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Universal Income & the Minimum Wage

Written By: - Date published: 12:50 pm, October 26th, 2010 - 101 comments
Categories: equality, poverty - Tags:

The political right don’t want the Minimum Wage. Act have said this outright (It’s part of the irrational economic theory that they follow) and National, too scared to actually drop it or say that they want to, have always let it decrease in real terms.

What the political right forget is that the Minimum Wage is there for a good reason and that is that nothing can be supplied for less than cost. It costs about $100 per week to feed anybody, it’s about the same for housing and then there’s all the other expenses related to going to work such as transport. The Minimum Wage is set to cover these and without it, all else remaining the same, we would soon find wages decreasing below these costs effectively having people paying to go to work.

It is possible to remove the minimum wage though as not all else needs to remain the same. The Universal Income is income paid to everyone (Adult and child) directly from the government (by the government printing money) to cover these basic costs and with these covered the Minimum Wage can be removed.

A Universal Income has some advantages and disadvantages.
The advantages:

  • The complete and total removal of absolute poverty which shouldn’t exist in any civilised society. Everyone will have enough to live on, and to live quite well, whether they work or not.
  • The simplifying of the welfare system. They’ll be no need to apply for an Unemployment Benefit or the administration that goes along with it.
  • People who lose their jobs won’t automatically be in the position to lose even more increasing financial security which will increase their freedom and so make them more willing to .
  • The economy will always turn over a minimum reducing the chance of major recessions and pretty much eliminating the possibility of depressions.
  • A decrease in crime as people will no longer be forced in to crime to pay bills or get ahead.
  • Businesses will be able to set pay rates commiserate with the value of the job and not have to directly cover each individuals basic costs.

The disadvantages

  • Taxes would have to be raised.
  • Now, a few people will exclaim that if people don’t need to work to get an income then they won’t but this was disproved during the early 2000s by the fact that unemployment dropped to ~3%. Most people want to work and are more than happy to do so. Those that don’t want to work make up only a very small percentage of the population and we can support them. Then there’s the fact that going to work under a Universal Income system will always make people better off rather than the present system where going to work (especially part time) can actually make people worse off due to the massive abatement rates applied (Directly through regulation and indirectly through costs) to the UB.

    – Draco T Bastard

    101 comments on “Universal Income & the Minimum Wage ”

    1. OleOlebiscuitBarrell 1

      Those that don’t want to work make up only a very small percentage of the population and we can support them.

      Why we would we want to do that?

      • Draco T Bastard 1.1

        Why would we want the possible increase in crime if we don’t?

        Besides they could as, CV points out below, contribute in other ways.

      • Colonial Viper 1.2

        Because they might be a family member, a friend, an acquaintence. Someone we don’t want to see begging on the street or starving, in a society where billions in capital wealth flow back and forth on a daily basis. Because if we show them kindness and a way forwards they might begin to contribute to themselves and society once again.

        Of course the real problem for the Right is that NZ has 150,000 to 200,000 people out there who would immediately start working if decent, well paying work was available for them. Which it isn’t. The focus needs to go there first – the creation of good, solidly paying jobs for everyone. (And I do not mean 2200 cycle way projects.)

        • Because if we show them kindness and a way forwards they might begin to contribute to themselves and society once again.

          Mmmm but I’d class people in that category as unable to work – people who might be suffering a definable condition such as depression, or something harder to define such as a complete dimunition of their self-worth and self-belief after years on the dole.

          But that presupposes we’d have a mechanism of “showing kindness and a way forward” (i.e. welfare of a non-moentary kind as well as the dole). At present we don’t… we have a system which, for all it’s talking of “helping”, is built on punishing those who don’t comply with their “benefit obligations”. So we’d need to create these welfare structures, hopefully based on best practice… but I wouldn’t like the job of trying to find best practice examples of a genuinely humane way of helping such people, as non one seems to practice it.

          And there’s also the hard core of bloody-minded sociopaths who are capable of work but believe society owes them a living while they indulge their chosen recreation (subsidised by a bit of drug dealing or grey economy work). Them I’m not prepared to subsidise whether “we” can afford it or not, and I suspect you’ll find that the majority of even the most kind-hearted of people will take a similar stance.

          Thus any successful system will need an effective way of differentiating between the two groups and dealing with each appropriately.

          • Colonial Viper 1.2.1.1

            Yeah the sociopaths at either end of the socioeconomic spectrum in NZ need effective dealing with.

            So we’d need to create these welfare structures, hopefully based on best practice… but I wouldn’t like the job of trying to find best practice examples of a genuinely humane way of helping such people, as non one seems to practice it.

            We can look to Scandanavia, and to the many local nonprofits who do great work, but at the end of the day NZ will have to lead the world in showing how it is done.

            Thank you for mentioning issues around self-worth, spirit and morale as a human being as critical factors. (For the employed, the unemployed, and the currently unemployable).

            • Rex Widerstrom 1.2.1.1.1

              I should also say that, speaking personally, being unemployed doesn’t affect my self-worth… I see life has its vicissitudes and accept them. I expect that a lot of other unemployed people feel the same way.

              What does drain my self-esteem very quickly (and as regular readers will probably have noticed, I’m not given to underestimating my own self-worth 😀 ) is:

              – Being treated like a work-shy simpleton by someone maybe half my age at WINZ, who then insists I go on a course to learn how to write a CV. Despite already having one, and making a living primarily from writing. And being threatened with having my children starved if I don’t comply. That one’s easily fixed if we want to.

              – Receiving 150+ rejections between jobs. Not even getting interviewed for positions I know I could fill because I’ve done the same job before. Finding that (particularly in the case of government positions) the whole thing was sham they went through prior to making an internal appointment. Or, worse till, having no idea why I keep getting turned down, and being left to wonder if I am in some way defective as a human being and not just as a prospective employee. Or often getting no answer whatsoever. And so on.

