatible with the contribution principle and the Christian family ethic, explicitly rejecting the ideal of economic independence for individuals. With the ruling coalition, the major opposition party and the central trade unions firmly against, the political chances of basic income in the mid eighties seemed to be bleak indeed. Safeguarding Social Security Yet, and quite unexpectedly, the WRR once more addressed the issue of basic income, in October 1985, this time in the form of a concrete reform proposal designed to ensure the continuity of social security in times where one has to count on long periods of unemployment.The status of the WRR, an advisory board nominated every five years by the government, is to formulate long-term recommendations, which require an official response in Parliament.The central element of Safeguarding Social Security is an unconditional partial basic income, coupled to two other institutional innovations. The basic income was to be financed by a special tax on production value. Moreover, it would be accompanied by the abolition of the minimum wage, and the indexing of the social minimum to changes in average income. As Figure 1 shows, the report attracted huge attention. It had a profound, though not wholly positive, influence on the terms of the basic income debate in the next decade.To see why this might be, we shall discuss it in some detail. In order to simultaneously lower labour costs, flexibilize the labour market and simplify the welfare system5 the WRR proposed an ingenious package of four measures: 1. A tax-financed universal partial basic income; 2. A compulsory general insurance scheme, providing insurance up to the prevailing social minimum for all kinds of contingencies (disability, unemployment, sickness, etc.). These benefits are not means-tested and have a maximum duration of six years, depending on labour market history;6 3. A tax-financed and means-tested social assistance scheme as a provision of last resort; 4. Privatization of all wage-related benefits above the social minimum, under regulations requiring a general duty of acceptance for insurance companies, and non-differentiated flat rate contributions. The reduction of labour costs was to be achieved in two ways. Firstly, the abolition of the minimum wage would make it possible to hire people at lower wages. The argument was that partial basic income would take over the protective function of the minimum wage in a modernized form, which would no longer be tied to the basic needs of a nuclear breadwinner family, and thus reflect the increased diversity in household earning patterns. Secondly, labour costs would be reduced because under the new tax system, employers would have to pay the partial basic income to their workers, in return for which they could deduct the costs of providing the partial basic income 202
Clues and Leads in the Debate on Basic Income in the Netherlands from their tax liabilities. Apart from the beneficial effect of this method on the black economy,7 the reduction of direct labour costs would be equal to the gross wage equivalence of the partial basic income, which is to say that the latter would act as a wage subsidy. Moreover, the WRR expected that the rise in wage inequality due to removing the minimum wage would be compensated by the effect of the partial basic income. For, with a partial basic income, pre-tax wage inequalities (both among fulltime workers and between full-time and part-time workers) have a smaller effect on their total net income.To finance the partial basic income and to compensate for lower tax revenues on wage income, tax exemptions and capital subsidies were to be skipped, and new taxes on production and environmental pollution would be introduced. However, the WRR was reluctant to undertake detailed calculations of costing. This proved to be a mistake, as we shall presently see. Before discussing how the proposal was evaluated by public opinion, it is instructive to review the other problems that the WRR wanted to solve by means of this new method of safeguarding social security, and in particular the crucial role of partial basic income. First of all, means-testing. In this respect, as was widely admitted, the Dutch system of the eighties had become very complex. In order to check the many entitlement conditions, the rules of general assistance and related laws required extensive monitoring of claimants.As we noted above, this was perceived to be invasive of the private sphere, and humiliating as well, under conditions of high unemployment. The complicated procedures also created incentives of benefit fraud and administrative shortcuts. Partial basic income was expressly designed to address that situation. The WRR had three main reasons to think that this would be effective. Firstly, far less people would need to claim social benefits, because a part-time job could be sufficient to lift them above the social minimum.This would mean cutting down on expenditure, and on administrative cost. Secondly, the level of partial basic income was chosen so as to equal the difference between the existing benefit of a family and a single person.This would considerably simplify the means-tested part of the social minimum. Both single person and family-claimants would now receive their personal partial basic income, plus the same means-tested amount per household, thus removing the need to differentiate means-tested benefits according to household size.8 An additional advantage of this particular level of partial basic income, according to the WRR, was that it remained considerably below the social minimum of a single person, thus maintaining the incentive to work among low earners who are in work. But at the same time, the level of partial basic income would still be high enough to give the unemployed with low earning potential the incentive to acquire jobs with earnings above the social minimum, since in accepting such jobs, they would only be losing the means-tested part of the social minimum. This argument later came to be widely recognized as addressing the problem of the ‘unemployment trap’. Thirdly, a partial basic income would give the small selfemployed in retail greater scope to compete with large-scale business (e.g. supermarkets). It would also replace special tax exemptions and subsidies covering the start-up period for the small- and medium-sized business sector. With Safeguarding Social Security, the WRR performed a remarkable piece of social engineering. Addressing the major weaknesses of the Dutch welfare state in the mideighties, and taking into account trends such as persistent unemployment at the low end of the labour market, the demise of the traditional breadwinner family, the gloomy 203
Basic Income on the Agenda prospects of the poverty trap, and the growing informal economy, it came up with an adequate and logically structured new system. Massive Rejection Within 24 hours of the official presentation, however, the report was unanimously shot down. Even those who had staunchly advocated a basic income, such as the PPR and the food workers union, found reasons to object to one or more features of the plan, and therefore to reject it pars pro toto. Headlines in the press were ‘14 million welfare recipients’,9 and ‘An armchair proposal’.10 In what follows, we briefly review the criticisms of government, of political parties, and of the unions and employer associations. The government coalition of Christian-Democrats (CDA) and Liberals (VVD) had originally requested the WRR to report on the reform of social security. But, faced with this result, it was not in a position to respond positively to the proposed radical innovations. For in the meantime, the government had politically committed itself to passing an expenditure-cutting reform of existing social security.This reform basically relied on keeping intact the two-tiered Dutch system, but with more selectivity, lower benefit levels and shorter durations of entitlement in the social insurance and universal benefits. Because of this, the government could not think of abolishing the minimum wage, which was, after all, the linchpin of the existing system. Still less could it entertain any idea of replacing the minimum wage with a partial basic income, given that it would increase social expenditures, instead of paring them down.11 So the last thing the government wanted to promote was a parallel discussion about the fundamentals of social security. In its response, therefore, it politely postponed consideration of the WRR plan to the year 2000. The CDA Minister of Social Affairs voiced the general feeling that a partial basic income, as long as it is below the social minimum, is unattractive because it is too low for those who need it and superfluous for those who do not.The coalition party VVD regretted the choice for a partial basic income instead of a negative income tax, and that tax progression was not reduced. The Labour Party, on the other hand, used the report to brush up its opposition image as the real defender of social solidarity. It argued that indexing benefits to wages is essential for solidarity. If benefits were to be linked to average income, as the WRR wanted, then welfare recipients would have to carry the full burden of adjusting to negative economic shocks, while with wage indexation they would at least be protected by the actions of organized labour for preserving wages in an economic downturn. The Labour Party also objected to the WRR’s proposal for making social insurance above the social minimum a privatized option, on the grounds that wage related income security would then become a prerogative of financially well-off workers.And instead of providing a partial basic income, which they thought would give incentives to withdraw from the labour market, or work only part-time, the social-democrats were in favour of facilitating a ‘right to work’, if need be by means of collective working week reduction and large scale job creation.Thus the Labour Party confirmed the stance which it had taken earlier, in response to the more radical proposals for a basic income by the food workers’ union. Only the Centre-Left party D66 was sympathetic to the main features of the WRR plan. But it opposed partial basic income, at least in the absence of a solid financial account of its feasibility. Finally, the radical Left party PPR, the only one that had been unambiguously endorsing a full basic income, held that a partial basic income would be totally insufficient for making unpaid work a true 204
Clues and Leads in the Debate on Basic Income in the Netherlands alternative to paid work. In this, it sided with the emancipatory movement, which condemned partial basic income as a disguised form of hush money to keep women at home, without giving them the economic independence that would offer a genuine choice between the home and the labour market. Predictably also, the unions fiercely opposed the plan. Elimination of the minimum wage, they said, would hurt the least productive workers.12 Also, privatizing the collective provisions of wage-related social insurance would endanger what the unions had been successfully fighting for since 1945, with the help of successive governments.The unions saw very clearly that if the government were made to retreat from wage-related social insurance, then they would have to negotiate directly with employers and insurance companies about income provisions over and above the social minimum. This could prove highly disadvantageous for the unions, in weak sectors of the economy. Moreover, both unions and employers disliked the fact that they would lose their control over unemployment and disability benefits at the social minimum level, which would become entirely state-administered. Both of these features of the WRR plan (listed under points 2 and 4 above), in short, posed clear threats to the corporatist bargaining model of the Dutch welfare state. Finally, and equally predictably, employer associations objected that paid work would no longer be the primary source of income, but would become supplementary to the partial basic income.The only positive element, in the view of employers, was the removal of the minimum wage. Although they welcomed a reduction in wage costs, they preferred specific measures targeted at the low end of the labour market, instead of the generic measures to lower labour costs proposed by the WRR. Several bridges too far Even though partial basic income was the central element of Safeguarding Social Security, its rationale was entirely pragmatic. For the WRR, partial basic income was a way of introducing a new orientation on basic questions of social security (unconditional vs. conditional, universal vs. selective, permanent vs. temporary, individualized vs. family-based). However, what the WRR may have overlooked, in retrospect, is that in view of its unconditional entitlement, even a partial basic income needs to be given a principled justification, especially if it stands out as the central element in a fundamental plan of reform.Another problem was bad political timing. For one thing, there was considerable consensus among the social partners to reduce the working week across the board, as a response to rising unemployment.13 This consensus was ignored by the WRR, and, in fact, its advocacy of a liberalized labour market offered no room for a collective shortening of the working week. In this stance it proved to be right later on, given the increase of part-time jobs in the Netherlands, but at the time this was not yet apparent.Also, since almost everybody perceived the high cost of the social security system as the major problem, it was no surprise that a plan proposing to raise social expenditures even moderately would be ruled out of court on that ground alone. Finally, as we noted, the plan came too late to change the welfare reform which was already in the stage of being passed through parliament. Unfortunately, it also came far too early to serve as a realistic stepping stone for a second reform, in the more distant future. By and large, the WRR-proposal was too ambitious. It wanted to accomplish too much in one time. The simplicity and consistency of the plan, and its style of logical 205
Basic Income on the Agenda argumentation from problems to solutions, are typical virtues of a social engineering perspective. These virtues do not necessarily count for much in a political process. Again, in retrospect, it was perhaps naïve not to present detailed modelling calculations concerning the effects of introducing partial basic income on household income, tax requirements, employment, prices, and so on.14 The WRR believed, quite rightly, that such exercises would be impossible to perform with any precision, given the complexity of the proposed institutional changes. But in its scientific honesty, it overlooked the point that economic model calculations play a huge symbolic role in Dutch political culture, when it comes to discussing the effects of any proposed reform. In sum, the proposal of a basic income, even if it is only a partial one, does not seem to have much of a chance, if it is accompanied with too many other structural changes, such as a shift from direct to indirect taxation and green taxes, the abolition of minimum wages, a radical change in the role of actors who have a large stake in providing social security, and so on. Safeguarding Social Security, in fact, was not a single reform proposal. It was an integrated package of multiple reform components, which were combined in a way that might be easily appreciated by a disinterested social scientist, but difficult to grasp for political actors. As a result, none of the political actors could fully accept it, while each actor could find ample grounds for rejecting the components that cut closest to the bone of its particular vested interests. Moreover, since the basic income component stood out as a central element of the whole package, without, however, being supported on independent grounds, it served as the lightning-rod of popular indignation. A final lesson of this episode is that an accurate examination of the detailed effects of a partial basic income on the distribution of income among different households and on employment, prices and output, seems to be absolutely essential for obtaining serious attention for the proposal.
1986-1992. Seven Lean Years Even though the massive rejection of Safeguarding Social Security quickly removed basic income from the political agenda in the narrow sense, the idea remained on the broader agenda of public debate, though in a subdued manner, since most trade unions and political parties now participated only with lukewarm interest, at best. Basic income, one might say, was confined to insistent whispers at the sidelines of the debate on welfare reform. As one can see from Figure 1, after 1985 there is a sharp drop in the frequency of political and press documents on basic income. However, the scientific debate continued, and even more intensely than in the periods before 1985 and after 1992, reaching a much more mature state compared to the debate in the pre-1985 period. In the wake of the first Basic Income European Network Congress (1986), in October 1987, fourteen organizations, including some trade union sections, political parties, claimants unions, and voluntary organizations, set up the Workshop on Basic Income (renamed Society of Basic Income in 1992) to stimulate and co-ordinate activities concerning the debate about basic income. It issued a newsletter three times a year, in which a small number of activists showed a remarkable dedication to keep the idea alive.The Workshop also organized some important seminars on the economic feasibil206
Clues and Leads in the Debate on Basic Income in the Netherlands ity of a partial basic income reform, on the economic effects of basic income under several financing methods, as well as on questions of ethics and citizenship.This stimulated the elaboration of concrete proposals such as de Beer’s (1988) costed proposal for a basic income of Dfl. 1000.The Workshop provided a stable platform to discuss issues on basic income in detail, more or less outside the attention of public opinion. In speaking about a ‘more mature state of discussion’, it serves to note that, following the example of the WRR, the proponents of a full basic income were motivated to engage in detailed considerations of the advantages and disadvantages of basic income and negative income tax, compared to a variety of other alternatives to the existing system of Dutch social security.Two studies in particular need to be mentioned. Firstly, sponsored by the research centre of the Dutch Labour Party, Paul de Beer’s ‘Being Jobless.Three Scenarios for the Labour Market (1988) systematically compares the labour market effects of (1) the continuation of the current government’s strategy (wage moderation, reduction of the public sector, forms of workfare); (2) the Labour Party’s official alternative policy (collective reduction of the working week to 25 hours over a period of ten years); and (3) the introduction of a basic income at the level of the current guaranteed minimum income, along with a slower collective reduction in the working week and the fostering of individual working time reduction. On De Beer’s calculations, the second scenario barely performs better than the first one in terms of unemployment, and only the third scenario has a chance of achieving nearly full (voluntary) employment. Secondly, a comprehensive study, commissioned by the Ministry of Social Affairs, was undertaken by Joop Roebroek and Erik Hogenboom in 1990 under the title Basic Income:Alternative Benefit or New Paradigm. It contained an updated and balanced account of the discussion so far, systematically outlining the major variants of basic income, and clearly presenting the arguments for and against each. The study also gave a detailed survey of the international debate, including a section on the negative income tax-experiments in the USA, during the 1960s and 1970s.According to Roebroek and Hoogenboom, the fundamental fact prompting basic income proposals – ranging from right-wing, market oriented, selectivist ‘alternative benefit systems’ (à la Milton Friedman) to typically left-wing, collectivist, universalist ‘new paradigms’ (à la Robert Theobald) – is the increasingly manifest failure of social insurance systems to provide adequate income support.They identified three major trends: a dramatic increase in the number of long-term unemployed (who are no longer covered by such systems), a dramatic increase in the number of young unemployed (who have never had the opportunity to enter the social insurance system) and a dramatic reduction in the stability of households (which accounts for a growing number of households with no one earning or socially insured). ‘New challenges of a technological, social, political and cultural nature keep coming up. The times of transition are not over yet’, the authors concluded. This high-quality report anticipated the theme of social exclusion, which was to become prominent in the mid 1990s.
1993-1996. Basic Income and Social Exclusion At the end of 1992, the Central Planning Bureau, the major forecasting agency of the Dutch government, published a large scenario study entitled Scanning the Future. The object of this ambitious exercise was to trace the fate of the Dutch economy in three 207
Basic Income on the Agenda possible scenarios of economic development during the next 25 years.The study generally assumed that each of these scenarios would be accompanied by a distinct set of labour market and social security policies. In the Global Shift scenario, the focus of the world economy shifts to the US and Pacific Basin.The Netherlands shares in the meagre fruits of a general ‘Eurosclerosis’, in which the generous Dutch welfare system, and its rigid labour markets, are not changed.The unhappy consequence is a near-collapse of the welfare state around 2015. Almost the opposite occurs in European Renaissance, the scenario that has the United States lagging behind, and Western Europe locked into a dynamic process of integration. In the Netherlands, a revitalized corporatism produces the consensus that enables the welfare state to maintain its high levels of benefit, but with a tightened regime of eligibility conditions, and Swedish-type ‘active labour market’ measures.This scenario was especially welcomed by the Labour Party, since it coincided with the optimistic hopes of the Party’s official Welfare Commission’s report No one excluded (1992) to restore full employment, and increase the participation rate of the labour force. Surprisingly, the third scenario had a basic income as its centrepiece, in the form of a negative income tax that was to replace all social minimum benefits, and was envisaged to grow at a slower level than average income, thus lowering the ratio of social minimum to average living standards over time, while at the same time staying ahead of inflation. Of the three scenarios, this one, Balanced Growth, was the most successful in terms of growth and employment, and it was set against an international background, which has the ‘wealth of all nations’ developing favourably. The assumptions behind Balanced Growth are an enlightened mix of liberal market economics and ecological restraint, notably a heavy worldwide tax on energy consumption.With the welfare state much leaner and simpler to administrate, the poverty trap much reduced, and meanstesting finally eliminated, the Central Planning Bureau reinstated a familiar picture of basic income, as a pivotal device of liberal social engineering, even though it hardly referred to the other major exercise in this perspective: Safeguarding Social Security. Considering how far basic income was removed from the political agenda in the narrow sense – since the dramatic failure of the WRR plan seven years earlier – this part of the CPB-report contributed significantly to re-establishing its respectability within the community of economic advisers in the country, as well as among the political parties, in particular the liberals. But the mild recession in the years 1993 and 1994, accompanied by rising unemployment rates (see Figure 1) may have also been helpful in putting back basic income on the political agenda. For this recession focused attention on a theme which was by now becoming prominent in the political debate: the persistence of social exclusion and poverty, despite the improved trend of employment growth in the Netherlands. High hopes for basic income After a social-liberal coalition came into power in September 1994, hopes of a serious role for basic income on the agenda of social security reform were raised high.15 The coalition was formed, following four months of tough negotiation, on a compromise platform of drastic cuts in government expenditure, priority for satisfying the criteria for membership of the European Monetary Union, boosting labour participation, and a much-publicized announcement to discuss the future of the social security system in the summer of 1996 in Parliament. 208
Clues and Leads in the Debate on Basic Income in the Netherlands In December 1994, Hans Wijers, Minister of Economic Affairs and member of D66, said in an interview that ‘we are inevitably moving towards something like a basic income’ because this is a rational way of combining the dynamism and flexibility of the labour market with the kind of minimum income security which is considered a sign of ‘civilized society’ by many in the Netherlands. Emboldened by this unmistakable political cue, D66 held a well-prepared consultative conference on the ‘feasibility and desirability of basic income’ in March 1995.16 At the conference,Wijers firmly restated his opinion, adding, however, that a basic income could be introduced only during a long-term process, in which the Dutch labour force would have to become more entrepreneurially oriented, and less disposed to educating workers into lifetime employees: ‘We should try to see how we can use the system of basic income to promote the creativity of people.The current system does not stimulate this, on the contrary, the benefits of social assistance tend to put a brake on creativity’.17 These comments sparked off a rather intense media debate during the first half of 1995.Though Wijers declined to participate any further in it, another prominent coalition member – Gerrit Zalm, Minister of Finance and former Director of the Central Planning Bureau – reiterated his sympathy for basic income as a privacy-friendly and low-cost way of overhauling the elaborate Dutch social security system, as shown above in the scenario of Balanced Growth, which Zalm authored. To be sure, the social liberal coalition also had its determined opponents. In particular Ad Melkert, the social-democratic Minister of Social Affairs and Employment, was quick to register his disagreement in no uncertain terms. Melkert, whose name nowadays graces no less than four newly created types of subsidized jobs wrote:‘the freedom that basic income seems to offer amounts to a definitive separation of outsiders from insiders in the labour market’.18 To contain an all too heated public debate within the coalition, Prime Minister Kok had to calm things down. In a press conference, he stated that the policy option of basic income could not be ruled out in advance, but that it was to be seen as one of several possible alternatives in a future discussion (though not necessarily in 1996, under the responsibility of the present government). Nonetheless, the ensuing months had the media speculating on the probable shape of the 1996 agenda.19 According to most commentators, any viable system of social security would at least have to combine the following three objectives: it should induce increased participation of the low-paid and relatively unproductive part of the labour force; it should be compatible with the rapidly growing variety of employment modes, in particular short-term flexible labour contracts; and it should effectively prevent poverty, by durably providing a social minimum to those out of work.Three policy alternatives were identified: 1. a refurbished version of the present system: leaner on benefits, meaner on work requirements and more generous on job subsidies, but holding on to the existing two-tiered structure of minimum-wage-linked universalistic social assistance benefits and collective insurance for workers. 2. a so-called mini-system, especially promoted by the VVD, which is a uniform means-tested safety net at a sharply reduced social minimum, and privatization of collective worker insurance. 3. gradual build-up of a basic income in the income tax system for all adults, at 50 percent of the social minimum for families, with a gradual phasing out of the min209
Basic Income on the Agenda imum wage, and indexing to per capita income instead.This basic income would have to be supplemented to safeguard the social minimum for certain groups, such as single old-age pensioners.20 In this anticipation of a debate to come, and with the backing of two prominent Ministers, it seemed plausible that the basic income alternative would stand some chance of becoming a serious candidate for reform. With its drawback of high cost mitigated by a gradual introduction, the proposal could claim to combine the three above-mentioned objectives in the most simple and effective way. Despite the vehement objections of Melkert, the Christian-Democratic opposition, and VVD-leader Bolkestein, the basic income proposal was indeed considered to be the most realistic one in early 1995 by leading Dutch newspapers, its radical features needed to be appreciated against a background of unstable employment in the long run.As an editorial in NRC Handelsblad (23-12-1994) remarked, after stressing the participatory advantages of unconditional income, the idea of basic income ‘erases the conventional thought that social benefits are merely temporary, in anticipation of one’s next stable job. This message is a difficult one to accept, and politically difficult to get across. It touches the ethical core of our welfare state’. 1996: Back to work! However, by the time of the annual review of the budget in September 1995, it became apparent that the social-liberal coalition had no intention of starting to prepare for a fundamental reform discussion in the summer of 1996. In retrospect, it seems to have made its choice for the refurbished version of the existing system well in advance. It is most likely that this was due to the fact that employment growth was rapidly reducing the unemployment figures, and that the need to increase the rate of labour participation became more evident within the coalition. It was time to get back to work, and to stop speculating about reforms.This could be read most clearly in the official publication on employment and social policy (Sociale Nota, 1996).The tenor of this influential document is aptly summed up by chapter titles such as:‘Work,Work,Work’,‘Searching for Employment’ and ‘A Working Social Security’.21 As mentioned above, Minister Melkert had become the undisputed champion of subsidized jobs. He initiated an elaborate plan to create 40.000 public sector jobs for long-term unemployed (estimated cost: 1.6 billion guilders), provide legal opportunities for employers to hire long-term unemployed below the statutory minimum wage, and conduct experiments with different forms of workfare.22 Though even Melkert himself admitted that these schemes are quite costly, and tend to run into serious implementation problems, the political climate of response was prepared to grant him the benefit of the doubt. With Melkert’s jobs of last resort, workfare-type measures were introduced into the Law of General Assistance in January 1996.These concerned the imposition of sanctions by local benefit centres on those unwilling to take part in a schooling or job ‘trajectory’. This new law considerably tightens work requirements. Categories previously exempt, such as single mothers with children over five years of age were now required to search for a job or accept some form of public employment.23 Also, the income norm for single persons was scaled down from 70 percent to 50 percent of the family social minimum, with discretionary powers for local centres to provide supplements for the needy.24 Finally, other parts of social security were tight210
Clues and Leads in the Debate on Basic Income in the Netherlands ened by building in additional means-testing (provisions for widows and next of kin), or were scrutinized for further cost-cutting and work incentives (wage-related insurances for sickness and disability).25 It could no longer be denied that the social-liberal coalition government was involved in an extensive reconstruction job on the existing system, and that it was wasting little time. The promised reform discussion swiftly receded into the background. Frank de Grave, the newly appointed liberal State Secretary of Social Affairs, officially stated his willingness to drop the idea of a ‘mini-system’ despite protests in his party.26 Also, the annual party conference of D66, held in March 1996, withdrew its previous support for the basic income reform strategy, retaining only the promise not to close the door on the idea for good.This was reminiscent of the 1994 PvdA election program’s stance of keeping open the basic income option, as a future possibility of a ‘more relaxed organization of labour’ (we shall comment on this below).Thus, in this episode, the more serious consideration given to basic income proposals, after the idea had gained a new infusion of respectability (following Scanning the Future), revealed a simple bottom line: on the ruling political view, the Dutch electorate was held to be in favour of retaining the features of the existing system, and considered to support the ethic of paid work.27 In a way, as we shall show later on, it may have been salutary for the prospects of basic income that the reform discussion of 1996 was postponed.The idea would not have survived political scrutiny as a major policy alternative. The pragmatic turn of basic income Despite the continuance of a principled debate on the moral desirability of unconditional income guarantees,28 the state of the discussion in the Netherlands during the second half of the 1990s had a resolutely pragmatic orientation. It focused on empirical questions that bear directly on the political chances of introducing (some kind of) basic income (within some time span). These qualifiers in parentheses are important, given the proliferation of forms and transitional scenarios, only some of which have been discussed, up to now. With respect to the long-term impact of a basic income on behaviour, an interesting discussion took place between professional economists in the fortnightly journal Economisch Statistische Berichten, in early 1995. Following an admirably clear exposition of basic income’s potential advantages, professors Lans Bovenberg and Rick van der Ploeg (who also figured as the financial spokesman of the PvdA in Parliament) took a firm position against the proposal with a sophisticated form of the ‘dilemma of cost versus protection’.Their most provocative thesis is that over time, the introduction of a substantial unconditional income in the form of a negative income tax – which would offer adequate social protection but imply high marginal tax rates – would undermine the incentives of young people to invest in skill and education, leading them to take up undemanding and often undeclared small jobs during their formative years.According to the authors, ‘these developments threaten the most important capital good in a knowledge-intensive society: human capital and the work discipline of future generations’. In the long run, therefore, basic income would tend to undermine its own financing base. The thesis is not entirely new,29 and it was swiftly attacked by economists De Beer (1995), and Nelissen and Polk (1995), who stressed the need to take account of the 211
Basic Income on the Agenda empirical evidence on schooling and skill formation, and argued that two counteracting forces work to lower the cost of acquiring human capital: (1) students would receive a basic income which covers the subsistence cost of studying, whereas most of them now have to incur large debts to finance their education; (2) with lower net wage rates due to higher tax rates, the foregone earnings of full-time schooling would decrease.This exchange of views is politically significant, because it shows that the state of the discussion on basic income among economists has been shifting from the familiar short-term effects on labour supply to more qualitative (and necessarily speculative) long-term effects. Given the influence of economists on political debate in the Netherlands, this means that the debate on the more conventional issues has been waged with some success by those who have promoted basic income over the years, and is able to address more difficult issues which would not have arisen at all, failing this success. The new wave of pragmatism can be also illustrated with reference to another form of the ‘dilemma of cost versus protection’, in the context of more directly political debates on partial versus full basic income that were conducted since the concept of partial basic income was introduced in Safeguarding Social Security. The dilemma is expressed as the ‘impossibility theorem’. It says that a basic income is either too low to be socially acceptable, or too high to be economically feasible.This is a favourite debating point of social democrats such as Melkert (who became the parliamentary leader of the Labour Party in the second social-liberal government, headed by Wim Kok, in 1998). The response of basic income advocates to this putative dilemma raises complicated issues, which will have to be sorted out in the coming years.30 First of all, a partial basic income (whether it is seen as permanently partial as the WRR envisaged, or as a stage on the way to a full basic income) does not stand on its own. Rather, it is to be regarded as the unconditional component of a new system, which offers social protection up to an agreed level of social minimum, and which is more in line with the diverse realities of a modern labour market. However, the difficulty of this response is that the beneficial effects of the unconditional component, as well as the total cost of the new system – including its ‘supplementary’ conditional part – will ultimately depend on a fundamental question.This question concerns the desired level of the social minimum over time, relative to average income. It is this issue which decides what a ‘full’ basic income would ultimately amount to, and thus what it would cost to maintain it, in time.31 Secondly, as was made clear once again at the Conference ‘A Future Welfare State with Basic Income’, the behavioural impact, and therefore, the economic feasibility, of any given basic income level crucially depends on the method of its financing, in particular the impact on labour cost.32 This point is usually overlooked by those who put forward the cost versus protection dilemma. However, this second response again reveals a problem for the basic income movement: the existence of a strategic trade-off. Either one tries to finance an unconditional grant by the traditional means of income taxation, implying acceptance of the adverse effects on labour supply occasioned by higher marginal rates of tax, hence a lower sustainable level of the grant – or one goes along the ambitious route of trying to introduce basic income along with a radical change of taxation and financing of social security, implying better prospects of sustaining a high level of basic income, but at the cost of having to provide independent arguments for two fundamental reforms at the same time. The dangers of this second route have been amply illustrated by the fate of Safeguarding Social Security, as we have shown earlier. 212
Clues and Leads in the Debate on Basic Income in the Netherlands Thirdly, and once more concerning the ‘impossibility theorem’, some long-term trends make it easier to introduce a basic income, or make its introduction more urgent. Since World War II, most Western countries have experienced continuous growth in GDP per capita, a decrease in the average number of hours worked, a gradual improvement of the conditions of employment, an increase in the female participation rate, and an increase in the number of disabled and early retired. All these factors facilitate the implementation of a basic income. High unemployment exerts pressure on working hours, reducing them, so as to distribute the total amount of employment over more people. Thus, as time goes by, the norm of full employment itself becomes set at a lower standard of annual working time.This trend motivates the use of a basic income of an appropriate level because basic income increases the number of persons that are looking for smaller-sized jobs, and can therefore help achieve full employment at the lower standard. Furthermore, the gradual improvement of the conditions of employment, combined with the shortening of the working week, makes it all the more feasible to reduce wage income as a necessary compensation of the ‘disutility of working’. And finally, what makes the introduction of a basic income so expensive, under current conditions, is the large number of women who do not perform paid work, and are not entitled to a social security benefit under present arrangements. If the female participation rate continues to rise in the future, then it will become less expensive to finance a basic income by replacing conditional entitlements, provided that a basic income does not deter women from entering the labour market. Conversely, if the proportion of disabled and early retiring persons in the population grows, then the collective financing cost of this is reduced by a basic income floor, in the same way that the capital cost of pension financing in the Netherlands is reduced by the state pension, (which effectively is a basic income over age 65, as we have noted before).33 As we shall see below, these trends have been appreciated to some extent by forces on the political Left, despite the commitment of the social-democrats in the coalition to the conventional notions of full employment and raising participation in paid work. The non-governmental Left: tax credits and basic benefits. On the non-governmental Left (the Green party GroenLinks, and the Trade Unions), the period under consideration was marked by a reticence to take active part in the media confrontation between ‘ideal type models’ of basic security, such as depicted in Figure 1 of the Introduction to this volume. However, new proposals were developed, which might be seen as first steps towards a genuine basic income. In its platform for the 1994 election, GroenLinks announced a plan to turn the personal income tax exemption into a small refundable tax credit (Dfl. 280 per month for each adult). In November 1995, its Executive Committee decided to re-label this as ‘foot income’, and raise the amount to Dfl. 500 per month, to be financed additionally from environmental taxes. Then, in its June 1996 Congress, the party proposed to raise the foot income another hundred guilders, so as to reach about two-thirds of the current minimum income for a single person.The party seems to be currently undecided whether it wants to proceed along the route of gradual introduction of a ‘full’ basic income at social minimum level, or stop at some kind of updated form of the 1985 WRR plan for a partial basic income. But whatever the case may be, it seems that the Green Left party has moved to a position which is far more favourable to basic income than might 213
Basic Income on the Agenda have been expected. In view of the party’s increasing popularity, and its wish to take part in a future social-liberal coalition, this is not unimportant, even though it remains to be seen what would happen if these governmental aspirations were to be realized. The union approach to basic income has always been strongly concerned with the issue of labour participation. In a discussion paper launched at the end of 1995, the Trade Union Federation (FNV) critically reviewed the social-liberal government’s performance on social policy, as an introduction to a new proposal of its own. In the form of a refundable tax credit, their so-called basic benefit (‘basisuitkering’) would again start by replacing the income tax exemption, and then rise gradually up to 50 percent of the minimum wage in 2010. Like a basic income, it would be an individualized entitlement, whose size does not depend on family earnings. But unlike basic income, this benefit would be restricted to people who either have a job, actively seek paid work, or are engaged in care work within the family. The basic benefit plan was favourably reviewed by the Central Planning Bureau, which praised its effects in creating jobs in lower segments of the labour market.34 Within trade union circles, the plan may well represent a compromise between long-standing opponents and advocates of a pure basic income. In fact, the plan closely resembles the UK proposal for a ‘participation income’, developed by Tony Atkinson in the early nineties (Atkinson, 1993). Seen from a strategic perspective, such proposals may constitute a different route to a full basic income. Instead of starting with a small unconditional income, which is then raised to cover basic needs, this strategy starts by making a basic needs-covering income accessible, subject only to the most entrenched of all conditionalities, the ‘reciprocity’ requirement of willingness to do (un)paid work. The governmental Left: towards a relaxed labour market In the same period, two publications (1994; 1997) by the governmental Left (the Labour Party) expressed the need to relax the organization of work. The normative position is that what makes participation in ‘work’ a strategic good for individual wellbeing and agency is not paid work as such, but rather a flexible mix of paid work and unpaid activities, which persons should be able to vary over the course of their lifetime.35 The empirical premise behind the call for a ‘more relaxed organization of work’ was expounded in the Labour Party’s election programme of 1994: the prospects for full employment in the long run are uncertain, but in any case, the demand for the work of the lesser talented and lower skilled will in all probability continue to present employment problems at the low end of the labour market. From these normative and empirical premises, it follows that it is both prudent and ethically defensible to broaden the concept of lifetime work by admitting that ‘all paid and unpaid activities actually contribute to participation and integration’. In other words, the concept of a relaxed organization of work holds that the ‘intrinsic’ good of labour participation must be taken to include the value of unpaid activities in voluntary work, the upbringing of children, and neighbourhood care.36 The desire to achieve a more relaxed labour market qualifies the conventional fullemployment policy goal. ‘Full employment’ is now seen as a matter of providing lifetime access to paid work, while at the same time ensuring that people will be able to leave the labour market for longer periods, and be able to work shorter hours, even in a full-time job.This means that the corresponding objectives of social security need to be adapted in the direction of a flexible system of benefit entitlements, in both tiers of 214
Clues and Leads in the Debate on Basic Income in the Netherlands the Dutch system. As the 1997 party document Time for Participation shows, the ideas that the Labour Party has been discussing internally reflect a keen awareness of adapting social security to this relaxed conception of full employment. In the sphere of social insurance, this is to be accomplished by building in contribution-financed periods of home or study leave into the insurance package. In universal social minimum provisions, the document goes a long way in the direction of the unions’ proposed basic benefit system, which was just mentioned. In some ways, this development runs counter to the Party’s governmental stance in the reform debate, which is of course much more oriented to the uptight position of maximizing people’s lifetime participation in paid work, for men and women alike. But given the stridency of the drive for ‘Work, Work, Work’, one might expect that if these tensions in social democratic thinking are to be resolved in the long run, then it is likely that the relaxed position will have to become more influential. If so, the climate for basic income will become that much more hospitable.
