Idiot/Savant at No Right Turn on the recently published results of a two year UBI experiment in the United States,
Indeed, and it’s heartening to see this outcome.
A comment in Open Mike by Ed1 asked,
I wondered how such a scheme could work in New Zealand. We have different laws relating to social welfare assistance – would any payments from a charity to trial a guaranteed minimum income just result in abatement of any state welfare payments, whether Working for Families or other? With a three year election cycle, can we count on getting 5 years experience without any trial being closed down for not wanting answers?
There are different kinds of UBIs depending on who designs them and their intentions. I’ve written in the past about UBI: what is it good for? outlining the different reasons across the spectrum for wanting a UBI. The gist is that the right like the idea too, and any UBI in New Zealand needs to have welfare bolted on, and needs to be tory-proofed.
Gareth Morgan’s original UBI model for instance is liberal right wing. He had some good intentions but wanted a low UBI rate to replace welfare and for the supplementary benefit system that most long term beneficiaries depend on to be removed, including accommodation supplement and disability allowance. This would force solo mums and such to stand on their own two feet.
TOP’s Youth UBI policy in 2017, based on Morgan’s work, actively discriminated against disabled and other youth who were unable to work. A twenty something barista earning $30,000/year would get the $10,000/year YUBI on top of their wages, a disabled youth on Supported Living Payment would get their benefit of $13,000/year and no more.
This discrepancy was how TOP (and Morgan) intended to pay for the UBI. Robbing Peter to pay Paul. Imagine Peter and Paul being flatmates.
Those are neoliberal models, and we need to be extremely wary of them. They’re designed by economists intent on keeping the workforce corralled into supporting their neoliberal economic goals. It’s not primarily about the wellbeing of New Zealanders. National would love nothing more than to dismantle welfare, imagine Paula Bennett in charge of a UBI.
A UBI with welfare bolted on experiment needs to give the UBI to all people in the scheme on top of their other income irregardless of where that income comes from. That’s the point of a UBI demonstrated in the US experiment, to create the buffer that allows people to get ahead. Key in that trial is that there were no conditions on how the UBI was spent.
I can’t see any reason why WINZ couldn’t pay a UBI in the same way as the supplementary benefits, on top of the base benefits. They’re effectively a grant, in that they’re not taxed. There are some complicated formulas used to calculate benefits, but Labour managed to give the winter heating payment without any of that kicking in and lowering the in hand cash.
The Greens’ 2020 Guaranteed Minimum Income is another model that attempts to incorporate a UBI into welfare so that people get supported instead of penalised for being on welfare. This is the kind of model you get when you design with people’s wellbeing in mind and then figure out how to pay for it, rather than starting with the country’s economic wellbeing in mind.
The sticking point here is political culture. It would require Labour shifting away from the punitive-light, work is god model they currently support.
Related Posts
Politically you just won't get both a UBI and welfare at the same time. Nor will we get a full UBI without a substantial tax reform, because as Morgan correctly pointed out a UBI is essentially a negative tax band and cannot be understood or treated in isolation from the much wider tax system. And even with the enormous political capital this govt enjoys right now – I agree the political culture is just not ready to accept change of this magnitude.
Yet setting aside all of the technical aspects of a UBI it's vital to understand that it works because it's universal. As you point out, even a relatively low income of $500 pm delivers good outcomes, not because it's generous or even liveable – but because it came without any strings attached. No penalties, no conditions, no social stigma.
In this the TOP proposal delivered 100% on the universal aspect and the comprehensive tax reform necessary to deliver it. Much of your objection at the time, really just boiled down to the fact that the UBI number proposed didn't match existing disability benefits. At the time I responded by suggesting that given this was such a big show stopper for you, then simply implement the UBI at around the existing single unemployment benefit level as part of a tax reform package – and then top up the difference using a conditional 'bolt on' welfare payment. Well we seem to have arrived at the much the same point. Good.
Except as I suggested above, I'm not sure we can politically deliver this so in order to make progress in the right direction, I'm happy to accept the halfway measure of a GMI.
A GMI doesn't fully deliver on the unconditional universality aspect (which I suspect will weaken it's social impact) and it completely misses out on the major tax reforms necessary (that were in fact Morgan's prime focus) – but I believe it's achievable and absolutely worth supporting.
" A GMI doesn't fully deliver on the unconditional universality aspect "
I think it mostly does? The GMI is available to anyone, with no conditions other than their income being below a certain threshold.
With a GMI you can afford to make the assistance larger, compared to a UBI.
The GMI is available to anyone, with no conditions other than their income being below a certain threshold.
