A leaflet explaining the Citizens’ Basic income at the Green Party conference next weekend will not state that the CBI ‘Makes work pay’. This is the whole point of it. Well, as I keep saying, the wider purpose is to allow everyone, everywhere to think sustainable thoughts instead of here and now necessities. But a prime selling point will be omitted because Anne Gray thinks that aspect favours employers as against vulnerable workers.
I would normally have highlighted ‘Anne Gray’ with a hyperlink, but I cannot remember how to do this with text on my own laptop, so I have copied Anne’s paper as an Appendix.
Anne and I make opposite assumptions, which neither of us can prove in advance. Anne assumes that without controls employers will continue to exploit workers as they always have done. I assume that the CBI will give workers equal bargaining power with employers.
In the short term Anne may appear to be right. If the average entrepreneur is more quick witted than the average benefit claimant, the former will mostly get away with behaving as though nothing had changed. But blogs such as Johnny Void and Boycott Workfare will spread the word to everyone who is computer literate that they don’t have to do anything they don’t want to do. The message will quickly reach everybody it needs to.
For years 7 million – the number Iain Duncan Smith said would be receiving Universal credit by 2014 – have been used to living off benefits, supplemented by occasional undeclared work, or perhaps a little something that Tesco wouldn’t miss. The only difference for them is that one of those activities will be encouraged instead of prosecuted. Or to put it another way, a Basic Income will make work pay.
So why does Anne think this fact should be suppressed? In the first place it is a fact. Anne’s accusation is already levelled at Tax Credits, because they already do what a Basic income will do, only a BI will do it more comprehensively (and cost the better off more than £30 billion)..
I must correct one statement in Anne’s paper. She says:
“A BI shares an important feature with the notorious Speenhamland system of poor relief of the early 19th century – that is, the claimant gets the money however little s/he earns. “
I have taken the following from the Wikipedia link she gives
“The authorities at Speenhamland approved a means-tested [my emphasis] sliding-scale of wage supplements in order to mitigate the worst effects of rural poverty”
Do I have to spell it out? It is means testing which prevents work from paying. The Universal Credit was Iain Duncan Smith’s way of making work pay. Well, it wouldn’t actually, it would just remove means testing enough to make former claimants no worse off once they had been compelled to take a job – any job. But the UC remains a myth for 90% of its intended beneficiaries.
Milton Friedman was in favour of a Negative Income Tax. At first this looks like a Basic income. The effect would indeed be identical, except that the Basic Income gives money up front, and only takes more from you than it is worth if it turns out that you didn’t need it. A NIT on the other hand takes money from you, and may give it back later. Bad psychology. We are programmed to avoid loss.
I welcome the fact that wage rates can become flexible. Osborne’s low-grade version of the Living Wage is already running into threats of redundancies. A ‘proper’ Living Wage would be worse. Market forces can be used by the formerly weak, whereas now they are still a means of oppression by the strong. Mention of Friedman – a neoliberal – leads us where Anne fears to tread. But she is far from alone. I have a simple litmus test.:
“What is your attitude to Zero hours contracts? Think now, and then once we have a Basic income.” Anne fails this test, but so does Caroline Lucas, Natalie Bennett, and, as I discovered at the leadership count last Friday, so does Amelia Womack. The only explanation I can think of for none of them recognising means testing as the root problem is they are not yet able to think outside the socialist ‘workers v bosses’ box.
For me, the new’ persuasion is better than force’ rule means that the line given by the government (“Zero hours contracts suit some people, especially students, down to the ground”) changes from utter clap trap whilst such contracts are backed by benefit sanctions, into a simple statement of fact. A Basic Income will facilitate entrepreneurial start ups – no big deal if it doesn’t work out. But above all, the extra tax which the Basic Income will take from the better off can be presented as a compromise: for your money you (rich people) get a planet fit for your grandchildren.
Milton Friedman’s idea of a Basic income (or Negative Tax) would be around £15 per week, to ensure that everyone was still forced to accept slave labour. Many ‘left wing’ proposals really would be ‘unaffordable’. But neither side thinks in terms of sustainability – how to live without over-exploiting the ecosphere – the thin shell round a little ball which is the only known home of all life.