              That one’s harder to cure. But something around a legislated set of rights for minimum treatment of people applying to be employed, and not just those you end up employing, perhaps? Though I shy away from “nanny state” solutions, if people won’t treat other people as human beings deserving of respect and consideration, I’m lost for a better answer…

              • Vicky32 1.2.1.1.1.1

                “Being treated like a work-shy simpleton by someone maybe half my age at WINZ, who then insists I go on a course to learn how to write a CV.”
                Yes, exactly! My experience when I applied for the dole right after losing my job, was of giving my CV to the ‘case manager’ and having her not even read it, until the end of the interview when she said “Oh, you were in works for years?” Well, no sh** Sherlock!
                ” Receiving 150+ rejections between jobs. Not even getting interviewed for positions I know I could fill because I’ve done the same job before…. Or, worse till, having no idea why I keep getting turned down, and being left to wonder if I am in some way defective as a human being and not just as a prospective employee. Or often getting no answer whatsoever. And so on.”
                Exactly my present experience! When I have *asked* I have been told it’s because of my age, or my (lack of) looks, or in one case “It’s because, bottom line, I just don’t like you”. WTFFFFFFFFFFFFFFFFFFFFFFFFFFFF?
                I’d like to start with, the HRC to be given powers to punish bosses who refuse to hire on the grounds of age (at present, all they can do is punish a boss who discrimiates against someone he has already employed, on grounds of age, if s/he can prove that’s what the boss has done!
                It’s the not even getting a reply to an application that gets to me, and makes me think “sod it, why bother?”
                Deb

                • Lack of looks? Were you applying for a job as a pole dancer? 😉 I shouldn’t jest I know, but that’s so stupid you have to laugh or you’d cry.

                  AFAIK age discrimination in employment is illegal, period. And that includes rejections on the basis of age. Mind you I’m still forgetting NZ law and learning WA law and thus get the two comingled, so I could be wrong. Worth asking the HRC though, surely?

                  I’d be happy to be told “I just don’t like you”. In a small business where you’re working alongside or directly reporting to the owner, it’s vital that you’re compatible and as someone who’s hired people to work closely with me I know that is important. At least it’s a reason, and one that applies (hopefully) only to that person, so you can just move on to the next job.

                  Where Im qualified and experienced and don’t get an interview or a reason, I start to wonder whether my CV isn’t believable, or if there’s some terrible rumour about me that everyone else has heard but I haven’t (I only ate the one baby, honest), or whether I shouldn’t be writing so much anti-employer criticism on “The Standard”… 😀

                  • Vicky32

                    Pole dancer? 😀 If I had been, I could have understood it, but I think it’s just as a woman at an employment agency told me once “Bosses like to have something nice to look at when they come in to their office in the morning”.
                    “In a small business where you’re working alongside or directly reporting to the owner, it’s vital that you’re compatible ”
                    That is true – but in this instance, it was a pretty big business, and he wouldn’t even see me day to day! (I would have been pretty much on my own in a cubby two floors away from anyone else – which is why he’d wanted to interview me in the first place – as I had just finished a 3 and a half year stint sole charge!)
                    I feel the same way, I have even thought of googling myself to see what a prospective employer might see! I have an extremely common name, maybe employers think I am the American military wives (about 4 of them) or the Scots woman who runs a charity for solo Mums?
                    The real me is represented by a signing of a condolence book for John Nathan Turner in 2003…
                    On the encouraging hand, one woman complimented me on my great CV, even while turning me down…
                    Deb

                • M

                  Dear me, hope I don’t lose my job anytime soon – it sounds as though some at WINZ are almost unemployable themselves given the lack of service and care to people they’re supposed to help.

                  It’s unbelieveable that someone won’t be hired because of their looks or supposed lack of them – was the rejection from some balding, jowly middle aged guy with a verandah hanging over his tool kit? Often model types are unbearably smug and use their looks to get away with all sorts of stuff at work, ugh! It may be my age but I find that people even 10 years younger than me often cannot string a coherent sentence together, use spellcheck and should have to mount a scaffold for the amount of apostrophe abuse I see on a daily basis, apostrophes in plurals being a pet hate – please people buy the book by Lynne Truss.

                  • Vicky32

                    Quoto al 100% M, as they say…
                    “It’s unbelieveable that someone won’t be hired because of their looks or supposed lack of them – was the rejection from some balding, jowly middle aged guy with a verandah hanging over his tool kit? ”
                    Yes, it’s as if you were there!
                    “Often model types are unbearably smug and use their looks to get away with all sorts of stuff at work, ugh! It may be my age but I find that people even 10 years younger than me often cannot string a coherent sentence together, use spellcheck and should have to mount a scaffold for the amount of apostrophe abuse I see on a daily basis, apostrophes in plurals being a pet hate – please people buy the book by Lynne Truss.”
                    I have a 20-something niece who fits that description to a T. She has no problem getting jobs, she simply can’t keep them as literacy *is* a requirement for office admin..
                    As an ESOL teacher (because I can’t get an admin job) I make sure all my Saudi, Chinese and Vietnamese students can treat apostrophes far more kindly than so many native speakers, ironically.
                    Deb

                    • KJT

                      “balding, jowly middle aged guy with a verandah hanging over his tool kit? ”

                      As one of the above I find the prejudicial stereotyping offensive.

      • Blighty 1.3

        a) Because we’re not animals and if we recognise a right to life then we must also recognise a right to the basic means of life

        b) because you don’t throw the baby out with the bathwater. Just because a few might choose not to work doesn’t outweigh the benefits to everyone of a universial income.

        • Jaghut 1.3.1

          I for one will choose not to work, and will spend the remainder of life conducting primary research into the effects of various drugs, in addition to pursuing women.

          I suspect this lifestyle will keep me entertained until my eventual death.

          This policy has my full support!

          • Doug 1.3.1.1

            You obviously have an inflated opinion of what you can do with the dole. Roof and food, that is about it. You will have to find some other supplementary income for the drugs and the women. If that involves crime then you are not one of the people that I consider that this article is talking about.

      • Maynard J 1.4

        There’s a simple economic reason to support those who have no inclination to work.

        It is cheaper than trying to find them and cut their allowance, and better than accidentally removing allowances from those who genuinely need it.

    2. Colonial Viper 2

      Good of you for bringing this up DTB. We also need to have a serious discussion around a living wage for anyone who works. Today such a wage would be set at $15-16/hr.

      Those that don’t want to work make up only a very small percentage of the population and we can support them.

      Those who are able to work but do not wish to be in paid employment could easily contribute to our communities in other, objectively measurable ways.