1997-2001. Basic Income: Implementation by Stealth? Due to the success of the ‘Lowlands-Economy’ – notably its employment growth, its steadily decreasing budget deficit, and its combination of rising profits with the maintenance of still generous social security standards – public discussion of basic income in the Netherlands has subsided. In so far as there has been any discussion at all recently, it is a repeat performance. But mainly, to return to our distinction of the political agenda in the broad and the narrow sense, basic income is strictly off the agenda in the broad sense, as one can see from the curvature of Figure 1. Yet, paradoxically, basic income is on the political agenda in the narrowest possible sense, though admittedly in a small way. How can this be? The answer is the recent decision (as mentioned at the beginning of this chronicle) to introduce a tiny basic income in the tax system, without one moment mentioning it as such. In February 2000, Parliament agreed to introduce a personal refundable tax credit of Û 1,507 (Dfl. 3,321) per year for all adult residents, except students, which is to take effect as of 2001. Over and above that, those earning 130 percent of the minimum wage are given an additional variable tax credit of up to Û 803 (Dfl. 1,847) per year.These measures are part of a total package to reform the tax system (see Tax Reform 2001 by the Ministry of Finance, 1999). The tax reform is quite wide ranging, and it was launched by the second social-liberal coalition under the slogan ‘Broadening, Greening and Shifting’. Broadening refers to the strengthening of the tax base by reducing the number of tax-deductible items (e.g., mortgages on the second house, interest on loans, annuities, etc.). Greening means that environmental taxes are doubled, although they still remain quite modest. Shifting refers to two things: first, direct tax rates (on all earned income) are reduced, while indirect tax rates (VAT) are raised; and secondly, related to the broadening objectives, income from labour and income from capital are henceforth subject to different rates of tax, with capital income treated very favourably. The introduction of the personal tax credit is part of the reform that deals with wages and salaries. It replaces the current general tax allowance, which has always been transferable from non-earning partners to the breadwinner within the household.Actually, 215
Basic Income on the Agenda Table 1:1Tax Table Tax Reform 2001 Present tax system Tax allowance (transferable)
3,900
Tax credit (refundable)
1,507 (+ 803 if working)
1st tax bracket + tax rate
[3,900; 21,350] at 37%
Two lower income tax brackets
[0; 14,027; 23,529] at 32% and 36%
2nd tax bracket + tax
[21,350; 46,957] at 50%
Middle income tax bracket
[23,529; 48,869] at 42%
3rd tax bracket + tax rate
[46,957; at 60%
Higher income tax bracket
[48,869; at 52%
VAT
17.5%
VAT
19%
rate
*
Tax reform proposal
]
]
All expressed in Euro.
the level of the tax credit corresponds to the tax advantage of the general allowance for low income earners (which is equal to the tax allowance times the tax rate of 37.5 percent, in the first income bracket). For single-earning families in the higher brackets, who face a marginal tax rate of 50 percent or 60 percent, this replacement would constitute a significant loss of net income. Income neutrality of the tax reform is however attained by reducing the marginal tax rates across the board (see Table 1). The micro-economic reasons for introducing the refundable tax credit are twofold. Firstly, in the present system dependent partners of breadwinners have only a small financial incentive to perform paid work, due to the above-mentioned transferability of the tax allowance.This makes the implicit marginal tax rate on income earned by the dependent partner equal to the marginal tax rate of the breadwinner. Introducing an individualized tax credit removes this adverse effect on labour supply. Secondly, the replacement of transferable tax allowances by tax credits generates considerable additional tax receipts (approximately Dfl. 2.3 billion), which can be used to lower tax rates on wages and salaries. As noted above, the reduction of tax rates is such that the negative income effects of the middle and high income earners are more or less compensated. For this reason, the cutback in marginal tax rates is much higher in the middle and higher income brackets, as Table 1 shows. Despite the lack of support for a basic income among political parties (excepting the Green Left party, which is in favour of a partial basic income, as we have seen), the tax reform outlined above is a major step towards the implementation of a substantial basic income. Why? First, the instalment of a nearly universal and refundable tax credit means that some fundamental objections against basic income have been waived. For, in the new system, individuals (again, except students, who receive a small universal study grant) receive an unconditional income entitlement through the tax system, which is characteristic of a basic income. Secondly, the tax reform is a definite step towards a tax system in which the unit of taxation is the individual, not the household.This can also be considered as an important prerequisite of a basic income scheme, when it takes the form of a negative income tax. So, even though the motives behind the proposed tax reform have little to do with the principled emancipatory or justice-oriented motivations that advocates of basic income usually deploy, the government is well on the way to conceding that a basic 216
Clues and Leads in the Debate on Basic Income in the Netherlands income type scheme is at least part of a rational method for attaining fiscal individualization, a flexible and dynamic labour market, and a decent minimum income security for all. However, this concession is entirely implicit, since in defending the tax credit, the social-liberal coalition has kept studiously silent about the fact that the measure entails an unconditional income. Given the political preference for the overt productivism of the Lowlands-Economy, and given a Zeitgeist which strictly favours tightening rather than relaxing work requirements on benefit recipients, it cannot be openly admitted that a basic income constitutes part of the new taxation package.The present mood among policymakers, and among the political parties who voted for the tax reform, is that one is allowed to name the tax credit as one wishes, as long as it is not called a ‘basic income’.
Conclusions With this overview of the Dutch discussion on basic income from the early 1970s to the turn of the century in mind, we briefly relate the different episodes to different strategies for bringing basic income onto the political agenda, and assess which of them has been most successful for squeezing basic income into the realm of political possibilities. Looking back, three strategies can be distinguished in the Dutch debate: (1) the royal way: arguing for a full and avowedly unconditional basic income, by a careful exposition of the critical power of the notion of ‘decoupling of income from work’, and then going on to point out the attractions of concrete proposals for a emancipatory and redistributive reform policy; (2) arguing for a partial basic income, as the linchpin of a problem-solving social engineering strategy; finally, (3) the strategy of bringing in basic income by the support of measures that are not associated with the notion of unconditionality, but in practice serve to loosen the link between income and paid work.This strategy we call implementation by stealth. It may be argued that these strategies have been applied sequentially, in the order we just presented them. Everything started with the strategy of the royal way, following professor Kuiper’s ethical appeals in the mid-1970s.The strategy was the dominant one until 1985. Predictably, because of the novelty of the idea it tried to promote, it had little real impact, apart from triggering an important discussion on the fundamentals of the welfare state.The achievement of the royal way was to place basic income firmly on the agenda of public discussion. But it soon became apparent that the royal way was not suitable for getting basic income even close to the legislative agenda, because unconditionality, and ‘decoupling’, are highly controversial in a society with a strong work ethic, and invoke extremely strong gut feelings of opposition. As we have suggested, however, the sudden rise of unemployment in the early 1980s created a climate of urgency, which motivated governmental advisors to explore the problem-solving potential of the idea. Governmental advisors have been largely responsible for turning basic income into an instrument of practical policy in the Netherlands, within a social engineering perspective. But there again, the open advocacy of unconditional entitlements proved to be a bridge too far, this time perhaps for opposite reasons, to wit, that the controversial nature of basic income was now underestimated by its advocates, and thus remained undefended against moral opposition.When the Scientific Council for Government Policy (WRR) made partial basic income a prominent element in its 217
Basic Income on the Agenda grand design of reorganizing the social security system, it probably did not fully realize what the response would be. The direct success of this strategy has thus been strictly limited as well, even though the problem-solving potential of a partial basic income was explored far more successfully, though also more loosely, in the 1992 scenario study Scanning the Future of the Central Planning Bureau. However, indirectly, the very failure of the social engineering approach may well have made it possible to achieve the modest, but real, breakthrough of partial basic income in 2000, by including a genuine element of negative income tax in the tax reform. It made policymakers realize that while unconditional grants can be useful if they are not too large, one should not emphasize the element of ‘giving away something for nothing’. It is rather difficult to judge whether implementation by stealth, the third strategy which we identified above, will play any further role in Dutch politics.The reason for this is that it is hard to tell whether the strategy is a proper strategy in the first place, that is to say, a publicly accountable way of choosing policy means to achieve given political ends. From a Machiavellian point of view, it may of course be eminently rational to try to bring in a reform by the back door, if the front door happens to be closed. But the problem is that the back door, so to speak, may either be too small to allow the whole package to pass through, or it may be that once part of it is inside, it can easily be thrown out through the same door again, without anyone caring much, or even noticing. Outside observers of the Dutch scenery of social policy may wonder what the fuss is about, given that the popularly supported state pension in the Netherlands is already granted independently of whether one has worked or not during one’s lifetime. But the point is that this pension scheme (which was extremely controversial at the time) could be introduced precisely because everyone was assumed to have worked between age 16 and 65 as a matter of course.To exempt the age group of ‘able-bodied’ even partly of the duty to work is a quite different matter.Thus, for the proponents of basic income at least, an alternative mode of looking at the modest result of twenty years of agonizing and campaigning is perhaps to admit that things often do not happen in the way one expects, but that it is important to cash in on them, if and when they do happen. From this more patient point of view, there may be reasons to be moderately optimistic, despite the dominance of the productivist attitude to social policy at present. In the near future, social security, in both tiers of the Dutch system, is meant to be implemented by means of compulsory ‘instatement contracts’.37 This approach will involve a high degree of tailoring individual duties to accept work, retraining or job search, in which people’s needs and capabilities are to be taken into account.This system may be very costly to administrate fairly and efficiently, however, in the cases of less employable persons who have reason to assume that the instatement contract holds no real prospect of improving their lives.Their ‘needs and capabilities’, then, might benefit more from exemptions from paid work, or from a more substantial refundable tax credit. Some experience with the contractual approach will no doubt offer administrators and policymakers ways of finding out, by trial and error. As remarked in the Introduction to this book, the wish to move towards a more ‘relaxed labour market’, with more scope for combining paid and unpaid work over the life cycle, is starting to be realized only in social insurance, in the form of paid parental leaves, or collective agreements to save for going on sabbatical leave.As we also noted earlier, such developments are highly compatible with the logic of a ‘participa218
Clues and Leads in the Debate on Basic Income in the Netherlands tion income’. However, as yet, they still remain to be introduced into the domain of basic social security.This may take some time. At present, it seems that those who are far removed from the labour market are perceived as people who must be disciplined, whereas those holding ‘proper jobs’ are apparently assumed to possess the right kind of work-ethic. This makes them eligible for a more relaxed regime of discipline, which includes organized exemptions from paid work. But it may well be that running viable contracts of instatement will ultimately necessitate similar arrangements in basic security as well, slowly at first, as exceptions to the rule, or perhaps concealed as income legitimized by the promise of some kind of useful activity. Perhaps, after the trick of the tax reform has been repeated in several other fields, the Netherlands will after all be having something like a basic income, though by then, no one may remember what the term was supposed to mean.
References Atkinson,A.B., (1993), Participation Income, Citizen’s Income Bulletin 16, 7-11. Beer, P. de (1988), Werkloos toezien? Drie scenario’s van de arbeidsmarkt (‘Being Jobless.Three Scenarios for the Labour Market’), Deventer:Van Loghum Slaterus. — (1993), Het verdiende inkomen, Houten: Bohn Stafleu Van Loghum. — (1995), Is het basisinkomen een utopie?, Economisch Statistische Berichten 80 (4003), 311-2. Bovenberg, A.L. and F. van der Ploeg (1995), Het basisinkomen is een utopie, Economisch Statistische Berichten 80 (3995), 100-4, and Naschrift, idem, 80 (4003), 314-6. CPB (Centraal Planbureau) (1992), Nederland in drievoud; een scenariostudie van de Nederlandse economie 1990-2015 (‘Scanning the Future’),The Hague: SdU. CDA (Christen-Democratisch Appel) (1995), Nieuwe wegen, vaste waarden; aanzet tot een strategisch beraad binnen het CDA, Report,Amsterdam: CDA. DIS (Denktank Intermediaire Structuren) (1995), Keihard sociaal. Werk, inkomen en de stadsstaat, Oss: DIS. FNV (Federation of Netherlands Trade Unions) (1995), Tijd voor nieuwe zekerheid, Amsterdam: FNV Press. Heij, J.J. et al. (1993), Basisinkomen in drievoud,Amsterdam: Het Spinhuis. Kuiper, J.P. (1975),Volwaardige arbeid, ook voor mindervaliden, AVO, December, 2-9. — (1976), Arbeid en inkomen: twee rechten en twee plichten, Sociaal Maandblad Arbeid, 503-12. — (1977), Samenhang verbreken tussen arbeid en levensonderhoud, Bouw 19, 507-11. — (1978), Denkoefeningen omtrent arbeid en inkomen, Anders met arbeid, Scheveningen: Stichting Maatschappij en Onderneming. — (1980), Aspecten van een geïntegreerd inkomens- en werkgelegenheidsbeleid, Sociaal Bestek, no. 14, 257-9. — (1982), Een samenleving met gegarandeerd inkomen, Wending,April, 278-83. Ministry of Finance, 1999, Tax Reform 2001, Den Haag: Sdu. Ministerie van Sociale Zaken en Werkgelegenheid (1995), Sociale Nota 1996, appended to the Budget 1996 of the Ministry of Social Affairs and Employment, The Hague: Sdu. Nelissen, J. and S. Polk (1995), Ervaringen elders, Economisch Statistische Berichten 80 (4003), 312-3.
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Basic Income on the Agenda Pels, D. and R.J. van der Veen (1995), Het basisinkomen: Sluitstuk van de verzorgingsstaat?, in: R.J. van der Veen and D. Pels (eds.), Het basisinkomen: Sluitstuk van de verzorgingsstaat?, Amsterdam:Van Gennep, 7-52. PvdA (Partij van de Arbeid) (1992), Niemand aan de kant, Report of the Wolfson Commission, prepared for the Congress of March 1992,Amsterdam. — (1994), Wat mensen bindt, Election Programme of the Dutch Labour Party, Amsterdam: PvdA. — (1997), Sociale zekerheid bij de tijd (‘Time for Participation’), Discussion note, prepared for the Congress of February 1997,Amsterdam: PvdA. Roebroek, J.H. and E. Hogenboom (1990), Basisinkomen alternatieve uitkering of nieuw paradigma?,The Hague: Ministerie van Sociale Zaken en Werkgelegenheid. Smakman, S. (1996), Op weg naar de heilsstaat, Haarlems Dagblad, 26/31-3-1996. SCP (Sociaal en Cultureel Planbureau) (1994; 1996), Sociaal en Cultureel Rapport 1994; 1996, Rijswijk: SCP. SWB D66 (Stichting Wetenschapelijk Bureau D66) (1994), Een zorg meer of minder, De Democraat 27: 8, 10-31. Theobald, R., Gewaarborgd inkomen in een vrije maatschappij: economische en sociale gevolgen van de automatisering (Dutch Translation of ‘Free Man and Free Market’ (1963) and ‘The Guaranteed Income: Next Step in the Economic Evolution’ (1966)), Amersfoort: Stichting Werkgroep 2000. Van der Veen, R.J. (1995), Morele weerstanden blokkeren basisinkomen, NRC Handelsblad, 10-1-1995. — (1999), Participate or Sink:Threshold Equality Behind the Dykes, Acta Politica 34, 35181. Van Parijs, Ph. (1995), Real Freedom for All, Oxford: Oxford University Press. Varkevisser,A. (ed.) (1996), In de basis voorzien,The Hague: SWB D66. Vereniging Basisinkomen (Netherlands Society for Basic Income) (1995). Hoe? Basisinkomen Zo,Amsterdam:Vereniging Basisinkomen. Voedingsbond FNV (1981), Met z’n allen roe en in de woestijn: een tussenrapport over het losser maken van de band tussen arbeid en inkomen, Utrecht. Vrijhoef,W. (1995), Basisinkomen op Congres Nieuwe Stijl, De Democraat 28: 1, 3. WRR (Wetenschappelijke Raad voor het Regeringsbeleid) (1981), Vernieuwingen in het arbeidsbestel, Report no. 21,The Hague: Staatsuitgeverij. — (1983), Beleidsgerichte toekomstverkenning, deel 2: een verruiming van perspectief, Report no. 25, Den Haag: Staatsuitgeverij. — (1985), Waarborgen voor zekerheid: een nieuw stelsel van sociale zekerheid in hoofdlijnen (‘Safeguarding Social Security’), Report no. 26,The Hague: SdU. — (1997), Van verdelen naar verdienen.Afwegingen voor de sociale zekerheid in de 21e eeuw, (‘From Sharing to Earning’), Report no. 51,The Hague: SdU.
Notes 1
Political documents are classed as government publications (ministries, standing advisory organizations) and publications issued by political parties, unions and employer organizations. Scientific documents, besides books and journals, include papers presented at seminars, and specialized newsletters. Press documents are mainly national newspapers and periodicals
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Clues and Leads in the Debate on Basic Income in the Netherlands items, and in some cases transcriptions of items on radio or telex. Kuiper (1975; 1976; 1977; 1978; 1980; 1982). The pacifist socialists opted for a non-means tested social minimum, conditional on the willingness to seek employment after redistribution of labour would have been achieved by a 25-hour working week.This proposal thus accepted a (de facto) unconditional income only as an emergency measure, during a short transition towards a state of ‘full employment’ for men and women alike. 4 The status of the WRR as an independent think tank of the government is to provide scientific information about the long-term developments that may have a serious impact on society, and to formulate the major bottlenecks and problems in order to give a timely overview of the major policy issues and policy alternatives.As a matter of fact, the studies of this body are of high standing and have had a considerable influence on the policy measures that have actually been implemented in the past, following the advice of the WRR. 5 The Council asserted that everyone able to understand the results of the soccer league is also able to understand the new system. 6 For every year that levies are paid, one is entitled to half a year of insurance. 7 Employers would forfeit the ‘partial basic income tax credit’ if they employ workers informally, and for labour intensive work only wage cost additional to partial basic income would have to be paid to make it worthwhile. 8 Partial basic income (PBI) is the difference of the social minimum for a two person household (SM2) and a single person household (SM1). SM1 is 70 percent of SM2, so the PBI is set equal to 30 percent of SM2.The means-tested general assistance benefit, which has to be paid out to top up the PBI, is GI. It is equal to 40 percent of SM2. For a single person household on welfare, total income is PBI + GI = 70 percent of SM2. For a two person household on welfare total income is 2 PBI + GI = 100 percent of SM2. Whatever the household composition, only one GI-benefit is provided per household.Thus by choosing the level of PBI in this way, paying out differentiated levels of means-tested income has become unnecessary, while the required differentiation in social minimum entitlements between households is preserved. 9 NRC Handelsblad 25-6-1985. 10 ‘The plan is a construct of the study room, with no connection to reality, financially completely infeasible, now and in the future’ (De Telegraaf 21-6-1985) 11 Partial basic income would increase social expenditures, mainly because large groups (housewives, the self-employed, workers), who would otherwise not be entitled to any benefit, would now be receiving the partial basic income.The savings that the WRR plan might as a whole have in the long run could not be calculated easily, while these increases in cost stood out quite visibly. 12 The move of the WRR to combine partial basic income with the abolition of the minimum wage was new and ingenious.Without a minimum wage, full-time workers with an earning capacity below the social minimum would have to claim supplementary general assistance, which is considered to be socially unacceptable in the Netherlands. Partial basic income precludes this, and is thus a stepping stone (a non-earmarked wage subsidy) for the least productive workers. However, what the unions pointed out was that the least productive workers would be insufficiently protected by a partial basic income of the proposed size, given that wage rates might decrease significantly across the board. From this point of view, it would be more justifiable to lower the minimum wage correspondingly, rather than abolish it completely.
2 3
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Basic Income on the Agenda 13 This consensus emerged despite the fact that working week reduction in order to distribute the available jobs over more people has the disadvantage that the more productive workers are forced to work less to provide less productive workers jobs. Besides this efficiency loss, there is the serious danger that employers react with further rationalization of the production process (more machines and computers) instead of hiring more workers. 14 Although the report clearly expounded the direction of the effects, no estimates were given for the magnitudes of the changes on economic variables. 15 This coalition, which is in its second term of government now, consists of the liberal party VVD and the Social-Democratic PvdA (to which Prime Minister Wim Kok belongs), with the smaller left-liberals D66 wedged in between.The left-liberals have been especially instrumental in forging the coalition, and thus removing the Christian-Democrats from their habitual place at the centre of power in Holland. Currently, however, they are having large difficulties in maintaining their political identity. 16 See the main conference document in SWB D66, 1994, and see Vrijhoef, 1995. The main contributions have been published in Varkevisser (ed.), 1996. 17 Quoted in Trouw, 6-3-95. 18 Quoted from the Volkskrant, 24-12-1994 19 See for a detailed review Pels and Van der Veen, 1995: 7- 40. 20 This is the most current, but less ambitious, of the two variants of a basic income system set out in the new information brochure of the Dutch Basic Income Society, see Vereniging Basisinkomen, 1995. The other variant aims at a basic income of 100 percent of the social minimum for a single person. 21 This may be compared to the coalition’s social battle cry, often repeated by Wim Kok in 1996:‘Werk, werk en nog eens werk’ (Work, work, and work once more) 22 Sociale Nota 1996, Ch. 5. 23 The present government proposes to extend this measure to single parent families with children under five years of age: they are expected to work 24 hours a week, provided that child care is available. 24 A lively inventory of the changes is given in Kroon and Vinckx in ‘De ambtenaren blijven praten totdat de bijstandsmoeders aan het werk willen’ (‘case-workers will keep talking until the single mothers go and look for a job’), NRC Handelsblad, 21-12-1995: 7. 25 Not all of these developments can be placed unambiguously in the first category of policy alternatives mentioned under ‘High hopes for basic income’. Stricter means-testing and exemptions of the minimum wage law fit into the mini-system strategy as well, whereas replacement of contributions by income taxes to finance state pensions, another measure announced by government in response to demographic pressures, is compatible with a basic income strategy. It should be noted, moreover, that some leading proponents of basic income took up a more relaxed position with regard to (non-coercive forms of) workfare, which they were willing to envisage as a means of easing the transition to a basic income system. See in particular DIS, 1995: 72-75. 26 According to an interview in Algemeen Dagblad, 13-8-96. It should be noted, however, that VVD-leader Bolkestein has not endorsed de Grave’s statements. The liberal party probably remains in favour of the mini-system option, which it has been consistently promoting since 1984. 27 A public opinion survey conducted by the Social and Cultural Planning Bureau in 1993 showed that 41 percent of the Dutch population would support a mini-system, only 19 percent a partial basic income (along the lines of the 1985 WRR-proposal), and no less than 59
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28
29 30 31
32
33
34 35 36 37
percent would be in favour of a workfare system. See SCP, 1994, Ch. 6, and the recent analysis of these three alternatives in Vrooman and De Kemp, 1995. The survey was repeated in 1995, with closely similar results (see SCP, 1996). See De Beer, 1993; Heij et al., 1993; and Van der Veen and Pels, 1995. These works have attracted little attention in the Netherlands. Despite their close attention to policy issues, they may be perhaps said to fit better into the international philosophical debates on the ethics of basic income, which have been intensified after the publication of Van Parijs, 1995. It was raised earlier, and discussed in depth, by Erik-Jan van Kempen in Heij et al., 1993, Chs. 7 and 9. A highly readable journalistic overview of these various issues for the general public is found in Smakman, 1996. The importance of this point is particularly clear from comparing the scenarios ‘European Renaissance’ (a conditional and permanently high social minimum over time) and ‘Balanced Growth’ (an unconditional and decreasing social minimum over time), in Centraal Planbureau, 1992.The point is extensively discussed in Heij et al., 1993, Ch. 12. This conference was organized by the Dutch Society for Basic Income in February 1996. It dealt with several other issues, such as the link between basic income and the Green movement, and improving the communication between the basic income movement and the entrepreneurial world. Of course, this last argument only holds as long as the society in question remains committed to collective, rather than privatized, provisions for disability and early retirement.At present, this holds for disability social insurance, but with respect to early retirement, the government has decided to abolish collective provisions. Early retirement is now part of a person’s more flexible options of capital-funded pension. See NRC Handelsblad, 7-2-1996. See PvdA, 1994: 31 See PvdA, 1994: 10. This particular position is also stressed by the Christian Democratic Party, see CDA, 1995. The WRR has been quite influential in getting this mode of implementation accepted, see its most recent report on social security (WRR 1997). For an analysis, see Van der Veen, 1999.
