Money Finance News Should the govt give away money for free?

Should the govt give away money for free?

Wolf of Wall Street Leonardo DiCaprio
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They say nothing in this world is free, but some European countries are looking to change that with the introduction of a revolutionary new approach to welfare – the ‘basic income’.

True to the name, it is a simple enough idea – give every citizen a guaranteed wage, no strings attached.

No dole queue, no job hunting requirements, just a cheque from the government every month for being a human being.

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A scheme guaranteeing the equivalent of $3500 per person, per month is to be put to a referendum in Switzerland next year, and Greece is also looking at the idea as a way to salvage its crippled economy.

The idea is gaining momentum in Europe thanks to the continent’s high unemployment levels, but a similar squeeze could very well hit Australia in the future, with a recent PricewaterhouseCoopers report predicting nearly half of all local jobs could be wiped out by technological advancements over the next 20 years.

Those concerns are echoed by economists and futurists around the world who warn that the information-analysing jobs that replaced much of the manual labour work eliminated by automation will in the coming decades meet the same fate.

But will it work, and what about Australia?

Unsurprisingly, the ‘basic income’ is popular among left-wing economists, who see it as a way to eradicate poverty, remove some of the stigma of unemployment, and stimulate consumption and economic growth.

Switzerland could be about to change the face of welfare. Photo: Getty

It has support among some on the other side of the political spectrum as well, such as leading small-government economist Milton Friedman, who argued that waste would be dramatically reduced by merging complex webs of welfare payment systems into one simple flat payment, eliminating the need for hordes of bureaucrats.

There is the fear, however, that with enough money to survive and no obligations, people will just stop working completely.

Annie Lowrey of the New York Times countered that most proposed forms of basic income offer enough money to live, but not to live well.

The current system of reducing benefits when people earn more money creates a disincentive to work, where with the basic income people can earn whatever they want without losing benefits.

Alternatively, economist Tony Atkinson suggests reclassifying the benefit as a “participation income” only reserved for those who work or volunteer, but this would require additional administration.

Such a dramatic change of course offers up huge challenges.

Switzerland’s proposed system would be eye-wateringly expensive – initial projections suggests it would cost the equivalent of $270 billion, or 30 per cent of the small but wealthy European country’s GDP.

Australian welfare payments per month for singles

The dole: $1564
Newstart: $1038
Austudy: $853
Basic Income proposal: $3500

Political hurdles

Switzerland is one of the world’s most famous economies. Photo: Getty

Researchers at the Queensland University of Technology have investigated the basic income proposal, and suggest a combination of raising taxes and eliminating existing welfare schemes would cover the cost of a basic income in Australia, but both these changes would be politically difficult.

Raising taxes is an obvious turn-off for voters.

As Australia’s Institute of Public Affairs Senior Research Fellow Dr Mikayla Novak noted when the Swiss proposal was first announced, it would be equally challenging in Australia to save money by removing the other welfare programs replaced by the basic income.

“It is unlikely that the concentrated beneficiaries of existing welfare subsidies would support the abolition of their favoured programs, and even if a basic income scheme was successfully implemented the interest groups would quickly seek to undermine the generic application of the basic income,” she said.

Given how politically far away it is here compared to other countries – aside from Switzerland and Greece’s interest, the Canadian town of Dauphin trialled a similar program to great success in the 1970s, and more pilot programs are underway in Brazil and Namibia – it seems likely that whatever happens, Australia will get to see what basic income looks like in practice overseas before we’ve even come close to the point of giving it a whirl ourselves.

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