Yup this is a perfectly fine point, but the subtle difference is that I'm thinking you would still have to apply for a GMI as a welfare payment, whereas a tax based UBI payment simply arrives in your bank account every week or month of your life regardless.
It may look like a small point, but the necessity of applying for the GMI leaves alive the entire category of beneficiary – and it's at this level I think it's psychological impact would be diluted. A GMI still fundamentally targets that group of people whose other income falls below the minimum.
With a GMI you can afford to make the assistance larger, compared to a UBI.
Without going into a whole bunch of technical detail, I don't think that's necessarily true.
One part that i have not seen discussed is the saving in winz costs, as there will be less use of evaluators to see what benefits are needed.
Yes that is one of the attractions of a pure tax based UBI, in principle you could eliminate a whole raft of costs – both fiscal and social – by simply not having a targeted welfare system at all.
However I think it's unrealistic to expect a wholesale leap from a welfare based system to a tax based system all in one go. The complete package of changes necessary to implement this would overwhelm any government, both politically and operationally.
It's more reasonable to start with a welfare based GMI, and then over time progress toward the wider tax reforms necessary (eg a CCT, FTT, etc) to gradually implement a UBI. It's a process that could easily take a decade or two.
The odd person from the right wing has also proposed a UBI. I recall it was a Republican who started Alaska's investment which funds their UBI program.
Do things right and you could do a deal with the Nats and have something which both sides of the political spectrum support.
https://en.wikipedia.org/wiki/Alaska_Permanent_Fund
Its worth noting a few critical facts…Alaska population approx 750,000…oil exports approx 51 billion USD pa….annual stipend around $1500, or $30 pw.
I get a bit dark at people commenting under my post when they patently haven't bothered to read it.
Alaska's "UBI" is, as I understand it, simply a distribution of the state's oil royalties to the people, and can vary from one year to the next in accordance with how much oil they sell.
You will never get a UBI in NZ because it can't be targeted at landlords, employers or supermarkets. The idea of letting beneficiaries have choice about how they spend their money is anathema to middle NZ.
where was all the objection to the winter energy payments in recently years?
Neutralised by selling shares in electricity companies to those who could afford them.
haha, ok so the sell is how a UBI benefits rich people/
If we leave the current housing 'market' as is, they can clip the ticket that way. Sweet as. 🙂
horse trading, you rich people get to keep your capital gains so long as you support a govt to give us a UBI+welfare. This might work if the UBI was indexed to housing inflation and started at a high enough rate 😈
Which is why you don't see "rich people" objecting to the landlords subsidy, the accommodation supplement.
My observation is that the established money power, of whom we learned in what will be known for generation: the 16 billion dollar question, are really without morals and conscience. They will never allow this, you are right. NZ is governed by these powers and this is why no government ever will make inroads in the issue of poverty. Never has, never will.
Sad part, Maori are no better despite more and more really good people out there trying their best to stem the tide. Some get carried away by race issues never stopping to think that at that junction they just have become a tool.
There are two points here that correctly point to the reason why the UBI is a very dangerous concept in today's environment…
"Those are neoliberal models, and we need to be extremely wary of them. They’re designed by economists intent on keeping the workforce corralled into supporting their neoliberal economic goals."
"The sticking point here is political culture. It would require Labour shifting away from the punitive-light, work is god model they currently support."
New Zealand politics is ruled by what is essentially a ideological duopoly, we can see quite clearly that both Labour and National adhere absolutely to a neoliberal free market frame work that ultimately guides their every action and policy.
Therefore any move towards a UBI while we live within this neoliberal duopoly would be a absolute disaster for the working classes, disenfranchised and everyone working towards a progressive left project.
Turn Labour Left!
Turn Labour Left! and do it now by voting Green 😉
I can't see Labour at this point in time developing a model that bolts on welfare and is tory-proofed. GP with 20 MPs might change their position.
@weka, I do vote Greens (without much enthusiasm, sorry) for reasons probably not worth going into now, the Greens have almost no buy in with the working classes or disenfranchised, have been pretty shit at getting youth/students to come out and vote in serious numbers for them…and without making some sort of inroads into at least a couple of these demographics, their chances of turning Labour Left are not good at all.\
Even if they did, then there is the question of how much free market liberalism has embedded itself into the Green party?, how much real fight is there within the Green Party to actually get in the ring with Labour liberals if the Greens had a bit more power to do so?
I know this is a bit of a long bow, but just look at the Justice Democrats in the US, after all their big talk, they are proving themselves to be absolutely toothless and without a hint of backbone when it comes to fighting the establishment within the democratic party itself….we need fighters with a records of standing up to the man..people like Sue Bradford and Helen Kelly (still miss her) for instance.