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The History of an Idea Why did Basic Income Thrill the Finns, but not the Swedes? Jan-Otto Andersson
Introduction In two of the Scandinavian countries – Denmark and Finland – the idea of an unconditional basic income has received much attention. However, in Sweden and Norway it has been almost a non-issue.The differences can be seen in the intellectual debates as well as in the activities of the political parties. At the BIEN conferences the participation from Denmark and Finland has been regular, whereas Swedish and Norwegian interest has been curiously low. In this book there is an article devoted to the Danish case. Here I shall look at the fate of the idea in Sweden and Finland. Why did basic income appeal to the Finns more than to the Swedes? The first part of the article presents the debate in Sweden.The focus is on the most important proponents and on the stands of the political parties.The second part deals with Finland. Who were the proponents? Who were sceptics or outright opponents? How have the political parties reacted? In the third part I discuss the differences and some possible reasons why the idea of a basic income has had a stronger political impact in Finland.
The Swedish Proponents of a Basic Income Three authors have proposed some version of a basic income in Sweden: Gunnar Adler-Karlsson at the end of the 1970s, Thomas Ehrenberg 10 years later, and Lars Ekstrand in the 1990s. All three wrote as if the idea had never been introduced in Sweden before.1 Although writing independently of each other, they had a common critical stand towards the social democratic principles of ‘full employment’ and ‘the work principle’ (‘arbetslinjen’). According to these principles everybody should have the right to a job, but also a duty to work. Adler-Karlsson’s book appeared in Danish with the title ‘Nej til fuld beskeftigelse. Ja til materiel grundtryghed’ (No to full employment.Yes to a material basic security), but his Swedish publisher made him change the title into the less offensive ‘Tankar om den fulla sysselsättningen’ (Thoughts on full employment). Ehrenberg – who published ‘För en frihetlig socialism’ (For a libertarian socialism) himself – contrasted ‘the politics of free time’ to the ‘politics of full employment’. Ekstrand’s works focused on a critique of the quest for full employment, instead of which he proposed a Project for the liberation of labour (‘arbetsfrihetsprojekt’).The titles of his books, which were published by an alternative publisher, are telling: ‘Den befriade tiden. Om arbete och medborgarlön’ (Liberated time. On work and citizen’s wage) and ‘Arbetets död och medborgarlön’ (The death of labour and citizen’s wage). The term used by both Ehrenberg and Ekstrand is ‘medborgarlön’ – citizen’s wage – but both wanted to have a full and unconditional basic income, which would liberate 224
The History of an Idea the individual from the obligation to do wage labour. The term derives from the Danish pamphlet Revolt from the Center (1978), which was a bestseller in Denmark and received some attention also in Sweden. In Adler-Karlsson’s case, however, the term citizen’s wage (henceforth CW) is more appropriate – although he did not use it in his 1977 pamphlet. He explicitly rejected the idea of an unconditional basic income, because he feared that too many people would exploit this possibility and that the tax payers would therefore not go on paying for such a ‘right’. He felt that the right to receive a basic material security should be balanced by an obligation to do one’s share of work. Despite heavy criticism, he insisted on this: everyone should, for some limited time, take part in ordinary necessary work. He spoke of an obligation to work (‘arbetsplikt’) and even of work as military service (‘arbetsvärnplikt’). All three proposals were put forward in a futuristic and utopian manner.They saw a CW as a means to radically transform society, but were relatively short in the analysis of which trends and forces would actually work in favour of their visions. AdlerKarlsson’s and Ekstrand’s ideas received some attention, but were generally dismissed. I have found no response to Ehrenberg’s book. Ekstrand actively tried to bring about a political discussion, and his books were reviewed in some newspapers.As headlines such as ‘He dreams of a citizen’s wage’ and ‘The apostle of laziness provokes’ indicate, the reception was not enthusiastic. In Moderna Tider – a political monthly – he was supported by the freelance journalist Eva F. Dahlgren, who wrote from the perspective of concrete individuals. However, in the same issue his views were severely criticized by a leading authority on social policy, Gunnar Wetterberg, head of the powerful ‘Kommunförbundet’ (the central organization for the municipalities).Wetterberg called the claim that work is becoming scarce ‘the triumph of resignation’. In a more recent article in the leading Swedish newspaper Dagens Nyheter, Wetterberg repeated his critique under the ominous heading ‘Medborgarlön göder undre världen’ (‘A citizen’s wage feeds the underworld’).2 A few lesser attempts to introduce a basic income discussion in Sweden should be mentioned. In 1986, when BIEN was founded in Louvain-la-Neuve, the only Swedish participant – except Adler-Karlsson – was a journalist, Gunnar Lindstedt, from the metal workers union. Inspired by the meeting he wrote an article in the union journal under the heading ‘Give us a citizen’s wage!’This article was probably the first to propose an unconditional basic income in Sweden, but it did not lead to any noticeable follow-ups.Two years later, the same fate befell the ILO-economist and BIEN-activist, Guy Standing, when he discreetly set out, in a report on the Swedish labour market, the idea of an unconditional basic income. In 1996 the social democratic theoretical journal Tiden published a short article written by Hans-Erik Persson, working in the administration for children and youth in Örebro. After observing that the production of goods requires less workers, and that the production of services tends to become too costly, he asked for an unprejudiced discussion of a model which would include both an unconditional citizen’s income (henceforth CI) and a conditional CW. One idea which has received a fair amount of attention in Sweden is the ‘citizen’s account’. It was introduced and promoted by Stefan Fölster, a researcher at IUI (a research centre maintained by Swedish industry). Fölster built his model on a recent 225
Basic Income on the Agenda reform of the Swedish pension system.This new system is constructed in the form of individual lifetime accounts – the more you earn during your active life, the more you receive as a pensioner. Fölster further elaborated these individual accounts by including insurance for unemployment, sickness and parenthood, as well as social assistance.The main purpose was to construct a system which would give good working incentives and smaller tax wedges. It would be possible to remodel the citizen’s accounts so that they would include not only a minimum pension, but also a minimum basic income, but Fölster has not discussed this possibility, because it would imply more redistribution and higher marginal tax effects, than he advocates.
The Swedish Political Parties and Basic Income The Swedish political parties have not – with one exception – been interested in the basic income idea. The Social Democratic Party has been the main defender of the existing system, which is based on the idea of full employment and a general system of income-related social security (‘inkomstbortfallsprincipen’). The interest for the CWidea has, therefore, been minimal inside the party.The main document prepared for the party congress in 1997 did not hint at anything like a basic income, and among the almost 100 motions under the heading ‘General welfare’, only one put forward the idea of a ‘social wage’, which should ‘as far as possible be general’. However, the motion was not supported even by the author’s own association. Neither did it receive any attention by the party executive. On the other hand, there were no less than six motions proposing that the child benefit – now the main universal benefit not related to income – should be means-tested.The party executive rejected them using arguments that are typical among supporters of a basic income (see http://www.sap.se). The conservatives, Moderaterna, have worked out a large document called ‘Land för hoppfulla’ (A country for the hopeful) in which they state that Sweden has three options. The first is to continue making marginal adjustments to the old system. This would lead to growing tax burdens for middle-class people, unless public services and transfers were gradually reduced. In the second option, the state takes a very small responsibility for everyone,‘a kind of citizen’s wage’, but then there would be constant demands for ‘improvements’.The third possibility, favoured by the party, is a ‘general and individual’ system, which is based on a clear correspondence between contributions and benefits – a kind of citizen’s accounts – plus strict means-testing for those with special problems. As to child benefits, the party would prefer tax allowances to direct support. The three parties of the centre – Folkpartiet, Centerpartiet and Kristdemokraterna – have all stressed the need for a basic security (‘grundtrygghet’), but have not accepted deviations from means-testing. However, some of the arguments put forward could be read as support for a basic income. At a recent congress the Folkpartiet discussed a motion on ‘basic security and a citizen’s allowance’,3 but did not support any significant changes in the existing systems. It rejected one motion asking for citizen’s accounts, on the grounds that obligatory personal savings do not allow enough insurance (see http://www.folkpartiet.se). The Left Party, Vänsterpartiet, has discussed a CW casually, but the idea has not been accepted. It has been regarded as tantamount to condoning unemployment. Instead, the party has for a long time asked for a six-hour working day and strongly supports the 226
The History of an Idea existing Swedish income-related social security system (see http://www.vansterpartiet.se). The Green Party, Miljöpartiet, is the only one which has flirted with the idea of a CW. However, it has not been able to accept it on a programmatic level or to make a concrete proposal. Like the other parties of the centre, it has stressed the importance of a decent ‘basic security’ (see http://www.mp.se). In a recent book, Birger Schlaug, the spokesman of the party on economic and social issues, writes on CW in enthusiastic but utopian terms:4 Maybe a citizen’s wage, paid from our birth until we die, could liberate the individual, breed creativity, give us the courage to build social, economic and cultural networks, trust people as human beings instead of as role-playing ombudsmen and salesmen, who fill their time as their roles require. Maybe a citizen’s wage is a way to humanize society, bring it back to people and reduce the stage, so that we could take further steps outside that stage each day. Maybe it could give us the courage to be ourselves – maybe it could deliver unforeseen powers. Maybe it could be the greatest emancipatory reform we have carried through. From the left they say that it is a right-wing idea. From the right they say it is a left-wing idea.This is perhaps the best sign that it is a good idea.
These ‘maybe’ sentences in a way summarize the Swedish debate.The idea of a basic income or CW is fascinating to some, but is assigned to a utopian future.Anyone who tries to introduce it today is ignored or else attacked for relinquishing full employment and the general system of income-related social security. In an article focusing on recent tendencies in the Swedish social security system,Ann-Charlotte Ståhlberg came to the conclusion that despite a tendency towards an increasing dependency on basic security (‘grundskydd’) the main goal has been to secure the existing income-related social security system (‘standardskydd’).
Proponents of Basic Income Schemes in Finland The first to suggest a basic income in Finland was the writer Samuli Paronen.The idea first appeared in 1971, and was later repeated in several of his works. He recommended an ‘independence grant’ (‘riippumattomuusraha’) or ‘living grant’ (‘elämisraha’), which would guarantee a minimum income to everybody.The only condition for the grant was ‘to be a human being’ (Paasilinna, 1990: 23). The term ‘citizen’s wage’ was introduced in 1980 by Osmo Lampinen and Osmo Soininvaara in their book ‘Suomi 1980-luvulla’ (Finland in the 1980s).The subtitle was The road of soft development and the book contained an all-embracing analysis of Finnish society from an ecological and humanistic point of view.The young authors predicted a decade of declining economic growth and increasing unemployment, and they outlined a future with growing family and local activities, and with more free time and mental peace. The book was written at a time when the Finnish economy had been hurt by a deep recession with a record high rate of unemployment. Lampinen and Soininvaara criticized the efforts to create employment at all costs, and suggested that the strict relation between work and income should be relaxed. They proposed that all who were unemployed or deliberately chose not to work 227
Basic Income on the Agenda should receive a ‘B-wage’, which would correspond to the lowest unemployment benefit.This B-wage would make it possible to leave the ordinary labour market (‘the hard sector’) to study, to care for children, to make art, to participate in social activities etc. (in ‘the soft sector’). For those who wanted to, there would then be better chances to receive an ordinary job and an ‘A-wage’. People would in particular want to leave jobs that were low-paid and menial, and this would only be for the good, since income differences would tend to be reduced (Lampinen and Soininvaara, 1980: 153-4). After discussing the difficulties associated with a B-wage, the authors came to the conclusion that the best solution technically would be to introduce a CW which would be given unconditionally to everybody. By taxing those receiving an A-wage so that their net income would remain the same, a CW – although appearing to be very costly – would correspond to a B-wage. The income tax above the CW could be a simple flat rate tax, and it would be complemented with indirect taxes.These, in turn, could be used as instruments to influence production and consumption along more ecological lines. The authors also suggested a freeing of working-time, so that everybody could choose how many hours they wanted to work.This might lead to a shortage of labour, but, again, the effects could be positive, encouraging firms to locate in a more decentralized way. Osmo Soininvaara, who became the most influential thinker of the Green Party, continued to develop these ideas in several books and reports. In ‘Ratkaiseva aika’ (Decisive times) from 1986, which is a very broad discussion of the global problems, he clarified his views on a CW. CW can be seen either as a part of the national income being divided equally between all its members, or as an extension of the progressive income tax, so that you receive a transfer below a certain level of income (a negative income tax). Soininvaara invited those who had difficulties in understanding how a CW could be financed, to think in terms of a negative income tax.The main argument for the CW was to change the incentives of the poor and unemployed, and to make it possible to live on a low wage. Soinivaara suggested a level which was so low that it would be quite difficult to live on it, but high enough to give support to those who had a low-paid job. Therefore, it would have to be supplemented with other types of social security. In 1984, professors Jaakko Uotila and Paavo Uusitalo published a book with the title ‘Työttömyys, laki ja talous’ (Unemployment, the law and the economy). One chapter of the book was called ‘Kansalaispalkka’ (citizen’s wage).They defined CW as a basic right, for every citizen, to at least a minimum income regardless of whether he or she participates in wage-labour or not. One justification for a CW was that an automated economy could not use the working capacity of all citizens. Uotila and Uusitalo presented their CW-model with the explicit purpose of reducing the supply of wage-labour. They discussed the possibility of a means-tested CW, according to which those with special needs would receive a CW in exchange for some kind of activity in the informal economy. However, they discarded this idea in favour of a system in which those who wanted to could get a CW. They suggested a fairly generous CW, and thought that five per cent of the adults would be on CW for half a year at a time. The CW would be taxed and would be payed for by savings in unemployment benefits, student allowances and social assistance. Thus their CW proposal was actually more akin to a paid sabbatical, which would mainly be used by people with low earning capability. 228
The History of an Idea In 1985 Osmo Kuusi, a social democratic young futurologist, published in the leading party newspaper two long articles relating to a CW. He discussed the future of work and the existing methods to achieve full employment. He proposed a modest and gradually implemented negative income tax, which would be complemented with shorter and more flexible working time, as well as with measures to activate people in different ways. The articles also showed the results of an inquiry regarding people’s readiness to leave their current work to do other things or nothing in exchange for a fraction of their current earnings. At the end of the 1980s, during a time of rapid economic growth, the interest in basicincome ideas spread rapidly. It was presented in a positive spirit in writings by myself (a radical economist), as well as by Simo Aho (labour sociologist), Markku Ruohonen (director of the Social Security National Association), Matti Virtanen (editor-in-chief of The journal on alcohol politics), Kyösti Pekonen (political scientist), Jorma Kalela (economic historian), and Pekka Korpinen (economist and a prominent social democratic politician). Jouni Särkijärvi, a conservative MP, recommended a negative income tax. I introduced the term ‘citizen’s income’. In the book ‘Vänsterframtid’ (Left future), I used the term both in a utopian red-green context and in discussing possible outcomes of the crisis of the Fordist mode of development. I also studied the probable effects of a CI reform from the point of view of different persons, depending on their economic situation and aspirations. Gradually I came to favour a combination of a low unconditional CI and a conditional CW, targeted towards activities in the ‘third sector’. Aho studied wage labour as the foundation of society and problems, which followed from the undermining of full employment and the polarization of the possibilities to receive a rewarding job. For him, a basic income would not by itself solve the problem of giving everyone a sense of doing something socially valuable, but it would open new alternatives for living a satisfying life. Ruohonen, although sympathetic to the idea, did not believe that the time was ripe for an implementation of a full basic income scheme. It would be too costly in terms of rising marginal income taxes, and people would not in general accept that one could receive money without any means- or willingness-to-work test. In the short run, he wanted to stress everybody’s right to a decent income, and favoured reforms along the lines suggested by an official report on a subsistence income guarantee (‘Perustoimeentulotyöryhmän muistio’). Virtanen saw basic income in the context of a large transformation of society, which he summed up in the phrase ‘from the factory to the studio’.To him, a basic income was essential for the realization of the new ‘studio-culture’. Furthermore, it would be a just way to distribute the proceeds stemming from a highly automated production of goods.To contribute to the financing of a basic income he proposed a tax on ‘materials’. To Pekonen a CW would be a means to improve the vitality of civil society and people’s participation in politics. To Kalela, who had made a profound study of the treatment of the unemployed during the 20th century, a CI could prove to be a solution to several contradictions which had emerged and which were worsening in the traditional system of securing income for the unemployed. The most utopian basic income scheme was outlined by Korpinen. He pondered the possibility of a withering away of the state and a kind of ‘revisionist anarchist’ process of emancipation. For the 229
Basic Income on the Agenda next century, he conceived of a society with a high CI and a complementary citizen’s insurance, but with all public services being paid for by the recipients. Two Finnish researchers, Reija Lilja and Tuire Santamäki-Vuori, together with Guy Standing, wrote an extensive report on the Finnish labour market. Standing was probably responsible for a section on CI in the report. A CI was seen as a natural means to achieve labour market flexibility, meaningful employment and more adult education. In 1988 Olli Rehn (from the Center party) and David Pemberton (from the Green party) took the initiative in creating a group which would discuss and promote the idea of a basic income.The group was chaired by Eeva Kuuskoski-Vikatmaa, a leading personality in the Center party and a long-time minister of Social and Health Affairs.The group included representatives from most political parties. Its secreteray, Ilpo Lahtinen, wrote a book which reflected the ideas discussed in the group. He proposed the introduction of a partial basic income along lines suggested by Hermione Parker from the UK. However, the book appeared at a most unfortunate time; the Finnish economy was in the midst of a depressionary spiral, and there was little interest for large reforms or costly improvements. The basic income idea was buried for some years as the depression took its toll. In ‘Hyvinvointivaltion eloonjäämisoppi’ (A survival doctrine for the welfare state), which was awarded a price as the best economics book of the year and received much attention, Soininvaara in 1994 continued the discussion of basic income in a concrete and detailed way.5 It was based on two reports written by the author for the Ministry of Social and Health Affairs.6 The base of his scheme was a basic income (‘perustulo’) differentiated for household composition.The income tax rate would be 53 percent.The author proposed two types of conditional ‘extra allowances’ (‘lisätuki’) to supplement the basic income for special contingencies. Soininvaara tried to assess who would gain and who would loose, and what differences there would actually be in relation to the existing systems. Soininvaara’s arguments had changed: he was now interested in creating a system that would induce everyone to contribute as much as possible to the national economy, and he criticized those who wanted a ‘CW’ in order to make work voluntary (ibid., 194). Soininvaara discussed three different ways of introducing a basic income. The first was to extend the existing housing benefit into a general income support of a negative income tax type.The second would let people choose whether they wanted to join a basic income scheme instead of the existing system.The third one (proposed by the French economist Malinvaud) consisted of eliminating payroll and income taxes from people receiving only a minimum wage.This third way would not, however, lead to a general basic income, yet Soininvaara still saw several advantages attached to it. Other concrete proposals followed suit. Jouko Ylä-Liedenpohja, a professor of economics, designed a system that would encourage work. He proposed a basic income of 2000 FIM a month, financed by a tax on other incomes of 50 percent. He presented the same proposal in terms of a negative income tax. There have been new demands for some kind of CW for work in civil society or the third sector, especially from the representatives of the organized unemployed (e.g. Oittinen, 1996; Rannikko, 1997). I elaborated my own vision of a combination of low unconditional CI and conditional CW, 230
The History of an Idea taking into consideration both libertarian and communitarian arguments (Andersson, 1997; Stenlund, 1997: chapter 5.13). The Finnish Society for Futures Studies has made a public appeal in favour of a basic income, stressing the impact of automation and technological changes on work requirements (Malaska et al., 1997). As the last, but hardly as the least, proponent the (now retired) Archbishop of Finland should be mentioned. In a speech to the unemployed he suggested strongly an unconditional basic income: I look at the question from the point of view of human dignity. A basic income paid to everyone would be less humiliating than the present benefit system can sometimes become.A basic income would send every citizen the following encouraging and motivating message:You are important.You are not a burden, but a resource.You are important by being a human being for others.Whatever work you do, in whatever situations, whether or not you are paid to do it, you still contribute to building our society.
Finnish Sceptics and Opponents One group that has tended either to ignore or to be sceptical towards the idea of a basic income are the social-policy researchers.7 They have stressed the problems of working society and the Nordic-type welfare states, but they have been very cautious in discussing any basic income-type proposals. In an anthology, edited by Ilpo Lahtinen in order to popularize the idea of a CW, Risto Eräsaari (1988: 181-2) – the only Finnish social policy researcher who participated – brushed aside the idea in one sarcastic sentence. The most explicit critics of a basic income have been the employers’ organization (STK, later TT) and the national trade union organization (SAK). Both were critical towards the report of the Urponen-working group in 1986. STK interpreteted the suggested income guarantee as a ‘citizen’s wage’, since it was not conditional on willingness to work. The organization ridiculed the idea that there would be any mass unemployment in the future and expressed a fear that it would become difficult to get people willing to work. It asked for a more selective social policy. According to SAK the report had to be redone from completely different premisses. Social security should encourage people to work and should thus promote full employment (Paasilinna, 1990: 50-51). In a large book (Riihinen, 1992) which looks at the future of social policies in Finland in a 25-year futuristic perspective, and which includes most of the leading researchers in the field, the idea of CW is practically ignored. Keijo Rahkonen (1992: 248-9), who writes about the social political utopias and anti-utopias, does not even mention the Finnish basic income discussion. He takes a ‘realistic’ position, according to which group interests will prevail and there does not exist a positive conception of what could come after the existing welfare state.There is only the negative utopia of a reduced welfare state. In the same volume professors Kyösti Urponen and Olavi Riihinen write about the different principles for guaranteeing social security and present general scenarios for the future. In both presentations there seems to be no room for a renewal of the welfare state along more universalistic and emancipatory lines. 231
Basic Income on the Agenda In February 1992, Briitta Hiltunen from the municipal workers union (KTV) asked the Finnish SAK to study the advantages and disadvantages of a basic income. She was inspired by the report written for the Ministry of Social Affairs by Osmo Soininvaara. A working group, consisting of four persons from the SAK staff, was given the task of writing a report on basic income. The title of the report is almost untranslatable, but it reflects a curious and disapproving attitude towards the idea.8 The report compared three different types of social security systems: income-related, needs-based (or targeted) and with equal-size benefits. It held up income-related benefits as the best from a trade-union perspective, and recalled the past disputes, in which equal-size benefits had been pushed forward by agricultural interests against the trade-union position. It argued that wage earners were already paying disproportionally much, either as fees or as taxes, even for the income-related systems. The study recognized substantial poverty traps due to three types of needs-based benefits – social assistance, housing support and day-care fees. It wanted to reduce these traps, not through a basic income, but through incremental adjustments in the existing systems. According to the report, full employment could be restored through rapid and sustained economic growth, through reductions in working time and work sharing, and through better education and training. If a basic income scheme were introduced society would develop towards a low wage, low skill society, a ‘boot-cleaner society’. It would threaten the existing income-related benefits, and contribute to the creation of a divided and fragmented society. Shortly after the SAK-report, TT published a report on ‘the incentive traps of social security and taxation and proposals to overcome the problems’. It was entitled Work or citizen’s wage. Actually the report treated basic income/CW/negative income tax proposals on one page only. However, it set two principal lines against each other: ‘the emphasizing of the priority of work and earned income’ and ‘the development of the basic subsistence income towards a citizen’s wage’.According to the TT report, income should generally be based on work, and society cannot afford a system based on a CW. Furthermore, it stressed that means-testing should be increased in order to save costs. The dilemma between, on the one hand, asking for a system where disposable incomes always grows when doing some kind of work, and on the other, stressing more meanstesting is never raised in the report. The critical attitude of SAK towards the basic income idea was confirmed in a pamphlet on the future of welfare policies – ‘Valoa tunnelin päässä’ (Light at the end of the tunnel). Two authors discussed basic income. Janne Metsämäki (SAK, 1997: 32) stated that CW models were expensive and vague: it was not possible to assess their effects, but surely they would cost more. Sinikka Näätsaari (ibid.: 93) found the idea of a participation income (as proposed by Atkinson) interesting, but feared that it would be difficult to distinguish between ordinary wage labour and work made for a CW. She found a pure basic income model too costly and thought that it could only be realized at the expense of public services; Finland would change from a ‘service state’ to a ‘redistributive state’.
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The Finnish Political Parties and Basic Income Four of the political parties have been very interested in some form of basic income: the Centre Party, the Left-Wing Alliance, the Green Party and the Young Finns. The Centre Party, which is the main representative of the farming population, has all the time supported universal welfare schemes, which give a basic security to all inhabitants. Therefore, the party, especially its youth section, has for a long time supported the idea of a CW or a basic income. In a recent document, Finland needs a work reform, the party declared that the goal is a uniform basic income. It calls for an elimination of the incentive traps and for an effort to implement a negative income tax model. The party’s youth organization takes the view that ‘a basic income, which encourages work and enterprise, should be the new social security model… It joins social security and flexible labour markets to each other.Thus a basic income creates not only employment but also freedom’ (Mikä on Nuoren Keskustan Liitto eli NKL). The party programme of the Finnish Communist Party from 1987 saw a CI as a basis for a future communist society. The CI idea was even more pronounced in the declarations made at the start of the Left-Wing Alliance LWA in 1990. It was seen as a means to liberate and decommodify work. In the programme that was approved in 1995, CI is described as a means to increase ‘real freedom for all’, a fundamental value of the ‘third left’. However, the LWA has had difficulties in formulating concrete proposals, and it has not wanted to substitute the income-related security which has been built up by the labour movement. The Green Party has been a supporter of a basic income since its foundation in the beginning of the 1980s.‘To each a basic income’ is one of the slogans in a poem outlining the principles of the Greens. Osmo Soininvaara, who has had a decisive influence on the standpoints of the party, and who has been the leading figure in the whole Finnish basic income debate, became Minister of Social Affairs in April 2000. The Young Finns, a small liberal party, adopted basic income as one of its leading themes. In the elections of 1999 it put forward a detailed proposal – to a large extent inspired by Jouko Ylä-Liedenpohja, and by an intensive discussion on internet – but the party lost its two seats, and then decided to dissolve itself. The Social Democratic Party has never accepted proposals close to a basic income scheme. At the party congress in 1996 two motions proposed a CW.The party executive answered the motions by stressing the costs and the danger of dividing people into two categories: those in work and those living on a CI. The party strongly defended the existing welfare system (see http://www.sdp.fi/pk96/e144.htm). The conservatives – the National Coalition Party – have shown some interest in the idea of a negative income tax. However, the party has taken a negative stance. The Swedish People’s Party has also been against a basic income, although its youth section has toyed with the idea.