      Fact of the matter is that everyone needs to have some structure to their day to day lives in order to live fully and healthily. This includes daily activities to get on with as well whether that is knitting a jumper for a granddaughter, planting a vegetable garden or cutting a million dollar deal.

      • Vicky32 2.1

        “Fact of the matter is that everyone needs to have some structure to their day to day lives in order to live fully and healthily. This includes daily activities to get on with as well whether that is knitting a jumper for a granddaughter, planting a vegetable garden or cutting a million dollar deal.”
        Absolutely true!
        Deb

        • Bill 2.1.1

          Maybe it’s time we reclaimed the term ‘work’ from the elites and used it in reference to any work done that is not effort expended at a job as an employee.

          In other words, cutting a million dollar deal is the depersonalised activity of an employee doing a job, while planting a vegetable garden is work.

          Then work becomes seen (rightfully) as rewarding, personal and enjoyable. While a job seen in it’s proper light is well, just a fucking job…worthless crap that we enter into only insofar as we live in a set-up where we have to pay bills etc.

          • Rex Widerstrom 2.1.1.1

            That’s demeaning the work done by a lot of people as employees who have taken on their jobs (often at the opportunity cost of pursuing a far better remunerated career) because they want to “make a difference”.

            I don’t think the tasks performed by most teachers, doctors, nurses, social workers… heck, even some journalists and politicians… as “worthless crap”.

            In fact on reflection I’d apply that only to people who go to work and produce nothing but money out of nothing (currency traders, share traders, bankers, etc).

            I know I have this strange need to feel that what I do during the day does some good for others, and as a result I’m usually on the bones of my arse because there’s very little money out there to pay people for doing “good” jobs… so if you have that urge you either work for a lower salary than you could get doing something else or, as I do at present, do something else part of the time and use that to cross-subsidise the “good” stuff.

            I’m all for reclaiming “work”, and then revaluing it. Why is John Key’s time at Merril Lynch worth more than his time as Prime Minister, for instance?! Regardless of your views on his performance, leading a country is more important than moving around money.

            The fact that he’s “relaxed”, along with many others, about the disparity shows what’s wrong with our definitions of work, methinks.

            • Bill 2.1.1.1.1

              Jobs demean us.

              Most people are forced to be employed in jobs that carry no compensatory benefits beyond the wage at the end of it. Most people perform rote and demeaning tasks that make no positive difference to anyone or anything beyond the level of the employers profit. And that is not the fault of the employees. Most people are in the job they are in in order to live…factory worker, fast food server, night watchman, petrol station attendant, supermarket worker, toilet cleaner, street sweeper…Most people are not ‘living for their job’.

              Now, you might be arguing that some jobs are less demeaning…even rewarding? Okay. So what?

              And you might be arguing that some jobs are rewarding and empowering? Okay. And how high up or low down the job place hierarchies we talking there Rex? Managers and ‘closed shop’ professionals perhaps?

              Or you might be arguing that work is worthwhile. And that by accident rather than design, sometimes a job can entail carrying out tasks that one would happily do as work. But then we have to look at the job environment…the constraints,demands, and general impositions that job environments entail …and compare that to a work environment where the same tasks are performed.

              I mean (by way of example), even if you enjoy cooking, there is a world of difference between cooking the exact same meal when that meal is cooked in your home. Or a restaurant kitchen where you are employed as a chef. Or in a prison where you were sent after poisoning your boss.

              • Rex Widerstrom 2.1.1.1.1.1

                I’ve felt in no way demeaned by some of the jobs I’ve had. The salary I’ve received I looked upon as a generous donation by my employer so as to enable me to have the free time to pursue tasks I thought worthwhile and which, by happy accident, were the self-same tasks my employer wanted completing.

                I’m thinking of the time when I worked in social services for several years. Most (but by no means all) the times I worked as a journalist or editor. Most of the jobs I had in radio. Certainly my foray into politics. Because I used all those jobs to campaign for change, either on a broad scale, or helping an individual, or both.

                Other jobs demeaned me completely. Sorting dirty underpants in the prison laundry. Standing alone all day on the concrete floor of a garage assembling (of all things) lights to go on the tops of police cars. Many more demeaned me than lifted me up, but my point is, some did. Some were a joy, that I still wish I had to this day (politics chief amongst them).

                I agree a lot of jobs – probably the majority of jobs and certainly those you’ve listed – don’t do anything for the person undertaking them or for anyone else except their employer, for whom they generate profit.

                But to argue all jobs demean us ignores the passion and enjoyment some jobs engender in the people who do them. The examples I cited earlier of teachers and medical professionals and social workers and even some lawyers (criminal defence ones, mainly) I work alongside, who’d choose to do those jobs even if they didn’t need the income.

                The fact that some Lotto winners stay at their jobs when they could easily retire shows the value of employment for some… but, as you say, not all.

                As for your cooking example… do you know many chefs? Those I know burn with a passion for food that’s astonishing. No way would they be satisfied with dishing up their creations just to friends and family. They want, they need, a restaurant full of paying customers. It’s their passion. Give them an income and make them stop being a chef and they’d hate you.

                • lprent

                  Add programmers. The older ones do it mostly because it is so much fun. And you’re an old programmer if you hit 30 still coding

    3. Lanthanide 3

      “The simplifying of the welfare system. They’ll be no need to apply for an Unemployment Benefit or the administration that goes along with it.”
      Yes, it’ll be somewhat simplified, but not a whole lot, I don’t think. At the moment there are various special circumstance add-ons you can get, and that would probably still persist.

      Also you forgot one of the positives, and IMO one of the biggest ones (especially as it is a supposed Nirvana of the right):
      – Flat tax rate on all income earned, so no ‘high marginal tax rates’ to ‘discourage’ workers or for the right to use as bogeymans.

      • Colonial Viper 3.1

        You know, I have never ever seen a worker who wanted a $250K p.a. job turn it down just because they would be on a higher marginal tax rate. Funny that.

      • Draco T Bastard 3.2

        Yes, I did forget that and it would be, as you say, a fairly major advantage as it would remove a lot of unneeded complexity.

    4. Nick C 4

      You make the argument that the minimum wage is nessesary because nothing can be provided at less than costs. Of course you have completely ignored the difference between fixed costs and variable costs here (the costs of living are fixed) which again leads me to believe that your understanding of economics is very shallow. But lets ignore that for the moment

      Draco i take it you have at least some understanding of the price mechanism and why setting minimum and maximum prices leads to inefficiency. Would you support abolishing the minimum wage if there was a universial income provided by the government?

