This is only for people that are earning less than $2800. In Switzerland that's basically only unemployed people. The unemployment rate when I was there was ~3.5%, so it's roughly $10B / year, which looks acceptable for a country as wealthy as Switzerland.
Umm, the curreent Swiss proposal of basic income (and the meaning of that term) is not "only for people that are earning less than $2800" - if you're getting a salary of $2800, then the basic income would be on top of that.
That's the way I understand it from the few articles that I've read. But that can't be it. The numbers just don't work out. It has to be merely a guaranteed floor (i.e. no matter what you do you will make at least that much, if you make more, you're on your own).
The "guaranteed floor" version of a basic income has a lot of harmful effects — for example, any work that pays anywhere close to the basic income would be a ridiculously bad deal that no rational actor would accept. In the "actually guaranteed" version, a job that pays 90% of the basic income would still be worth doing because you're nearly doubling your income.
You wouldn't want to make an actual hard floor, rather if you want something along those lines you do a graduated negative income tax which smooths out the incentives near the boundary.
Interestingly enough a negative income tax was proposed by Milton Friedman of all people.
It should also be mentioned that along with basic income and a negative income tax, a third grand idea for eliminating poverty and replacing welfare is guaranteed employment (i.e. the government is the employer of last resort). Right now that last is mostly being advocated by Australian adherents of the MMT school.
>The "guaranteed floor" version of a basic income has a lot of harmful effects — for example, any work that pays anywhere close to the basic income would be a ridiculously bad deal that no rational actor would accept.
Not necessarily. The types of jobs that people would do at wages close to the floor are the types of jobs that they would do regardless of salary. Writers, musicians, painters, artists, contractors, entrepreneurs, small-business owners, stay-at-home-parents, interns would appreciate a guaranteed floor. Seasonal jobs, sales jobs and other jobs with month-to-month variance (make a lot some months, make little other months) would be more attractive. Any job that has the potential of upward mobility (make less now so you can make more later) would be be more attractive with a guaranteed floor.
Jobs in retail or fast-food, jobs that require hard-labour, or are unattractive for various reasons would have to pay more - which isn't a terrible thing. Now MacDonald's and Walmart would have to pay a living wage else nobody would bother with those jobs.
So it may actually work. I'm still a believer. Besides, instead of a hard floor, you could introduce a scaling floor to provider further incentive to work.
> Now MacDonald's and Walmart would have to pay a living wage else nobody would bother with those jobs.
They would have to pay way more than a living wage — nobody's going to go from a life of leisure to a Walmart job for a 5% increase in income. This would drastically increase costs, would would simply spur inflation.
Drastically increasing costs for unskilled laborers wouldn't kill the companies - say, McDonalds wouldn't go out of business or double their burger prices because of that, as long as their competitors get the same labor cost increase.
For a bunch of professions it would accelerate automation - already there are a lot of jobs that could be better done without humans, simply minimum wage workers are cheaper than the automation. On the other hand, such basic income program would be also a fix for that rising unemployment.
> Drastically increasing costs for unskilled laborers wouldn't kill the companies - say, McDonalds wouldn't go out of business or double their burger prices because of that, as long as their competitors get the same labor cost increase.
I have to admit I don't quite follow. How would everybody getting the same labor cost increase prevent price hikes?
There would be a price hike for all companies, but it would be much, much smaller than the increase in wages - the price of a burger (unlike, say, price of a haircut) is mostly independent of the cook's wage, and to the extent that it matters, there are valid avenues for automation that put a cap on it.
No, the whole point is that it goes to everyone, and is not means-tested, so that there is never a disincentive to work.
But, since it will eliminate poverty, it would also eliminate existing government programs to help the poor, such as unemployment insurance etc., and that would be a major cost saving.
That definition might stop working. The important thing is whether you can afford food, clothing, shelter, required transport, and still have some money left over to take care of everything else.
But that definition might not stop working. If you calculate the poverty line as, for example, median income multiplied by 0.6, it is possible to have every single person above that line.
It's not a guaranteed floor. Everyone gets it. For some people, the actual marginal after-tax value will be less because the basic income is income subject to income tax, and Switzerland does have a progressive federal income tax system, as well as canton and local income taxes which may or not be progressive (seems to vary).
That doesn't really work out. Otherwise unemployed people would earn the same as the lower paying jobs.
If the people with jobs get this money, they surely raise their tax bracket by a big margin, so it's not all spending.
This actually makes perfect sense. It represents a cleanly defined abstraction layer and awareness of separation of concerns.
The Swiss government pays everyone a check every month, rich, poor, whatever. Everyone now has income and feels fair because they all get the check. This also adds a wealth effect, because those with a great job now feel richer since they have $2800 more per month and spend more because of it. This is the welfare abstraction and has little to no waste or overhead because you only need to check if someone is or is not a system. This is completely binary and easily provable.
At the other end, you have taxation. The only interfaces between the guaranteed income system and the tax system are (1) the guaranteed income system provides a list of all citizens registered for guaranteed minimum income (i.e. drawing a check, which should be like 99+% of the population), and (2) the tax system collects taxes to pay for the guaranteed income system.
Everyone who gets a check, which is pretty much all Swiss citizens, now need to add one line item to their taxes, which the government can verify via interface (1) above. Those who make a lot of money via their job and the minimum income pay more in taxes. For pretty much everyone who is rich, the $2800/month actually comes right back out in taxes.
It's a pretty brilliant implementation. Nicely architected.
> Everyone who gets a check, which is pretty much all Swiss citizens, now need to add one line item to their taxes, which the government can verify via interface (1) above. Those who make a lot of money via their job and the minimum income pay more in taxes. For pretty much everyone who is rich, the $2800/month actually comes right back out in taxes.
From what I kind, the highest combination of federal and cantonal income taxes in Switzerland is less than 29%, so unless they have truly stupendous local income taxes, it will never be true that "the $2800/month actually comes right back out in taxes".
Obviously, those in higher tax brackets will get less additional after-tax income, but it looks like every citizen will get at least a significant fraction of the $2800.
Good point. Either way at the end of the day this program is going to enjoy a lot of popular support (because the overwhelming majority will benefit) and they will have to balance the cost of the program, which means taxing the richest the most. Since the richest gain the least marginal utility from their money, they need to balance that lost marginal utility against remaining a Swiss citizen. Some obviously will renounce their citizenship and shop for other places to live over this, but I suspect that this would be a minority of rich Swiss people and that these rich Swiss are going to be those not really contributing anything to Swiss society other than spending money.
If they are Swiss business owners, operating in Switzerland, it's not like they are going to be able to pack up entire businesses and leave Switzerland wholesale when they renounce their citizenship. John Donne once wrote, "no man is an island unto himself", and this is also a valid observation about economic success as well. Most rich people have been successful because of the society around them and not in spite of it. Those who are actually rich from a business that benefits from being in Switzerland serving some need wouldn't renounce citizenship since doing so would essentially be cutting off one's nose to spite their face.
Think of the people who have been in the media for having renounced their US citizenship? The example that springs to mind and is most indicative of my point is Eduardo Saverin. What value did he provide to the US? What value does he provide to Singapore where he now resides. I'd say he's hardly a loss for the US people. Of course, he's just one data point, so this is completely useless anecdotal evidence. However, I would expect investigative journalism looking into exactly what kind of citizens are renouncing their citizenship over tax policy to be among those that add the least value to society.
How many CEO's and other well-compensated C-suite executives in the US have renounced their citizenship while still working as a productive member of society?