Why did Basic Income Thrill the Finns, but not the Swedes? There are two fairly obvious reasons why the interest for basic income has differed between Finland and Sweden.The first relates to the hegemony of the Swedish Social Democratic Party and the second to the relative success of the Swedish welfare state. 233
Basic Income on the Agenda The party most consistently averse to any basic income proposal both in Finland and in Sweden has been the Social Democrats. Both the SAP in Sweden and the SDP in Finland have seen basic income as a break with two fundamental principles: the ‘work principle’ and the ‘income-maintenance principle’. According to the ‘work principle’ (‘arbetslinjen’), one should either work, be looking for work, or study.The central goal of economic policy has been ‘full employment’ in a traditional sense. Introducing a basic income would mean surrender in front of the difficulties to maintain or achieve what is regarded as full employment. ‘The income-maintenance principle’ (‘inkomstbortfallsprincipen’) means that the right to social security is closely related to earlier incomes from work. Unemployment and sickness benefits, as well as pensions, should be related to incomes, and those few who have not been gainfully employed – but are willing to work – should only have the right to a low daily allowance.The last resort should be a strictly means-tested income-maintenance scheme for people who are unable to support themselves. The only basic income type elements supported by the Social Democrats are children’s allowances, housing benefits and the people’s pension scheme. The electoral support of the Finnish SDP has been only about half that of its Swedish counterpart SAP. SDP has therefore always been compelled to form coalition governments, whereas SAP has been able to govern alone for most of the time since the 1930s. In Finland the Centre Party has been as strong as the Social Democrats, and the LeftWing Alliance has competed on a more equal footing. Both the Centre Party and the LWA have traditionally tended to support universal benefits. In Sweden both the blue- and white-collar trade-union movement have been closely related to the party, and even when the bourgeois parties occasionally have been able to form a government, they have not tried to change the main principles of the social policy model. In Finland the blue-collar trade unions have also been influenced by the LWA.The white-collar unions, again, have had a strong non-socialist membership and leadership.Although the Finnish Social Democrats have participated in the government with only a few exceptions, the parliament has in general had a bourgeois majority. The other obvious reason for the different receptions of the basic income idea is that the Swedish welfare state is older and more sacrosanct than the Finnish, and that Sweden until recently has not been plagued by mass unemployment.The levels of benefits are generally higher in Sweden.They are also more strongly related to the incomemaintenance principle – the ‘standard social security’.The income-related unemployment benefits – administered by the trade unions – have covered about 85 percent of the earlier gross incomes. In Finland the corresponding figure is 60 percent.The daily allowance for the uninsured has also been more generous in Sweden. It would, therefore, be relatively more costly to change the Swedish system into a pure basic income system. Sweden was able to avoid mass unemployment until the beginning of the 1990s. This was achieved by careful macroeconomic policies, by active labour-market policies and by a rapid growth of the public-service sector. In Finland mass unemployment appeared in 1976. It was gradually reduced towards the end of the 1980s, but from 1991 onwards has been the principal scourge of the Finnish economy. Despite six years of rapid economic growth, the rate of unemployment is still more than 10 percent. Unemployment in Sweden, while not subdued, is only about half that of Finland. One curious reason why basic income has been more thrilling in Finland can relate to 234
The History of an Idea a difference in national character. According to experts on culture, there is a clear difference. In Sweden it is necessary to be part of and receive moral support from a group. No decisions are taken without long discussions and an emerging consensus. In Finland leadership styles are more individualistic. It is permitted to be somewhat idiosyncratic and to change one’s opinions without engaging in long discussions. Finns are thrilled by new technical solutions and they are not much afraid of sudden changes. The Swedes seem to be more pragmatic and cautious. Basic income is probably most welcomed in a society which is individualistic and solidaristic at the same time. There must be a special combination of values, which allows citizens to make unconventional choices at the same time as their basic economic security is guaranteed by the state. The Lutheran Nordic welfare states differ slightly from each other – Denmark probably being the most liberal one – but even in Denmark and Finland the readiness to accept a ‘left libertarian’ solution has not been quite strong enough to bring basic income onto the political agenda.
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Basic Income on the Agenda Andersson, J.O. (1988), Vänsterframtid. Nationalekonomiska studier av fordismens kris och morgondagens alternativ, Folkets Bildningsförbund. — (1989), Kansalaistulo – keino kestävämpään talouteen, TTT Katsaus 4. — (1993), Mistä uusi perusta hyvinvointivaltiolle, in: J.O. Andersson et al., Hyvinvointivaltio ristiaallokossa, WSOY. — (1994), Rättvisa och incitament på lång sikt genom en medborgarinkomst och en medborgarlön, in: M. Forss and S. Lindberg (toim), Välfärd eller irrfärd?, Åbo Akademis tryckeri. — (1997), Building Blocks for a New Society.Why Citizen’s Income Should be Combined with a Citizen’s Wage, Citizen’s Income Bulletin 23. — (1998), Inkomst utan arbete? Debatten om medborgarlön i Finland och Sverige, Historisk Tidskrift för Finland 2. Citizen’s Income Bulletin 25 (1998), Archbishop supports CI. Eräsaari, R. (1988), Teollisuusyhteiskunnan modernisoitumisriskit – sosiaalivaltio pahan poismanaajana?, in: I. Lahtinen (toim), Kansalaispalkka. Ken elää sen syömänkin pitää. Haataja, A. (1998), Tasaetu, tarveharkinta vai ansioperiaate? Sosiaalipolitiikkamallit, mikrosimulaatiot ja työttömien taloudellinen asema, Annales Universitatis Turkuensis (with English summary, Meanstested, flat-rate or earnings-related benefits?). Kalela, J. (1990), Mikä kysymys työttömyysturva/kansalaistulo on?, Kansantaloudellinen aikakauskirja 3. Korpinen, P. (1989), Valtio ja vapauden kasvu, Hanki ja Jää. Kuusi, O. (1985), Nyt on aika keskustella kansalaispalkasta and Kansalaispalkasta helpotusta, Suomen Sosialidemokraatti 22.2.1985 and 1.3.1985. Lahtinen, I. (toim) (1988), Kansalaispalkka. Ken elää sen syömänkin pitää, Ylioppilaspalvelu r.y:n julkaisusarja, (With articles by I. Lahtinen, K. Pekonen, S. Aho, J.O. Andersson, U. Mückenberger, C. Offe, I. Ostner, M. Ruohonen, R. Eräsaari, and M.Virtanen). — and Perustulo (1992), Kansalaisen palkka, Hanki ja Jää (With comments by J.O. Andersson, P. Arajärvi, P. Pakarinen, O. Soininvaara, and M. Stenius-Kaukonen). Lampinen, O. and O. Soininvaara (1980), Suomi 1980-luvulla. Pehmeän kehityksen tie, WSOY. Lilja, R.,T. Santamäki-Vuori, and G. Standing (1990), Unemployment and Labour Market Flexibility, Finland, ILO. Malaska, P., J. Nurmela, and M.-L.Viherä (1997), On kansalaispalkan aika?, Helsingin Sanomat 2.9.1997. Oittinen, H. (1996), Kansalaistoiminnasta palkka, Helsingin Sanomat 5.8.1996. Paasilinna, M. (1990), Kohti kansalaispalkkaa? Perustulo- ja perusturvakysymykset politiikan päiväjärjestyksessä (Masters thesis approved at Helsinki University). Penttilä, R. (1986), Nuorsuomalaiset ja köyhän asia (http://live.nuorsuom.fi/risto209. html). Rahkonen, K. (1992), Sosiaalipolitiikan utopiat ja anti-utopiat, in: O. Riihinen (toim), Sosiaalipolitiikka 2017. Näkökulmia suomalaisen yhteiskunnan kehitykseen ja tulevaisuuteen, WSOY. Rannikko, P. (1997), Kansalaistyö kokeiluuun maaseudulla, Helsingin Sanomat 9.4.1997. SAK (1994), Mikä ihmeen perustulo? — (1997), Valoa tunnelin päässä. Näkökulmia hyvinvoinnin tulevaisuuteen, SAK, Työväen Sivistysliitto. Soininvaara, O. (1983), Vihreä valo. Kirja Suomen muuttamisesta, WSOY. — (1986), Ratkaiseva aika, WSOY. — (1990), Vihreä markkinatalous, Hanki ja Jää. — (1992), Hyvinvointivaltio ja talouden kriisi, Sosiaali- ja terveysministeriön julkaisuja 11. — (1994), Hahmotelma perustulomalliksi, Sosiaali- ja terveysministeriön monisteita 2.
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The History of an Idea — (1994), Hyvinvointivaltion eloonjäämisoppi, WSOY. — (1999), Täystyöllisyyteen ilman köyhyyttä, Art House. Stenlund, H. (toim.) (1997), Työn tulevaisuus.Työskenaariohankkeen loppuraportti, Euroopan sosiaalirahasto ja Työministeriö,Työhallinnon julkaisu 185. Työtä vai kansalaispalkkaa. Teollisuus ja Työnantajat, 1995. Uotila, J. and P. Uusitalo (1984), Työttömyys, laki ja talous, Tammi. Urponen, K. (1986), Perustoimeentuloryhmän muistio (osa 2), Sosiaali- ja terveysministeriö (Report by a working group chaired by K. Urponen). Uusitalo, H. (1994), Osmo Soininvaaran osittaisen perustulon malli, 20.1.1994 (unpublished memo). Virtanen, M. (1987), Tehtaasta studioon, Hanki ja Jää. Ylä-Liedenpohja, J. (1995), Kansalaispalkka kannustaisi työntekoon, Helsingin Sanomat 16.1.1995. — Taloustiede tänään, Lillett Oy, 1993.
Notes 1
2 3 4 5 6
7
8
However, even before Adler-Karlsson, the conservative student organization had started a discussion in terms of a negative-income-tax proposal.They dropped the idea in the middle of 1970s, and according to Johan Westrin, information secretary of Moderaterna, it is completely dead in Sweden today. It is fascinating to ponder that basic income has been proposed in Italy as a means to weaken the hold of the mafia. The proposal made by Bengt Held was not a basic income scheme. He wanted a ‘citizen’s allowance’ paid by the state to unemployed persons without other incomes. Extract from e-mail sent by BS, translated by JOA. ‘Vihreä markkinatalous’ (A green market economy) appeared in 1990. His latest book ‘Täystyöllisyyteen ilman köyhyyttä’ (Full employment without poverty) was published in 1999. One (The welfare state and the crisis of the economy) treated several aspects of the system of taxes and transfers.The other (An outline of a basic income model) was a detailed calculation of how a basic income scheme could be conceived within the financial limits of the existing social security and tax system. There are, of course, exceptions. Hannu Uusitalo wrote a relatively positive memo concerning Osmo Soininvaara’s partial basic income calculations. Kari Vähätalo, who has studied the situation of the unemployed, has been favourable to the basic income idea.Anita Haataja has used a micro-simulation model to calculate the effects of a hypothetical negative income tax and a CI. ‘Mikä ihmeen perustulo?’ is perhaps best translated as ‘What (a) queer basic income?’
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From Concept to Green Paper Putting Basic Income on the Agenda in Ireland Sean Healy and Brigid Reynolds*
A Recognized Failure? The Irish social welfare system was designed to operate in a world which is no longer relevant today.This ‘Beveridge’ system can work well when: – – – –
full employment (for men) is the norm women’s labour force participation is low unemployment, when it occurs, is of short duration social welfare payments act simply as a transition mechanism to support people – during short-term illness or unemployment – employment is usually full-time at relatively good pay rates – jobs are permanent.
These were the basic assumptions which underpinned the social welfare system when it was originally designed.The end result is a complex and inadequate system which is now failing to meet the needs of the people trapped within it. Today, society is less homogenous than heretofore.We experience rapid technology change, increasing selfemployment, atypical work and fluctuating incomes.There is increasing complexity in household responsibilities and relationships.These need to be catered for by our system of taxation and income distribution. However, the existing tax and social welfare systems suffer from many disadvantages, which have been widely recognized, including: – Unemployment traps: where net income when unemployed is higher or almost as high as net household income in work. Moreover, we have seen, over the past two decades, the ridiculous situation where unemployed people must do nothing and always keep themselves available for non-existent jobs, if they are to receive their social welfare payments. – Poverty traps: where an individual at work receives a pay increase, net household income either declines or rises by only a small amount. – Its heavy emphasis on conditionality has contributed in large measure to the downgrading of areas of work for which payment is not made or received (e.g. work in the community, in the voluntary sector, in the home, etc.). – Complexity: where citizens are unsure of the effects on household income of decisions regarding work, marriage, family size, etc. * The authors wish to acknowledge especially the work of Sean Ward on which they have drawn, as referenced, in this paper.
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From Concept to Green Paper – Policy inflexibility: it is difficult to modify the existing systems to increase the incomes of the poorest households (who do not have ‘proper’ jobs), without simultaneously decreasing work incentives. These disadvantages are unintended consequences of the current tax and welfare system. Several changes were introduced over the years with a view to addressing particular difficulties. Frequently, the outcomes have been unsatisfactory, in that new anomalies have arisen and old problems have remained largely unresolved. For example, Family Income Supplement (FIS) was introduced so that families would be better off if a parent on unemployment assistance or benefit took up low-paid employment. However, FIS suffers from low take-up and if the employee on FIS achieves a wage increase he or she may be no better off as a result, due to tax and the withdrawal of FIS. Basic income is a simple idea designed to overcome the disadvantages of the current systems. It is worthwhile to reflect on what is involved in basic income. At its core, it involves a redistribution of earned income by a different mechanism than the existing systems. All of the benefits of basic income vis-à-vis existing systems (such as greater equity, elimination of financial barriers to work and simplicity) derive from this redistributive mechanism. However, it might be objected: ‘Why bother evaluating basic income? Indeed, why bother with tax reform at all?’ Such an argument might run as follows: ‘The best antidote for inequity, unemployment and exclusion is employment growth. From 1990-1997, employment in Ireland grew by 17.4 percent (Gray, 1997). Surely this employment growth (and earnings growth) is more important than tax reform? Surely the existing tax and welfare systems are more conducive to employment growth than basic income?’ Several points may be made in response to this objection: – Recent impressive employment growth may not endure. For example, in the period 1980-1989, employment fell by 0.4 percent (Gray, 1997). – Most employment growth is accounted for by labour force growth. Even in a buoyant job market, those with poor education and low skill levels find it difficult to escape from long-term unemployment and into a job (Duffy et al., 1997).The taxwelfare system should cater for these people. – While unemployment is a very important cause of poverty, many poor households do not have an unemployed household head. In 1994, one-third of poor households had an unemployed head; the remainder were self-employed, farmers, employees, retired, ill or on home duties (Callan et al.,1996). The tax-welfare system should include these people also. – Trends in earnings can exacerbate inequity. From 1987 to 1994, the ratio of the hourly earnings of the top decile to the bottom decile grew from 4.2 to 4.9 (Gray, 1997).The tax-welfare system should promote equity in the presence of widening wage dispersion. – The employment effect of basic income is not certain. Basic income should not simply be assumed to have a negative effect on employment. Indeed, the only analysis available (Clark and Kavanagh, 1995) suggests that it would have a small positive effect. Neither should basic income be introduced without the employment effect being thoroughly analyzed. 239
Basic Income on the Agenda In recent years, a considerable amount of analysis has been carried out on basic income. This analysis has confirmed the proposal developed by the Conference of Religious of Ireland (CORI) as a serious contender for implementation. Further comprehensive and rigorous analysis is now required before deciding whether the system should be introduced. CORI has sought successfully to put basic income on the political agenda. Ireland now has two major government-funded studies under way examining the viability of basic income.The Irish government has also made a commitment to publish a Green Paper on basic income. In the remainder of this paper we outline the debate on basic income from the late 1970s onwards. We pay special attention to the approach CORI followed to put basic income on the political agenda and conclude with some remarks for the road ahead.
From Initial Scepticism to Pathways of Basic Income In the late 1970s, the National Economic and Social Council commissioned Brendan Dowling to report on how personal income tax and transfers might be integrated.This report (Dowling, 1977) examined three broad options, one of which was basic income, but initiated little debate about basic income. However, a wide-ranging debate about tax reform ensued which culminated in the establishment of the Commission on Taxation.The First Report of the Commission on Taxation (1982) contained a cursory examination of basic income which it rejected, mainly on cost grounds. Similarly, the Commission on Social Welfare (1986), quoting the Report of the Commission on Taxation, rejected basic income on cost grounds, but also because basic income might represent a detour from the priority objective of increasing social welfare rates to adequate levels. Since then, two approaches to basic income have been developed in Ireland.The first approach (Honohan, 1987; Callan et al., 1994) preserved key elements of the existing tax and welfare systems.Ward (1998: 242-3) has summarized the Honohan and Callan approach succinctly as follows: The models developed by Honohan and Callan were quite similar. Each adult of working age would receive an untaxed payment equivalent to that paid as unemployment assistance: this is a ‘full basic income’. Elderly people would receive somewhat higher payments and children would receive smaller amounts. All social welfare payments would be discontinued. Existing ‘discretionary’ tax reliefs (such as mortgage interest, employee pension contributions, etc.) would be retained. All government spending programmes would also be retained. Both authors found that a very high tax rate would be required to fund this type of proposal. Tax rates in excess of 65 pence in the pound would be required on all personal incomes. It was mooted that such a high tax rate could act as a disincentive to work. In addition, Callan found that the income distribution effect of his proposal was not advantageous for significant numbers of low-income households. Honohan and Callan concluded that these models of basic income should be rejected. Some official reports in 1996 reviewed the findings of Callan, notably the Department of Enterprise, Trade and
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From Concept to Green Paper Employment (1996), Forfas (1996) and the Expert Group on the Integration of the Tax and Social Welfare Systems (1996). These reports endorsed Callan’s conclusion that this model of basic income was not viable.
This conclusion coincided with CORI’s view and underpinned CORI’s alternative approach which drew on the work of Ward (1994). He illustrated how the present tax and welfare systems could be replaced, a basic income system introduced and the tax rate kept below the current top tax rate. CORI adopted and developed this approach. The main changes in the CORI approach compared with Honohan/Callan were the following: – While ‘full’ basic income would be paid to the elderly and children, adults of working age would receive a ‘partial’ basic income; for those who were unemployed this would be topped up to the minimum income recommended by the Commission on Social Welfare (1986). – All discretionary tax reliefs would be abolished. – A range of public expenditures (e.g. headage payments, community employment payments, etc.) would no longer be required. However, the general public was not clear about these different approaches. At that time all basic income proposals were seen as more or less the same. Consequently, CORI was faced with the bizarre situation that a conclusion with which it agreed (Honohan/Callan) was being used to dismiss CORI’s own proposals which were fundamentally different.
CORI’s Approach: Developing the Analysis, the Vision and the Means This was the framework from which the CORI Justice Commission approached the task of putting basic income on the political agenda. CORI responded by commissioning the Pathways to a Basic Income (1997) study, by producing a video to outline its proposal and by producing Surfing the Income Net (1997) which was a simple, userfriendly outline of basic income aimed at a mass audience.This was a good example of the need to be able to respond to crises which threatened to undermine the whole proposal.The general public and the policymaking community eventually grasped the fact that there were substantial differences between the Honohan/Callan studies and the CORI approach. They also came to realize that CORI accepted the Honohan/Callan conclusions. Consequently, government commissioned studies are now focusing solely on the CORI proposal. CORI’s analysis of the present tax and social welfare system and of alternative options led them to the conclusion that basic income offered the best solution to the major problems arising from the present structure. They held public conferences, targeted most of the arenas already involved in policymaking, used both electronic and print media to engage in public discourse, held many meetings, briefings, discussions, etc.To underpin this work CORI produced a number of publications.These include: Towards an Adequate Income For All (1994): This publication presents one paper which argues the case for change in Ireland written by the Secretary of the 241
Basic Income on the Agenda Commission on Taxation which was established by the Irish government during the 1980s.The second paper presents an argument in favour of an adequate income guarantee written by Healy and Reynolds.The third paper entitled Evaluating Basic Income Options was written by a team from the Economic and Social Research Institute (ESRI), headed by Callan. It contains the results of a study they had done in 1994. Finally, and most importantly, the fourth paper outlines what is possible in terms of introducing a basic income system for Ireland. In this ground breaking paper Sean Ward, an independent economist, looked very closely at the whole Irish Budgetary situation and presented detailed figures which showed what could be done in terms of introducing a partial basic income system for Ireland in 1994. An Adequate Income Guarantee For All – Desirability,Viability, Impact (1995): The papers contained in this study take forward the debate contained in the previous publication of 1994.The basic costings are looked at by an independent economist and the impact on the labour market is looked at by two other economists. In the second part of the book, updated costings are provided for a partial basic income system and written responses from the six political parties represented in Ireland’s parliament are published. Planning for Progress (1996): This was CORI’s annual Socio-Economic Review. It included the full costings of CORI’s basic income proposal at that stage. It also analyzed the impact of basic income in other sectors and presented a range of budget proposals consistent with introducing a basic income system. Pathways to a Basic Income (1997):This study was commissioned by CORI and conducted by two economists, Professor Charles Clark and John Healy. It looked at the financing as proposed by CORI (1996) and had this checked by the Irish tax authorities (The Revenue Commissioners). Further, the study goes on to look at the whole issue of efficiency and the impact on the labour market. Pathways to a Basic Income – A Summary (1997):This document is a short summary of Pathways to a Basic Income and focuses in particular on the values underpinning it and the basic questions addressed in the larger study. It does not go into the detailed numbers contained in the major study. Surfing the Income Net (1997):This publication is a simple question and answer outline for those who know little or nothing of basic income. It concludes with a ready reckoner to show how people would be better off under CORI’s basic income proposals in Ireland. Pathways to a Basic Income found, and the Revenue Commissioners confirmed, that previous CORI proposals for a basic income had substantially underestimated the income that would be available to fund the basic income and that, in fact, a full basic income could be implemented in Ireland within a three-year time frame.The three–year implementation option, when associated with increasing revenue buoyancy, would allow minimum ‘pain’ to be experienced by some, mainly better-off, tax payers during the transition period. These tax payers would gain more from a continuation of conventional government tax strategies than from the introduction of basic income. However, the gradual implementation of basic income would minimize or eliminate their losses with respect to their present circumstances and channel the benefits of revenue buoyancy mainly towards the less well-off. In addition, the pace of implementation could be adjusted to minimize any perceived risk to the economy or the Exchequer. 242
From Concept to Green Paper Table 1: Summary of Merits, Demerits and Unknowns of Basic Income vs existing Systems Merits
Demerits
Would provide financial incentives to work for those currently without much incentive
Would ensure that no householdÕs income fell below the basic income level
Would increase the marginal tax rate for those now below the exemption limit or paying tax at the standard rate (In some versions) loss of discretionary tax reliefs in the existing system would make some people on middle/high incomes worse off (In some versions) loss of existing farm income supports
Would promote retraining and further education, with greater freedom of choice
For those aged under 21 and at work, many would be worse off
Would promote vertical and horizontal equity
Unknowns
Would facilitate self-employment, atypical and part-time working
Would labour force participation rise or fall? Would this be good or bad?
As a policy tool would facilitate direct implementation of chosen trade-offs between the level of basic income and the tax rate
Would employment increase or decrease?
Would facilitate some to withdraw from the labour force to pursue other ends
Would promote financial independence of women
Would people save more or less?
Would promote dignity
Would wages rise or fall?
Would eliminate take-up problems
Would there be increased tax evasion or better tax compliance? Would there be increased immigration from other EU states? Would overall competitiveness improve or worsen?
Would promote living in rural Ireland Would be simpler and cheaper to administer
To date, no concrete proposal for tax and welfare reform has been developed which can compete with the CORI basic income proposal. Basically, CORI’S approach is that basic income deserves serious consideration on the grounds of equity, efficiency and freedom to participate in work and society. Notwithstanding the analyses issued by CORI, much more in-depth analysis needs to be done to assess how basic income would measure up to these principles in order to justify its introduction. Summarizing, both approaches (Honohan/Callan’s and CORI’s) have expanded the state of knowledge about basic income in Ireland.Table 1 attempts to summarize the (de)merits and unknowns.The reader should be aware that the classifications used are subjective. In particular, what may be counted as a ‘merit’ or ‘demerit’ by some may be classified differently by others. 243
Basic Income on the Agenda
Into the Government’s Programme: Towards a Green Paper In Ireland, for the past ten years, government has negotiated with employers, trade unions and farmers’ organizations to develop three-year national plans. In 1996 an additional pillar was added to this partnership representing the voluntary and community sector. CORI is one of the organizations which is now recognized as a full social partner as part of this new pillar. In the course of the negotiations for the new programme called Partnership 2000 (covering 1997-1999), CORI was successful in getting agreement from the other social partners to include a section on basic income which reads as follows: Further independent appraisal of the concept of introducing a Basic Income for all citizens will be undertaken, taking into account the work of the ESRI, CORI and the Expert Group on the Integration of Tax and Social Welfare and international research. A broadly based steering group will oversee the study.
Work is proceeding on implementing this commitment and CORI is part of the steering group ensuring that this commitment is implemented. The steering group also includes representatives of employers, trade unions, farming organizations, the community and voluntary sector as well as senior civil servants from key government departments.The steering group decided to divide its study into two phases. Phase one entails an examination of the economic and budgetary aspects of introducing a basic income system into Ireland. It will also identify the winners and losers in such an approach. Phase two entails an examination of the immediate and long-term dynamic effects of a basic income system on factors such as labour supply and demand responsiveness, wage rates, competitiveness, etc. In the build-up to the 1997 General Election CORI approached each political party seeking a commitment that if elected to Government, they would support the publication of a Green Paper on Basic Income.After the General Election the negotiators who were finalising the new coalition government’s programme were approached with the same request.When the new government was finally voted into office by the Dail and published its programme, this contained a commitment to produce a Green Paper by June 1999.The Taoiseach (Prime Minister) Mr. Bertie Ahern has on several occasions renewed his commitment to publishing this Green Paper.
The Latest Developments: Is there a Window of Opportunity for Basic Income? For many years, debate on the annual Budget has focused on whether general tax reductions should be implemented by reducing tax rates or increasing tax-free allowances. Each year, CORI has produced an analysis of the impact of the Budget. These analyses have shown that neither approach is of much assistance to the least well off, while reductions in the tax rate are worse from an equity perspective than increasing allowances. 244
From Concept to Green Paper Budget 1999 introduced to Ireland for the first time a significant move towards tax credits. Traditionally, tax credits had been regarded as very complex and difficult to administer (Report of the Working Group on the Integration of the Tax and Social Welfare Systems, 1996).While the tax credit that was introduced was non-refundable, it could be developed into a refundable tax credit.According to a recent report (1999) agreed by the National Economic and Social Council (a think tank comprising government and social partners): A further step would be to move to refundable tax credits; if a person’s tax liability is less than the tax credit, this difference is paid to the tax payer. This means that all tax payers would receive equal benefit from an increase in tax credits.
In addition, it would make sense to increase the value of the tax credit and align it with the value of payments made to the unemployed via the social welfare system, so that nobody would have a net income below an agreed poverty line. In the new national programme negotiated between the Social Partners and the Government (entitled Programme for Prosperity and Fairness, February 2000) there is agreement that ‘the role which refundable tax credits can play in the tax and welfare system should be actively examined’. A working group will be established, including representatives of social partners, government departments and the tax authorities, to conduct this examination and a progress report will be prepared by the end of 2000. Fully developed, refundable tax credits and basic income can be regarded as two sides of the same coin. Suitably specified, refundable tax credits could deliver the same net income to every citizen as a basic income. Of course, basic income is far simpler to understand and administer than refundable tax credits. However, the onset of tax credits in Ireland can provide an opportunity to substantially improve the net incomes of the less well-off, by substantially increasing the value of tax credits and making them refundable. When that happens, the switch to basic income will be justifiable on grounds of simplicity, administrative efficiency and quality of service provided by the state to all citizens.
References Callan, T., C. O’Donoghue, and C. O’Neill (1994), Analysis of Basic Income Schemes for Ireland, Dublin: ESRI. —, B. Nolan, B.J.Whelan, C.T.Whelan, and J.Williams (1996), Poverty in the 1990s: Evidence from the 1994 Living in Ireland Survey, Dublin: Oak Tree Press. Clark, C.M.A. and C. Kavanagh (1995), Basic Income and the Irish Worker, in: B. Reynolds and S. Healy (eds.),An Adequate Income Guarantee for All, Dublin: CORI. — and S. Healy (1997), Pathways to a Basic Income, Dublin: CORI. Conference of Religious of Ireland (CORI) (1994),Tackling Poverty, Unemployment and Exclusion: A Moment of Great Opportunity, Dublin: CORI. — (1995), Ireland for All, Dublin: CORI.
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Basic Income on the Agenda — (1996), Planning for Progress, Dublin: CORI. Department of Enterprise,Trade and Employment (1996), Growing and Sharing our Employment: Strategy Paper on the Labour Market, Dublin: Stationery Office. Dowling, B. (1977), Integrated Approaches to Personal Income Taxes and Transfers, Dublin: National Economic and Social Council. Duffy, D., J. FitzGerald, I. Kearney, and F. Shortall (1997), Medium-Term Review: 1997-2003, Dublin: ESRI. Forfas (1996), Shaping our Future, Dublin: Forfas. Gray,A. (1997), Foreword: Irish Economic Challenges and International Perspectives, in:A. Gray, International Perspectives on the Irish Economy, Dublin: Indecon. Healy, S. and B. Reynolds (1994), Arguing for an Adequate Income Guarantee, in: B. Reynolds and S. Healy (eds.), Towards an Adequate Income for All, Dublin: CORI. — and B. Reynolds (1995),An Adequate Income Guarantee for All, in: B. Reynolds and S. Healy (eds.), An Adequate Income Guarantee for All, Dublin: CORI. Honohan, P. (1987), A Radical Reform of Social Welfare and Income Tax Evaluated, Administration 35 (1). Partnership 2000 for Inclusion, Employment and Competitiveness (1996), Dublin: Stationery Office. Report of the Commission on Social Welfare (1986), Dublin: Stationery Office. Report of the Working Group on the Integration of the Tax and Social Welfare Systems (1996), Dublin: Stationery Office. Reynolds, B. and S. Healy (eds.) (1994), Towards an Adequate Income for All, Dublin: CORI. — and S. Healy (eds.) (1995), An Adequate Income Guarantee for All: Desirability,Viability, Impact, Dublin: CORI. Ward, S. (1994), A Basic Income System for Ireland, in: B. Reynolds and S. Healy (eds.), Towards an Adequate Income for All, Dublin: CORI. — (1998), Basic Income, in: S. Healy and B. Reynolds (eds.), Social Policy in Ireland, Dublin: Oak Tree Press.
