Why a Universal Basic Income is the solution to inequity

Why a Universal Basic Income is the solution to inequity

universal basic income

Imagine society as a ladder. At the top, you’ll find wealth and status. At the bottom, poverty and discrimination.

Where we start life on the ladder is largely a function of ‘the ovarian lottery’.

For almost everyone, there are rungs above you representing people with more wealth and status. There are also almost always rungs below you too.

People on lower rungs might be willing to trade positions with you in a heartbeat – if it was an option.

Some people climb the ladder of society toward wealth and status with ease. Others struggle just to stay in the same spot, fighting not to slip down several rungs.

Meritocracy believers would say people who progress up the ladder do so thanks to talent, hard work and their performance. Some will tell you poverty is a personality defect.

Those who say meritocracy is a myth suggest human biases and our personal networks play a significant role in any movement on that ladder. They’re more inclined to say poverty comes from a lack of cash, not a lack of character.

Whichever your opinion, it turns out the length of that ladder – the distance between the top and bottom rungs – matters.

It impacts your happiness. And perhaps not in the way you’d think.

You might suppose that the more rungs there are – the larger the gap between the top and bottom – the happier you’d be if you’re near the top.

After all, the top of a longer ladder means you’re better off, relatively speaking, than more people. Surely that’s a little buzz of satisfaction?

If we’re measured against the metaphorical top rung – which by most metrics in Australia would be a white man – then that demographic must be happy as pigs in the proverbial, right?

Nope. At least, not as happy as they could be.

It turns out the inverse is true. A bigger gap means less happiness, not more.

Happiness is a shorter ladder

The gap between the top and bottom rungs of that metaphorical ladder represents equity.

The smaller the gap, the more equity citizens enjoy. As the gap widens, a society becomes less equitable. And everyone in that society is less happy as a result.

That’s right: inequity is making you unhappy. Yes, you. Whoever you are.

That may seem a bold claim, but I don’t need to know you for this to be true. It’s that universal.

Whether you’re on the uppermost rung – which tends to be occupied by members of majorities – or clinging to the very bottom, the more inequity in your community, the less happy you’ll be.

Those at the top are probably happy, or at least more comfortable in their misery. But they’re still missing out, because they could be happier.

Happiness is not a finite resource – there aren’t limited units of happiness in the world. If you become happier, I don’t have to give up some of my happiness.

In short, a more equitable society is in everyone’s interests. We all stand to gain from it.

How do we achieve equity?

This is no small task.

Listening to the Black Lives Matter movement in recent weeks, I gather the answer may include:

  • dismantling colonialism, possibly capitalism and/or our patriarchal society too,
  • rewiring a few billion brains, and
  • undoing millennia of injustice.

In short, it’s clear it’s time for some big changes.

Even if some of us are in denial (I’m looking at you, Mr ‘There was no slavery in Australia’ Morrison) it seems inevitable that change must come.

Yet, I find myself sceptical that lasting change can be achieved because Western society’s track record for such change isn’t great.

I hope I’m wrong, but my fears are not unfounded.

For example, it’s been more than half a century since the women’s rights movement began, yet the gender pay gap is 22% where I live in Western Australia and the gender retirement gap was 52% in 2013/14 in Australia. We’ve had – at best – glacial progress in recent years.

Then there’s racial inequity. As a white woman, I might earn less on average than a man but I’m still a heck of a lot better off than an Aboriginal woman in WA. She can expect to earn 30% less than me. And that’s 12 years after Kevin Rudd said sorry.

She can also expect to earn 30% less than an Aboriginal man, as it turns out non-Indigenous women and Indigenous men have similar earning expectations in WA4. The gender gap applies regardless of race.

I take from this that systemic change is bloody hard, to achieve and to maintain.

Machiavelli captured why beautifully in ‘The Prince’:

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.

Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.

This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them.”

But does that make it impossible?

No.

We just need the right tool

When faced with a massive obstacle, you can chip away at it slowly or you can blow it to pieces. The former takes a long time; the latter risks collateral damage.

…or you can look for a lever.

If we want swift systemic change that improves equity without risking collateral damage, we need to find a lever: the smallest change we can make to have the biggest impact in the shortest time.

And I reckon that lever is universal basic income (UBI).

Money for nothing

The concept of UBI is:

  • Free money for all adult citizens.
  • No strings attached.

That’s right. No exclusion questions. No maze of paperwork to get it. No threat of it being withdrawn at short notice.

Automatic handouts based on your age and your citizenship.

The aim: no one falls below the poverty line.

In Australia, that’s an income of $23,764 a year for a single adult. In theory, that’s enough to afford basic housing and food even if you didn’t go to work. If that doesn’t sound like much, please remember it’s about what age pensioners live on right now.

