Asia Global Institute

An Idea Ahead of its Time?

Wednesday, June 29, 2016

An Idea Ahead of its Time?

Patrick Low, Fellow of Asia Global Institute, expounds on a recent Swiss referendum on the introduction of a universal basic income.

On June 5, Swiss voters were asked in a referendum whether to introduce a universal basic income for all Swiss. The proposal, backed by more than 100,000 people - a prerequisite for Switzerland's popular initiative system - was roundly defeated by the electorate, with 77 per cent voting against.

Under the proposal, every adult would have received a guaranteed and unconditional income. This might have been the first time the idea of universal basic income has been given such a wide airing. But it is not new.

According to an article produced recently by The Economist magazine, the idea was embraced by Thomas Paine as long ago as the late 18th century. In more modern times, it has been explored and experimented with in a number of advanced economies, including Canada, Finland, the Netherlands and even a hi-tech enterprise from Silicon Valley in the United States.

Various versions of universal basic income have been advocated across a wide political spectrum. It is not a pet project limited to left-leaning ideologues and aspiring social engineers. The concept has been supported across the political divide, including on the right.

Is a guaranteed income for every citizen an idea whose time has come? Perhaps not quite yet. It has its problems. But more discussion of options is healthy. It suggests growing concern with what ails market-based economies that concentrate incomes and enjoy rapid technological advances, mostly through digitization.

Two major, possibly connected, factors appear to be at work in support of universal basic income. These are most relevant to high-income economies, but will doubtlessly figure more prominently elsewhere as incomes grow, growth rates slow and automation takes off.

One factor relates to stagnant wages, accompanied by growing poverty and inequality in most major economies. Since the 2008 financial crisis, most income growth has been enjoyed by a disturbingly small segment of the population. Governments and the Establishment more broadly face a growing legitimacy crisis.

The second relates to a fear that digitisation, robotics and other forms of automation will eliminate jobs without creating enough additional employment to avoid mass joblessness in a not-too-distant future. Some would argue that these fears are exaggerated and at the very least premature.

One can nevertheless see the attraction of trying to set up a social contract that is far more inclusive than anything we have today. But there are drawbacks. A first consideration is whether universal basic income might irreparably undermine the work ethic, skew incentives and create an even sharper "them and us" divide.

Would there be a risk of creating a multitudinous community of alcohol-sodden television-watching individuals who have lost any sense of purpose or community? In short, more resentment all round? Would there be a range of non-automated jobs that nobody would be willing to do?

Or would additional leisure time make space for skill upgrades, new ventures and a more creative and productive population?

The answer to these questions would probably be mixed, but universal basic income would be a big social change.

A second concern relates to immigration. Foreigners could flood into a country to enjoy universal basic income. Or perhaps foreign workers would be an unentitled underclass - an "other" population. Either way, there would be a problem with borders unless action was collective across them.

The third and probably biggest challenge of all is affordability. Even if all expenditures were switched from social support - unemployment benefits, health care, education and state pensions - the amount that could be paid out to everyone would be too small for purpose.

This is at least partly why income support measures have typically been directed towards a restricted group. These have often taken the form of wage subsidies of one kind or another, but they risk being cut in austere times.

An attraction of universal basic income would be that no social distinctions are made in terms of benefits. Minimum wages are another mechanism, but these tend to affect employment adversely.

Universal basic income is a big idea, not for rapid deployment, but deserving of a long and careful debate.

This article first appeared in the South China Morning Post on June 22, 2016 as Guaranteed income for everyone a big idea deserving of careful debate.

The views expressed in this article are the author's own and do not necessarily reflect Asia Global Institute's editorial policy. 


Patrick Low

Senior Fellow, Asia Global Institute

Patrick Low


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