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Short Cuts and Wrong Tracks on the Long March to Basic Income Debating Social Policy Reform in Germany Stephan Lessenich
It has become a – certainly useful – ritual on BIEN’s Congresses to recapitulate publicly, in the form of short country surveys, the path taken in each nation on the long march to basic income. Having myself been involved twice up to now in this procedure, I dare to remark that an uninvolved and somewhat malicious observer of these sessions, listening to the succession of country reports, might well feel as if he or she were attending a – let’s say, Chinese – people’s congress, with its hand-picked speakers unwaveringly presenting somewhat strained success stories concerning the supposedly smooth achievement of official output targets. Now, as we all know (and may or may not regret), even Chinese people’s congresses were better in the old days. To be sure, the message of the following national report, of my – admittedly and inevitably subjective – remarks on the peculiarities and new directions in the recent German debate on social policy reform, is utterly sobering for any orthodox apologist of basic income in its puristic sense. To cut a long story short: there is no good news from Germany concerning the basic income matter. But that is the short story only. The long version roughly goes as follows: there indeed has been a broad intellectual debate on different concepts and variants of staterun minimum income provisions in Germany over the last years: debates on publicly rewarded ‘civic work’ (‘Bürgerarbeit’), on a negative income tax-like ‘citizen’s income’ (‘Bürgergeld’) or on public subsidies for low-paid jobs (‘Kombilohn’ and other models); I will briefly sketch these debates in what follows. But the point to be made here is that exactly those proposals that resemble most the idea of an unconditional and non-work-related basic income did not make it to the public, political debate. Inversely, the concepts that actually did reach a wider public did so only because they fit perfectly well into the revival of work ideology that German politics and society are currently experiencing (as a matter of fact, one might say that these concepts have even boosted this revival). The recent and rather unexpected wave of fierce propaganda against all forms of a jobless income and, accordingly, against social policy concepts advocating any sort of ‘de-commodification’ (that is, the exemption of individuals or certain groups of individuals from the compulsion to offer their labour for sale on the market) has led to a situation where questioning the sacred employment nexus and arguing for a real basic income is tantamount to the self-exclusion of the social policy community.Thus, the argument put forward here is that those concepts figuring most prominently in the current debate on social policy reform in Germany – concepts pleading for a state-subsidized upgrading of low market incomes – are far from being something like a first step towards anything only slightly resembling a basic income. In this sense, for the time being, and at least as far as the political discussion is concerned, 247
Basic Income on the Agenda there seem to be no short cuts but only wrong tracks on the way to putting basic income on the agenda of German politics.
The Fall and Rise of Social Policy Reform Looking at the German social policy debate in the 1990s, two distinct discourses may be distinguished, each of them characterizing roughly one of the halfs of the decade. It was in the late 1980s that almost every political party with parliamentary representation in Germany had discovered, under different headings, the idea of basic income to be an exceedingly decorative and, for that purpose at least, harmless ornament to their respective party programmes.The call for a ‘citizen’s income’ (‘Bürgergeld’) or for some kind of a guaranteed minimum built into the social security and income transfer systems (‘Soziale Grundsicherung’) gradually found its way into the programmatic statements of Liberals (FDP), Social Democrats (SPD), Greens (Die Grünen), and, after 1990, Post-Communists (PDS), with only the Christian Democrats (CDU) still resisting to give way to the pressures that part of its rank and file (mainly its ‘labourist’ wing) was exerting in that direction. In basic income we trust: that seemed to be the collective creed of pre-1989 party conventions and electoral platforms. It was the fall of the Berlin wall and ensuing German re-unification that suddenly rendered these unanimous but, as it were, non-committing testimonies completely anachronistic and politically insignificant. During the first years of the re-unification decade, the unprecedented transfer of resources and institutions from triumphant Western to wrecked Eastern Germany effectively silenced even the most half-hearted attempts to make political reference to a possible need of reforms for instance of the institutional foundations of German social policy – be it biased towards the strengthening of minimum income elements or not. Comprehensibly or not, the intellectual and administrative energy of German politics was totally absorbed by the restoration of what chancellor Helmut Kohl, in a remarkable and famous (but, at the end of the day, fatal) flash of inspiration, called a blooming landscape (‘blühende Landschaften’) in the East German ‘länder’. As is well-known, the East German industrial landscape did not bloom but steadily faded away over the course of the years, and if the social scenery did not deteriorate to the same extent it was only because of the gigantic tax and social security transfers that flowed and continue to flow into the public maintenance of masses of formerly unproductive employment, which, after the end of state socialism, the East German economy was forced (or allowed) to get rid of almost overnight. It was exactly the so-called ‘costs of unification’ (‘Kosten der Einheit’), maybe the most popular stereotype of German political discussions of the last years, that brought social policy reform back to the political agenda. In the second half of the 1990s, a series of controversies about issues of social policy reform entered the political arena just like shooting stars: they unexpectedly appeared on the political agenda, only to silently disappear again after a short time, their destiny being at best to be debated further in the splendid isolation of the scientific community. In the following sections, I will shortly review what I think were the most important issues at stake in these discussions, trying to discern in each case their substance and significance in regard to the political claim for a (‘real’) basic income.
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Short Cuts and Wrong Tracks on the Long March to Basic Income
The Race to the Bottom in Tax Reform To begin with, a recurrent feature of German social policy debate throughout the last years has been the rearrangement of the income and payroll tax system. On the whole, there is much evidence that the problems of the welfare state, seen as a complex mechanism of incentives and constraints, and their solution are increasingly being debated in Germany as a matter of tax reform. For some time in the middle of the decade, the governing coalition of conservatives and liberals and the social-democrats in opposition vied with each other in presenting, indeed, revolutionary proposals aiming at a sweeping simplification of the system and radical tax cuts, alternatively at the lower end of the income spectrum (the social-democratic variant) or for those better-off and, therefore, supposedly most prone to engage in productive investment (the liberal option). In this fiscal ‘race to the bottom’, the main contender for a hypothetical ‘Milton Friedman award’ in German politics was (and continues to be) Christiandemocratic MP Gunnar Uldall whose proposal is based on only three tax rates (of 8, 18, and 28 percent), ‘progression’ ending at the very modest income of 30 thousand DM per year. Similar concepts are advocated not only by the liberal party, but also by the present leader of the social-democrats in the federal parliament (Bundestag), Peter Struck, or by influential MPs of the Green party such as Christine Scheel and Oswald Metzger, adding to a potential big coalition for a neoliberal tax reform that would constitute the first step towards a simple negative income tax model (Uldall et al., 1996). For the time being, it seems rather implausible that things could go so far. But, even if tax cuts were of a much more modest scale – the most radical reforms estimate them at some 115 billion DM – tax reforms always entail a huge redistribution of income and wealth. A welfare state that renounces to keep up the tax burden of its ‘hard working’ citizens (and its easy-earning capital owners) is obliged to cut its expenses correspondingly – and experience teaches us that the recipients of public transfers at the lower edge of society to suffer the most from shrinking state budgets (the current consolidation programme put forward by the newly elected leftist government being the latest confirmation of that golden rule of fiscal policy).
Green Social Policy Going Astray Of all the social policy initiatives started during these last years, the one that came closest to the guiding ideas of a basic income was the basic protection scheme driven forward by Germany’s Green party, and by Green MP Andrea Fischer in particular. The project of a ‘Grüne Grundsicherung’, proposed only a few months before Greens and social-democrats won the federal elections of September 1998, aims at integrating the existing transfers to the low-earning, the long-term unemployed and to asylum-seekers into one single benefit (Bündnis 90/Die Grünen-Bundestagsfraktion, 1998). This transfer would be paid on a household basis, but then be evenly distributed among every single household member, thus breaking with the notorious notion of the ‘head’ of the household that has pervaded German social policy since its very beginnings. By providing lump-sum payments slightly above the level of today’s social assistance (‘Sozialhilfe’), however, this programme would in no way abolish the existing practice of means-testing, allowing at the same time for somewhat larger possibilities to com249
Basic Income on the Agenda bine minimum transfer and earned income. Its additional cost of some 12 billion DM (compared to the currently existing social assistance scheme) was originally supposed to be reimbursed by imposing higher taxes on assets, but today, the party’s mainstream is very reluctant to raise the tax burden of the well-to-do beyond the existing levels. On the whole, however, these are all minor details considering the fact that the ‘Grundsicherung’ project, formerly (and for quite a long time) an affaire de cœur for Green party members and supporters, was inexplicably removed from the Green agenda once they made it to government in late 1998.While Ms. Fischer, now head of the health department, is getting lost in the impenetrable undergrowth of the health reform jungle, the social-democratic Minister of Social Affairs, former union leader Walter Riester, is hopelessly devoted to save the public pension scheme from the dark menace of financial collapse. Incidentally, his plans for a pension reform, fiercely criticized and resisted by the Christian democratic and liberal opposition, include the introduction of a minimum pension within the social insurance system, the most meagre pensions being lifted up to the social assistance level, thus preventing long-standing contributors to the system from having to end their days in misery.
New Visions (1): Beck to the Future Commission Interestingly enough, apart from the Green ‘Grundsicherung’ initiative gently having fallen asleep, the most important reform debates in terms of basic income took place in a politico-scientific border area that actually only emerged in the last few years. The second half of the 1990s was characterized by an intellectual climate of deep pessimism concerning the competitiveness of German industry in an age of ‘globalization’ (the socalled ‘Standortdebatte’) as well as of generalized criticism of the alleged immobilism of German politics. Quite consistently, the term ‘Reformstau’, referring to the accumulation of postponed or unfinished, in any case pending, major political projects, was proclaimed ‘word of the year 1997’ by the semi-public association for the German language. In this situation, it comes as no surprise that both the Christian democrats and the social-democratic party resorted to the idea of setting up their respective ‘future commissions’ (‘Zukunftskommissionen’), mobilizing more or less well-known social scientists more or less inclined to one side or the other to collectively think of possible solutions to the social problems of our time. The ambitious Prime Ministers of the traditionally conservative ‘länder’ Bavaria and Saxony, Edmund Stoiber and Kurt Biedenkopf, were the first to take the initiative and to bring together a group of experts that elaborated a voluminous report on the future of employment and labour markets in Germany. In the section of the report that was probably debated the most after its publication, the commission pleads for the public encouragement of so-called ‘civic work’ (‘Bürgerarbeit’) as a promising alternative sphere of activity for discouraged unemployed people.The concept, developed for the commission by Ulrich Beck, possibly Germany’s best-known sociologist (and something of a Greenish submarine within the group of commissioners), consists of channelling the jobless into a sector of voluntary, public interest engagement which, in principle, is not to be paid but to be immaterially rewarded (through so-called ‘favour credits’). People engaged in this sector may claim, in case of need, for a ‘citizen’s income’, a public transfer identical with the conventional social assistance being paid 250
Short Cuts and Wrong Tracks on the Long March to Basic Income up to now – except for one aspect: its amount (which, according to the commission’s proposal, should lie well below the level of today’s ‘Sozialhilfe’). Apart from the fact that, under these circumstances, the programme would simply amount to a hidden act of welfare state retrenchment, it is highly debatable whether ‘civic work’ can plausibly represent a substitute for productive employment and, more importantly, a realistic option for those apparently constituting the main target group of the proposal: the long-term unemployed.To be sure, the existing empirical evidence on volunteer and honorary work clearly shows that it is not the desperate job seeker but rather the fulltime employed who engages in unpaid, only intrinsically motivating and rewarding activities.
New Visions (2): The Ebert Empire Strikes Back The Biedenkopf/Stoiber initiative was immediately followed by an even more demanding project. The social-democratic party foundation (Friedrich-EbertStiftung) retaliated by gathering together its own think tank, asking the experts to identify the structural reasons for the apparent exhaustion of the ‘German Model’ and to figure out possible solutions to the dilemma of simultaneously achieving, in a radically changed international context, economic growth, social cohesion and environmental sustainability. Confronted with this almost superhuman task, the commission concentrated on outlining four selected, strategically relevant reform projects, one of them being structural changes in the welfare state leading to the improvement of employment opportunities for the low-skilled. Starting from the diagnosis that it is the institutional idiosyncrasy of German social policy (among other things, the welfare state’s guarantee of a jobless subsistence-level income) that hampers or even prevents the creation of new jobs for the low-qualified, two competing proposals for the opening of a ‘socially acceptable’ low-wage job market were put forward (cf. The Future Commission, 1998: 22-25; as to the broader debate, see the literature listed in the annex). One option presented in the final report is the ‘citizen’s income’ or ‘Bürgergeld’ model developed by the economist Joachim Mitschke, by the way one of the members of the commission. Mitschke has a long-standing record, including the highly combative involvement in a commission on the reform of the German tax system set up by the Ministry of Finance in the early 1990s, of advocating the integration of most of the tax-funded and income-related benefits into one single, needs-related and householdbased cash payment (see his contribution to this volume). Due to the proposed negative income tax-mechanism (with a supposed standard tax rate of 50 percent), so the argument goes, the incentive for transfer recipients to take up a job would be incomparably greater than under the present system where social assistance is paid only below a rigidly fixed income threshold, additional earnings almost entirely being confiscated. On the other hand, employers would find themselves in a happy situation where wages and thus labour costs could be significantly reduced without their employees‘ real incomes falling below subsistence levels. But unfortunately, only too frequently the best solutions are not really the most pragmatic ones (and vice versa) – a rather trivial fact that obviously even ‘future commissioners’ have to recognize and pay tribute to. As a consequence, the commission fairly mercilessly dismissed the 251
Basic Income on the Agenda ‘Bürgergeld’ option, not (or at least not primarily) because of the proposal’s financial imponderabilities, but, remarkably enough, due to the expected ‘political costs’ the simultaneous changes in tax law, social legislation and collective wage agreements would entail.Thus, it seems that ‘gaining the future’ (‘die Zukunft gewinnen’), recently one of the favourite sayings of German politicians, is reasonably popular only as long as it is not too demanding politically and intellectually. Given this situation, the commission report finally opted for the alternative, less ambitious reform project of subsidizing low-paid jobs, adopting the model elaborated by the renowned political scientist Fritz Scharpf, another of the expert group’s members. For the commission, the striking argument in favour of this proposal is that it involves no major reform of social legislation and that, by concentrating subsidies strictly on low-income earners, its effectiveness would be significantly higher as compared to a broader citizen’s income approach. Instead of taking into account real incomes and fictitious needs of a household unit, the only relevant aspect for the Scharpf transfer model is the market wage paid by the employer: the wage subsidy would progressively be reduced as wages come closer to the upper threshold (the report starts from the assumption of a potential lower and upper limit of DM 10 and DM 18 per hour).Again, the guiding idea is that the cost reduction made possible by a public supplement on market wages would be sufficiently substantial to make it profitable for companies (and for job seekers) to engage in the only slightly productive (and thus low-paying) sector of so-called ‘simple services’ and to create there ‘large numbers of additional jobs’ (The Future Commission, 1998: 25).
Fatal Attraction: Making the Unemployed Work As a matter of fact, making not only the unemployed work but also significant parts of the hitherto non-active population in the supposedly underdeveloped service sector – thus imitating what is reverently called ‘the American job miracle’ (or ‘job machine’) – has become something of an obsession in German politics. Backbenchers of every shade publicly wonder how to avoid the ‘unemployment trap’ putatively resulting from excessively generous income replacement rates of unemployment insurance or from overly restrictive regulations concerning the possibility of combining earned incomes and welfare benefits.The, for some time, quite popular concept of a ‘mixed salary’ (or ‘Kombilohn’) was another product of this generalized ‘labourist’ or ‘productivist’ mood. The idea, presented first by the peak organization of German employers’ associations (BDA) and supported by the Christian democratic party, consists of a tax-financed increase of social insurance replacement ratios for the long-term unemployed (by 20 points, compared to today’s 57 percent – or 53 percent for recipients without children – of the former net income) in case they accept a low-paid job offered to them.The possible occupation effect of the programme was estimated at some 150,000 (out of 1.35 million) people currently being entitled to long-term unemployment benefits (the so-called ‘Arbeitslosenhilfe’). Nevertheless, both the German unions and the liberal party, which formerly held the Ministry of Economy, opposed the project, although for different reasons: while union representatives did not want to have the state subsidizing dumping wages, liberal ideologists feared a potential dynamic irreversibly leading to the institutionalization of a statutory minimum wage.Things being as they are, 252
Short Cuts and Wrong Tracks on the Long March to Basic Income the political interest in this project has dwindled, with only some pilot programmes on the local level being debated seriously for the time being. Despite the rather poor performance of the employers‘ ‘Kombilohn’-campaign, the public promotion of low-wage employment continues to hold a fatal attraction for political actors, no matter which party they belong to or sympathize with.The political initiatives developed within the context of the so-called ‘employment alliance’ (‘Bündnis für Arbeit’) – a half-hearted attempt to resuscitate former neo-corporatist bargaining practices, initiated by metal union leader Klaus Zwickel some years ago and adopted later by the Schröder government as part of its political agenda – corroborate the low-paying jobs’ irresistible appeal to German political decision-makers and their advisors. It was the so-called ‘benchmarking group’ of the ‘Bündnis’, headed by wellknown (and SPD-prone) sociologists Wolfgang Streeck and Rolf Heinze, that popularized the idea of subsidizing social security contributions instead of wages – a proposal already to be found in the social-democratic Future Commission’s report. According to this concept, the contributional burden would be progressively reduced for lowearning workers, wages below a certain level (again, the report suggests DM 10 per hour to be the lower limit) being exempted completely from contributions of any kind. Apart from the serious doubts one might have as to the potential net employment effect of such a measure, what really gives cause for concern is the new and obviously consensual philosophy underlying the different policy proposals presented so far:‘social policy can no longer be limited to providing those excluded with a non-work-based income above subsistence level’ (The Future Commission, 1998: 25).And in a provocative article for Germany’s leading news magazine Der Spiegel, Streeck and Heinze go even one step further, holding traditional social policy responsible for the fact that German citizens obviously – and mistakenly – consider a jobless income to be a legal right granted to them. The times, they are a‘ changing: according to Streeck and Heinze, there is no such thing as a right to de-commodification, and de-commodifying people – releasing them from market pressures – is far from constituting a favour for the beneficiaries (or, seen from that perspective, the victims) of such policies.‘Any job is better than no job’ – so goes the simple slogan (cf. Streeck and Heinze, 1999: 44).
Towards a Productivist Consensus in Social Policy Reform To summarize and put it simply: in the current debate on social policy and social policy reform, the central issue at stake is definitely not ‘poverty’ (or how to guarantee a decent standard of living to everybody: young or old, able or disabled, German or not), but ‘employment’ (or how to make them all work). As a consequence, whenever basic income or some sort of social minimum to be covered by the state is mentioned in this debate, it is referred to not as a means of combatting or at least alleviating poverty in an extremely prosperous society, but as a functionally necessary complement to a lowskill/low-income employment strategy in a globally competing economy. In the context of this strategic scenario, it is not poverty or a low income, but unemployment – being without a job – which leads to social exclusion; employment, no matter under which conditions, is regarded per se as an act of social integration; and social justice eventually is being redefined, referring not to some kind of income equity (or even 253
Basic Income on the Agenda equality), but to the overall goal of equal employability, the political meta-value to which each individual and every social institution inevitably has to submit and subscribe (cf. Lessenich, 1999; Ostner, 1999). It seems, then, that current political debates in Germany are extremely far away from the vision of a jobless income for everybody.The strong ideology of paid work pervading German social policy from its very beginnings, and its distinct bias towards achievement and work performance criteria, constitute rather unfavourable institutional conditions for the implementation of a basic income. However, this institutional legacy could be overcome, in principle and in the long run at least, if there was an emerging consensus to do so. Unfortunately, just the opposite seems to be true.The spreading talk of the German welfare state as a ‘social hammock’ (‘soziale Hängematte’) – a verdict quite popular lately, not only on the front-pages of journals and magazines, but also among leftist social scientists like Streeck and Heinze – cannot properly be said to constitute a good omen for basic income and its proponents. For the time being, reform proposals have to pay homage to the income-employment (or work-welfare) nexus if they want to gain a place on the agenda of German politics. In this sense, establishing social minima within the different social insurance schemes or promoting decent employment opportunities in innovative fields of activity certainly do represent sensible social policy initiatives. However, they cannot be seen as being the heralds of a coming basic income.To be sure, the idea of a basic income is diametrically opposed to any of the workfare strategies en vogue these days, in Germany and elsewhere. Basic Income against the Workfare State – that will have to be the gauge of social policy proposals in times to come. As things are, on the eve of the 21st century and BIEN’s eighth Congress, it does not seem that Germany has made any progress (indeed, it seems to have fallen back) on the long march to basic income. But who knows – maybe there is good news instead from China?
References Bündnis 90/Die Grünen-Bundestagsfraktion (1998), Die Grüne Grundsicherung: Ein soziales Netz gegen die Armut, Bonn: Bündnis 90/Die Grünen. Lessenich, S. (1999),Vorwärts – und nichts vergessen. Die neue deutsche Sozialstaatsdebatte und die Dialektik sozialpolitischer Intervention, Prokla: Zeitschrift für kritische Sozialwissenschaft 29 (3), no. 116, 411-30. Ostner, I. (1999), Das Ende der Familie wie wir sie kannten, Blätter für deutsche und internationale Politik, no. 1/99, 69-76. Streeck,W. and R.G. Heinze (1999), An Arbeit fehlt es nicht, Der Spiegel, no. 19, 10.5.1999, 3845. Uldall, G. et al. (1996), Zeitgespräch: Die Vereinfachung des deutschen Steuersystems, Wirtschaftsdienst 76 (6), 275-89. The Future Commission/Friedrich Ebert Foundation (1998), Economic Performance, Social Cohesion, Environmental Sustainability:Three Goals – One Path, Bonn: FES.
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Annex: Basic Income/Negative Income Tax The German Discussion. A Selected Bibliography (1994-99) Synopses of Basic Income Concepts: Arbeitsgemeinschaft sozialpolitischer Arbeitskreise (AG SPAK) (1995), Soziale Grundsicherung: Dokumentation des Sozialpolitischen Forum 1994, München:AG SPAK. Hanesch, W. (1995), Optionen der Armutspolitik im Umbau des Sozialstaats, in: W. Hanesch (ed.), Sozialpolitische Strategien gegen Armut, Opladen:Westdeutscher Verlag, 141-75. Hauser, R. (1996), Ziele und Möglichkeiten einer Sozialen Grundsicherung, Baden-Baden: Nomos. Kaltenborn, B. (1995), Modelle der Grundsicherung: Ein systematischer Vergleich, Baden-Baden: Nomos. 2nd ed.: Von der Sozialhilfe zu einer zukunftsfähigen Grundsicherung, Baden-Baden: Nomos, 1998. Kress, U. (1994), Die negative Einkommensteuer: Arbeitsmarktwirkungen und sozialpolitische Bedeutung. Ein Literaturbericht, Mitteilungen aus der Arbeitsmarkt- und Berufsforschung 27 (3), 246-54. Mückenberger, U. et al. (1996),A Basic Income Guaranteed by the State:A Need of the Moment in Social Policy, in: C. Offe, Modernity and the State, Cambridge: Polity, 201-21. Vobruba, G. (1995), Arbeit und Einkommen nach der Vollbeschäftigung, Leviathan 23 (2), 15464. Vobruba, G. (forthcoming 2000), Alternativen zur Vollbeschäftigung: Die Transformation von Arbeit und Einkommen, Frankfurt a. M.: Suhrkamp. Weeber, J. (1996), Radikalreform oder Umbau des Sozialsystems?, Zeitschrift für Sozialreform 42 (4), 209-26.
Negative Income Tax/Citizen’s Income (Bürgergeld): Bäcker, G. and J. Steffen (1995), Die Negativsteuer – ‘Aussteigerprämie’ oder ‘Lohnarbeitspeitsche’?, Widersprüche, no. 54, 37-45. Becker, I. (1995), Das Bürgergeld als alternatives Grundsicherungssystem: Darstellung und kritische Würdigung einiger empirischer Kostenschätzungen, Finanzarchiv 52 (3), 306-38. Bundesministerium der Finanzen (1996), Probleme einer Integration von Einkommensbesteuerung und steuerfinanzierten Sozialleistungen, Bonn: BMF. Hackenberg, H. and S. Sell (1997), Die ‘Negative Einkommensteuer’ als beschäftigungspolitisches Instrument – oder: Über die Einseitigkeit modelltheoretischer Annahmen, Sozialer Fortschritt 46 (4), 86-90. Hinterberger, F. (1994), Für eine differenzierte und konsistente Sozialpolitik. Eine Anmerkung zur Debatte um die negative Einkommensteuer, in: J.Wahl (ed.), Sozialpolitik in der ökonomischen Diskussion, Marburg: Metropolis, 149-70. Institut für Weltwirtschaft (1996), Das ‘Bürgergeld’ – ein sinnvolles Konzept? Abschlußbericht zum Forschungsauftrag der Friedrich-Naumann-Stiftung, Kiel: Institut für Weltwirtschaft. Krause-Junk, G. (1996), Probleme einer Integration von Einkommensbesteuerung und steuerfinanzierten Sozialleistungen, Wirtschaftsdienst 76 (4), 345-9. Krupp, H.-J. (1995), ‘Bürgergeld’ oder zielorientierte Sicherung?, Hamburger Jahrbuch für Wirtschafts- und Gesellschaftspolitik, 40,Tübingen: Mohr, 291-313.
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Basic Income on the Agenda Lang, K. (1994), ‘Negative Einkommenssteuer’: Ein Programm gegen Ausgrenzung oder zur weiteren Spaltung des Arbeitsmarktes?, Die Mitbestimmung 40 (4), 53-6. Ludwig-Erhard-Stiftung (ed.) (1996): Negative Einkommensteuer: Gibt es pragmatische Lösungen?, Bonn: Ludwig-Erhard-Stiftung. Matthes, B. and G.Vobruba (1997), Konsequenzen der neuen Ergebnisse von Längsschnittanalysen zur Einkommensmobilität für das Konzept einer negativen Einkommenssteuer, Düsseldorf: HansBöckler-Stiftung. Meinhardt,V. et al. (1994), ‘Bürgergeld’: kein sozial- und arbeitsmarktpolitischer deus ex machina, WSI-Mitteilungen 47 (10), 624-35. —et al. (1996), Auswirkungen der Einführung eines Bürgergeldes – Neue Berechnungen des DIW, DIW-Wochenbericht, no. 32/96, 533-43. Mitschke, J. (1995a), Steuer- und Sozialpolitik für mehr reguläre Beschäftigung, Wirtschaftsdienst 75 (2), 75-84. — (1995b), Jenseits der Armenfürsorge – Das Bürgergeld kann unbürokratisch und ermessensfrei das Existenzminimum sichern, Die Zeit, no. 50, 8.12.1995, 30-1. — (1995c), Bürgergeld für mehr Arbeitsplätze, Frankfurter Allgemeine Zeitung, 16.12.1995, 17. Pelzer, H. (1996), Bürgergeld – Vergleich zweier Modelle, Zeitschrift für Sozialreform 42 (9), 595614. Scharpf, F.W. (1994), ‘Negative Einkommenssteuer’ – ein Programm gegen Ausgrenzung, Die Mitbestimmung 40 (3), 27-32. Schildbach, S. (1997), Bürgergeldmodell zur integrierten Grundsicherung, Wirtschaftswissenschaftliches Studium, no. 1/97, 21-8. Schulte, E. (1996), Mit dem Bürgergeld aus der Armutsfalle, Frankfurter Allgemeine Zeitung, 27.2.1996, 14. Sesselmeier, W. (1997), Negative Einkommensteuer und ihre Auswirkungen auf die Beschäftigung, Sozialer Fortschritt 46 (3), 63-8. Siebert, H. (1995), Bürgergeld – ein Fehlanreiz, Frankfurter Allgemeine Zeitung, 14.1.1995, 11. Spermann,A. (1994), Das Bürgergeld – ein sozial- und beschäftigungspolitisches Wundermittel?, Sozialer Fortschritt 43 (5), 105-11. Suntum, U.v. and S. Bohnet-Joschko (1996), Das Bürgergeld ist keine Wunderwaffe, Frankfurter Allgemeine Zeitung, 9.3.1996, 15. Weeber, J. (1995), Pro und Kontra ‘Bürgergeld’, Arbeit und Sozialpolitik 49 (11-12), 47-52. Wilke, U. (1999),The Earned Income Tax Credit – Hat Amerika es besser? Zur Diskussion um die negative Einkommensteuer in Deutschland und den USA, WSI-Mitteilungen 52 (4), 25560. Witzel, R. (ed.) (1998), Bürgergeld rettet Arbeitsmarkt:Vom entmündigenden Wohlfahrtsstaat zur postindustriellen Bürgergesellschaft, Bonn: Lemmens. Zukunftskommission der Friedrich-Ebert-Stiftung (1998), Wirtschaftliche Leistungsfähigkeit, sozialer Zusammenhalt, ökologische Nachhaltigkeit: Drei Ziele – ein Weg, Bonn: FES.
