> If you would like more than this, you can go and get a job and hopefully earn more (have a better lifestyle) than staying at home not working.
Except this isn't the case, since benefits are usually cut when you starting working. This means that you start work in an insecure job with no necessary increase in quality of life.
With a guaranteed income, if you were to get a job, you'd have a guaranteed increase in your quality of life, since the benefits are always there, so there is actually more incentive to work.
That's correct Mike, it's not always the case (benefits being cut and working a job can provide you with a worse quality of life) - but I think that is more of a problem regarding the wages people are being paid in jobs, rather than the benefits system.
For a long time inflation, house prices and general costs have beat basic wage increases - leaving many working for less money relatively than they would've got years ago. Meanwhile, the big corporations report yet ever greater profits and the CEO's take ever higher multiples of basic salary in bonuses each year.
The system is broken, but the equality of pay and living standards is not to blame with the government, it's to blame with greedy corporations, share holders insisting they need to do anything for profit and wages being pinned down to the minimum they can be that the work force will stand for (to maximise profits).
If corporation pay was fairer (like it used to be) where perhaps a CEO only makes 10 times the basic workers salary, rather than 100 or 1000 times the basic workers salary, then the wealth from the corporation output would be shared more evenly and the problem would be solved (for people in work).
Not to mention corporations which don't pay tax causing governments to lose out on a lot of tax revenue which would in turn pay to support the poor!
> The system is broken, but the equality of pay and living standards is not to blame with the government, it's to blame with greedy corporations, share holders insisting they need to do anything for profit and wages being pinned down to the minimum they can be that the work force will stand for (to maximise profits).
Let me ask you something... If you start a new business, and let's say you take out a huge loan to pay your startup expenses, and you have a huge pool of qualified workers fighting to work for you for 10 dollars per hour, are you going to pay them any more? Knowing full well that that's a shitty wage, but that if you pay them any more you might go out of business and have a huge debt burden... Or do you pay them 20 dollars per hour out of generosity, and risk going bankrupt, with repercussions that could follow you for years?
It's easy to blame corporations, but remember, there's more players in the job market, including many struggling small businesses... Furthermore, large corporations have gone out of business, and when they fail entire towns and cities can become destitute (look at Detroit).
Corporations pay market value for wages, to increase wages you need to either increase the number of jobs, or decrease the number of workers.
Capitalism is powered by money and greed. At it's heart, the point is to maximise profit and efficiency. This drives innovation and growth across the world... this is no bad thing.
However, as a side of effect of this, it also means businesses want to become more efficient, reduce costs and maximise profitability - your share holders are expecting good returns and that's just the way the world works!
Let's say the CEO takes $9.6 million and the average worker gets $40,000...
This income divide is causing the problem, as the prices will move up in line with the wealth the CEO has just got (along with the workers obviously), but to the average worker, they're not really being paid much more (or any more at all) to counter act the inflation.
If you go back to that graph in 1980 where the CEO only made 35 times the amount of the average worker and redistributed more of the profit to the employees, let's say average employee now gets $55,000 and the CEO gets $2,000,000 then the prices remain more affordable relative to the money in the market and the wealth has been distributed more evenly.
Note this is with the assumption the corporation still made the same profit whichever way it was divided.
The top 1% of wealth is greater than the other 80% of wealth combined in the USA and it's this greed that is causing the divide, rise in prices and rise in poverty line compared to the 'average salary'.
The growth in the divide is caused by changes in CEO compensation that reward CEOs of public companies with large stock option rewards. In theory this is a reform-- only CEOs with rising stocks should get paid. Also just looking at the top public companies isn't really representative of the economy as a whole. The median CEO really makes around $360,000, which is a respectable 9-1 ratio.
Further, being paid $9.6mil/year as a CEO is exceptionally rare. $10.2mil of total compensation would have placed you in the top 100 out of the 100Ks (millions?) of CEOs world wide in 2012. $20mil would have placed you in the top 20.
> Corporations pay market value for wages, to increase wages you need to either increase the number of jobs, or decrease the number of workers.
To a large degree the market value for wages is such only because of a government subsidy to the employers. Take Wal-Mart for example, they go as far as helping their employees enroll in all sorts of government poverty programs because even though they are full-time workers they still qualify for SNAP (food stamps), Medicaid and other similar programs.
Wal-Mart, McDonalds and other similar large low-wage paying corporations should not be able to use government welfare in what effectively part of their compensation to employees.
The government isn't subsidizing Wal-Mart; Wal-Mart is subsidizing the government by reducing these people's dependence on government benefits from 100% to something less.
