Time to test if a universal benefit works
Finland has this year begun a random trial of a $860-per-month universal income given to 2000 people currently on welfare.
The payment will not stop if they find a job. It is hoped that it will give them financial security and allow them to make life plans.
Pilot schemes have also been run in Namibia, Ontario, Manitoba and Utrecht.
In recognition that technology is displacing jobs, Silicon Valley start-up accelerator Y Combinator has begun a basic income experiment in Oakland, California, to provide what its president, Sam Altman, calls "a cushion and a smooth transition to the jobs of the future".
Ryan Greenaway-McGrevy, a senior lecturer in economics at the University of Auckland, said a rethink was needed and a similar trial should be conducted here.
"Finding a job for life is likely to become increasingly difficult as technology advances and roles become automated, so we need to think hard about where self-worth really comes from," he said.
"A guaranteed income would challenge the notion that people are only valuable to society if they are in paid employment.
"The industrial revolution also caused massive disruption, and over the long-term it led to an increase in everyone's standard of living. But it took a long time for the people at the bottom to benefit - the latest research suggests it took about a century. Technology is a good thing if everyone can share in its benefits."
Gareth Morgan and Jess Berentson-Shaw this year produced a book, Pennies from Heaven, arguing for a $200-a-week benefit for all parents with children under three.
Greenaway-McGrevy said policymakers should give serious thought to how the UBI could work. He said child poverty had been "pretty atrocious" for some time and there had been no one willing to do anything about it.
"A UBI would be a one-shot welfare policy that would replace much of the complicated system we have now and would be far less costly to administer," he said.
He said it had the potential to be a much better system because there would not be the same strings attached. The current system of targeted welfare has unintended consequences.
People who were unemployed and on the benefit would find the marginal tax rate on any part-time work they were offered was so high that it would put them off in some cases, he said.
The structure of Working for Families can also create a tax disincentive to a second earner working longer hours or working at all. "If you get rid of those strings you get rid of the unintended consequences."
A trial would need to test income levels to determine how much money would need to be given to achieve the desired effect, and look at measures of success including workforce participation and child poverty.
There would have to be a complete rewrite of the tax system to pay for it.
Greenaway-McGrevy suggested that might include implementing a proper capital gains tax or a land tax, and doing away with progressive income taxation which, at the other end of the pay scale, can encourage tax avoidance.
"A flat income tax coupled with the UBI could be quite progressive, because the basic income would be tax-free."
One of the possible side effects of a UBI could be to raise wages in low-paid jobs such as in supermarkets, fast food outlets and cleaning services as these became less attractive to job seekers. As a result, the price of many goods and services could rise as businesses sought to recover the increased cost of labour from consumers.
Written by Susan Edmunds. First appeared on Stuff.co.nz.