      • Draco T Bastard 4.1

        Of course you have completely ignored the difference between fixed costs and variable costs

        It’s a blog post Nick C, not a friggen doctoral thesis. Yes, I do know the difference between fixed costs and variable costs (I have been studying economics for ~10 years after all) but they weren’t important to this post.

        (the costs of living are fixed)

        Yes, and no one can live on nothing, ergo, the economy must provide enough for everyone to live. The UI and the raising of taxes to cover it would be an acknowledgement of that fact.

        Would you support abolishing the minimum wage if there was a universial income provided by the government?

        That’s what I said Nick. The UI would ensure that people would have enough to live and to get to work (within a reasonable margin of error) and so allow for the minimum wage to be removed (This is not an argument for the removal of wages).

      • jbanks 4.2

        which again leads me to believe that your understanding of economics is very shallow.

        Well this is from a guy who thinks a BA in Pols makes him an authority on economics.

        • nzfp 4.2.1

          Well this is from a guy who thinks a BA in Pols makes him an authority on economics.

          Heh heh … The beauty of economics is that it isn’t rocket science, it really isn’t.

          • Colonial Viper 4.2.1.1

            Didn’t a bunch of highly qualified specialist economists (particularly financial types) manage to destroy about US$3T in global value in the last 24 months?

            I guess that does take truly expert skill.

    5. Macro 5

      excellent post draco.
      as we see in another recent post people work because they want to. those who don’t have many good reasons why they don’t or are unable too. there is the problem of compensation for added responsibility etc, but a very good starting point.
      a socially just society is the only society that we should as a country be aiming for.

    6. Sanctuary 7

      Whilst I think there is some merit in discussing a UBI, you’ve missed a major thorn in it as a proposal. The minute the government mandates a minimum basic income for all New Zealanders, the right will be gin to agitate for the privatisation of health, welfare and education and superannuation, with citizens now expected to finance all these things from a UBI.

      Before a universal income is instituted, you have to have first have a solid bipartisan agreement on what it does, and does not, include.

      • Colonial Viper 7.1

        the right will be gin to agitate for the privatisation of health, welfare and education and superannuation,

        I’m not seeing a huge change in behaviour here. The only thing stopping NAT from agitating for all of this right now is that they want to get back into power next year. Having the power is for them more important than living up to their ‘principles’, although they still get pissed off about it.

    7. jbanks 8

      Taxes would have to be raised.

      Sounds like a vote winner right there. I hope that the Labour Party introduce it asap.

      • Draco T Bastard 8.1

        Can’t have something without paying for it, that includes a viable society, no matter how much the right think that they can.

      • Blighty 8.2

        jbanks. Remember that the taxes raised flow right back into the public’s pockets.

        I reckon a universal income would have to be accompanied by a ground-p reformation of the tax system.

        and, finally, remember that Labour won in 1999 promising a tax rise.

    8. gingercrush 9

      I could actually get into a Universal Income. I think it has many advantages for the right as it does the left. Can provide tax cuts for all and simplify the welfare system and its still possible to give someone an even lower universal income or cut their universal income if they choose not to work etc.

      Also there isn’t an actual need to raise taxes. Cost savings I would have thought would make tax raising unnecessary.

      • felix 9.1

        …its still possible to give someone an even lower universal income or cut their universal income if they choose not to work etc.

        I think you’re kind of missing the whole point of going down this road if you want to meddle in what people choose to do with their UI.

        • gingercrush 9.1.1

          Yes I know. But I like the idea of universal income because of how much it would simplify the whole process that doesn’t mean you can’t have exceptions that the left wouldn’t like but that a right-wing government could get behind.

          • Pascal's bookie 9.1.1.1

            You would lose the simplicity benefits because you need a whole lot of people and systems around deciding who qualifies and who doesn’t.

            Relatedly, I’m all in favour of a flat tax so long as those with more money pay at a higher rate.

            • Jaghut 9.1.1.1.1

              “Relatedly, I’m all in favour of a flat tax so long as those with more money pay at a higher rate.”

              That’s not a flat tax then.

              • Draco T Bastard 9.1.1.1.1.1

                With the UI the income tax rate is flat. All income, except the UI itself, is taxed at the same rate. What happens is that as an individual earns more money they pay more tax eventually paying more than the UI at which point the real tax rate goes positive (Universal income is also known as a negative tax) and starts approaching the actual tax rate as income increases. It will never actually reach it as the UI will always be a negative on the rate.

              • Pascal's bookie 9.1.1.1.1.2

                “That’s not a flat tax then.”

                Really? Is that how it works? Thanks ever s’much.

                So I guess it’s similar to how a ‘universal income’ that could be denied to someone wouldn’t be universal.

                How fascinating. I wish you’d thought of that.

      • Vicky32 9.2

        “and its still possible to give someone an even lower universal income or cut their universal income if they choose not to work etc.”
        Impeccable rightist thinking! I am shocked that your so blatant about it though… On what basis would you decide that someone was “choosing not to work”? Suppose they’re a parent bringing up a child, or a parent caring for a child with disabilities? Would you decide that they could send their disabled child to a home, and that therefore they were “choosing not to work?”

    9. tsmith 10

      “directly from the government (by the government printing money)”

      Government printing money to pay for its expenses? That sounds a lot like Zimbabwe to me, and their experiment has turned out quite well hasn’t it…

      The government can’t just create wealth by printing it, wealth comes from the production of goods and services. Anyone who has a basic understanding of economics knows this.

      • Colonial Viper 10.1

        Yeah time you upgraded your understanding, it sounds like. First, you better find out where approx 97% of our money comes from, as in who it is issued by.

        The government can’t just create wealth by printing it, wealth comes from the production of goods and services.

        I’ll be even more specific for you – and this is what was discussed heavily at the Labour Party conference – its about the tradeables component of the economy.

      • Draco T Bastard 10.2

        The government can’t just create wealth by printing it, wealth comes from the production of goods and services.

        You’re right and yet we have the banks doing exactly that and which, as could be expected by anyone who understands economics (ie, not the economists) the whole thing fell down and we’re still navigating the aftermath of that collapse. This, of course, is why I said that taxes would need to be raised. Money in – money out to maintain balance.