The two sides can be brought together in the Green context. The Basic income must be enough to cover basic needs, so that no one need do anything, or be in favour of the government allowing or doing anything which might damage the ecosphere. Although I myself was born into the socialist tribe, I am against the Citizens’ Basic income being any more than adequate coverage of basic needs. If we are to have a Cat in Hell’s chance of saving the ecosphere for future generations, we need all the neoliberals (and those who think neoliberalism is working for them) and socialists we can recruit.
BASIC INCOME, MINIMUM WAGE LAWS AND ‘DE-GROWTH’ – SOME FURTHER THOUGHTS
Anne Gray for PWG 15.8.16 [PWG – Citizens’ Income Policy Working Group]
In this text I first address what I think is a major gap in the arguments amongst the group so far – the probable effects of a BI on employers’ behaviour. There are two parts to this – firstly how a BI would affect offered pay rates, which leads to the question of whether abolishing job centre rules would be an effective and immediately available support to resisting low pay independently of a BI. Secondly, if BI is seen as a way of making precarity acceptable, what would be employers’ response in terms of the balance between precarious jobs and full-time permanent jobs?
I go on to consider another question which is coming up in the PWG – would a BI help to make ‘de-growth’ acceptable to the population and if so how?
How would a basic income affect the pay rates employers offer?
It is frequently argued that BI would release some people from the ‘poverty trap’ – that is, the feeling that it’s not worth working if you gain a wage only to lose JSA and/or other out-of-work benefits, representing a massive tax rate on the earnings of those exiting unemployment into work. If it’s true that BI, by ending this ‘poverty trap’, would persuade some unemployed people to take jobs they previously wouldn’t have accepted because of low pay or short hours, employers will find it easier to recruit their required numbers than before. Then the employers may find they can get enough recruits at a lower wage – unless a minimum wage law stops them offering less pay in their next job advertisements.
A BI shares an important feature with the notorious Speenhamland system of poor relief of the early 19th century – that is, the claimant gets the money however little s/he earns. Critics of the Speenhamland system argued that employers took advantage of that by paying less – see the summary of Karl Polanyi’s 1957 critique, if you don’t know it, on https://en.wikipedia.org/wiki/Speenhamland_system. Any benefit system with that same feature risks having the same effect – unless prevented by a minimum wage law. (With Speenhamland, eventually the authorities realised this and introduced workhouses instead!).
Fran Bennett (then of the Child Poverty Action Group) made this same argument in relation to tax credits when they were first introduced, in papers published by the Joseph Rowntree Foundation. Several academics have made it in relation to Universal Credit (references on request). These critiques emerge even though the guilty feature is modified in the case of TC and UC by high withdrawal rates as earnings rise.
Most importantly, right wing writers (e.g. Milton Friedman, Hermione Parker) have argued for BI precisely because it helps and encourages people to take low paid jobs. And if pay falls, it falls not just for those who may be desperate for any job, but for all those changing jobs that already had one – and possibly even for those IN jobs and staying in the same workplace; many recent press reports show how easy it is for employers to issue new, worse contracts in the current under-regulated, under-unionised environment. Pay will fall not just for small businesses (amongst which Greens might want to encourage small shops but hardly the junk mail distributors or battery chicken farms), but for JD Sports, the supermarkets, and all the other corporate giants. Surely we don’t want taxpayers’ money to go indirectly to these companies to help them reduce their wage bill and/or casualise their workforce even further?
Why abolish the minimum wage law if it doesn’t do any harm ?
We have it, trade unions struggled for it and want it – and if we are being opportunistic though I think Greens should not be, there are more potential votes from them than from people who might be tempted away from the Tories.
Does leaving a minimum wage in place actually do any harm?