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Ups and Downs of Basic Income in Denmark Erik Christensen and Jørn Loftager
Basic income has never seriously been on the Danish agenda of practical politics. On the contrary, in recent years the idea has been outright rejected, and political leaders have been careful to dissociate themselves from it. However, the very fact of the explicit statements against basic income in itself indicates that it has become a recurring issue in the Danish debate concerning social and labour market problems.And this is by no means accidental; for several reasons, basic income is an obvious theme in a Danish context. Both regarding the model to which the Danish welfare state belongs and the way in which social structures and welfare policies have developed, there are several aspects with striking affinities to a guaranteed, unconditional income to all citizens. The most intensive and widespread discussions on basic income took place at the beginning of the 1990s, no doubt as a reflection of the preceding period, which to a considerable extent indicated a ‘creeping basic income’ or a ‘basic income through the back door’. However, a labour market reform in 1993 signalled a new departure in Danish welfare politics. A new philosophy of ‘activation’ or workfare was introduced, replacing the ‘passive’ line of the previous cash-benefit schemes. Since then, the labour market as well as social policies have developed within this new framework of activation, and the actual set-up of the Danish public transfers has definitely moved away from the basic income trajectory of the early 1990s. In that perspective, a Danish basic income reform, even a ‘creeping’ one, looks much less likely today than five or six years ago. Nonetheless, a valid assessment of the potential of and prospects for a basic income scheme in Denmark should also consider the development in popular values and preferences. In regard to that, there seem to be tendencies and inclinations which are more in accordance with the ideals of basic income than with the philosophy of workfare. In the following, we shall offer an overview of the history of basic income from the perspective of the Danish welfare model, briefly characterized as an example of the Scandinavian universalisist model.After discussing the way in which the income maintenance system has developed during the last two decades or so, we portray the debate on basic income and conclude with the future chances for schemes like basic income in Denmark.
Two Opposing Trends: Decommodification versus Activation The Danish welfare state conforms to the Scandinavian model, characterized by relatively strong universality and financed by general taxes (Esping-Andersen, 1990). Accordingly, services as well as income transfers have to a substantial degree been offered to citizens as rights rather than being based on contributions, means testing and bureaucratic discretion.To a great extent the Danish welfare state has reflected the ideal and principle of equal democratic citizenship in the sense and tradition of Marshall (Marshall, 1950; cf. Loftager, 1996). The essential aspiration is to secure equal dignity 257
Basic Income on the Agenda and status for everyone in spite of different market resources and social conditions.This is often interpreted as a characteristic of a ‘social democratic’ welfare state because of its decommodifying consequences.At the same time, however, it must be stressed that the (former) Danish ‘passive’ system of transfers also had basic liberal qualities in the sense that it remained morally neutral with respect to how individuals define the good for themselves (Cox, 1998). Precisely on this point recent years’ ideas of welfare present profound changes.The new paradigm of activation has moved far away from any liberal notion of the autonomous self, in favour of a conception according to which identity is constituted by specific behaviour in general and participation in gainful employment in particular. Inclusion has been transformed from a question of equal status of citizenship by means of social rights to a question of accomplishing duties of activation. The policies of activation manifest a shift from a liberal to a communitarian conception of community, according to which the essential substance of community is shared norms and values – and doing (paid) work is the invariable top norm par excellence. Without fulfilling that, it is impossible to be part of the community. In the following, we sketch the schemes of public support, and the changes due to the shift towards activation. Unemployment benefit is conditioned by (voluntary) membership of an unemployment insurance fund. However, unemployment benefits are largely financed by general taxes rather than contributions. Especially for low wage groups, the level of compensation is high, i.e. 90 percent of the former wage, but with a relatively low ceiling (about 11,000 DKr per month before tax).Actually, the average compensation level has declined from 75 percent to 65 percent from 1975 to 1994 (Pedersen, Pedersen and Smith, 1995: 41). Consequently, the system is almost flat-rate in favour of the low income groups. Also for other reasons, the unemployment benefit system as it was organized up to 1994/95 showed significant similarities to a basic income system. Firstly, it was easy to get access to it. The requirements were one year’s membership of an unemployment insurance fund and 26 weeks of employment. Secondly, the period of support was rather long: seven or nine years, depending on circumstances, and entitlement to a new period ordinarily required normal employment for 26 weeks. In practice, only few persons were expelled from the system. Thirdly, because of the high level of unemployment, the obligation to be available to the labour market was rather formal.The unemployed were required to be actively job-seeking, but due to the employment situation, the control could not be effective. Fourthly, there was a steady increase in the number of people who insured themselves. From 1982 to 1992, the share of the total labour force covered by the union insurance system rose from 67 to 76 percent (Statistisk Tiårsoversigt, 1996). In recent years, several changes have modified and weakened the universalist qualities of the unemployment benefit system. It has become more difficult to gain access to it: the requirement of previous ordinary employment has been extended from 26 weeks to one year.The unemployment benefit period has been reduced to a maximum of four years, of which the last three involve compulsory activation. In addition, since 1995, the maximum period of unemployment benefit for people under 25 has been restricted to only six months before they are obliged to accept 18 months of education on notably reduced benefits. The obligations of activation differ decisively from the obligations in the previous,‘passive’ system. In the latter, unemployed persons had to be 258
Ups and Downs of Basic Income in Denmark available for jobs on normal conditions, i.e. the same conditions that apply for everyone else on the labour market.According to the new activation principles, people have to accept work on conditions decided by the authorities, which means no right to wage negotiations, no renewed access to the unemployment insurance system, and no right to take an extra job. Similarly, according to the new system each unemployed person must have a so-called ‘action plan’, specifying educational and job-training activities.Thus, the actual duties to be performed are not known in advance, because they do not appear from general rules, but are decided concretely for each unemployed individual. This same tendency towards activation applies to the means-tested social assistance benefits, which were previously based on the income-disappearance principle (the idea that a temporary loss of income should not lead to a decline in standard of living). However, due to the subsequent mass unemployment, social assistance came to function as a permanent alternative to the unemployment-benefit system for many people. During the 1990s, the activation line has increasingly manifested itself, and in 1997 activation officially replaced the income-disappearance principle as the overall guiding principle for social assistance. From the very start, in 1891, the Danish old-age pension system was deliberately formed as a counterpart to the insurance system established in Bismarck’s Germany about the same time (Plough and Kvist, forthcoming), and since then it has been a cornerstone in the universal welfare model. It was designed as a citizen-based and tax-financed scheme, and after 1956 the basic amount of the pension became a universal benefit without means-testing. However, in 1994 an income-test was introduced, which means that old age pensioners with additional earnings from work (i.e. not other pensions) exceeding a certain amount now receive a reduced pension or none at all (ibid.: 35). Moreover, successive governments have over the last 15-20 years introduced several tax-relieving pension-saving schemes to encourage private savings. In addition, unions and employers have established ‘private’ labour market pensions as part of their collective agreements. Together with the income-tested supplements to the basic amount of the ‘folkepension’, this will probably result in a change of the Danish flat-rate pension system into an income-related pension system with no maximum. Until recently, Danes were entitled to old age pension from the age of 67, but the real pension age has become considerably lower due to additional pension schemes. Against the background of high and rising unemployment, in 1979 a voluntary retirement pay (‘efterløn’) was introduced for people between 60 and 67 who had been members of an unemployment insurance fund for a specified period of time.This scheme was especially intended for ‘worn-down’ manual workers, but it has won profound and widespread popularity in the general public. Also as a market-clearing remedy, a flatrate transitional allowance was introduced in 1992, enabling long-term unemployed people in the age group 50-60 to retire. Despite or because of its success, this scheme was cancelled in 1996. In 1999, a comprehensive reform of the old age pension scheme was enacted.The pension age was reduced to 65, and the early retirement scheme was changed profoundly to prompt people to stay longer on the labour market. The practical consequences remain to be seen, but literally all concerned will have to do something in 259
Basic Income on the Agenda return for their cash benefit. The reform takes a step in the direction of an insurance system in the sense that in the future, entitlement to early retirement is conditioned by paying a specific contribution. In 1987, a generous and universal child allowance was introduced. From time to time, critics have suggested a means-testing of this allowance in order to target it toward the most needy; but although ‘targeting’ in general has been on the welfare agenda, nothing has been changed so far. Finally, various leave schemes for parental, educational and sabbatical purposes make it possible to drop out of the labour market temporarily. From a basic income perspective, what makes these schemes especially interesting is that they entitle able-bodied people of working age to an income from the state without being available to the labour market.The arrangements enable wage earners to leave their job for a limited period and receive from 60 (originally 80) to 100 percent of maximum unemployment benefit. From the start in 1994, the leave arrangements proved to be very popular (Madsen and Loftager, 1997: 127f ).The total number of persons taking leave in 1994 was approximately 140,000, and in the following years the success became so immense that the conditions were tightened considerably. Sabbatical leave was dropped completely, and compensation for parental leave reduced to 60 percent. As a consequence, much fewer have made use of the arrangements during the last years. As regards educational benefits, in recent years these have been made universal and more generous for students from 19 and upwards. In conclusion, two main and, to some extent, opposing trends have characterized the Danish arrangements of public support since mass unemployment manifested itself in the wake of the two oil crises in the 1970s. On the one hand, they have become more universal; partly because new citizen-based schemes have been introduced, partly because of a substantial expansion of the workforce due to women’s increasing participation in the labour market. This means that arrangements which are formally insurance-based in practice function as near universal arrangements. As a result, the basic tendency is that Danish society is developing into a society of individual income receivers (Loftager, 1996: 135). Furthermore, it is worth noticing that, although the number of people dependent on public transfer payments has grown tremendously, the proportion of the population employed has been remarkably constant during the same period.Accordingly, what has happened is not that the burden of support has increased, but that private support within the framework of the family has been replaced to a large extent by public support (CASA, 1995). On the other hand, more recently an anti-universalist philosophy has appeared and now permeates the policies to a substantial degree. The scene has been captured by a new workfare ideology with slogans like ‘there is a need for everyone’,‘from passive to active’ and ‘give and take’ (Plovsing, 1994; Cox, 1998; Loftager, 1998).A striking manifestation of this is that activation is not only demanded of the able-bodied; the adoption of the activation principle means that everyone with even the slightest working capacity has to work in order to get public support. Overall, the new social and labour market policies of the 1990s have lost much of their decommodifying content. Public support schemes are no longer understood as 260
Ups and Downs of Basic Income in Denmark alternatives for people who cannot meet the conditions of the market to secure a market-independent foundation of citizenship. Rather, the status of citizenship is considered as being conditioned by the ability to meet obligations to work (Loftager, 1998).
The Danish Debate on Basic Income since the 1970s The interesting feature of the climate of ideological debate in the 1970s is that, in relative independence of one another, ‘outsiders’ in four different ideological settings – social-democratic, socio-liberal, Marxist and liberal – advanced parallel notions of introducing new social provisions for maintenance of livelihood without traditional wage labour in return (see also Christensen, 1999; 2000): 1. The Swedish economist, Gunnar Adler-Karlsson, then a professor at Roskilde University Centre in Denmark, published a couple of books in the mid 1970s (Adler-Karlsson, 1976; 1977) which made a social-democratic case for a ‘guaranteed minimum income’. 2. The idea of a basic income aroused widespread public attention in Denmark especially through publication of the book Oprør fra midten (Rebellion from the Centre) by the philosopher Villy Sørensen, the natural scientist Niels I. Meyer and the politician Kristen Helveg Petersen, in February 1978.This linked the idea to socio-liberal circles and to new ‘green’ aspirations for ‘a humanely balanced society’. 3. Around the same time, the ideas of the French socialist André Gorz about the introduction of a ‘social income’ came be known, in socialist circles especially, through translation of several of his books (Gorz, 1979; 1981; 1983). 4. Finally, a former co-operative society director, Niels Hoff, launched the notion of a ‘citizen’s stipend’ for debate in liberal circles (Hoff, 1983). These very diverse authors were at one and the same time each linked to a particular ideological milieu, while having an outsider status in relation to it.They figured as typical heretics, conceptual innovators and provocateurs, who ‘stood things on their head’, broke away from established ideological frameworks and challenged industrial society’s conventional growth discourse. The thoughts of Adler-Karlsson, Gorz and Hoff were known only within small circles and were quickly forgotten. It was Rebellion from the Centre and its conception of a citizen’s income that stirred public debate. Publication of this book led to the establishment of a new periodical, the formation of a new grassroots movement and publication of a series of books. A network was set up, which served as a political agent to disseminate the new ideas. It came as a surprise for the initiators that the notion of a citizen’s income attracted the greatest immediate support. The new grassroots movement took up this notion first with a view to translating it into concrete policy. So, an attempt was made in the 1980s to turn the idea into a ‘political issue’, to set a political discourse going about basic income. It followed that the idea had to be linked to the solution of a series of specific political problems, and that efforts had to be made to form a coalition or political alliance around the issue.The means adopted to this end were a number of conferences, the publication of discussion books and pamphlets, and interviews with leading politicians.The prime objective was to build a political alliance 261
Basic Income on the Agenda around the issue between the trade union movement, the Social Democratic Party, the Radical Liberals and the Socialist People’s Party. In the early 1990s – especially 1992-94 – the basic income debate reappeared in a different guise. A new discourse on the theme was created in the form of a counter-discourse to the dominant discourse around the labour market and social policy concerning renewal of the welfare state.The idea of a basic income took on a new shape as a political discourse, as the movement-oriented, the scientific and the political strands of debate about the issue, for a short time, became intertwined.A number of parties took up the question. New cross-political fora were created, and the idea became a subject of social scientific analysis. For a brief period, the new basic income discourse thus managed to give voice to widespread sentiments among the population, and to sow the seeds of a new pattern of alliance between groups across a series of political divides. The interesting feature of the 1990s’ debate about the issue was that the idea of a basic income was brought onto the political agenda both ‘from the bottom upwards’ and ‘from the top downwards’. It came ‘from the bottom upwards’ in the sense that it was promoted by marginalized people themselves, by ‘outsiders’ on the fringes of the worlds of business and trade unions, by spinners of ideas and by a few practitioners and controversialists of social science; and a new journal, SALT, strove to join the debates in the party-political arena with the debates in the arenas of social science and social movements.‘From the top downwards’, in turn, the new discourse was met by attempts to delimit, diminish or exclude it: attempts to those ends were made by the leadership of the established political parties, by a number of ministers, and by public commissions of enquiry and civil servants. The fact that the issue of basic income entered the official agenda of politics in these years can be ascribed to the development of a particular political context and its coincidence with a set of economic, institutional and political circumstances.The problems of unemployment and transfer payments were attracting growing attention, since joblessness continued to rise until the turn of 1994-95.At the beginning of the 1990s, the government had set up a series of commissions of enquiry, whose tasks were to devise a more rational system of labour market arrangements and public benefit provision: the targets were simplification and savings. In 1993, moreover, the new social-democratic government had enacted a set of measures for reform of the labour market. On the one hand, these widened employees’ opportunities for paid leave; on the other hand, they significantly broadened the scope for ‘activation’, that is, forcing the jobless to enter training schemes or find work. Among the political parties, the Radical Liberals are of particular interest.The party was influenced by the idea early on, and circles within the party kept it alive over the years. This fact is important because the party generally holds the balance of power in the Danish parliament. It was therefore a breakthrough when the Radical Liberals’ conference in 1993 recommended that the party work towards a national basic income scheme. It was the result of a determined effort among party grass roots, and in fact it bothered the party top to such a degree that the leader of the party, Minister of Economic Affairs Marianne Jelved, initiated an examination of the economic implications of adopting a basic income scheme. In the English summary, the result of the analysis reads as follows: 262
Ups and Downs of Basic Income in Denmark A citizens’ income scheme (a fixed basic payment to every citizen from the government) might simplify the welfare system substantially, increase employment of marginal groups, and provide better incentives to participate in the work force, but such a scheme is impossible to finance by taxes (marginal taxes would exceed 100 percent in some cases). Modified citizens’ income would not have the same inviting properties as a ‘pure’ scheme. (Ministry of Economic Affairs, 1993: 242)
The message of the report very quickly got through to the opinion leaders and the media.Within a few days and weeks, the main newspapers published the results of the analysis, and leading ministers contributed with articles underlining how a basic income scheme would be ‘economic nonsense’ (SALT, 1994; Christensen, 1994).The ministerial analysis was not left unchallenged. For instance, it has been argued that the analysis is based on misconceived premises (Loftager, 1994; Panduro, 1995). First and foremost, it does not pay any attention to the tax system and fails to acknowledge that basic income has to be seen as an integrated part of a new system of both taxes and benefits (Atkinson, 1995). However, an apparent result of the analysis was that the basic income idea lost most of its supporters in the Radical Liberal Party, and since 1994 it has not been on the party’s agenda.The same holds true for the public political agenda in general. At least for the time being, it seems as if the leading mass media were right in judging that the ministerial report dealt the deathblow to the idea of a basic income. At any rate, it goes without saying that the current dominance of ideas of activation and workfare makes little room for basic income. On the contrary, the innovation of the activation programmes should be seen as a response to the obvious basic income trajectory which took shape in the early 1990s (Goul Andersen, 1996). It was against this background that it became commonplace to warn against ‘the danger’ that existing arrangements would, in practice, lead to an introduction of basic income ‘through the back door’, as a leading economist put it (Ølgaard, 1995; cf. Loftager 1996: 143). In other words, basic income primarily became a bogey, something which represented exactly the opposite of what a renewed welfare state should aspire to. The fact that, around the turn of 1994-95, the discourse on citizen’s income vanished again from the official political arena, must be attributed to a change in the political and economic conjuncture. Those parties most clearly committed to the goal of economic growth were also the parties most strongly opposed to the idea of a citizen’s income. Parties semi-critical of growth – such as the Socialist People’s Party and the Radical Liberals – held views on the idea that were ambivalent and unclear.The Social Democrats and the right-of-centre Agrarian Liberals now found themselves with a new common enemy. Both parties then amended their programmes to distance themselves from the idea of a citizen’s income.The failure of the citizen’s income discourse to gain a foothold was also linked to the fact that it achieved little support from central circles in contemporary social critique. For these circles, the notion either seemed too controversial and was ignored or it was ridiculed as unrealistic. The women’s movement dismissed the idea without explicitly addressing it.The leftwing think tank CASA (Centre for Alternative Social Analysis), which served as an expert body for the left in trade union and political affairs, although critical towards the overriding goal of economic growth, yet held back from taking a stance on citizen’s income. CASA instead looked to an enlargement of wage-earning work as the 263
Basic Income on the Agenda way forward, to be achieved through job sharing and the creation of new ‘green’ jobs in the public sector. An independent cross-political debating group also kept its distance from citizen’s income, and proposed that wage employment be expanded by means of new jobs in the private service sector.Taken together, these responses demonstrated the continuing hold of the ideology of wage labour over even the critical flank in the public debate.
Recurrent Themes in the Debate The main pro and contra arguments in the debate have clustered around two main themes: economic efficiency and (moral) legitimacy. Apart from discussions on the possible economic consequences of the introduction of a basic income scheme, the debate has dealt with the economic effects and sustainability of large-scale universal cash benefit systems in general.Thus turning away social and labour market policies from the ‘basic income trajectory’ has been motivated by fears that it would be economically damaging in the long run. First and foremost because of negative effects on the supply of labour due to labour market marginalization and weakened work incentives caused by generous benefits and high marginal tax rates. Against this it has been argued that the flourishing Danish economy in general and the fact that supply problems as well as labour marginalization have been rather small seems to indicate that a system with universal and generous benefits may function much better in practice than expected in economic theory (Goul Andersen, 1996; Loftager, 1996). A fresh analysis from the Ministry of Labour (1998) confirms that long-term unemployment does not seem to produce the problems of labour market marginalization as previously assumed. Most arguments against basic income have, however, concentrated on moral considerations. Different points have been put forward. One is that that a basic income, because of its unconditionality, will have pacifying consequences and tend to legitimize the ongoing processes of social marginalization. However, supporters stress that the aim of a basic income is certainly not to keep people away from the labour market, but rather to serve as a basis for extended participation and that empirical evidence indicates that so-called passive benefits given on universal terms do not necessarily make people passive and generate extensive social exclusion. Rather, they seem to prevent it to a surprising degree (Goul Andersen, 1996). Another kind of moral argument has been put forward by former Minister for Social Affairs and former chairman of the Social Commission,Aase Olesen (1993). She rejects the idea because it would imply a dependency on the state detrimental to some of our most cherished values and virtues, i.e. autonomy and the capacity to take care of and look after oneself.The paradox is, however, that advocates of a basic income refer to precisely the same values in support of a basic income scheme, arguing that in modern society it is a pre-condition for taking care of oneself that a money income is available. Although it is correct, of course, that meeting this condition by means of a basic income will in fact involve relations of dependence vis-à-vis the state, the same objection might be raised against all possible rights which exist only as long as they are guaranteed by the state and supported by the citizenry (Plant, 1993). 264
Ups and Downs of Basic Income in Denmark Furthermore, it is stressed that what really deserves critical attention is the possible negative outcomes produced by systems constructed on the premises of workfare and selectivity in the shape of clientilization, stigmatization, paternalism, moral hazards, misuse, cheating, injustices, etc. (Loftager, 1996). Finally, one of the prominent standard arguments in the Danish debate against basic income is that it is simply morally wrong to allow able-bodied people to live on public transfers without doing anything in return. In this respect, a counter-argument says that, in fact, society is paid back, although no specific labour contracts are involved: not only in the shape of socially useful economic activities, but more generally by the accomplishment of essential social functions in the informal sphere of civil society (Loftager, 1996; Socialforskningsinstituttet, 1997).
Looking Forward The paradigm-shift from universality and ‘passivity’ to selectivity and ‘activity’ is leading in the opposite direction of a basic income system.The discourse of basic income has temporarily been defeated. A heretical counter discourse is difficult to create. If a real counter-power is to be established as some people have tried in the new social movements, it requires a change in the dominant language, a conscious consent to new values rather than those that currently dominate, support from alternative scientific paradigms and the creation of a new political discourse. It cannot be created by individuals or any single organizations, but can only be created through a prolonged historical collective learning process. Despite the recent defeat, fragments of new frames are present which in the future can become the basis for more clear narratives of citizen’s income. Further, the defeat shows that language can be consciously used in a counter-power strategy and that the hegemonic discourse is, below the surface, full of contradictory values.These contradictions may well lead to future crises of the hegemonic discourse and to the development of new counter-discourses. Add to this that the activation discourse won hegemony within a surprisingly short period of time (Jespersen and Rasmussen, 1998). So in the longer run, things might turn out differently, depending on both structural socio-economic developments and the policy measures the decisionmakers adopt in response to these developments. For instance, if a recession appears again, the question is whether it would be possible to preserve the activation line for the simple reason that it is much more costly than mere transfer of cash benefits.Assuming, first, that we are unlikely to return to a situation of ‘normal’ full employment and, second, that the process by which family support has been replaced by a situation in which practically the entire adult population are individual income receivers is irreversible, one might say that one precondition for the introduction of a basic income scheme has already been fulfilled. Whether the idea of basic income is likely to become ‘operational’ at the level of political decisionmaking depends on the electoral support for the idea and the politicians’ responsiveness to popular ideas. Research on popular attitudes on ‘how unemployment should be combated’ shows that a tremendous gap exists between the attitudes at the policy elite level and at the voter level (Goul Andersen, 1995). In general, voters’ trust 265
Basic Income on the Agenda in current policies and policy suggestions is rather limited, one of the exceptions being the introduction of paid leave arrangements, which ironically enjoys rather ambiguous support in the policy elite. Conversely, the voters support strategies to which the policy elite is opposed.Work sharing strategies in particular receive strong popular support, and the single strategy which gets the most positive appraisal among the voters is the so-called ‘dustman model’ of paid leave arrangement whereby employees share the paid leave: 83 percent of respondents were in favour of this (ibid.: 28). Furthermore 40 percent of the respondents consider the proposal for a basic income to be ‘good’, 46 percent consider it ‘bad’, and 14 percent ‘don’t know’. Compared to the support for the ‘dustman model’ which actually makes up a part-time basic income this may seem a rather weak backing, but compared to the very massive and outspoken rejection of the idea at the policy-elite level and in the press it is surprisingly strong. Therefore, although one ought to interpret such data very cautiously, in the light of these findings, the outlook for basic income type schemes still exists. Thus, much depends on the degree of responsiveness among the decisionmakers and, as just indicated, their responsiveness tends to be very weak in these matters. Whether this picture will change in the future, no one can tell for sure. But recent political history shows that new ideas, for example the ‘green’ policies of post-materialist politics, can break through conventional political channels despite the opposition of the political elite. So, maybe the last chapter in the Danish story on basic income has not yet been written.
References Adler-Karlsson, G. (1976), Lærebog for 80’erne. Et antikonsumistisk manifest, København: Fremads Fokusbøger. — (1977), Nej til fuld beskæftigelse – ja til materiel grundtryghed, København: Erling Olsens Forlag. Atkinson,A.B. (1995), Public Economics in Action, Oxford: Clarendon Press. CASA (1995), Velfærd eller forsørgelse, København: Center for Alternativ Samfundsanalyse. Christensen, E. (1994), Argumenter for borgerløn nogle debatindlæg 1993-94, Arbejdstekst. AUC: Institut for Økonomi, Politik og Forvaltning. — (1999), Citizen’s Income as a Heretical Political Discourse: The Danish Debate about Citizen’s Income, in: J. Lind and I. H. Møller (eds.), Inclusion and Exclusion: Unemployment and Nonstandard Employment in Europe, Ashgate:Aldershot, 13-33. — (2000), Borgerløn. Fortællinger om en politiske ide, Aarhus: Hovedland. Cox, R.H. (1998), From Safety Net to Trampoline: Labour Market Activation in the Netherlands and Denmark, Governance 11(4), 397-414. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Oxford: Polity Press. Gorz,A. (1979), Ecology as Politics, London: Pluto Press. —, (1981), Farewell to Working Class: An Essay on Postindustrial Socialism, London: Pluto Press 1982. — (1983), Path to Paradise: On the Liberation from Work, London: Pluto Press 1985. Goul Andersen, J. (1995), Hvordan skal arbejdsløsheden bekæmpes? Vælgernes syn på arbejdsmarkedspolitikken, Arbejdspapir no. 5 fra Det danske Valgprojekt, Department of Political Science, University of Aarhus.
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Ups and Downs of Basic Income in Denmark — (1996), Marginalisation, Citizenship and the Economy: The Capacities of the Universalist Welfare State in Denmark, in: E.O. Eriksen and J. Loftager (eds.), The Rationality of the Welfare State, Oslo: Scandinavian University Press. — (1997),The Scandinavian Welfare Model in Crisis?, Scandinavian Political Studies 20 (1), 1-31. Hoff, N. (1983), Borgerstipendiet – den liberale velfærdsmodel, Forlaget i Haarby. Jespersen, S.P. and S.L. Rasmussen (1998), Fra velfærdsstat til velfærdssamfund en analyse af 90’ernes velfærdsdebat, Institut for Statskundskab,Aarhus Universitet. Loftager, J. (1994), Citizens Income and the Crisis of the Welfare State. General Reflections and a Danish Perspective, Aarhus: Department of Political Science,Aarhus University. — (1996), Citizens Income A New Welfare State Strategy?, in: E.O. Eriksen and J. Loftager (eds.), The Rationality of the Welfare State, Oslo: Scandinavian University Press, 134-49. — (1998), Solidarity and Universality in the Danish Welfare State: Empirical Remarks and Theoretical Interpretations, working paper,Aarhus: Department of Political Science,Aarhus University. Madsen, P.K. and J. Loftager (1997), Denmark, in: H. Compston (ed.), The New Politics of Unemployment, London: Routledge. Marshall,T.H. (1950), Citizenship and Social Class, Cambridge: Cambridge University Press. Meyer, N.I. et al. (1978), Rebellion from the Centre, London: Marion Boyers 1981. — et al. (1982), Røret om oprøret. Mere om midten, København: Gyldendal. Ministry of Economic Affairs (1993), Økonomisk Oversigt December 1993, København: J.H. Schultz Information A/S. Ministry of Labour (1998), Marginalgruppen under 90’ernes opsving 1994-1997, København: Arbejdsministeriet. Olesen,A.(1993),Arbejde og velfærd, SALT 2 årg. nr. 3, 23. Panduro, B.(1995), Økonomisk profil af borgerlønnen, SALT 4 årg. nr. 4, 11-13. Pedersen, L., P.J. Pedersen, and N. Smith (1995),The Working and NonWorking Population in the Welfare State, in: G.V. Mogensen (ed.), Work Incentives in the Danish Welfare State. New Empirical Evidence, Aarhus: Aarhus University Press / The Rockwool Foundation Research Unit. Plant R. (1993), Free Lunches Don’t Nourish; Reflections on Entitlement and Citizenship, in: G. Drover and P. Kerans (eds.), New Approaches to Welfare Theory,Aldershot: Edward Elgar. Ploug, N. and J. Kvist, Continuity or Change in the Danish Social Security System?, in: E.Albæk et al. (eds.), Negotiated Adaptation: The Survival of the Danish Welfare State, Århus: Aarhus University Press (forthcoming). Plovsing, J. (1994), Social Security in Denmark Renewal of the Welfare State, in: N. Ploug and J. Kvist (eds.), Recent Trends in Cash Benefits in Europe, København: The Danish National Institute of Social research, 27-37. Socialforskningsinstituttet (1997), Aktivering af kontanthjælpsmodtagere, København: Socialforskningsinstituttet, 97:21. Statistisk Tiårsoversigt (1996). Ølgaard,A. (1995), Borgerløn ad bagdøren, Berlingske Tidende, 2 February.