      • KJT 10.3

        Like the US debt mountain which exceeds any possible future production in goods and services.

        The Government is just as able to spend money into the economy to pay for goods and services as banks are to produce money out of nothing to be paid back by future labour.
        Especially for services like education and infrastructure which will be paid back by having a more productive workforce in future.
        The advantage is the Government does not have to pay itself interest.

        I have advocated a Guaranteed minimum income, administered through IRD, instead of the many different benefits and entitlements which we have now. It would have to be accompanied by a minimum wage. Otherwise it becomes a taxpayer subsidy to poor employers who cannot pay their true costs of labour. Like WFF.

        The savings in administration and accounting fees would go a long way towards paying for it. As would getting rid of tax dodges like private trusts, LAQC’s and differential tax rates.

        Simplifying the tax and benefit system is something that I am sure most will support. Whatever their political views.

        • Draco T Bastard 10.3.1

          The advantage is the Government does not have to pay itself interest.

          The banks don’t pay interest either, the people paying back the loans do, that’s how and why the banks make so much money.

          It would have to be accompanied by a minimum wage.

          Can you expand on this a bit? I must admit that I don’t see the need if the UI is in place. I’m pretty sure that most people wouldn’t work for nothing.

          Otherwise it becomes a taxpayer subsidy to poor employers who cannot pay their true costs of labour. Like WFF.

          Technically it would be a subsidy but I’m of the opinion that a community tends to cross subsidise things anyway and there’s no way for that to be removed. Auckland pays a hell of a lot more in tax than is spent on it. This isn’t actually bad as the whole country benefits, including Aucklander’s, in better infrastructure etc. And those small employers may just be the ones that make a major break-through that wouldn’t have come another way. Of course we don’t want excessive subsidisation but that would probably be best looked at through the tax system. When I said raise taxes I wasn’t just talking about income taxes.

          • Colonial Viper 10.3.1.1

            The banks don’t pay interest either, the people paying back the loans do, that’s how and why the banks make so much money.

            In fact the interbank trading system means that many banks, including NZ banks, owe a tonne of interest bearing monies to the international banking system. (in addition to the bank cash that they created individually).

            Hot high liquidity inflows flooded NZ to take advantage of our relatively high interest rates you see. Local (Oz) banks got filled up with overseas cash, our NZD went up sky high killing our exporters and our farmers, and then the local (Oz) banks lent out all of this cash at even higher interest rates to ordinary kiwis.

          • KJT 10.3.1.2

            “The banks don’t pay interest either, the people paying back the loans do, that’s how and why the banks make so much money”.

            They are an unnecessary charge and drag on the real economy and have been taking an ever increasing share.

            “It would have to be accompanied by a minimum wage”.

            “Can you expand on this a bit? I must admit that I don’t see the need if the UI is in place. I’m pretty sure that most people wouldn’t work for nothing”.

            Many people do work for little or nothing. Those desperate to get a job or training or just to undercut someone else to remove competition.

            E.G. Many who work for a certain burger flipping company often do not get enough hours to pay for their transport. Even though the company gets a subsidy.

            “Otherwise it becomes a taxpayer subsidy to poor employers who cannot pay their true costs of labour. Like WF.

            “Technically it would be a subsidy but I’m of the opinion that a community tends to cross subsidise things anyway and there’s no way for that to be removed. Auckland pays a hell of a lot more in tax than is spent on it. This isn’t actually bad as the whole country benefits, including Aucklander’s, in better infrastructure etc. And those small employers may just be the ones that make a major break-through that wouldn’t have come another way. Of course we don’t want excessive subsidisation but that would probably be best looked at through the tax system. When I said raise taxes I wasn’t just talking about income taxes”

            I think it would be better to help startups who have useful ideas and technology separately from income. E.g. Government venture funds..

      • nzfp 10.4

        Hey tsmith,

        That sounds a lot like Zimbabwe to me, and their experiment has turned out quite well hasn’t it…

        Thank you for bringing up Zimbabwe. It is a common fallacy to conflate Draco’s assertions with the plight of Zimbabwe.

        Before discussing economics – it really pays to agree basic definitions – for example, the definition of money.

        Aristotle defines it best :

        Money exists not by nature but by law (Ethics 1133)

        For Aristotle, the legitimate end of money is as a medium of exchange but not as wealth or as a store of value. He observed that money became the representation of want by agreement on law. A currency acceptable within the polis permits the full potential to be realized.

        Now that we understand that money by definition is FIAT and defined by law – we understand that without law we do not have a formal definition of money, consequently the money system collapses.

        Zimbabwe was a failed state, as such it did not have a rule of law to define the monetary system. Consequently it wasn’t the Government “printing” money that caused hyper-inflation, it was the lack of law.

        There is more to this subject, I recommend you read the following article:
        http://bilbo.economicoutlook.net/blog/?p=3773#more-3773

        • Colonial Viper 10.4.1

          Consequently it wasn’t the Government “printing” money that caused hyper-inflation, it was the lack of law.

          Or more specifically, a lack of control of the quantity of money in the market place.

          Enforced savings or consumption taxes would have taken some of that money out of the system. But as you said, that would have required the rule of law to enforce.

          Today do you know how our Reserve Bank controls inflation? By pushing unemployment up thereby reducing aggregate demand for goods and services in the economy.

          It is wasteful, destructive and stupid.

          Labour needs to seriously reform the RB Act.

        • RedLogix 10.4.2

          Simpler still.

          Imagine a toy economy with the only good or service being cows. Imagine there are 10 of them. Lets also imagine the only currency is notched sticks and there are exactly 100 of them in existence.

          Clearly in this economy, 1 cow is worth 10 sticks.

          Imagine 100 more sticks are ‘printed’… so that now there are 200. Now 1 cow is worth 20 sticks. This is what most people think inflation is.

          But equally imagine if due to some dreadful mismanagement, 5 of the 10 cows die, so that there are now only 5 cows, and still our original 10 sticks. Now 1 cow is worth 20 sticks ALSO!!

          This is another form of inflation that most people are not familiar with… and is analogous to nzfp’s case above.

