Guaranteed Basic Income: it’s more important than you think

Debora Cardenas on Unsplash

Income support provides routine sport for today’s tabloids. Some media relish labelling people who receive entitled social security as “dole bludgers” or “welfare cheats.” Headlines regularly portray them as “bleeding the taxpayers” dry.

The stories may attract initial clickbait and a stream of petty-minded comments. Unfortunately, they’re a cover story for a social security system that is failing the most vulnerable in our community.

Why income support needs a reset

For those with no experience in Australia’s income support system, the idea that it’s failing would be a surprise. After all, we have a system of support for those going through tough times, so why reinvent the wheel?

The reason is that our existing social payment safety net no longer fits its purpose. It’s costly, it benefits rent-seekers rather than job-seekers (and other social security recipients), and it is based on a workplace model that no longer exists for many people.

Moreover, contrary to a widespread pernicious community myth, social security isn’t accessed by a minority of Australians. At one time or another, many Australians of working age rely on some form of income support, according to Professor Whiteford at the ANU Crawford School of Public Policy.

For a system so critical to so many Australians’ lives, increasingly, our income support system is resulting in genuine claimants getting life sustaining payments processed in a timely manner . Some claimants are waiting for weeks, usually months, to access the benefits to which they are entitled.

However, this doesn’t even begin to describe the significant problems in income support. Even more distressing is that the people stricken with cancer (and other medical conditions) don’t qualify for the Disability Support Pension (DSP). Many potential claimants miss out because DSP rules classify serious conditions like cancer as possibly curable and therefore episodic, so only people who have a permanent severe disability can qualify for DSP.

This leaves many people in a terrible bind. They’re either in the awkward situation of looking at whether they have another illness that could qualify them for DSP, or battling a medical condition while subsisting on the grossly inadequate Newstart allowance, which means they usually go for days without food or essential medication or medical equipment.

Furthermore, difficulties claiming payments are only part of the social security horror show. There’s also the near impossibility of income support recipients locating affordable housing. Sick people on income support are also at increased risk of homelessness. Their conditions may necessitate relocation to residential regions near medical care where rents are at a premium rate.  They have the added burden of the cost of unsupported expensive packing and moving.  This is in no small part due to decades of inaction on the part of both political parties.

And homelessness can happen to anyone. Prior to become homeless due to illness Colleen was a school teacher. “Before the cancer I was a prolific painter, I was an art teacher at a primary school, I was a prolific bush walker. I was a very healthy person, a very happy person”

Tragically her story is becoming all too common here in Australia.

For one of the wealthiest countries in the world, this isn’t okay – not even by a long shot.

It’s not as if the government can’t afford to do better – they could do much better, but they choose to fixate on so-called economic management, which is code for hacking away at social security benefits.

Further reasons for a major re-think on social policy

There is a more pressing reason for revising income support policy. Put simply, the ranks of redundant workers are likely to swell, including those rendered unemployed through outsourcing of Artificial Intelligence (AI). These ranks may also include freelancers whose work has been superseded by robotics.

These people face a grim future that is dependent on Centrelink – a fate many people strive to avoid.

Why is income support failing the most vulnerable?

Failure to look after the most vulnerable has been an entrenched problem for decades. It started particularly after the ’70s oil shocks caused the skyrocketing of inflation and unemployment. This fostered the perfect environment to breed prejudice against those out of work.

Governmental belt-tightening became fashionable, and by the end of the ’70s, it became gospel that governments preferably needed to run surpluses.

This obsession with belt-tightening and surpluses has meant that, as time has gone by, successive governments have taken an increasingly fiscally tight-fisted approach to income support. This has all been under the guise of using taxpayers’ money frugally.

It is because of the surplus and expenditure-cutting mania that recipients are classified as a burden. Basically, adequate social spending makes it harder for the government to cut expenditure. Hence, all recipients are perceived to be bludgers (scroungers) without exception, whether they be stricken with cancer, the parent of a young child, or a student. Whatever your circumstances – no matter how trying – your worth is assessed by one question: Do you work? This question is intended by governments as a dog whistle. When many people hear: “Do you work”, what they also hear is are you contributing to the revenue. If not, if then you’re living off benefits, then you’re a scrounger (bludger) living off my taxes.