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What Reforms are Needed for the Minimum Insertion Income (RMI) in France? Chantal Euzéby
France did not wait until 1988, the year the minimum insertion income (‘Revenu Minimum d’Insertion’) law was enacted, to tackle the poverty problem. Numerous actions on the local and national level were carried out long before the enactment of the law. Seven means-tested social minima programs were implemented for specific groups of the population in need: senior citizens, the handicapped, single parents, the widowed, the long-term unemployed, and first time job-seekers (the young and women at home). Several local districts (around thirty) have tried out some sort of a minimum income scheme. On the other hand, numerous emergency plans were introduced for the homeless (e.g. during the 1986 and 1987 winter period) or focused on adults in need. Although the legitimacy of the RMI is nowadays unchallenged, many shortcomings remain. The need for its reform was engaged after the demonstrations of the unemployed during the fall of 1997. One of the main questions raised was how to encourage the beneficiaries of the RMI and those on other welfare programs to go back to work. Do we need to eliminate the insertion contract, to establish a bonus for them to return to work, to do away altogether with the means-test, or merge the RMI with other welfare programs?
The RMI Ten Years Later: A Mixed Assessment The law on RMI was meant to be innovative, by combining assistance and integration in the same plan of action.1 The purpose was to help the needy and to facilitate their return to work. The law brought no miracle solution to the problem of social exclusion, because the factors leading to social inequality kept growing due to the high unemployment rate and increasing impoverishment. Certainly, the RMI brought a needed assistance to an ever growing number of beneficiaries (one million in 1998 compared to 400,000 in 1989) but as far as the social integration is concerned, the results were disappointing when it came to their social integration in the work place. The legal right and conditions of eligibility The RMI is a differential benefit aimed at complementing the resources of the needy to a level of income sufficient to live on.The representative equation consists of s=Gg, where s designates the benefit, G the level of the amount guaranteed,2 and g represents the eventual professional and personal income of the beneficiaries (including social aid). Entitlement to the RMI-benefit also includes the right to medical aid and to lodging and housing benefits. However, the latter are partially cumulative with the RMI; the remaining portion is included in g. RMI is subsidiary to other welfare and 268
What Reforms are Needed for the RMI in France? social benefits and food banks, i.e. it is a safety net after all other social benefits have been used up. It is a conditional minimum income because the claimants have to sign an integration contract, which is supervised by a local commission composed of elected officials and local associations. If the beneficiary of the RMI does not abide by the terms of the contract, he or she risks suspension, or even termination of their benefits. The RMI is not accessible for people under 25 unless they have children in charge, nor for illegal foreigners.The payments of the RMI are made by the social security office when it is for the general public, and by the agricultural social security office when it is for the farmers.The state takes care of the funding and officials at the local districts are in charge of the integration of beneficiaries. The assessment The RMI includes some favourable and some less positive aspects. It is without any doubt a social step forward. Nearly two million people (3 percent of the population in 1998) managed to escape total deprivation with the RMI payments. 60 percent of the recipients are single persons, 50 percent is between 25 and 35 years old and 20 percent are single parents. Large families represent a much smaller proportion, due to the generosity of the social benefit programs for this segment of the population. The RMI allowed 20 percent of the beneficiaries to get full medical coverage (it is free of charge only since 1992). In 1998, RMI costed 30 billion FF (Û 4.6 billion) of which 5 billion (Û 0.76 billion) were expenses for local insertion. If we add the payments for the other seven social programs mentioned earlier (more than 4 million people), the bill reaches close to 100 billion FF (Û 15 billion), which represent 5 percent of the total amount of the government social benefits budget (without taking into account the medical aid nor the credits for the insertion on the national level). The most expressed criticisms concern the payment method and the insertion programs for RMI recipients.The benefit is also said to be too low (less than 50 percent of the minimum wage), which is below the official poverty level equal to half of the average income per capita (3500 FF, Û 534). The total amount of the RMI and the housing allocation is too low to allow the beneficiaries to live decently in urban areas, especially in Paris where the rent is usually exorbitant. The required procedures to obtain the benefit are difficult and cumbersome. The control of income every three months and the fulfilment of the insertion contract are too restrictive for the recipients wishing to receive the aid on a long-term basis (15 percent of the recipients drop out). The exclusion of people under 25 from the RMI is also a major handicap, due to the fact that the unemployment rate in this segment of the population is significant and that some of the youths do not benefit from specific programs designed to help them.Those who are at odds with their families are exposed to the dangers of homelessness and drugs. Another problem often mentioned is the lack of work incentives and the spread of moonlighting, yet the mechanism initially established allows the beneficiaries to work 750 hours a year (equivalent to four months of full employment), while keeping RMI benefits. However, a family with two children on the RMI had no incentive (until the law was changed in 1998) to find or keep a job, since total benefits amounted to 86 percent of the statutory minimum wage.Therefore, they rather chose the RMI while making ends meet with undeclared paid activities. The most severe criticism, however, relates to the integration component of the RMI.The results of all integration efforts were quite disappointing. Due to the lack of 269
Basic Income on the Agenda job creation, high unemployment and the rise in wages of low-skilled jobs, the employers became too selective. Many of the long-term unemployed among the RMI beneficiaries suffer a lack of confidence and are victims of discrimination. Employers prefer to hire someone who is only short-term unemployed because they are more efficient and perform the required tasks faster. This handicap cannot be overcome unless employers are given stronger incentives to hire the long-term unemployed, such as more generous wage subsidies or a significant reduction of employers’ social contributions. The average rate of actually implemented insertion contracts remained low during the past ten years (about 50 percent), and varied from one district to another. Some districts were actively engaged in the RMI program, others waited until the government led the way by intensifying the employment policy and the training programs, and expanding the social housing units. Moreover, some of the insertion contracts were merely oriented toward social insertion (to get medically treated, find a lodging, become proficient in the French language, etc.), or just loosely preparing for paid work insertion (job search counselling, training programs, etc.). In most cases, the only goal of the beneficiaries was to keep the RMI-benefit. Overall, only one-third of the beneficiaries found a job or followed a training program. Most often, the job found is lowpaid, for a short time period, and in many cases in the public or community sector where it is generally subsidized (solidarity contracts, with the state taking the burden of the social contribution). Integration in the private sector is quite rare. Half of the beneficiaries of the RMI do not leave the program within 18 months, and one-third stays for more than four years.Thus, we are far away from the original ideal of providing real help to the most needy. In effect, the RMI is the last resort for those who cannot fit into the market place, or have surpassed the maximum duration of other social benefits.
Basic Income: An Interesting but Uncertain Method The idea to grant a basic income to all individuals (and not to the family as in the case of the RMI or negative income tax) without any conditions, seems to be spreading in France.3 Some associations and unemployment groups rallied to the idea.A colloquium on the subject was even debated at the national assembly in 1998. But for now, the subject is not quite ripe yet.As I shall argue, there is definitely a need to go through intermediate, more pragmatic and less radical steps. The expected positive effects The most fervent supporters of this idea (Y. Bresson, J.M. Ferry, Ph.Van Parijs,A. Gorz) point out three well-known advantages.The formula would rationalize the social security system since it would replace several social benefits (study grants, RMI, solidarity benefits, and agricultural subsidies). It would make the system transparent, less costly to administer and, since it would not be means-tested, more efficient to tackle the poverty problem. By offering a fixed unconditional income, it would allow individuals either to stay idle, to work more or less regularly or only part-time, or to devote more time to their families or to training. We also cannot rule out that it could have a beneficial effect on self-employment. In short, it would be a way to free the labour market and to reduce involuntary unemployment. Paid work would no longer be the primary route 270
What Reforms are Needed for the RMI in France? to social integration, and everyone would be free to choose the life they desire, hence evolving gradually toward a society where work is not likened to a paid job. It also facilitates innovative activities and activities of collective interest (household activities, neighbourhood and voluntary services, environmental protection, etc.). The expected major problems Obviously, implementing such a reform introduces new difficulties. If the level of basic income is too low, it does not solve the poverty problem. If the amount is adequate, e.g. at a level suggested by Gorz (1997), the cost might be prohibitively high. Furthermore, there is the fear in the long term of a weakening in productivity and economic vigour.The suggested solution by Bresson (1994: chapter 4) is supposed to be practical and financially feasible. He recommends a low basic income (1500 FF per month, around Û 229) to be implemented in a five-year period, which would amount, after being adjusted for savings in other programs, to a bill of about 260 billions FF per year (according to 1994 figures).A basic income for adults equal to the RMI (2400 FF, Û 366), for children 1200 FF or Û183 and for the handicapped and elderly4 3400 FF or Û 518, would require about 380 billion FF or Û 58 billion (about 4.5 percent of the 1998 GDP), which in turn would require a quite drastic raise of overall tax rates. The opponents of basic income invoke, secondly, the unfair character of unconditionality: paying an equal sum to all people, even the wealthy, does not make sense. Although a progressive tax would take back what the wealthy were given in terms of their basic income, the real problem is to reform the tax system, including a restructuring of social security contributions, ecotax, tax on financial revenues, capital income tax, etc.All this would yield a major increase of the overall tax rate on the households’ income, a move the government is not willing to make in the current political context. Thirdly, a frequently mentioned disadvantage is the risk of creating a bipolar society if the basic income is only modest. The beneficiaries who are most unfit to better their precarious situation will be forced to live on a small income and have no other choice than to accept low paying jobs.A more substantial basic income would have the danger that society would see it as their legal debt towards the least fortunate, who are not even able to perform paid work, and would give itself a clean bill of conscience. For all the above-mentioned reasons, it would be judicious to generalize certain social minima, and to set forth a security revenue for those jobless periods, measures which would be less radical and less costly than implementing a basic income.
Basic Social Security Tailored towards Present-Day Socio-Economic Developments The RMI in its present form is out of date. It was the last piece added to a social system conceived during the industrial era, and designed for traditional breadwinner families. Why carry on with various social minima benefits (for single parents, widows, long-term unemployed, etc.) which have the same objectives, to wit insertion and assistance? Why maintain the insertion contract if there are insufficient insertion offers? Why treat self-employed and salaried workers separately and differently, while the status of the latter comes closer to the former due to subcontracting?5 Reforming the 271
Basic Income on the Agenda RMI revolves around three measures: standardization of various social benefits existing alongside RMI, universalization (e.g. including the young), and ending poverty-traps. Four types of adjustments, with reduced cost, seem possible and desirable. Standardization would be a way to get out of the actual institutional compartmentalization among different compensation systems, placement agencies, and training organizations for the unemployed; a partition which hurts the efficiency of the insertion policy. The merger between RMI and other benefits should be dealt with through a common treatment of assistance and insertion within the same institution. It should expand the insertion capacity of the people concerned and guarantee a professional follow-up for several years, as well as directly manage their training or at least co-ordinate such action. Hence, it does not suffice to bring material help for the needy; we need to improve their workability to increase their chances of finding a job. It is an important factor for social integration in our modern society where knowledge has a prime position, and where qualification and skills can become rapidly obsolete, under the effect of the new information and telecommunication technologies. It is also a question of collective solidarity, which should engage all economic partners: the state, business firms and workers. It is not the job seeker’s fault that the market place has become so selective. Universalization requires that the RMI also encompasses youths between 18 and 25 years, even if the compensation scale is lower.The youths’ inclusion is needed because they are particularly affected by unemployment and labour market precariousness.This will also prevent some of them from becoming homeless and bring French legislature in line with the rest of the European community. Finally, the RMI should be tied to an incentive mechanism to promote the resumption of paid work, instead of beneficiaries being caught in the poverty trap. The law enacted in July 1998 was a step forward to remedy the most serious disincentives of the RMI. In case of work resumption, the recipient is allowed to cumulate RMI with the salary of the first three months, and part of the next nine months, according to a taxation of 50 percent of the wage earned.The law applies also to three other social minima, the solidarity specific allotment, the isolated parent allotment, and the insertion allotment. Because the financial incentive is but temporary, lasting only a year, beneficiaries might return to the RMI. Therefore, the sociologist Alain Caillé suggests an ‘RMI bis’, without an insertion contract, automatically granted to those whose income is less than half of the statutory minimum wage, and drawn concurrently with other resources, subject to income taxation. The taxation could be around 30 percent on earnings equivalent to a quarter of the minimum wage above the RMI, and 50 percent between this threshold and the minimum wage. For beneficiaries who do not manage to get a job, the state should take over by offering jobs in the social or public sector.The advantage of this proposal resides in the fact that it introduces an idea of freedom and initiative on the side of the beneficiaries, before we go into the workfare logic.We can even go further by choosing Godino’s (an advisor of Michel Rocard) solution (1999), a linear profit-sharing scheme between the RMI and the minimum wage. Under this mechanism, a beneficiary of the RMI (2400 FF, Û 366 per month), who finds a job which brings in 1000 FF per month (Û 153), will be subjugated a tax of only 36 percent on his earnings, instead of 100 percent. He therefore receives an allotment of 2040 FF (2400 minus 360) instead of 1400 FF (Û 332), and his total income is 3040 FF 272
What Reforms are Needed for the RMI in France? (2400+640) instead of 2400 FF (Û 464 instead of 366). Such a system is undoubtfully incentive-friendly and consistent with a will to develop part-time jobs. It combines integration of the needy and job sharing, but it is costly for the state to finance (25 billion FF, Û 3.8 billion, and that’s only for the RMI).
Replacing the Actual Insertion Contract with an Activity Contract The activity contract is suggested by the Boissonnat Report (1995). It consists of a five-year contract (at least) between the worker and case-worker, supervized by a moral entity with representatives from firms, public organizations and associations. Hence a certain professional assurance would be guaranteed for the RMI recipients during the whole period of their contract (part-time jobs, training courses, or community services). The beneficiaries would be able to acquire the know-how and the skills needed for their next job, once they finish their contract.The insertion responsibility would be shared among the different partners (private, public and associative). The difficulty would reside in co-ordinating the various jobs allocated, and in the risk that the private sector would not like to be fully involved. In such a case, the government could compel them under a collective solidarity rule. No doubt, an RMI coupled with an activity contract would be more secure, respectful of individual choices, and more efficient in terms of professional insertion. For beneficiaries unable to find a job after completion of the contract, social support measures could be implemented.
Granting All Residents a Minimum Pension In 1998, France adopted a universal health insurance plan, which is a first step in the direction of the ideal of health coverage under the charter of human rights.A rich society has the duty to care for all its citizens, regardless of their family status or occupational background.The same principle should also apply to old-age pension plans.A minimum pension for the elderly, regardless of their work status or work history, should not be subjected to the elderlys or their descendants’ financial resources. In other words, the idea is to adopt the Nordic model of the three-pillar based old-age pension, where the first pillar would be this minimum old-age pension.This pension serves as a floor.The second pillar would be the benefits based on earlier social contributions and earnings.The third pillar would be the pension rights derived from optional private plans such as pension funds and retirement saving plans. Hence, with a basic pension guaranteed, active individuals would readily agree to take temporary or part-time jobs, or even interrupt their career to take a sabbatical, a parental leave or training courses.This would increase the chances for the unemployed to fill these vacancies, and also give a certain financial autonomy for spouses at home who did not have the chance to have a paid job during their active years.
Improving Social Coverage of Independent Workers The people in this group are seasonal workers or workers in large firms, whose work contracts have been changed into service contracts, following subcontracting opera273
Basic Income on the Agenda tions or externalization activities (mainly in equipment maintenance, fast food service, and secretary, cleaning, and accounting activities).These ‘pseudo’-independent workers are often subject to conflicting orders from different bosses, and exposed to working conditions and rates of pay much less attractive than their fellow workers. With increased competition, their number is doomed to swell and they will eventually experience an ever-growing insecurity.Therefore it is essential to include them in the social security system. Giving them the right to unemployment coverage would give them a sort of ‘right to fail’.The compensation should be for short periods only (i.e. six month, or depending on work history) so as to avoid any abuse.The same argument applies for work accidents and professional illness. It is not only a question of social fairness (we could trim equally the social benefits of some managers or high-paid executives), but also a way to make this type of flexible work more attractive. Hence, improving the social coverage of these independent workers would prompt the unemployed to open their own firms and, eventually, to start hiring workers. All these measures would strengthen national solidarity. Minimum rights, either introduced or modified in this manner, are required to meet the new needs generated by contemporary social-economic change.The welfare system would be more effective in fighting social exclusion. These proposals are just a first step forward towards a new social order meeting today’s and tomorrow’s human needs. (Equally important is the reform of labour market relations between trade unions and employers, and to renovate and rethink state intervention at various levels.) The ultimate aim is to strike a better balance between economic efficiency and social progress.
References Boissonnat, J. (1995), Le travail dans vingt ans, Rapport pour le Commissariat général du Plan, O. Jacob, Paris. Bresson,Y. (1994), Le partage du temps et des revenus, Economica. Euzéby, C. (1991), Le revenu minimum garanti, La découverte, Collection Repères, Paris. Euzéby, C. (1993), Du RMI au revenu minimum d’existence, Futuribles, no. 177. Euzéby, C. (1998), Pistes pour une révolution tranquille du travail, Le Monde diplomatique, no. 529, April 1998. Godino, R. (1999), Pour une réforme du RMI, Notes de la Fondation Saint-Simon. Gorz,A. (1997), Misères du présent, richesse du possible?, Paris, Ed Galilée. Mauss (1996), Vers un revenu minimum inconditionnel?, special edition of the journal Futuribles, no. 184.
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Notes 1 2
3 4 5
For further details, see Euzéby (1991) The income guarantee under RMI is 2400 FF (Û 366) for a single person, 3600 FF (Û 549) for a two-person household (2400+ 0.5 x 2400), and 4220 FF (Û 643) for three (3600 + 0.3 x 2400), plus a supplement of 0.4 x 2400 FF for each additional person. For a summary of the various conceptions and controversies on basic income in France, see Euzéby (1991; 1993) and Mauss (1996). Because they have fewer means to gain extra revenues to top-up their basic income. See Euzéby (1998).
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The VIVANT Experiment in Belgium Yannick Vanderborght*
In the days following the multiple elections of June 13, 1999, Belgian newspapers were unanimous:VIVANT, a two-year-old party entirely unknown until a few months earlier, had achieved more than an honourable result by attracting about 130,000 votes (i.e. about 2 percent) at each of the elections that took place that day.1 The remarkable fact was that the party platform practically reduced to a single proposal: the introduction of an unconditional basic income. Founded in 1997 by high-tech businessman and member of BIEN Roland Duchâtelet,VIVANT had taken part in elections at any level for the first time.With no public funding or elected representative, the party had made its name by a large-scale campaign, essentially financed with Duchâtelet’s personal means. He would later confess that his contribution to the campaign had reached the impressive amount of Û 2,500,000.Through huge posters, advertisements in the press and massive doses of leaflets,VIVANT had been successful in attracting attention on its central proposal. ‘You will receive an income at the age of 18’, ‘Mum,VIVANT will give you an income’, ‘Free yourselves with the basic income’, ‘Choose your liberty with basic income’: with VIVANT, basic income was making a conspicuous and controversial entrance in Belgium’s public debate.2 Since the mid 1980s, the idea had mainly been supported by the two green parties, the Francophone ECOLO and the Flemish AGALEV.3 ECOLO adopted the idea of an unconditional and sufficient basic income as a medium-term objective at its first socio-economic congress in 1985, but it has always been a ‘theoretical horizon’ rather than a policy proposal. In the party’s last economic programme, basic income is symptomatically presented as ‘one of the points of reference as regards the politics of income redistribution’.4 As far as AGALEV is concerned, basic income has tended to be more visibly promoted as a short-term reform.According to its most recent programme,‘the basis of the new green social security will consist in a guaranteed basic income for everyone’.5 The related idea of a Negative Income Tax (NIT) was somewhat more popular in other political circles. It was discussed in the 1970s, in a radical version, within the Flemish liberal party (PVV) and the Flemish employers organization (VEV), and resurfaced in a more modest version during the last electoral campaign, when the Francophone liberals (PRL) led by Secretary of State Eric André pushed forward the idea of a low NIT (for workers only) as a way of reducing unemployment traps.6 However, it is not even mentioned in the new federal government’s agreement cosigned by the two liberal parties, the two socialist parties and the two green parties. * Université catholique de Louvain, Chaire Hoover d’éthique économique et sociale (3, Place Montesquieu, B-1348 Louvain-la-Neuve, Belgium,
[email protected]). This paper was written within the framework of the PAI project ‘The new social question’ (Belgian Federal Government, Prime Minister’s Office, Federal Office for Scientific, Technical and Cultural Affairs). I wish to thank Jo Buelens, Roland Duchâtelet, and Albert Mahieu for providing me with information. I also wish to thank Axel Gosseries, Philippe Van Parijs, and Jeroen Vergeylen for useful comments.
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The VIVANT Experiment in Belgium Before the birth of VIVANT, the pure basic income proposal had mostly been discussed in the academic and intellectual milieu. In the French-speaking part of the country, the debate had been launched in 1985 by the so-called ‘Collectif Charles Fourier’, a group based at the University of Louvain-la-Neuve which included, among others, Philippe Van Parijs and Philippe Defeyt (now federal secretary of ECOLO).7 For several years, another version is being defended by Jean-Marc Ferry, a French philosopher teaching at the Francophone University of Brussels.8 In Flanders, the debate has been fostered by left-wing journals like Komma and the Vlaams Marxistisch Tijdschrift 9 and by social scientists such as Walter Van Trier (University of Leuven) and Jacques Vilrockx (Flemish University of Brussels). So, the VIVANT phenomenon might provide an interesting opportunity to assess the political chances of basic income in Belgium whether from the point of view of its electoral potential or of the receptivity of politicians and commentators. It may also provide some insight, more broadly, into the prospects of basic-income-focused parties in any industrialized country.
Composition and Historical Background of the Movement Since the early nineties, Roland Duchâtelet is head of a micro-electronics company which has a turnover of millions of Euro.10 He is a civil engineer and graduate in economics; he also holds an MBA. Now in his early fifties, he has accumulated a sizeable wealth.This success does not prevent him from scrutinizing the redistribution mechanisms of Western welfare states. In 1994, he published a book (Belgium Inc. Report to the Shareholders11) in which he suggested an alternative socio-economic model based on the introduction of a full basic income. He presented his views at the 1994 BIEN congress in London.12 Duchâtelet also got in touch with various political organizations to which he presented his reform proposals. Everywhere, he says, he met with a polite refusal. He concluded that there was only one way out: to set up his own party. In the Spring of 1997, he founded VIVANT,‘the oxygen of politics’. The advertising campaign he soon launched was not long in bearing fruits. Roland Duchâtelet was invited by the press to explain his projects. In every interview, when asked about his motivation, he answered along the line: ‘If I don’t do it, who will?’13 Sometimes compared to the American multimillionaire Ross Perrot, Duchâtelet objects that he is not seeking power for himself. His ambition, he asserts, is to feed the debate on the future of European welfare states, with the hope that his ideas will be taken up by others. VIVANT’s founder took care of all party’s expenses, which allowed him to make the affiliation free, and to rapidly register many new members. In September 1998, about a year after its birth,VIVANT announced being 2,000 members strong. On the eve of June 13, 1999, the party proclaimed having passed the 5,000 members mark – that is even more, for example, than ECOLO.14 At first sight, one could think that this number of members is not significant since membership is free. However, at the party’s second congress of May 8, 1999, more than 700 people came along to hear speeches on ‘basic income and all its facets’.15 A considerable number for such a young party. There is not much information about the exact composition of VIVANT’s public. However, two elements are worth noting. Firstly, at the two congresses or at the local 277
Basic Income on the Agenda meetings, it seems that the party especially attracted a rather old public.An observer at the party’s first congress in November 1998 noted that most participants were aged between 35 and 60.16 Duchâtelet himself, after the elections, recognized he had failed in his attempt to approach the youth.17 It may be asserted, however, that all Belgian political parties are in the same situation: all of them are confronted with serious difficulties in mobilizing people under thirty. Secondly, on the socio-professional level, the composition of VIVANT’s public seems quite heterogeneous: self-employed, professionals, doctors, managers, pensioners, catering workers, housewives and unemployed people.18 According to Duchâtelet, ‘a negative experience with life’19 is the common feature of these categories of people. In other words, many members encountered problems with social security organisms, others had to give up the idea of hiring personnel because of tax pressure, still others went bankrupt for the same reasons. In the press,VIVANT was therefore sometimes presented as a party of protesting,‘frustrated’ voices.20
VIVANT’s Programme At the end of 1997, huge posters with eye-catching slogans and VIVANT’s logo appeared in the Belgian cities. From the outset, this seduction attempt was intended to support the spreading and media diffusion of a complete and well-documented programme. Each slogan squared with a concrete reform proposal, which was clearly explained in various papers, leaflets and brochures. VIVANT’s programme,21 very strongly inspired by Duchâtelet’s former proposals, was structured around three main claims, the first one being the most fundamental. Here is the core of it: 1. Introduction of a Basic Income for every citizen Given that ‘our society is able to produce enough resources for everyone’,22 VIVANT is calling for the introduction of an unconditional minimum income. Granted to every citizen during his/her life time, paid on a monthly basis without reference to other resources, the working situation or the marital status,VIVANT’s basic income is nevertheless adjusted as the age of the recipients increases.The amounts proposed are the following: – children <18: Û 125 (compared to a current average level of family allowance of Û 90); 23 – from 18 to 24: Û 375; – from 25 to 64: Û 500; – from 65: Û 750 (compared to a current average level of state pension of Û 795).24 It is thus definitely a full basic income that is at stake. In this model, mothers are empowered to receive their children’s basic income until they are of adult age. Moreover, a transitional period is promised to those who have paid their contributions for an old age pension higher than Û 750. In its defence of basic income,VIVANT takes the usual arguments. It particularly emphasizes rationalization and simplification of the social protection system, more effective struggle against poverty and exclusion, the end of stigmatizing controls on beneficiaries, an increase of individual freedom, and an effective way of suppressing unemployment traps. 278
The VIVANT Experiment in Belgium 2. Abolition of the income tax and social security contributions This second proposal is aimed at strongly reducing the labour costs by putting an end to the tax on earnings lower than Û 1,250 and to social security contributions for both wage-earners and employers.A flat tax of 50 percent would apply to earnings above Û 1,250. The expected positive effects of such a measure are strongly stressed: higher net wages for the low paid, less underground activities, less businesses leaving the country. 3. Compensatory increase of Value Added Tax (VAT) Finally, in order to fund the proposed basic income and compensate the government’s loss of revenue,VIVANT advocates a massive increase of VAT. With (2) in place, this increase should be calculated in such a way that prices remain constant. In other words, ‘the decrease in the labour cost and the increase in VAT are offsetting one another, and retail prices remain the same’.25 Furthermore, VIVANT proposes the introduction of a so-called ‘social VAT’, the rate of which varies according to the nature of the product (more for luxury and polluting products, less for highly labourintensive services).The programme also states that this measure should be implemented at the European level.
Perception by Observers and the Political World Before examining the straightforward electoral results, it is instructive to consider how analysts, the media and political circles have perceived VIVANT’s programme. Ever since the birth of the party, the Flemish newspapers have been paying some attention to Duchâtelet’s views.The Francophone newspapers, instead, have generally confined themselves to critical judgements on the very nature of the party. According to political expert Pascal Delwit, whose remarks were carried by Le Soir (the main Francophone daily paper),VIVANT’s vision is just ‘absurd’ and its programme, based on basic income,‘ultra-liberal’.26 In the same way, the new left-of-centre daily Le Matin described the basic incomebased programme as a ‘simplistic message’ and the plans of VIVANT’s candidates as a ‘disparate, disorganized catalogue of protests’.27 La Libre Belgique (centre-right) first dismissed the party as a ‘simple marketing product’, a ‘cheat’,28 while adopting subsequently a more balanced position. In short, these newspapers tended to denounce a discourse perceived as demagogic. However, Le Soir and La Libre Belgique became more cautious as the elections were approaching. The tone was quite different in the Flemish press. Far from calling the programme ‘simplistic’, the left-of-centre daily De Morgen explained to its readership that VIVANT had ‘only one theme [basic income], and a rather complicated one’.29 The Christian Democratic De Standaard organized a confrontation between Roland Duchâtelet and Bea Cantillon, a senator and social policy professor at Antwerp University vigorously opposed to basic income.30 The weeklies Humo and Knack each published a long interview with Duchâtelet.31 Even though articles on VIVANT were not frequent and often focused mainly on its founder’s motivations, the approach was rather positive. The same contrast applies to the TV channels: while the Flemish public channel VRT news presented VIVANT’s programme and briefly explained the principles of basic income, the Francophone public RTBF kept completely silent.‘This is because of 279
Basic Income on the Agenda political pressures’, says Duchâtelet, who was also struck by the difference in press coverage on the two sides. In his view, the contrast is symptomatic of the differences between two cultures: ‘the Flemish, he asserts, are more rational and down-to-earth than the Walloons’.32 Albert Mahieu,VIVANT’s only elected representative, also thinks that ‘a businessman [like Duchâtelet] who is in politics arouses more suspicion in the French-speaking population’.33 Even more enlightening with regard to the political chances of basic income in Belgium is the attitude of the political world, which remained quite indifferent to the newcomer’s proposals.The only exception was the Francophone Christian Democratic Party (PSC), whose think tank took the trouble to analyze the economic feasibility of VIVANT’s basic income proposal. The conclusions were clear: ‘such a large-scale reform is not sustainable, be it in terms of financial feasibility, as regards the conditions of economic development, or in terms of social acceptability’. Basic income is said to be ‘an ultra-liberal plan aimed at reducing social security to a sort of social assistance’.34 Le Soir echoed this report in an article the title of which was:‘PSC buries VIVANT and its basic income’.35 Taking a similar stand, an official of the Francophone Socialist Party declared, speaking of VIVANT’s programme:‘nobody can believe that’.36 The ecologist formations, in which one can find the most people in favour of basic income, remained very critical of Duchâtelet’s proposals, always keeping distance.37 All this – the reading of the press in particular – would make us expect that the electoral results were much better in Flanders than in Wallonia or Brussels, and yet VIVANT scored higher in the southern part of Belgium.