    10. The Baron 11

      Wrong from the outset, Draco – the right have no problem at all with these ideas. It was Roger Douglas who first realistically advocated a minimum family income in 1987, as part of the tax reform package Lange backed away from. It would have done all of what you say is true, and more.

      It was also accompanied with a lower tax rate for all, so there goes another of your premises.

      Lots of things become possible when you take off your ideological blinkers – isn’t that one of your own mantras?

      PS – I am seriously worried if this is part of Draco ascending to some regular commentary spot. I don’t think the Standard’s credibility will be well served with Draco’s ongoing ideas vis a vis the money supply.

      • the sprout 11.1

        hmm… Draco’s opinion vs. yours?
        tough call 😆

        • The Baron 11.1.1

          Quite – though I’m still waiting Lynn’s offer for a by-line!

          • lprent 11.1.1.1

            Do the usual thing – write a contribute post or two. That is what Draco did.

            Incidentally, I don’t usually handle contribute posts unless there is a hole in either the posts or in the person who usually doing them. Marty or Eddie I think…

            But I have been known to read them and decide to put them up…

      • felix 11.2

        Thanks for your heartfelt concern, Baron.

      • Colonial Viper 11.3

        What was Roger Douglas’ minimum family income again? Oh yeah, it was a kick in the guts and a knife between the shoulder blades. Got it.

        Draco’s ongoing ideas vis a vis the money supply.

        I’ll state the idea really really simply:

        Raise the CFR to at least 20% and have the Government start to issue the majority of the country’s money debt and interest free itself, simply by spending it into existence (for instance by paying this UI into individuals’ bank accounts – no printing presses are actually necessary), and without relying on the private banks to do so by the creation of ****loads of DEBT.

        You may not have noticed Baron, but interest bearing DEBT is crushing and it is exactly how most of the money in NZ today has been created.

        • The Baron 11.3.1

          It turns out that Douglas still bangs on about that particular “kick in the guts”:

          “On the tax side, an individual’s first $30,000 will be tax free. Above this tax free-threshold, individuals will pay tax on the basis of a flat tax rate. Over the next 15 years this flax tax rate will be steadily reduced, along with the corporate tax rate, to 15 percent. The Labour Government made money for the tax planners by adopting different rates of personal, corporate, and trust tax. We must end this kind of ad hoc tax approach and restore simplicity and fairness to the tax system.

          The Government talks about inflation indexed benefits, but we think it is time to treat the taxpayer in the same way. As such, the $30,000 tax-free threshold will rise to keep up with inflation. This ensures that low-income earners receive a significant tax cut that will not be taken away by inflation.

          Families with dependent children will have a different tax-free threshold. For a couple with one child it will be $50,000. The thresholds will increase based on the number of dependent children.

          To ensure that families are able to adequately provide for themselves, there will be a guaranteed minimum income for families. The guaranteed minimum income will ensure that, should they find themselves earning less than the tax-free threshold, families will receive a tax credit to boost their income.”

          Source: http://www.scoop.co.nz/stories/PA0902/S00135.htm

          God doesn’t it sound positively awful, CV – though I guess it must be worse than cheering for the same team like a useful idiot…

          • Colonial Viper 11.3.1.1

            Douglas could propose anything he liked, because he didn’t have to live with the consequences of it, everybody else did.

            NB no plans to actually create a productive high value economy, just to cut taxes and give the rich back more of what they had made anyway.

            cheering for the same team like a useful idiot…

            Meh

          • Pascal's bookie 11.3.1.2

            That speech was awesome. Starts off by saying how the govt spends too much in complicated systems, and to fix it proposes the system you partially outline, prefaced with:

            ; I now want to move on and present to you my vision of achieving a high-growth low-tax welfare state. I believe the only way to change our economic prospects is to radically redesign our income tax system in concert with our social welfare system. Individuals should have the ability to opt in to the new system. Individuals who like high tax rates and monopoly-run health, welfare, education, and superannuation services can stick with the old system. But if you want to opt out of that failing system, then you should be able to have a lower tax burden in exchange for taking personal responsibility over your life

            We need to simplify govt and lower it’s overheads by running a parallel tax system.

            Awesome*.

            *For certain definitions of ‘awe’.

          • Draco T Bastard 11.3.1.3

            That’s not an UI but a complicated way to lower taxes and really fuck up the economy. In other words, about as stupid as I’d expect from Douglas.

      • Draco T Bastard 11.4

        It was Roger Douglas who first realistically advocated a minimum family income in 1987,…

        I don’t recall that. Got link?
        Was it “family” only or was it universal? There is, after all, a hell of a difference.

        It was also accompanied with a lower tax rate for all, so there goes another of your premises.

        Considering that he also promised us better telecommunications and we can see how well that (didn’t) turn out I suspect that his lower taxes rate would have turned out about the same.

        Lots of things become possible when you take off your ideological blinkers

        I took off my ideological blinkers a long time ago. It’s why I’m now on the left of the political spectrum rather than the right.

        • The Baron is correct according to my recollection and that of Michael Bassett:

          Roger Douglas’ proposed Flat Tax/GMFI package in December 1987 dealt with those in work, and provided an incentive of $80 per week for those prepared to rejoin the work force. But it didn’t go ahead. Substantial change to welfare entitlements didn’t occur either.

          From what I recall (which isn’t much) my thoughts at the time pretty much mirrored Lynn’s: imaginative, very badly costed, and hopelessly optimistic. Though I think it’s probably worth revisiting to see if some numbers can be made to work.

      • lprent 11.5

        Yeah I remember that. I thought that the numbers in the ‘budget’ for it were nonsensical at the time. So did the Labour cabinet as I recall.

        • The Baron 11.5.1

          I’d have to give way to you actually being there at the time, but it seems logical to me that the ’87 crash ran roughshod over any budget predictions.

          Regardless, the point remains the same – the idea isn’t new, and isn’t monopolised by the left. In fact, it has a longer pedigree in NZ on the far right.

          • lprent 11.5.1.1

            The stock market crash was in 1989 from my recollection..

            I thought that ideas were imaginative, very badly costed, and hopelessly optimistic (and I was 27 at the time). It made some completely heroically optimistic assumptions about the transition period of 30-40 years that would be required for the intergenerational issues in the social contract. Quite simply it removed the tax base without showing that it would have the desired effects.