It's just a different approach than trad lefties like Bradford or Kelly. If you take the long game at dismantling neoliberalism and you have a commitment to bring people with you, then the adversarial approach isn't the only or best way. This doesn't mean that one can't be strong or know how to fight, but too often the left look at *how the Greens operate and mistake it for them being centrist or whatever.
Which isn't to say that they don't have their own internal issues around the political spectrum, but the members voted in Davidson over Genter for female coleader and that shouldn't be underestimated.
The Greens aren't the party to save the left from Labour in the traditional working class sense, and it would be better to stop seeing them in that light and as failing. If people want a Bradford or Kelly then do the political work to make that happen.
My own view is that it's not the Greens that are the problem (show me the problem with their policies, which are easily the most left wing on offer, and I might change my mind). It's that most liberals actually want Labour instead. I'm in the process of writing about this, I reckon the political work for the next few years is to shift the culture around that.
" It's that most liberals actually want Labour instead. I'm in the process of writing about this, I reckon the political work for the next few years is to shift the culture around that."
Why would you bother trying to shift liberals and not put serious energy into converting the working classes and disenfranchised to our cause?
The Liberal class are fundamentalists, I think you would be wasting your time, unless you shifted your policies to suit them that is.
Unless you have a plan to turn NZ into a one Party state in which the 'tories' never form a government ever again – then your wish to 'tory-proof' anything will remain an idle one.
The best path to ensuring a stable UBI/GMI system is to build bi-partisan consensus on it, and the way to do this is to understand the aspects of the system that appeals to both the left and the right and work them together.
Besides we already have exactly what you're asking for – NZ Super is effectively a UBI for over 65 yrs olds and it's been a stable feature of our political landscape now for decades.
" NZ Super is effectively a UBI for over 65 yrs olds and it's been a stable feature of our political landscape now for decades. "
Excellent point! It isn't such a foreign concept after all. Probably no coincidence that the beneficiaries of this have consistently high voter turnout…unlike many of the likely beneficiaries of a GMI.
There are two points here that correctly point to the reason why the UBI is a very dangerous concept in today's environment…
Dangerous to whom?
New Zealand politics is ruled by what is essentially a ideological duopoly, we can see quite clearly that both Labour and National adhere absolutely to a neoliberal free market frame work that ultimately guides their every action and policy.
Therefore any move towards a UBI while we live within this neoliberal duopoly would be a absolute disaster for the working classes, disenfranchised and everyone working towards a progressive left project.
It would more than likely liberate the working classes, who would often find themselves in the position of being able to choose to work only when and if they happen to feel like doing so.
Thank you for highlighting the issues with TOP's UBI discriminating against disabled and youth.
you're welcome. I think they've changed their policy since then, they do appear to be listening and working through the issues post-Morgan.
I have a soft spot for Robert Reich and he summarises the findings:
https://www.youtube.com/watch?v=6Ho0U7UIOgI
With Trump rolling out hundreds of billions of untagged cheques, and Biden and Democrats rolling out trillions of somewhat more qualified cheques, the resistance is harder to put up.
The Labour government's approach has last week been to decrease abatement rates from $90 to $160 before cuts start.
https://www.beehive.govt.nz/release/government-delivers-promise-working-low-income-families
That's not unreasonable when seasonal workers are in such high demand and unemployment still low.
But it's not the step-change away from poverty levels that too many suffer from.
that's actually really good to hear, I missed that that was kicking in now. I agree it's not enough, but the abatement rate has long been a massive thorn for everyone in terms of knowing what to do about it. People with more policy wonk in them can probably figure out how to phase abatements out while bringing in a UBI+welfare, I think this is what the Greens are trying to do with the guarantees minimum income policy, a transition.
the immediate problem is that the hardship grant that so many long term beneficiaries depend on, TAS, is still abated from the first $ afaik, and those that can't earn aren't helped by this policy change. As ever, Labour frame everything within the jobs lens and thus fail to help across the board. It's galling that they still have no plan for the disabled community and others who can't work.
And obviously the housing situation undermines otherwise good policy like this.
These key social and psychological benefits of an unconditional UBI that Reich is outlining are precisely what I've been trying to convey here for over a decade now.
Yes there are a bunch of technical pros and cons that some people just love to get distracted by – and I've never shied away from responding to them in detail.
But they're all piffling sideshows – the big deal is how it gives people the freedom and dignity to organise their lives without conditions, fear or social stigma.
Reduction in abatement rates is a good step in the right direction. Amazing that here in NZ we apply the highest effective tax rates to beneficiaries.