Electoral Results On June 13, 1999, Belgians had to elect their representatives at various levels of power: the three Regional Councils, the two Federal Chambers (Senate and Chamber of Deputies) and the European Parliament.VIVANT entered candidates for all elections, in all districts of the country. All the main formations being split along linguistic lines, it was in fact one of the only parties to do so. On average, the results varied between 2 percent for the European elections and 2.4 percent for the Walloon Regional Council.VIVANT was more successful in urban districts: it obtained 3 percent in Ghent, Leuven and Charleroi, 4 percent in Verviers and 5 percent in Mouscron. The maximum result (7.1 percent) was reached in Ronse, a small district 55 km west of Brussels.38 Ultimately,VIVANT obtained only one seat, in the Council of the Brussels Region.39 Its incumbent will be Albert Mahieu, a colourful figure of the anti-corruption kind.Though a recent convert, he is a strong believer in basic income and is determined to attract the media attention on VIVANT’s programme.40 In spite of the negative coverage in the Francophone press, VIVANT reached its best score at the election of the Walloon Council: 2.4 percent, compared to 2.0 percent for the Flemish Council.41 This is only an apparent paradox.VIVANT, as newcomer and single-issue party, had to rely on protest votes. In Flanders, the competition on that ground is very strong: the far right Vlaams Blok managed to get the greater part of the voters who were disappointed by the existing formations.42 With regard to the federal level, the results ranged from 2 percent for the Senate to 2.1 percent for the Chamber of Deputies.This electoral outcome made VIVANT by far 280
The VIVANT Experiment in Belgium the most successful among the parties not previously represented in the Federal Parliament: none of them could reach the symbolic threshold of 1 percent.43 Its results are comparable to those achieved at first trial by parties which are now well-established (e.g. ECOLO). On the other hand, these percentages are far away from VIVANT’s own ambitions, at least as publicly expressed during its two years of existence. In August 1998, Roland Duchâtelet announced that ‘VIVANT should attract from 5 to 15 percent of the votes’. He repeated this forecast at the party’s first congress, held in Brussels in November 1998. In May 1999,VIVANT was still proclaiming that it would obtain a seat in almost half of the districts.44 Soon after the elections, the press asserted that Duchâtelet was very disappointed at how his movement performed.45 VIVANT’s founder announced a dramatic reduction in the level of his financial involvement, closed down most of the party’s local offices, and introduced a membership fee.
Conclusions Even though the emergence of VIVANT on the political scene has contributed to the spreading of the idea beyond academic circles, it cannot be said to have boosted Belgium’s public debate on basic income. Media attention above all concentrated on Duchâtelet’s personality, and the few discussions on his programme remained mostly polemical. Since the elections,VIVANT seems – so far – to have dropped out entirely from the public attention. In addition to that general conclusion, several lessons can be learned from this original experience. I will only mention three of them. The first one is suggested by Roland Duchâtelet himself, as he admits having made a mistake in trying to immediately attract a large electorate with such an innovative message. According to him,VIVANT’s programme should have been researched more thoroughly and made more credible, with the aim of appealing to ‘the innovators’,46 i.e. the youth and the intellectuals.These could later have spread the message. In short, one could say that Duchâtelet is thinking of a strategic implementation of Katz and Lazarsfeld’s ‘two steps flow of communication’47 rule. Secondly, one could assert in the light of this experience that it is not very promising to launch a party exclusively focused on basic income – assuming that the purpose is really to promote this proposal.There are two main reasons. First, a ‘credibility problem’:VIVANT, as an issue-based party focused on full basic income, was driven into claiming that this measure was an ideal solution for all social issues.The movement was thereby exposing itself to being labelled ‘demagogic’ or ‘simplistic’. As a foreign observer at VIVANT’s second congress put it, ‘basic income seemed like a panacea against all difficulties’.48 On the contrary, if the proposal is included in a more global alternative, its credibility may increase.The second reason is closely linked to the first. The visibility of a single-issue party like VIVANT, focused on a very specific proposal, is extremely dependent on the current political context. In June 1999, soon after the ‘dioxin crisis’, the debates in Belgium revolved above all around the quality of food and the control on farm-produce industry.VIVANT had little, if anything, to say on these topics. If social security had been the main theme of the electoral campaign, as it was at previous elections in 1995, the party would no doubt have attracted greater attention in the media and could have made more of a mark. 281
Basic Income on the Agenda Finally, the specific nature of VIVANT’s basic income proposal, related to a suppression of income taxes on low earnings and social security contributions, prevents us from using its electoral performance as a way of assessing basic income’s social acceptability and political feasibility in Belgium.VIVANT’s public seemed actually tempted by its pure anti-fiscalism at least as much as by basic income itself. In any case, the experiment goes on. Despite the spending cuts,VIVANT will be present at the Belgian local elections of October 2000 and is planning to establish itself in other countries. It has already entered candidates at European elections in France, where it reached 0.71 percent.49 Its setting up in Switzerland and the Netherlands is in its early stages. In September 1999, in the aftermath of the elections, it published a new manifesto with the following promising start:‘A spectre is haunting Europe: the spectre of Basic Income’.50
Notes 1
Results for the Chamber of Deputies. Source (for all results): Ministry of the Interior (CDROM, July 2, 1999). Registered voters: 7,343,466; actual voters: 6,656,709.Voting is compulsory. Belgium’s electoral system is based on Proportional Representation. For further comments on VIVANT’s results, see below and ‘Vivant prend un siège, le FN une claque’, La Libre Belgique, 15 juin 1999;‘Kleine partijen presteren wel als verwacht.Vivant is enige partij met ambitie’, De Morgen, 14 juni 1999 ; ‘Kleine partijen tellen niet mee’, De Standaard, 14 juni 1999. See also ‘Le scandale de la dioxine provoque la défaite de la coalition sortante’, Le Monde, 15 juin 1999. 2 See ‘La création controversée d’un ‘parti de l’emploi’ en Belgique’, Le Monde, 1 juillet 1998. 3 AGALEV: currently 7.0 percent of the vote (Chamber of Deputies); ECOLO: currently 7.4 percent of the vote (Chamber of Deputies). 4 Changer d’économie. Le programme économique d’ECOLO, Bruxelles: ECOLO – Luc Pire, 1999: 7), our emphasis. 5 URL: http://www.agalev.be/partij/programma/index.html (January 2000). 6 See for example ‘L’impôt négatif creuserait la pauvreté et les inégalités’, Le Soir, 16 février 1999. On NIT in Belgium, see also Vleminckx, A. (1978), De negatieve inkomstenbelasting, Brussel: Diensten van de Eerste Minister. 7 Philippe Defeyt was elected federal secretary in November 1999. He repeatedly restated his commitment to basic income, including in his recent book Le droit d’être actif. Pour une écologie du temps (with Bouchat,T.M., Gerpinnes: Quorum, 1999). 8 See Ferry, J.M. (1995), L’Allocation universelle. Pour un revenu de citoyenneté, Paris: Cerf. 9 See respectively ‘Naar een scheiding van arbeid en inkomen ?’, Komma, no. 22, april 1985, and Vlaams Marxistisch Tijdschrift, vol. 28, no. 1, maart 1994. 10 Turnover for 1997: 22.3 million US$ (source: La Libre Belgique, 16 août 1998). For a detailed description of Duchatelet’s career, see: ‘Wij hebben de kerstman eigenlijk niet meer nodig’, InterMediair. Het Weekblad voor de Actieve Professional, 22 december 1998. 11 Duchatelet, R. (1994), N.V. België.Verslag aan de aandeelhouders. Groot-Bijgaarden: Globe. For a summary, see Winter 1999 issue of BIEN’s Newsletter. 12 See Duchatelet, R. (1994),‘An economic model for Europe based on consumption financing on the tax side and the basic income principle on the redistribution side’, paper presented at the 5th International Conference on Basic Income, London, September 1994.
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The VIVANT Experiment in Belgium 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
28 29
30 31 32 33 34 35 36 37 38 39 40
41 42
See for example ‘Ik verkoop alleen ideeën’, Knack, 1 juli 1998. ‘Vivant schaart zich rond het basisinkomen’, De Morgen, 10 mei 1999. Idem. ‘Vivant houdt eerste congres’, De Morgen, 30 november 1998. ‘Vivant moet ingrijpend besparen’, De Morgen, 17 juni 1999. ‘Ik verkoop alleen ideeën’, Knack, 1 juli 1998. Roland Duchâtelet, personal communication, September 28, 1999. See for example ‘‘Vivant’, le parti de Roland’, La Libre Belgique, 16 août 1998. For a more complete overview of this programme, see among others Le Vivant, n°5, Octobre / Novembre / Décembre 1998. Electoral leaflet, 1999. Jacobs, D. (1997), ‘Transferts de solidarité en Belgique: ordres de grandeur’, La Revue Nouvelle, n°5-6, vol.CV, 170-2. Idem. Le Vivant, n°5, Octobre / Novembre / Décembre 1998. See ‘Le paysage politique s’enrichit d’une vieille utopie’, Le Soir, 15 juin 1998. See respectively ‘Vivant’ versus Vlaams Blok’, Le Matin, 2 juin 1999 and ‘Vivant, objet politique non identifié’, Le Matin, 16 avril 1999. See also ‘L’extrême démagogie’, Le Matin, 30 novembre 1998. ‘Vivant’, miroir aux alouettes’, La Libre Belgique, 10 décembre 1997. ‘Vivant, met hulp van positieve boodschap en vele miljoenen’, De Morgen, 31 mei 1999, our emphasis. According to De Morgen, the basic income proposal cannot be demagogic: actually,‘everyone has once flirted with the concept’ (Idem.). ‘Realisme of utopie. CVP-senator Bea Cantillon kruist de degens met Vivant-voorzitter Roland Duchâtelet’, De Standaard, 6 avril 1999. See respectively ‘Roland Duchâtelet spiegelt dromen voor maar drukt er ook de kop in’, Humo, 10 februari 1998 and ‘Ik verkoop alleen ideeën’, Knack, 1 juli 1998. Roland Duchâtelet, personal communication, September 28, 1999. Albert Mahieu, personal communication, September 30, 1999. ‘Le revenu de base proposé par Vivant. Argumentaire en 6 questions’, Centre d’études politiques, économiques et sociales, Bruxelles, 29 avril 1999. ‘Le PSC enterre Vivant et son revenu de base’, Le Soir, 27 avril 1999. Anonymous, quoted in ‘Le revenu de citoyenneté, cheval de bataille électorale de ‘Vivant’, La Libre Belgique, 17 août 1998 Roland Duchâtelet, personal communication, September 28, 1999. Results for the Chamber of Deputies. Unsuprisingly since the election for the Brussels Region is organized in a single 75-member district, whereas all other elections operate with districts of a smaller magnitude. ‘Andere’ Mahieu haalt enige Vivant-zetel’, De Standaard, 15 juni 1999. In January 2000, Albert Mahieu left VIVANT. His stated motive lies in Duchâtelet’s refusal to work out more seriously the party’s basic income proposal. Duchâtelet denies this assertion and has requested that Mahieu resign from the parliamentary seat he owes to VIVANT. See ‘Fraudejager Mahieu breekt met Vivant’, De Morgen, 4 januari 2000 ; ‘Duchâtelet: Mahieu moet zetel afgeven’, De Morgen, 5 januari 2000 ;‘Mahieu démissionne’, Le Soir, 4 janvier 2000. For the German-speaking Community Council: 3.3 percent.This last result is not really significant: the German-speaking Community corresponds to a small district (40,650 voters). Vlaams Blok: 15.5 percent for the Flemish Council.
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Basic Income on the Agenda 43 For information only, here are a few results for the Chamber of Deputies. PTB-PVDA (Marxist-leninist): 0.5 percent; PC (Communist Party): 0.4 percent ; PnPB (Party descended from the so-called ‘White Movement’ against pedophile criminality): 0.3 percent. 44 See respectively ‘Vivant’, le parti de Roland’, La Libre Belgique, 16 août 1998; ‘Vivant’ rêve d’entraîner l’Europe dans son utopie’, Le Soir, 30 novembre 1998 ; ‘Wij zijn de eerste sociaal-liberale partij in België’, De Morgen, 6 mei 1999. For the Chamber of Deputies, there are 20 electoral districts. 45 See for example ‘Vivant moet ingrijpend besparen’, De Morgen, 17 juni 1999. 46 Roland Duchâtelet, personal communication, September 28, 1999. 47 See Katz, E. and P. F. Lazarsfeld (1955), Personal Influence.The Part Played by People in the Flow of Mass Communications. Glencode: Free Press.‘Ideas, often, seem to flow from radio and print to opinion leaders and from them to the less active sections of the population’ (p. 32). 48 W. de Jonge, ‘Vivant. Basisinkomen als politieke partijgrondslag’, Nieuwsbrief Basisinkomen, no. 28, september 1999, p.13. 49 Le Monde, 15 juin 1999. 50 Verhulst, J. and M. Van Bogaert (eds.) (1999), ‘Basisinkomen en Vrijheid. Een Vivantisch manifest’, Brussels:Vivant.
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Notes on the Contributors Jan-Otto Andersson is Reader in International Economics and Research Director at Åbo Akademi University,Turku/Åbo, Finland. Paul de Beer is Senior Researcher at the Social and Cultural Planning Office (SCP), The Hague, the Netherlands. Erik Christensen is Asssociate Professor at the Department of Economics, Politics and Public Administration,Aalborg University, Denmark. Chantal Euzéby is Professor of Economics at the University of Grenoble II, France. Loek Groot is Post-Doctorate Research Fellow at the Department of Political Science, Amsterdam School of Social Research, University of Amsterdam, the Netherlands. Sean Healy is Member of the Justice Commission of the Conference of Religious of Ireland (CORI), Ireland. Anton Hemerijck is Associate Professor at Leiden University, the Netherlands and Visiting Scholar at the Max Planck Institute for the Study of Societies, Cologne, Germany. Laurence Jacquet is Research Assistant at the Hoover Chair of Economic and Social Ethics, Université Catholique de Louvain, Belgium. Stephan Lessenich is Assistant Professor at the Institut für Sozialpolitik/Zentrum für Europa- und Nordamerika-Studien (ZENS), Georg-August-Universität Göttingen, Germany. Jørn Loftager is Associate Professor at the Department of Political Science, Aarhus University, Denmark. Joachim Mitschke is Professor of Economics, Johann Wolfgang Goethe Universität Frankfurt, Germany. Steve Quilley is Lecturer in Sociology, Department of Sociology, University College Dublin, Ireland. Brigid Reynolds is Member of the Justice Commission of the Conference of Religious of Ireland (CORI), Ireland. Ingrid Robeyns is Ph.D. candidate at Wolfson College, Cambridge University, United Kingdom. 285
Notes on the Contributors Claudio Caesar Salinas was until recently Research Assistant at the Hoover Chair of Economic and Social Ethics, Université Catholique de Louvain, Belgium. Fritz Scharpf is Professor at the Max Planck Institute for Social Research, Cologne, Germany. Osmo Soininvaara is Minister of Health and Social Services, Finland. Frank Vandenbroucke is Minister for Social Affairs and Pensions, Belgium. Yannick Vanderborght is Research Assistant at the Hoover Chair of Economic and Social Ethics, Université Catholique de Louvain, Belgium. Robert van der Veen is Lecturer at the Department of Political Science, Amsterdam School of Social Research, University of Amsterdam, the Netherlands and Professor of Political Theory, Department of Politics and International Studies (PAIS), University of Warwick, United Kingdom. Philippe Van Parijs is Professor Chaire Hoover d’éthique économique et sociale at the Institut de recherches économiques et sociales, Université Catholique de Louvain, Belgium. Tom Van Puyenbroeck is Research Assistant at the Cabinet of the Minister for Social Affairs and Pensions, and Lecturer at the Centre for Economic Studies, KU Leuven, Belgium.
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Index
activation 24, 36, 85-106, 257-66 active labour market policies 19-21, 32, 41, 85-106, 148, 234; see also welfare state, active Adler-Karlsson, G. 224-5, 237 n1, 261 administrative costs 25, 36, 68, 113, 115, 150, 203, 218, 270 Andersson, J. 3-3 assistance see social assistance Atkinson,A. 20, 27-9, 38 n14, 83 n30, 166, 168 n7, 172, 180, 214, 232 Australia 151 Austria 119 Basic Income European Network 7, 9, 13, 37 n1, 80 n4-5, 155, 206, 224-5, 247, 254 basic income bargaining power 23, 25, 72-73, 126, 1312 costs of 23, 36, 48, 52 n6, 71, 77, 113-5, 203, 206-7, 212-3, 232, 240, 242, 263, 280 definition of 13, 80 n4 economic growth 50 experiments 36, 38 n18, 123, 207 female labour supply 123-4 passim for children 125-6 full 36, 64–65 passim, 199-200, 207, 212, 217, 240, 242, 277, 281 human capital investment 22, 50, 73-74 passim, 126, 131-2, 211-2 passim incentives 10, 22, 49-50 passim, 65, 71, 203-4, 211, 228, 243, 264 partial 19, 23-4, 35-6, 55, 62-84 passim, 124, 197, 199, 202-5, 207, 212-5, 217-8, 221 n8, 11 and 12, 222 n27, 230, 242 poverty see poverty unemployment see unemployment women see gender worksharing 50, 70-71 passim basic needs 55, see also social minimum Beer, P. de 22, 24, 37 n4, 207, 211 Belgium 32-3, 276-84 Bell, D. 141-2 black economy 114, 117, 201, 203; see also informal economy Blair,T. 151, 180
Bovenberg, L. 211 Brown, G. 177, 181 Bürgergeld 25, 32, 107-18 passim, 168 n8, 247-56 Caillé,A. 272 Calhoun, C. 175 capital mobility 17, 156, 164, 172, 174 Christensen, E. 32, 35 citizen’s wage 224-37 passim citizenship 139-154 passim equal 65, 258, 261 social 139-54; see also European citizenship citizen’s account 225-6 citizenship income see basic income Cohen, G. 87 communitarianism 30, 172, 178-80 passim, 231, 258 compensation 24, 37 n3, 91 conception of well-being 87-104 passim, 132 consensus see social consensus Conservatives 141, 233, 249 Christian democrats 204, 250, 252, 280 decommodification 145, 247, 253, 257-8, 260 demogrant see basic income Denmark 35, 36, 151, 224, 235, 257-67 Duchâtelet, R. 274-84 dual economy see exclusion; new social question Earned Income Tax Credit 10, 16, 21-24, 29, 41, 43-51 passim, 54-84 passim, 151, 159, 162, 166 eco-taxation 30, 35, 171-2, 176, 181-5 passim, 206 egalitarianism 91 responsibility-sensitive 24, 85-106 passim Ehrenberg,T. 224-5 Ekstrand, L. 224-5 emancipation 2-6, 121-35 passim employment trap 55 subsidies see wage subsidies environmental taxes see eco-taxes equality of opportunity 26, 87-88, 129 Erhel, C. 47 Esping-Andersen, G. 145, 257
287
Basic Income on the Agenda Eurodividend 27, 29-30, 35, 160, 165-7 passim, 170-185 passim Eurogrant see Eurodividend European basic income see Eurodividend European citizenship 30, 167, 170-185 passim co-ordination 28, 155-85 passim harmonization 30, 155-85 passim integration 9, 30, 155-185 passim, 208 Union 11, 28, 155–185 passim, see also Social Europe Euzeby, C. 32 exclusion 9, 15, 58, 144, 149, 155, 179, 181, 184, 197, 207-8, 239, 253, 264, 268, 274, 278 feminism 132-35 passim, 140, 200 Finland 33, 224, 227-237 passim fiscal competition see tax competition and welfare state, competitive Fitzpatrick,T. 37 n4 Fleurbaey, M. 92 flexible labour market 9-10, 13, 27, 43, 114, 176, 209, 217, 230, 233 France 32, 35, 268-75 passim free time see leisure freedom 10, 161, 233, 243, 278 flexibility 105 n3 real 101, 128-9, 161, 233 Friends of the Earth 181 Friedrich Ebert Stiftung 32, 116, 251 Gelauff, G. 49 gender equality 25, 26, 121-35 passim, 140, 143 roles 9, 25, 122 Genet, M. 172, 182-3 Germany 32, 34-5, 107-18 passim, 158, 168 n8, 247-56 passim Giddens,A. 178 good life, concept of 24 Godino, R. 272 Goodin, R. 15 Gorz,A. 261 Graafland, J. 49 Green parties 30, 34, 36, 117, 171, 178, 213, 216, 227-8, 233, 248-9, 276 Greenpeace 181 green taxes see eco-taxation guaranteed minimum income see minimum income guarantee Hammermesh, D. 51 n4 Hansenne, M. 83 n28 Healy, S. 33-4
288
Hemerijck,A. 21, 26-7, 37 n4 Hoogeboom, E. 207 human capital see basic income and human capital Humphrey, H. 84 n38 impartiality 89-91, 105 n4 impossibility theorem 36, 212-3 passim, 271 inactivity trap 14, 16, 23, 29, 85-6, 102-3, 146 incentives – comparison between 60-84 informal economy 66-7, 68-70 passim, 179, 181, 204 Ireland 33, 238-46 passim Jacquet, L. 23, 24 Jahoda, M. 143 job creation 38 n10, 147, 204 jobs of last resort 17, 19, 22, 46-48 passim, 110, 210 jobless growth 137, 145, 149, 153, 201 Jones, M. 178-80 Jordan, B. 121, 151, 178-80, 185 n3 justice compensatory 14 distributive 85 egalitarian 14-5 gender see gender equality social 162, 170, 253 Késenne, S. 123 Koskela, E. 49 Kosonen, P. 176 Krause-Junk, G. 168 n8 Kroft, H. 143 Kuiper, J. 200 labour time reduction see working time reduction Le Grand, J. 88 the Left 14, 16, 178, 182, 201, 213 leisure 155, 161 Lessenich, S. 32, 34 LETS 68, 179 Lewis, J. 124 liberty see freedom Loftager, J. 32, 35 marginalization see exclusion Marshall,T. 138-154, 257 Maximin 90-1 Mayhew, K. 83 n32 McGovern, G. 84 n38 Mead, L. 148-9 means-testing 9, 14, 18-20, 22, 27, 68-69 passim, 74-5, 80 n4, 109, 114, 151, 155, 157,
Index 164, 166, 170-1, 185, 200, 202-3, 208, 222 n25, 226, 232, 259-60, 268 minimum income guarantee 10, 23, 29, 5683, 114, 151 minimum wage 17-8, 85, 108-9, 145, 202-4, 206, 209, 214-5, 221 n12 Mitschke, J. 25, 32, 168 n8, 251 negative income tax 9, 25, 29, 55, 83 n26-27, 107-18, 155, 162-3, 166, 201, 204, 207-8, 211, 216, 228-30, 233, 247, 276 Nelissen, J. 123, 211 Netherlands 26, 33, 35-6, 84 n36, 139-154, 158, 197-219 passim new social question 15-18 passim, 26, 28, 30, 53-56 passim, 58, 73, 80 n2 Norway 224 Offe, C. 140-2, 149, 151 Okun,A. 41 Orloff,A. 122 Parker, H. 121, 128, 230 participation on labour market 87, 100, 102, 143-154, 178, 180, 208-10, 213 female 123, 177, 184, 213, 215, 238 participation income 18-22 passim, 25, 27-30, 35, 38 n14, 55, 82 n15, 83 n30, 166, 180, 183-4, 214, 218, 232 part-time work 22, 49, 70-1, 113, 121, 123, 146-7, 149, 177, 203-4, 243 Peck, J. 177 Pelzer, H. 82 n17 Phelps, E. 83 n29 Piketty,T. 81 n9 Ploeg, F. van der 211 political philosophy 14, 162 Polk, S. 123, 211 poverty 9, 13-4, 22, 33, 53-55, 150, 160, 162, 179, 181, 184, 208-9, 239, 253, 268, 271, 278 trap 16, 36, 38 n11, 45-6, 61, 125, 130, 197, 204, 208, 232, 238, 272; see also unemployment trap absolute 42-3 relative 42-3 productivism 34-5, 217-8, 252-3 Proudhon, P. 156 Quilley, S. 29-30, 33, 35 Rawls, J. 105 n7 reciprocity 20, 29, 94, 105 n15, 160 n6, 1789, 201, 214 redistribution 112, 141, 157, 163, 174-5
reduction of social security contributions 234, 54-84 passim, 85, 152, 162, 270 refundable tax credit 55, 60, 80 n4, 81 n6, 163, 199, 213-6 passim, 218, 245 regulatory competition see tax competition, welfare state competitive relaxed organisation of work/ labour market 35, 103, 211, 214-5 passim, 218 responsibility 14, 24, 85-104 passim, 172, 178 revenu minimum d’insertion (RMI) 32, 26875 passim Reynolds, B. 33-4 rights and duties 140 risk 75, 86-7, 157 Robertson, J. 182 Robeyns, I. 25-26, 37 n4 Roebroek, J. 207 Roemer, J. 89, 90, 105 n6 Salinas, C. 23-4 Scandinavia 51, 224-35 Scharpf, F. 28-9, 33, 150-1, 153, 161-7, 174-5, 252 Scholz, J. 44, 51 n3 self-employment 66-7, 177, 203, 243, 270 Sen A. 87, 126 social assistance 22, 112, 155, 259 social cohesion 30, 173-4, 251 Social democrats 34-5, 87, 116, 145, 172, 178, 180, 183, 200-1, 204, 213, 226, 233-4, 24851, 258, 262-3 social dividend see basic income Social Europe 10, 27-9, 155-85 passim social exclusion see exclusion social insurance 18, 109, 199, 202, 204 social justice see justice social minimum 36, 150, 199-200, 202-4, 212; see also basic needs European 159, 166 social rights 139-142, 258 social service 17, 19-20 Soininvaara, O. 33, 227-8, 230, 232-3, 237 n7 solidarity 14, 17, 24, 28, 116, 157, 160 n6, 204, 272, 274 European 29, 167, 174, 176, 182 Standing, G. 83 n32, 225, 230 statistical discrimination 127, 131-5 stigmatization 142, 144, 202, 265, 278 strikes 72-73 students 212, 215 subsidiarity principle 155, 174-5, 185 subsidies see wage subsidies subsistence – see basic needs Sweden 21, 32, 35, 51 n1, 158, 224-7 passim Swedish model 145, 149
289
Basic Income on the Agenda Switzerland 158 targeting 23, 77, 114, 151-2, 170-1, 232, 260 tax competition 14, 16, 28-9, 152, 156-157, 159, 174, 176; see also welfare state, competitive Theobald, R. 200, 207 Third Way 172, 178, 180, 183 Tobin tax 160 n3, 183 Tobin, J. 84 n38, 163 trade unions 9, 25, 35, 75-6, 108-9, 113, 116, 146, 167 n4, 200-1, 205-6, 213-4, 231-2, 234, 262 trade-off between equality and efficiency 41 between poverty and unemployment 42, 48, 50 between wages and emploment 146 unconditionality 27, 34, 172, 197 unemployment trap 16, 19, 55, 58-9, 60, 62-3, 65, 75 passim, 125, 130, 151, 164, 203, 238, 252, 276, 278 long term 14, 17, 21, 27, 87, 148-9, 151-2, 167 n1, 207, 210, 251, 264, 268, 270 voluntary 71-72, 77 United Kingdom 35, 51 n1, 181 universal grant see basic income universality 74-75, 149, 171, 181, 260, 265, 272 unpaid work 9, 24, 25, 35, 214-5, 218 care 121-35, 166, 180, 214, 228 community 149, 184, 238 revaluation of 125-35
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volunteer 68-70, 166, 180-1, 184, 201-2, 214, 238, 251, 271 Van der Veen, R. 101 Van Parijs, P. 9, 15, 23-4, 29-30, 35, 37 n4, 41, 51, 101, 149-50, 182-3, 277 Van Puyenbroeck,T.15, 24 Vandenbroucke, F. 15, 24 Vanderborght,Y. 33 Vilmunen, J. 49 VIVANT 32, 276-84 volunteer work see unpaid work wage subsidies 19-22, 24-5, 27, 107, 110, 1501, 158, 162, 166, 247, 270 general 45-6 passim, 48, 95-104 passim marginal 45-6 passim Weber, M. 142 welfare migration 28, 156, 158, 164, 174 welfare state active 17, 19, 30, 34, 85-86 passim, 102, 144 competitive 28, 33, 157, 159, 174, 179 White, S. 94, 105 n15 Wolff, J. 37 n3 work ethic 24, 30, 32, 137, 141-4 passim, 151, 153-4, 157, 170-1, 177, 184-5, 211, 217-9 work incentives see incentives work test 18, 20, 27, 70, 200, 229 workfare 17-21 passim, 22, 26, 30, 38 n18, 139, 148, 151, 157, 172, 174, 180, 184, 210, 222 n27, 254, 257, 260, 263, 265 working time reduction 147, 162, 201, 204-5, 207, 213, 222 n13, 232