Finance Finance News Ross Garnaut wants a universal basic income. But is it a good idea?

Ross Garnaut wants a universal basic income. But is it a good idea?

Ross Garnaut believes paying a UBI would help achieve full employment by boosting consumer spending. Photo: TND
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Australia could solve unemployment and boost wages in one fell swoop by paying everyone a basic income, former Hawke government adviser Ross Garnaut has argued.

In his new book, Reset: Restoring Australia after the pandemic recession, Dr Garnaut becomes the latest prominent economist to advocate for a Universal Basic Income (UBI) in the wake of the COVID-19 pandemic.

He wants the government to pay most adults in Australia $287 every week regardless of whether they have a job.

The policy would cost about $40 billion a year, but Dr Garnaut believes that’s good value for money as it would protect workers from unemployment, years of stagnating wages growth, and the disruptive force of increased automation.

“[UBI] will make for a fairer society and a more efficient economy, one that will more readily accept policies that are necessary to promote long-term increases in productivity,” he wrote.

Policies like UBI have become increasingly popular among economists over the past decade, as developed economies have continually failed to deliver decent wages growth for the vast majority of working people.

And the situation has only worsened during the pandemic.

The jobs market is the weakest in decades and automation is predicted to take millions of jobs by 2030.

Advocates argue that these issues are so structural that detethering income and employment is the best way to support workers in future, with Dr Garnaut arguing that the post-pandemic landscape is ripe for major reforms.

He argues that we’re better off not wasting a crisis. And if JobKeeper has already cost us $83 billion, then a UBI appears entirely feasible.

Garnaut: $15,000 a year for Australian residents

Called the Australian Income Security (AIS), Dr Garnaut’s plan would nearly double the lowest income tax rate to 37 per cent, while maintaining the current top rate of 45 per cent.

This means everyone would pay 37 cents in the dollar on incomes between $0 and $180,000 a year.

But, in return, workers would be paid at least $15,000 a year, regardless of whether they had a job.

And because incomes would skyrocket after the policy was introduced, Dr Garnaut predicts a surge in demand would move the economy towards full employment, which should in turn kickstart wages growth.

“At full employment, an estimated 3 per cent increase in hours worked and growth in economic activity within restoration policies would recoup more than half of the [$40 billion] shortfall,” Mr Garnaut wrote.

Ross Garnaut says a UBI is a small price to pay. Photo: AAP

Millionaires would be excluded and existing JobSeeker payments would also be gradually replaced as unemployment fell to 5 per cent – a level often associated with full employment.

But is Dr Garnaut’s a good idea?

Unsurprisingly, there’s plenty of debate.

It’s not even the first time a UBI has been suggested in Australia.

John Quiggin, a professor of economics at the University of Queensland, has advocated the policy previously, amid an explosion of support for the idea across developed economies such as the United States since 2009.

Professor Quiggin said its growing popularity proved economists were coming around to the idea that developed economies like Australia weren’t very good at achieving full employment (and wages growth) without targeted support.

“Do we think the economy is going to reliably deliver good jobs for everyone who wants to work?” Professor Quiggin told The New Daily.

“The evidence is, it doesn’t.”

But although many economists now support a UBI, the models vary drastically.

For instance, Professor Quiggin doesn’t favour radical change to the taxation and welfare systems like that advocated by Dr Garnaut in his book.

He wants a “liveable income guarantee” that sets JobSeeker at a rate similar to the aged pension, and believes mutual obligations should be removed and certain forms of voluntary work included under the UBI.

Professor Quiggin says this would cost about $20 to $30 billion a year – about the same amount as the government’s 2018-19 tax cuts.

But there are no shortage of UBI detractors.

Bill Mitchell, a professor of economics at the University of Newcastle, said there are better ways to deal with unemployment than a UBI.

“It surrenders the idea that the state can’t create work. Why give someone a basic income and not a job?” Professor Mitchell told The New Daily.

[UBI] really just constructs you as a unit of consumption.’’

Professor Mitchell favours a different scheme where the government guarantees jobs for unemployed Australians at a socially inclusive wage.

He argues that’s better than a UBI for the economy and mental health, because research shows employment is good for wellbeing.

And if the government did step in, existing systems used to manage the welfare system could be repurposed for getting people into work, he said.

“We created a new industry about a decade ago called the unemployment industry. They manage the unemployed, creating little hurdles to jump [like mutual obligations],” Professor Mitchell said.

“It’s a highly complex administration which could be easily turned into a job-creation structure.”

Scott Morrison is unlikely to take a UBI to cabinet. Photo: AAP

The government is very unlikely to take either a UBI or jobs guarantee to cabinet any time soon, though.

Prime Minister Scott Morrison has said he “won’t throw money around” in 2021 and has no shown appetite for such policies in the past, though he is considering raising the existing JobSeeker rate.

So, what’s the point of even having this debate?

Professor Quiggin said there are two kinds of policy suggestions: Utopian ideas that would require upturning the existing system, and ideas that are feasible but deemed politically impossible.

He believes UBI falls into the latter category, making the discussion a useful platform to explore how Australia could achieve full employment.

“There’s nothing too radical about it,” he said.

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