It matters little that many recipients, such as those with chronic medical conditions, full-time students etc. are unable to be part of the workforce.

In spite of these hardships – and often heartbreaking stories – the overwhelming picture of social security recipients in political and media circles is one of freeloading.

It was never intended to be that way. In 1943-6, the Chifley government established the National Welfare Fund to provide social security for such circumstances as advanced age, invalidity, child endowment, unemployment, or sickness. The fund commenced with a humble 30 million pounds. By the 1950s, the substantial proceeds were transferred to consolidated revenue from a trust account. In 1985 (at a time of high interest rates), legislated changes attempted to remove the fund forever from memory.

The founders of the National Wealth Fund had the best of intentions; they made sure the scheme was well secured in a Trust Account.  By 1950 it was clear the difference between revenue and expenditure from the fund was showing it to be financially sound and showing immense residual growth. The move to the Consolidated Revenue Account which is a general interest-bearing account assured it would grow even more.  Social Security should have been adequately funded and exist for perpetuity.

By contrast, our current stock of retail politicians’ routinely makes recipients’ the target of cuts to get the books back in the black.

Guaranteed Basic Income (GBI)

Enter the need for a Guaranteed Basic Income. It would provide a social safety net and would be pitched above the poverty line.

Payments would be determined by the UNSW Minimum Healthy living index. This index looks at what households require to survive comfortably. Hence, payments – for all Guaranteed Basic Income recipients – would need to be significantly higher than current payments. (see the section on how to pay for GBI).

A Guaranteed Basic Income would be available to those unable to work due to a medical condition, caring or full-time study.

Although individual recipients would receive more equitable income support (via a healthy living minimum standard), overall, the Government would have fewer social security recipients overall as many former recipients would be engaged in a Federal Jobs Guarantee (See the section on Job Guarantee).

Why is a Guaranteed Basic Income (GBI) better than a UBI?

Over the last four years, Universal Basic Income has established itself in the consciousness of the public. Driven in part by silicon valley, this replacement for income support is widely seen as a panacea for inequality.

Unfortunately, like in the case of many other worthy ideas, there are roadblocks, the biggest of which is a national obsession with affordability.

What do I mean by this? For a start, there is the cost. A UBI would be double the cost of our current social security system (around $170 billion per annum). At a time when politicians are obsessed with affordability, are they likely to want to double the money spent on social security?

However, there is an even more formidable stumbling block: raising the taxes on the rich. As a UBI is double the cost of the current system, it would probably require increasing charges on big targets. Legislatures find it challenging to increase taxes on corporations due to the formidable bargaining power of the rich.

Why would a Guaranteed Basic Income be better than a UBI?

Funding a Guaranteed Basic Income is much more affordable than a UBI for five reasons.

First, funds could be drawn from consolidated revenue. (This is where current social security funding comes from, not income tax.) or

Second, the government could issue bonds;

Third, the government could use targeted fiscal expenditure and Australia’s fiat currency to address to the problem;

Fourth, the government could terminate existing contracts and re-purpose expenditures; or

Fifth, they could establish a purpose specific general social security account operating separate from the Consolidated Revenue Account).

However, fewer people would need to claim GBI because many social security recipients would be engaged in a Job Guarantee Scheme. This scheme would guarantee real public sector employment in a range of occupations, child care, caring, environmental work, and community work.

Scheme participants would be employed as part of a new service and not part of the APS.

These jobs are real jobs, not welfare like Work for the Dole. The government needs only to use contract management arrangements with providers – there is no requirement to nationalise private businesses.

Conclusion

John Maynard Keynes once said, ” Look after the unemployment and the economy will look after itself.” By this, he seems to have been saying that if policy-makers tackle the issue of unemployment, the benefits will flow to the broader economy. Tragically our, contemporary politicians and the media never seem to have got the memo on this one, instead, they tell us that all social security recipients are a burden.

Furthermore,they also sell us a model of capitalism that doesn’t reflect reality. Often, politicians like to give the impression that small and large businesses are opportunity creators – this is a lie. It is everyday people – whether employed or not – who are the most significant opportunity creators of all.

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