            In particular it was completely light on people that didn’t have an income. For instance the burgeoning unemployed at the time, the burgeoning superannuation, and the burgeoning student population who really have no interest in being screwed by their parents inability to save for their education.

            From what I understand from the Baltic states where this was tried, the intergenerational tax transition has caused a total budget meltdown each time within a few years. I’m afraid that I’m with Draco on this – put the total tax take up (not down) so a very large surplus is accumulated for the downstream generational costs. Then it might be worth looking at. Quite frankly the obsessive need of ACToids to want to cut the tax tax without taking full cognizance of the inter generational downstream costs is one of their most revealing features. Sociopaths is usually how I view it.

            BTW: there was that interesting thought that Douglas was having these ideas whilst in Labour.. It is very hard to point to origional ideas origionating from the right.

            • nzfp 11.5.1.1.1

              put the total tax take up (not down) so a very large surplus is accumulated for the downstream generational costs

              A great way to make this palatable is to shift the tax burden from labour and productive industry to where the classical economists (Ricardo, Mills, Marx, George and Adam Smith) have all stated it should be – land and captital.

              We could increase taxes while at the same time reducing income taxes, GST, as well as SMB corporate taxes by implementing a progressive land tax as well as financial transactions taxes to reduce speculative and extractive financial activity.

              Land taxes are not and should not be uniform, they are progressive and are dependent on land maps that determine the economic value of the land in question. Consequently land in the center of Auckland (CBD) would be able to produce more economic rent then land in Otara – consequently land taxes in the Auckland CBD would be much higher then land taxes in the wastelands of South Auckland. This means that land taxes on Waiheke Island would reflect the value of land calculated by the ability to produce economic rent on that land (whether it is through production or other means).

              The land tax is the fairest means of taxation and allows for the burden of tax to be moved from the poor, middle class and even high income earners onto the wealthy elite and more importantly the banks and financial speculators. A land tax would have the added benefit of removing the preferred tax status on land consequently reducing it’s value.

      • KJT 11.6

        Unfortunately Douglas wanted to lower taxes by giving state services to the private sector. We would still be paying for them, but at a much higher cost, Like electricity.

      • nzfp 11.7

        It was Roger Douglas who first realistically advocated a minimum family income in 1987,

        Oh I’m sorry – did you mean Social Credit? Social Credit have been advocating a Guaranteed Basic Income since their inception in 1953 – a few years before Roger Douglas confused zero tax bracket with a national income. By the way, the 30K tax bracket you quote doesn’t do a lot for people who work (stay at home parents, care givers, volunteer workers, etc…) but earn no income … guess it’s not the same thing at all.

        The Social Credit Guaranteed Basic Income policy:

        • Promote the right of every New Zealander to have an adequate basic income

        • Provide the guaranteed basic income free from tax

        • Pay this guaranteed income to every resident New Zealander as a right of citizenship

        • Progressively replace all current benefits and allowances with a guaranteed basic income regardless of employment, marital or gender status

        • Retain supplements for the disabled, their carers and housing (source)

        Captcha:libraries – just another public utility – like Police, Firemen, Courts and what money should be.

    11. Bill 12

      The problem I see with a ‘universal income’ is that we have already, more or less, been there. But it hurts profit. And power flows from garnering profit.

      I believe it was in the 60’s that the realisation hit that there was no need for people to work full time as all our productive needs were more or less satisfied. And that was when the advertising industry (not advertising per se) was created and deliberately encouraged a throw-a-way mentality. (Never wondered why the 70’s was the decade of dreadful tat?)

      We could have worked piece meal and sustained very high living standards as well as had plenty of time to develop our individual human capabilities. But that would have hit profits and power. Not allowed.

      And nothing has changed on the permission front. And nothing ever will change on that front that isn’t forced change.

    12. Herodotus 13

      I have been amazed from comments to Red Alert (primarily) and to a lesser extend here. That there is no one or any links from the www network that displays what a livable wage is in $ value. There have been a few union leaders that have made the transition to MP status who have made reference to this term, yet nothing analyitical as to what value should be placed on a livable wage. Be it for an individaul, pensioner or family. How on earth we can have a social welfare & tax system designed when there is not the basis of what income is the basic need to more than survive but participate in society. Even Trev M in response to a comment stated that he had no idea of what a livable wage/benefit was, at least he was able to admit to his. 1st pricniples.

      • KJT 13.1

        It depends on your political views.
        The right reckon it should be just enough to survive, preferably on bread and water, as a punishment for being unable to get a job. The generous ones would offer a container to live in as well.
        The left reckon it should be enough to bring up your kids and be a functioning part of society.

        • Herodotus 13.1.1

          That was the reason for the inclusion of “need to more than survive but participate in society” otherwise send them to an instution and place a drip into their arm like The matrix or let them experience one drug fix. their last !
          Like the few real issues that need addressing this one will not. As I believe that the amount is far higher then many imagine and will just reinforce our relative low wage and our dependancy on govt assistance.

          • Draco T Bastard 13.1.1.1

            Well, personally, I think it’s about $20k/year and that is what I’d like the UI set to ATM and then have it increasing with inflation.

            • Herodotus 13.1.1.1.1

              I would struggle to argue against that- also I think a family of 4 requires $50k to live on. Which is about the average household income. What throws this out is the cost of housing and the variation throughout NZ.
              Also agree with NZherald regarding housing being 20% over priced. Only issue here is that no-one is making any money developing land, spec builders so there is no fat there to cut out.
              So DTB why have there been no studies to ascertain the $$ to live on? Still think that this would show up any govt at the time for expecting people to survive on min incomes. 1st call would be the level of the pension, then other benefits and min wage.

              • Draco T Bastard 13.1.1.1.1.1

                also I think a family of 4 requires $50k to live on.

                Apparently it costs ~$250k to raise a child through to their teens which would indicate that $20k/year each is still the amount required. $50k for a family of 4 would be subsistence living at best.

                why have there been no studies to ascertain the $$ to live on?

                I don’t know why there hasn’t been such a study but I’d like to see one.

                • RedLogix

                  An important fundamental that never gets mentioned is that all these ideas about ‘people have to work for a living’ are very old notions that held some validity in pre-industrial agrarian societies.

                  When most people lived in a marginal subsistence economy, where the output of one worker barely supported between one and two others…then it was more or less essential that everyone who was capable of working did.