Reading the Labour announcement, the reduction in abatement rates will "cost" $394m over five years (I wonder if that figure includes any of the other side of the ledger – e.g. less need for other services and tax paid on the money earned etc).
Meanwhile NZ's richest guy, Graham Hart, increased his wealth by about $3.5b in the last year. Enough to pay for the entire change to abatement rates for the next 44 years. And Labour (to me) thinks we don't need to do anything about inequality or taxing wealth.
AAhh Robert Reich, nice guy with some great insights for sure, but always a company man to the bitter end…
Robert Reich vs. Chris Hedges on Tackling the Neoliberal Order
https://www.youtube.com/watch?v=jr4cXH3Fil8
Bernie is now so far up Biden that you can just see his toes. The joy of being a company man. That’s what happens when you run the company.
Tory-proofed, an interesting term I don't recall seeing before. On this note, I'd advise you never to show a tory all your cards. If you like show them one or two and watch their reaction, this is usually enough to convince you not to show the rest.
Most tories are only playing with half a deck anyway, you know kinda like Trump and his supporters. Basically, leave them to it to live out their life smugly and blindly as a mushroom on a diet of darkness and bullshit.
Thanks for this Weka. While the long term solution is the ultimate goal, I was thinking more about whether even a trial scheme could work in New Zealand. The scheme referred to in NRT was funded by donations – effectively by Charities. My impression is that in the NZ situation, charities are very wary of giving cash, as that may be seen as increasing income and therefore automatically triggering abatement of benefits – assistance is more usually given by means of supermarket vouchers or similar, carefully managed so that it is ''as needed'' rather than "income." I am not knowledgeable in that area however, and was seeking information, as I suspect there are some charities that would support such a trial.
For the government to make such a trial would I suspect require legislation that allowed discrimination in favour of a group of New Zealanders, which would attract criticism of a different sort. I suspect it would be easier to allow a registered charity (and not other entities) to make regular payments of money up to a certain income limit while not triggering abatement of any existing benefits. Even that would be hard to legislate, and the charity would need to be closely monitored to ensure that it is not a ruse to make ''charitable payments"" to people close to donors to effectively make non-charitable payments.
It does seem that our current system is not allowing voluntary generosity through charities, as that is the job of government . . . (and yes that conclusion is a bit tongue in cheek . .)
Although it is an interesting idea, which existing NZ charity could do this without its donations tanking ?
I reckon a better option is a philanthropist with deep pockets and a heart of gold 🙂
I think the private/NGO funding aspect of it is worth exploring. However it's just not possible to use the abatement rate to skirt the issue of additional income. Afaik TAS, the ongoing hardship grant, gets abated from the first dollar earned. It's a stupid rule, one of many, and I'm thinking it's in legislation so Labour won't touch it. Also the issue of whether the UBI is taxable income (it shouldn't be). So I think it's better to just make a UBI a tax free grant that sits outside of the abatement rules in the same way that the winter energy payment does.
I think keeping the trial UBI as broad as possible makes sense so that it can't be targeted by bigotry. Maybe make it in an geographical area, and it would include minimum wage workers as well as beneficiaries.
I will look up the TAS thing when I get teh chance. Because the other side of all this is that a lot of what WINZ do is in policy not legislation and thus there is discretion to apply a rule or not.
Is a UBI a fixed amount, or like a grant to bring personal income up to a universal minimum?
I would expect quite a few charities would be interested in seeing their name on a list of those providing funding for a trial – and it may increase donations. We have an unbelievably large number of charities, and most are understandably not able to commit to ongoing financial support, but a trial over two years? The reason for suggesting through a registered charity is it would make it difficult for it to be a tax rort spreading of income within a family etc. Any long term arrangement needs to be government led. Abatements are difficult – but few situations of need suddenly stop with the first paycheck of a new job, but some grants are given for specific purposes – the need in theory stops with a single payment.
MSD could administer the scheme, but the group should not just be beneficiaries, it should include workers as well, even if it's low income workers. Making it non-taxable is not that hard (sunset amendment to the Social Securities Act and create a classification based on Accommodation Supplement since it's non-taxable), but for Crown payments, doesn't really matter either way since the Crown will just receive what it pays out, so the payments can be calculated on a net basis like benefits.
Administratively, I wonder what the best system is. The current system is the opposite of administratively simple, and simple and transparent is a noble aim of any welfare systems, whether targeted or universal.
Edit: Would it be easier to model it on Working for Families with a maximum annual amount, an abatement rate so it reduces above a certain income (so rich people don’t get it, even though taxes can be set so they don’t get it anyway), and people can choose whether it’s paid weekly, fortnightly or annually like WFF now?