Was your first thought…

‘But handouts make people lazy and indolent’?

Chalk that up as a point for capitalist brainwashing, but it’s not true.

I won’t regurgitate all of Rutger Bregman’s collated research findings on UBI in Utopia for Realists here. Suffice to say it’s well worth a read. He found most people still continue to work and earn an income when a UBI is in place.

In summary, his other findings were:

  • UBI is not a new idea,
  • it’s well tested and researched, and
  • time and again, UBI leads to net economic gain with positives across the board for mental health, wellbeing and equity.

If you’re curious about the stats, read chapters two to four of Utopia for Realists.

Converting an economy to a society

The upshot is that the free market model we base our economy on has reached its limits. The marginal good ‘more’ can do our citizens and country is diminishing.

We’ve got enough wealth. Now we need to improve access to it.

Which is why some people like the exceptional Eva Cox prefer the term ‘social contract’ to UBI. This is about progressing as a society so no one need live in poverty. In a country as rich as Australia, that seems a total no-brainer.

I reckon UBI’s got massive flow-on potential for race and gender equity because when your basic living costs are covered, you don’t have to choose between a roof over your head and your morals.

In short, you can afford not to put up with inequitable treatment.

For example, you can leave an employer who doesn’t behave ethically. You may be able to escape an abusive relationship. You can report discrimination. Because you won’t end up completely broke if someone with more relative power decides to cut off your money supply – whether that’s a wage, an allowance or through damage to your reputation.

If more people felt secure enough financially to do these things, might we not see societal change as a result? I think so.

Even if you can do all of the above already, UBI can still benefit you.

My basic income has meant:

  • I don’t have to work with assholes.
  • I can wind back my work on command to care for family members.
  • I can volunteer as much as I like.

‘Wait… how did you get a basic income?’

I did it the capitalist way.

I saved, bought assets, and now derive income from them.

Which is the premise of the Financially Independent, Retiring Early (FIRE) movement.

Or Financially Independent, Time Rich (FITR) as I prefer to call it, because indefinitely ‘retiring early’ turned out to be good in theory only.

Anyone aiming for FI is doing the same thing. They’re putting a floor under their income. No matter where they are, no matter what they’re doing, their living costs are provided by their assets, not their wages.

Like a proper capitalist, I’ve played the hand I’ve got at the metaphorical poker table of life. I chose a high-paying profession so I could get to FI quicker, and I spent less than my mates to add further speed.

But I had to do it myself.

UBI brings everyone a step closer to FI

A basic income guarantee is like a socialist version of FIRE or FITR.

Instead of having to go through the process of earning, saving and investing to generate enough income to cover basic living costs, it’s a gimme.

This can help level the playing field from age 18 on, bringing us closer to an equitable society.

So, how much will this cost?

As of September 2019, Australia’s population included 19,754,496 adults, ages 18 or over. Let’s call it 20 million.

The official poverty line is $23,764 – let’s call it $24k5.

$24kpa multiplied by 20 million people = $480 billion each year.

So yes, this is expensive.

But you don’t actually fork out $480 billion a year to achieve it.

You use tax exemptions and deductions to deliver the UBI to those earning above that $24,000 limit. In practice, that means raising the tax-free threshold from $18,200 to $24,000. That portion of the UBI becomes foregone tax revenue as opposed to cash you have to find. Remember: most people keep working. Income from wages dropped less than 5% in one long-term UBI study6.

Anyone who earns less than $24,000 gets topped up to that level. Hence the idea of a ‘guarantee’.

And we haven’t yet counted cost savings, remembering that UBI has delivered a net economic gain in its experiments and case studies. Cash handed out is offset by:

  • eliminating swathes of administrative cost for welfare system delivery,
  • reduced incarceration rates – it’s expensive to imprison people, and
  • reduced medical costs of homelessness – because everyone can afford some kind of home.

There are many other benefits with long-term upside for society, such as high school completion rates rising and teen pregnancy rates dropping. For the full rundown, again I recommend chapters two to four of Utopia for Realists6.

Even more important in post-pandemic world?

Do we really believe COVID-19 is our last lockdown?

Do we really believe we won’t need JobKeeper, JobSeeker, and early super access plans if another pandemic happens?

If everyone had a basic income guarantee before COVID-19, perhaps we wouldn’t have needed economic stimulus of such magnitude. We might not have seen 1.3 million people taking money out of superannuation early.

You could see a UBI as mitigating future potential losses. The risk of such losses seems quite high at the moment.

UBI is an idea whose time has come. Will we have the guts to consider it? I hope so.

We won’t be the first, but we can be next.

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