                  And equally importantly…because most people could access some common or unused land somewhere (I know there were plenty of exceptions to this….but I’m making a general case here) it was always reasonable to expect people to find some way of supporting themselves.

                  Industrialised economies break down both of these presumptions. Productivity rises enormously, meaning that there is ample wealth to sustain most people if it is distributed fairly…without demanding that everyone must work.

                  Moreover cheap or free access to common land vanishes meaning that if jobs do not exist in the industrial economy, there is no available ‘fallback’ position for the masses of umemployed to feed themselves in an agrarian setting. In other words, if the urbanised jobs simply do not exist, it is absolutely unreasonable to demand people ‘support themselves’ … especially if they have no access to the land or resource to do so.

    13. Andrew 14

      “by the government printing more money” – This stupid statement aside…

      This is hands down the stupidest idea I have ever heard. People may not all quit work but we would all certainly work a lot less. Especially with higher taxes the benefits of working would be be heavily reduced. Why would you work 40 hours per week if it was heavily taxed and wasn’t even necessary to pay rent food and transport.

      • Draco T Bastard 14.1

        Because you’ll be better off?

        …but we would all certainly work a lot less.

        Which would actually be good for us. Good for our families, good for our health and then there’s the simple fact that we don’t need to work as hard as we do today anyway as Bill points out up thread. We already produce far more than we need.

      • felix 14.2

        “we would all certainly work a lot less.”

        Good.

        “Why would you work 40 hours per week if it was heavily taxed “

        Why should you? But if you do want to, why wouldn’t you for the same reason you presumably do now? Are you seriously saying that if you had to pay a bit more tax you would prefer to work fewer hours and earn less money than you do now?

        Why?

        edit: snap Draco (more or less)

      • RedLogix 14.3

        “by the government printing more money” – This stupid statement aside…

        You really need to read some basic economics. The govt only ‘prints’ coins and notes. This is called the M0 and M1 supply (http://en.wikipedia.org/wiki/Money_supply).

        M0 is a tiny fraction, less than 1-2% of the total money in circulation …called the M3…most of which is credit ‘printed’ by privately owned banks.

        I’m always astounded at how people who get all anxious about ‘govts printing money’ are totally oblivious to the fact that almost all money in circulation is credit created by banks.

        Because the supply of goods and services increases with time so the total supply of money needs to increase to match. Someone has to ‘print money’, and it matters in this sense little whether it is the govt or the banks who do it. Essentially as long as you do not print more money than the economy can absorb, it does not cause inflation.

        • Draco T Bastard 14.3.1

          Actually, it does matter as the banks print it bearing interest and the government will print it without making life a lot cheaper and removing a major impediment to progressing the economy. As for inflation, well, the government printing the money without interest could essentially remove inflation as well.

          • RedLogix 14.3.1.1

            Agreed. I was making a simpler more fundamental point…but I agree… there really is no sane reason why private banks should create the vast bulk of the money supply as a private profit making enterprise.

            They should have at least a little competition from the state.

        • nzfp 14.3.2

          hey RedLogix,
          I made a point of this in response to another post a wee while back – essentially the private foreign (Australian) banks print 5000% more money in New Zealand then the Government. If that doesn’t spell out inflation or fraud then nothing will. The Government prints only 1.95% of our money supply, the rest (98.05%) is printed by the Ozzie private banks and we (tax paying New Zealand Citizens) pay rent (interest) to use our own money.

          The breakdown and references to everything I stated can be found here:
          Source: http://www.rbnz.govt.nz/statistics/monfin/c3/data.html
          Source: http://www.rbnz.govt.nz/statistics/monfin/c7/data.html

          In short
          M3: 202,104 Billion NZD
          M1: 3,938 Billion NZD
          Note: M1 is created by the Reserve Bank – and is the only money created at zero interest without debt by the RBNZ. The rest is created by Private Foreign banks primarily against mortgages – read asset price inflation – (c7 data aggregates)

          • RedLogix 14.3.2.1

            Thanks nzfp… actually I was pulling a wild guess out of my arse when I wrote 1-2% so I’m gratified to find that the actual number is 1.95%..

    14. Awesome post Draco I agree with your thoughts – another benefit from UI would be an improvement in relations between different, currently disadvantaged, social groups and society as a whole.

      • nzfp 15.1

        Yeah funny that – instead of arguing over who got to Aotearoa first or what new immigrant is stealing my job, we could be sitting together 4 days out of 7 each week in the back yard enjoying a barbie – being too damned happy to care about being pissed off!

        • Colonial Viper 15.1.1

          Yeah man, we’re getting ripped off. Our 5 day a week, 8 hour a day = 40 hour work week of 40 years ago should’ve been way less by now for an even better living standard.

          6 hours a day 4 days a week. Thats what I’m talking about.

    15. nzfp 16

      Draco,
      Ka whakaae au ki tenei whakaaro! He mihi nui tenei ki a koe e hoa!
      Well done! There are soo many benefits to a Universal Income. Rather then argue the obvious economic benefits as well as the economic logic behind such a policy, I’d like address my favourite benefit:

      Job sharing or liberation
      It has already been identified that progress is gradually replacing human labour with machine labour. It is more profitable for a factory to install robotics and automation then to have a factory line of workers. The obvious result is layoffs while the factory pursues profits. This should not be seen as a failure but rather as liberation.

      Instead of John working at a factory in a mind numbing job 5 days a week 8 hours a day. John could work at a Library (factory, pub, investment house, bank, where-ever) three days a week, while collecting a Universal Income (UI) to offset the loss in income to being replaced by a machine for the other two days he’s not working. John can spend the remaining four days a week volunteering at his favourite charity, playing with his children, tending his garden, getting a degree in economics or rocket science, what-ever – he has been liberated from his mind-numbing work.

      John could share the job at the Library (factory, pub, investment house, bank, where-ever) with Jill who was also laid off from the factory. Jill can then pursue her dream of getting a PHD in Politics and French Feminist Literature or Electronic and Electrical Engineering or what-ever!

      Captcha:computers – were meant to liberate us in an age of progress from wage slavery.

    16. Chess Player 17

      Guys, you need to change the game from Employee and Employer to Supplier and Customer…

      Throw away those shackles and become a free agent!

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