Wal-Mart, McDonalds and other similar large low-wage paying corporations should not be able to use government welfare in what effectively part of their compensation to employees.
Think about what would happen if they weren't able to do this. Prices would go up and who would this hurt the most? Their customers. Who are their customers, generally? Poor people.
"Let me ask you something... If you start a new business, and let's say you take out a huge loan to pay your startup expenses, and you have a huge pool of qualified workers fighting to work for you for 10 dollars per hour, are you going to pay them any more? Knowing full well that that's a shitty wage, but that if you pay them any more you might go out of business and have a huge debt burden... Or do you pay them 20 dollars per hour out of generosity, and risk going bankrupt, with repercussions that could follow you for years?"
This calculus does not apply at all to the companies currently turning record profits. That's not to say that there's necessarily no important reason those companies should be choosing to keep their profits high as opposed to paying out higher salaries, but this manifestly isn't it.
Actually, wages are increasing enormously, and faster than costs, for the vast majority of workers of those corporations. It's just that most of them are not American or European.
In any case, that assessment, valid or not, doesn't provide a solution.
I often hear this argument, but it sounds wrong to me.
Benefits are cut when you start working, and resumed when you stop again.
Did you consider the fact that salaries WILL be lowered to compensate for BI ?
If BI is 1000, that 1200 paying job will become a 200 paying job... I just can't see where's the incentive to work. Who wants a 200 paying job when you get paid 1000 for just breathing ?
On the other hand, there are many jobs people are willing to do for free/minimum wage because they somehow like them. But they can't because without money they can't live or they have to maintain a very low living standard.
If BI is 1000, that 1200 paying job will become a 200 paying job... I just can't see where's the incentive to work. Who wants a 200 paying job when you get paid 1000 for just breathing ?
You've got it backwards. The incentive is not to work, the incentive is for employers to offer market value for their wages. When people have the power to choose not to work, the market will have to adapt. If nobody wants a 200 paying job, the pay will have to go up.
The current system we have forces people to work unfair wages just to support themselves. Basic income will make it a competitive, voluntary labour market.
Definitely. I do think that with a guaranteed income, minimum wage laws as well as welfare in most other forms should simply be eliminated. Pay a market rate for the work, if you don't pay enough, you don't deserve an employee. But you can also charge less for easy work and get away with it because to the employees it's basically just spending money to use for luxury items.
How much should a garbage man get paid? Arguably (to me) more than many other professions. The free market for labor is badly broken, and I think that a guaranteed income will help (although not perfectly). Besides, I for one think that giving people the freedom to raise their kids for a while, or do art, or start a company, is more valuable to society than having them work a very likely unnecessary job just because we incentivize working over value generation.
"The incentive is not to work": I meant to contest that assertion made by previous commenter. Actually I really don't think there's any valid incentive.
"the incentive is for employers to offer market value for their wages"
You might put pressure on employers, for sure -> more unemployment. Maybe wages will go north. Then inflation.. then BI will have to increase too.
It's the first time I read that BI might cause wages to increase. Most advocates say "it will not change anything for you" if you already have a job :-)
Lastly, keep in mind that workers ARE the ones who will support the cost of BI.
Not employers, not the government... Only workers.
So you'd better not increase unemployment :-) or the cost of work will raise a lot
Or unemployment would raise sharply, taxes would raise sharply (to pay BI), then companies would relocate to a foreign country.
Or wages would raise, prices would raise (inflation), then BI would not anymore afford a minimal standard of living.
Or both: unemployment would raise, wages would raise, prices would raise, taxes would raise.. companies would go bankrupt or relocate, and most people on BI would be poor.
I agree, for this to work, everyone would have to receive that amount of money. Or at least say, everyone receiving under $100,000 a year in salary. Otherwise, you might feel cheated if you replace your $12,000 free money for a $20,000 job. You'd still have to receive the free money, so you'd then earn $32,000 a year.
$100k limit is completely unnecessary in a universal income. The whole point is that the basic income is fully "paid" through taxes at some point. If the universal income is $12k and someone is paying $14k in taxes total, the "true tax" to fund the state (apart from basic income) is $2k.
The equitability of a basic income is not its main selling point, as I see it; in other words it is not necessary that it be equitable according to some specific conception in order for a basic income to provide value to society as a whole. The selling points are, as I see them:
- There are now more people spending money because they have disposable income. This is good for businesses.
- There is added incentive to work, because one does not lose income by starting a job.
- The people being made redundant by automation are given a cushion that will help as they figure out how to become economically relevant again. This is good for everyone, because there are fewer families forced out onto the streets, etc.