Where is the evidence that small shops, etc. are unable to survive because of it, or would be unable if it rose further? Premises costs, rates, and aggressive competition from big business like supermarket chains and coffee shop chains are surely more important factors. If we want to subsidise small businesses, let’s give them a subsidy or tax concession designed to encourage them to employ extra people and/or have lower premises costs – don’t remove the minimum wage law, which would hand higher profits to big companies that make too much already. The sector that really is shedding jobs and services because of the Tories’ ‘living wage’ – namely social care homes and agencies – desperately needs more public funding but that is a whole separate policy issue.
The whole drift of Green policy at conferences and in manifestos over the last 5 years has been that the minimum wage needs raising not abolishing. Abolishing references to it in the MfSS would sit very oddly with previous conference motions and with other parts of the MfSS. We are committed to controlling the spread between minimum and maximum pay in a given company, as well as to equal pay for women and a European living wage. Abolishing the MW/LW would be like losing an important spanner from the toolbox.
GP policy is that we want to scrap zero hours contracts except in very limited circumstances (WR 354). This is an example of how we need MORE regulation of work contracts not less – and extending to other features as well as pay, to make sure employers don’t make conditions worse in other respects in order to comply with any increase in minimum pay.
If we want to reduce the supply of recruits to bad employers how can we do that ? Is BI the best or the only way ?
Let’s go back to the idea that BI lifts people out of the poverty trap and encourages unwaged people to work. These people fall into two groups; those on JSA and those who can’t claim it. The second group are mainly people with a working partner whose 6 months’ entitlement to insurance-based JSA has expired, or people under 18. The argument that people are deterred from working by the financial factor that when you get a job you lose benefits applies mainly to the second group.
Those who ARE on JSA are currently under such strict rules about what you can refuse that they would often be obliged to apply for rock bottom pay and conditions anyway, and to take any job offered for fear of sanctions (benefit being stopped). The financial incentive effect of a BI would make little difference to them. What would make a big difference is that BI is unconditional – all the job centre rules about applying for so many jobs each week, sanctions if you turn down a ‘suitable’ offer, etc. would go.
But we don’t have to have a BI to change the job centre rules and reduce the use of sanctions. We need to reduce the conditionality of existing benefits and of UC. We make far too little of this in the GPEW. We can demand this happens NOW, without concerns about how much exactly a BI would cost or how we would fund it. It is the idea of scrapping conditionality that has ‘sold’ BI to the PCS and UNITE and led them to link a demand for BI to their campaign against benefit sanctions.
Current JSA rules have been getting gradually tighter, with sanctions and the imposition of compulsory work-for-benefit placements becoming more common, even since 1996. This job centre bullying system was designed to chase people into bad jobs. If we want to resist bad jobs, relaxing the benefit rules is an effective and very cheap first step. It’s a serious omission that we have no stated policy that I can find on this – just a brief criticism, in the ROPS on welfare reform, of the emphasis on conditionality in the early UC proposals, which does not go near far enough and is only visible to members.
How would a BI affect the security of jobs and the extent of unwanted part-time work?
Another potential effect of BI is that it could make ‘precarious’ jobs acceptable – the temporary, the zero hours contract, the very part-time. Some economists like Guy Standing argue that precarity is here to stay and that BI is the best way to deal with it. But here there are dangers too.
In the 1990s and earlier, France, Belgium and Germany all had very high ‘disregards’ – amounts of money that unemployed people can earn without deduction from their benefits. This was in contrast to the UK where the JSA disregard has stuck at £5 at least since before the millennium and as Clive Martin points out, will be zero for childless people under UC. Trade unions, NGOs working with unemployed people and many academics all criticised the high continental disregards for encouraging employers to create casual jobs that fitted into the benefit rules whilst reducing the pool of secure full-time work which the same jobseekers really wanted. A poverty trap – not the same kind as the British one where you lose your benefits if you work a single hour, but a poverty trap none the less.