Or would it be easier to stick with a UBI paid by IRD and tinker with tax rates instead so it is very simple to administer?
Yes that's more or less what I meant above when I was making a distinction between a targeted welfare based system that we have a present, and a universal tax based one.
Welfare based systems are what we're accustomed to. Benefits are treated as conditional, which necessarily means a great deal of expensive, often clumsy administration and often a lot of unnecessary stress for the beneficiary.
Our tax system by contrast treats every individual in the same situation exactly the same – by design it brings universality into the picture. As the old saying goes, the only two certainties in life are death and taxes. A tax based UBI leverages this character by treated income support as a negative tax band.
Think of positive tax being what you're accustomed to – payment progressively taken from you as you earn more. A UBI negative tax is simply a fixed payment given to you unconditionally, regardless of how much other income you may have. Then the total tax you wind up paying is simply the sum of the two. In principle this would be a very clean and elegant scheme; it’s great merit being that it’s inherent universal nature eliminates the entire category of ‘beneficiary’ in a stroke.
In reality life is not so simple, and as others have argued elsewhere, you probably need to retain some mix of a welfare based conditional system with a tax based unconditional system.
I've toyed with a few models over the years, and while I like the theoretical EMTR curve of the TOP UBI, it's politically more palatable to arrange tax rates so that the top earners effectively get less UBI. Actual welfare for long term illness and disability would still be a necessity of all systems, whether it's direct welfare or through changing ACC.
Yes – initially I confined myself to thinking in terms of a simple flat UBI and a single flat PAYE rate – eg $10kpa for the UBI and 33% for the PAYE rate. It's easy to explain and is reasonably progressive over the majority in incomes.
But as you say it may be better to be more progressive in the PAYE rate, start at say 25% rate up to the median income, then 33% up to the top 95% of incomes, with a 39% band at the top 5% of incomes.
Another extension of the idea is to implement a reduced UBI for children – something similar to the old Child Allowance scheme NZ used to have. That would elegantly replace WFF.
And if over time a UBI proved as effective as I hope it might – I suspect we would find it easier to gradually evolve our current welfare model for long-term disability into something more effective. Right now for example the Australian Federal govt NDIS scheme is well in advance of anything we’re doing in NZ.
https://www.ndis.gov.au/
The UBI for children replacing WFF is part of the TOP scheme as well, so replacing at least the Family Tax Credit of WFF with a UBI would be the obvious move, but PTC and Best Start would probably be retained (both are automatic qualifications, so are easy to administer).
A common justification for the In Work Tax Credit is the additional cost of work due to things like child care etc, but I think that just goes back to keeping it administratively simple via free child care.
Not sure of exact tax bands, but would set rates so that the top 5-10% of income earners would effectively pay enough extra tax that it equals their UBI. I haven't done the calculations, but your suggestions look like an excellent starting point. IRD Income Distribution 2001-19 has the figures to work out the bands by percentage at least – the top 5% would be $124,000 p.a. and the top 10% would be $94,000 p.a. (I think top 10% would be quite sellable at that level so have used it in the next paragraph). Median taxable income is around $33,000 p.a. (these are all approximate and are based on the 2019 figures excluding people with nil taxable income).
Plugging those rates and bands into the Treasury's Aggregate Personal Income Tax Revenue Estimate Tool (and ignoring the caveats about likely changes in earning behaviours caused by large changes) gives us $14.63 billion extra to spend.
MBIE believes there are 245,544 people on temporary visas currently in NZ, so deducting from Stats current population estimate of 5,112,300, that gives 4,866,756 as the number of people eligible for the UBI (assuming it is restricted to residents and citizens) which in turn gives a cost of a bit under $49 billion at $10,000 each (I haven't adjusted for children getting less or potentially superannuitants getting more). We were set to spend about $28 billion on potentially replaced social welfare, WFF and overheads in 2019-20 (my theory is that pre-Covid forecast figures are probably more realistic for long term spend).
Shortfall is $49.6 billion less $28 billion current spend and extra revenue of $14.63 billion = $7 billion, and that's leaving Best Start, Accommodation Supplement and current disability services (such as they are) intact.
Some work still required if we particularly want to balance the budgets, but it's a good start. Not sure what the longer term savings would be in terms of health, wellbeing, less prison etc. but it might just about be worth it.
Some quick calculations say that someone is not a net income tax payer (i.e. income tax – UBI is more than 0) until just over $38,000, which is more than half of taxpayers. Might be popular if it was put together well.