- There is, potentially, less of a bureaucracy to manage the distribution of existing welfare programs, assuming existing programs can be consolidated into the new basic income scheme. This is an attractive point for conservatives and libertarians.
There's no need for equitability here, although that's also something that is desirable within bounds. But I think few millionaires and billionaires will find a significant decrease in their standard of living if they have to pay more into the pot than they receive. Also keep in mind that the billionaires are billionaires because society provides a framework for them to accumulate and retain the capital that they have; for this reason they have an implicit debt and obligation to society.
Equitability is not absolutely necessary, but it is a great selling point.
With a scheme like this, one would replace a system full of loopholes (for the rich) and handouts (for the poor) with a simple flat system.
Everybody gets $x/yr, and everybody pays y% in taxes on all income after that (not just earned income). No deductions, no credits, no loopholes, no welfare state (other than the UBI).
For some people this "mincome" would be theirs to spend, but for others it'd just be a minor reduction in income taxes.
What's somewhat clever about this is how it essentially balances out. The billionaire won't even notice the extra amount in their bank account, but there aren't many billionaires. Meanwhile the three jobs four kids single mom will be greatly impacted by this, which is the whole point.
The billionaire won't notice it because it won't exist; the billionaire will be taxed way above mincome, because otherwise how are you going to pay for it?
That's exactly the purpose of basic income. If a billionaire businessman replaces all of his workers with robots, all of his income goes directly to him. The laid off employees are now competing for the few jobs that are available which have not yet been automated, and not all of them will be able to find another job because other businesses are automating away humans too. We need a way to redistribute wealth from the billionaires who make their money off the efficiency of automation to the people who would have previously worked for them.
The only way for it to be fair is for everyone to receive it. Naturally, there will be an inflection point where at some income level a person starts paying out more than they receive.
I once calculated, based on what amounts to a back-of-the-napkin calculation based on a flat tax, that the inflection point would be somewhere in the $60-70k range for Canada. The US would be a bit higher due to the greater income inequality.
Happens in the UK. Every £2k over £100k and you lose £1k of your tax-free allowance. This means that you keep 38p of every £1 earned between £100k and £118k, before the tax rate relaxes back to a more sensible 40% after £118k (and then up to 50% at £150k).
Wouldn't be that much different than progress tax brackets, though. In that case, lowering the tax rate for you by 10 percent would basically mean receiving $10,000 more a year in "free money".
hiring managers would use it to convince people to take sub-100k wages. This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
I have yet to see an example about net pay decreasing with marginal tax rate increase. When you earn 120k, only those 20k over 100k will be taxed with the higher rate, not the amount below 100k, so every increase in gross salary leads to increase to net salary.
If you include welfare state benefits (which have wage-income-based phaseouts) in income, it's not hard to produce such examples. http://mises.org/daily/3822 has a simple case which has >100% effective marginal rates between about 20k and 50k for a family with one adult and 2 kids.
_That_ is the sort of thing that could go away with a guaranteed basic income. At that point, you'd just have taxes, which do in fact behave as you describe.
The US AMT can have that punitive effect, because AMT is an alternative calculation, not a marginal calculation. Yeah, not marginal, but it is a common tax system.
And there are some programs that don't have marginal phaseouts. Each one is trifilingly small, but they may add up.
Even programs with marginal phaseouts can end up adding up to the phaseout being > 100% of the income (e.g. 10 programs, each of which marginally phases out 11 cents on the dollar).
>This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
All sane countries with progressive taxation always apply the higher tax bracket only to the part of the salary that is in the bracket.
E.g. if the tax is 10% < $50k and 25% >= $50k, a $60k salary would have to pay 10% * $50k + 25% * $10k in taxes, and all wage increases increase net pay.
> This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
You don't understand how progressive taxes actually work. This simply doesn't happen. You can't make less money by making more money.
yea, I might have gotten it wrong about progressive taxation. The context I picked it up on was in choosing a higher salary vs. some benefits. The benefit did lead to more spending power compared to the salary increase and HR would push for this as salary increases would lead to more costs for the company.
That's why taxes must be proportional too.
The state spends X euro, the productive economy pays Y euro of salaries+dividends, therefore everybody pays incomeX/Y of taxes. X/Y is the income tax rate.
Or if you prefer to tax sales, with Z being the total amount of sales, priceX/Z. X/Z is the VAT rate.
Except this isn't the case, since benefits are usually cut when you starting working. This means that you start work in an insecure job with no necessary increase in quality of life.
With a guaranteed income, if you were to get a job, you'd have a guaranteed increase in your quality of life, since the benefits are always there, so there is actually more incentive to work.