What is important here is the similarity between the high disregards in these French, Belgian and German benefit schemes and a BI itself. They were like a partial BI for the unemployed. To combat these effects of encouraging more precarity, alongside a BI we need regulation of zero hours and limitation of temporary work. Perhaps we need to work with GPTU and other policy working groups to check whether the WR section of MfSS is adequate for this purpose in the light of recent developments in the labour market. Just as BI world still needs a minimum wage, it still needs several forms of labour regulation if the BI is not to end up subsidising employers who show no long-term responsibility for training and supporting their workforce and want to turn labour supply on and off like a tap. Just like the demand to end conditionality of benefits, reversing the march of casualization under Blair’s government is something we can work for straight away without waiting for a BI.
A BI does NOT solve all the problems of precarity. In particular, try telling your prospective landlord or mortgage company that you don’t know whether next week’s income will be your wage for 40 hours (say £400) plus your £80 BI, or just your £80 BI. It is creditworthiness and a secure long-term income that gets you a home.
Would a BI assist the process of ‘de-growth’ ?
Let’s return to the effects of BI on overall amount of work done. Giving people a way to refuse low pay or very insecure work would probably reduce the total of hours worked and jobs offered slightly. More people would stay unemployed longer. Some of the worst jobs would not be offered. So this would reduce total resources used. However, many of the worst jobs are in services rather than in making ‘things’ – agriculture and food processing being a notable exception. And we don’t actually want LESS work done in social care, hospital cleaning or paid childminding. We want these things properly, publicly, funded. Neither a BI nor softening of benefit conditions is going to make the overall economy better in terms of happiness or sustainability – for that we need different policy instruments.
At the same time clearly a BI would be a welcome support for some kind of work we do need more of – like starting small businesses, organic agriculture or running NGOs. But if we want these things, why not subsidise them directly? This would surely be better than subsidising all the businesses that might take advantage of the fact that workers were getting a CI by paying them less, or by putting more of them on temp contracts.
IF a BI was high enough (how high we don’t know) it would enable more people to work part-time, even those used to quite high hourly rates. Then we would be talking about de-growth. But the taxpayers’ money needed to fund BI does not come from thin air, even if some of the money is raised through non-income-tax sources like land value tax. Shrinking the economy inevitably means shrinking the tax base – whatever that tax base is.
Granted a BI would make greater, less conditional help for the unemployed more acceptable – by changing the work choices for EVERYONE. Granted it would help de-growth for a while by achieving higher incomes at the bottom through re-distribution – though the extent and shape of that depends very much on how it is financed, and if it’s done through higher basic income tax, re-distribution would not be very marked; we need to tax the rich and the big corporates. But ultimately the transition period would be up and there is no way to keep human demands on the planet at a sustainable level except…be content and not ask for more….maybe not more than we had in the 1940s ? who can say?
There is a danger that ‘the days of BI’ become rather like ‘after the revolution’- the illusion that everything will be great if we do this one thing, and no other changes will get what we want. I defending a policy that many regard as very adventurous, we risk using too many poorly defended arguments for too many advantages of BI. Let’s instead separate our various objectives and ask what is the best and the quickest means to achieve them.
In particular; ‘BI helps unwaged people enter work’ seems to contradict ‘BI helps people accept that there will be less work’ (whether because the planet can’t support it, or employers won’t pay for their workforce through slack periods of business, or machines are tending to replace human labour).
And also in particular; let’s attack benefit sanctions and the whole workfare-style job centre setup, along with several of the unions, as an immediate, cheap and feasible change.
And let’s not subsidise giant and bad businesses along with those small ones that we want to encourage.
Some of the issues in this paper, and the international evidence, are addressed in my previous writings which give lots of further references to relevant literature for anyone who wants it:-
Is Citizen’s Income the answer to workfare? On Citizen’s Income Trust web site at http://www.citizensincome.org/wp-content/uploads/2016/02/CIT_Newsletter_2014_Issue_2.pdf
‘Unsocial Europe; social protection or flexploitation ?’ Pluto Press, 2004
‘European perspectives on welfare reform – a tale of two vicious circles?’ European Societies, vol. 4/4, 359-380, 2002
Flexicurity: solution or illusion? ‘Labour Regulation, Precarious Work and Income Maintenance in an Expanding Europe’ in ‘Employment Policy in the European Union; Origins, themes and prospects’, edited by Michael Gold, Palgrave 2009