Replacing social welfare with a basic income

OleRodrigo · 09-12-2015 9:21pm #1

The Finns are piloting it, the Swiss are considering and it has been proposed by the Green Party in the UK. Some economists are arguing it will save the taxpayer in the long run. Would there be any merit to replacing social welfare payments with a basic income in Ireland? The Finns are looking at a figure of €800 per month for everyone.

http://yle.fi/uutiset/kela_to_prepare_basic_income_proposal/8422295

BoJack Horseman · 09-12-2015 10:05pm

It would prove to be very expensive.

As an example:
The 2016 social welfare bill is budgeted at €19.6bn.

Excluding the approx 600,000 pensioners & the 1.1 million u18's in Ireland, there are about 2.9 million adults of working age.

A payment of €800 per month for this number of people equates to €27.8 billion.
€8 billion more than is currently expended.

For the model to match current expenditure, the "basic income" paid to everyone would be €570pm.
Now this frankly would very strongly encourage job take-up at any level, however, it would be all but politically impossible as it equates to a 30% reduction in income for those currently on the top rate of JSA/JSB.

Iwasfrozen · 09-12-2015 11:50pm

BoJack Horseman wrote: »

It would prove to be very expensive.

As an example:
The 2016 social welfare bill is budgeted at €19.6bn.

Excluding the approx 600,000 pensioners & the 1.1 million u18's in Ireland, there are about 2.9 million adults of working age.

A payment of €800 per month for this number of people equates to €27.8 billion.
€8 billion more than is currently expended.

For the model to match current expenditure, the "basic income" paid to everyone would be €570pm.
Now this frankly would very strongly encourage job take-up at any level, however, it would be all but politically impossible as it equates to a 30% reduction in income for those currently on the top rate of JSA/JSB.

Yep, the whole idea is a no go.

mickdw · 09-12-2015 11:58pm

They would cut back on tax credits for workers as the payment would more than make up for the credits.
1 million paye workers would equate to 3.3 billion saved by deleting credits.

Nichard Dixon · 11-12-2015 8:37am

BoJack Horseman wrote: »

It would prove to be very expensive.

As an example:
The 2016 social welfare bill is budgeted at €19.6bn.

Excluding the approx 600,000 pensioners & the 1.1 million u18's in Ireland, there are about 2.9 million adults of working age.

A payment of €800 per month for this number of people equates to €27.8 billion.
€8 billion more than is currently expended.

For the model to match current expenditure, the "basic income" paid to everyone would be €570pm.
Now this frankly would very strongly encourage job take-up at any level, however, it would be all but politically impossible as it equates to a 30% reduction in income for those currently on the top rate of JSA/JSB.

It would be unwise to dismiss this on the basis of such a simplistic calculation. For a large part of the working population the basic income would be a replacement for a tax credit, likewise it would replace things like student grants that are not in welfare spending as such. I imagine a rate close to the lowest rates of welfare could be achieved and then pensioners, recently unemployed etc would have an additional payment from the PRSI system. I think it worth exploring, it would simplify things a lot and prevent a lot of the poverty traps and perverse rewards in the present system.

BoJack Horseman · 11-12-2015 9:38am

Nichard Dixon wrote: »

It would be unwise to dismiss this on the basis of such a simplistic calculation

I'm not dismissing it.... I'm doubtful the people are willing to cough up the billions needed.

what was inaccurate about my calculation?
(simplicity being very secondary to accuracy & no grounds for dismissal).

Student grant expenditure is below €400m per annum..... tax credits are €3.3bn.
So, where are you going find the rest?

FreudianSlippers · 11-12-2015 9:54am

I had a whole thread on this. It doesn't work on the numbers.

Negative income tax with a flat tax could certainly work, but one or two posters were obsessed with the idea that a small percentage of the people in this country who suck up the highest amount of welfare would be slightly worse off.

It'd be a joke really if it wasn't so depressing.

steddyeddy · 11-12-2015 10:44am

BoJack Horseman wrote: »

I'm not dismissing it.... I'm doubtful the people are willing to cough up the billions needed.

what was inaccurate about my calculation?
(simplicity being very secondary to accuracy & no grounds for dismissal).

Student grant expenditure is below €400m per annum..... tax credits are €3.3bn.
So, where are you going find the rest?

Simplicity is inaccuracy when you leave out several variables.

BoJack Horseman · 11-12-2015 10:46am

steddyeddy wrote: »

Simplicity is inaccuracy when you leave out several variables.

so what was the inaccuracy with the cost calculation?

and how will you make it cost neutral?

steddyeddy · 11-12-2015 10:47am

With a flat 800 you could take away the medical card for all bar those who are long term sick. That would save a lot. You could also make all schools fee paying which could improve education and the economy in the long term.

steddyeddy · 11-12-2015 10:49am

BoJack Horseman wrote: »

so what was the inaccuracy with the cost calculation?

and how will you make it cost neutral?

A scientific calculation and a conclusion based on that variable (I.e we couldn't afford it) is inaccurate when limited variables are used in the calculation.

E.g calculating how long it would take to get to work using wind factor as the sole variable.

BoJack Horseman · 11-12-2015 10:58am

steddyeddy wrote: »

With a flat 800 you could take away the medical card for all bar those who are long term sick. That would save a lot.

How do the numbers stack up?

13% of the population have a disability.
35% of the population have a chronic illness.

You could also make all schools fee paying which could improve education and the economy in the long term.

How much would you make schools charge?
This would surely be a juicy slice of the €9,600 income you will be giving an unemployed single parent, considering he/she is now paying €50 a pop to bring their child the GP.

Bob24 · 11-12-2015 11:01am

I think it could work in theory and would be a good thing, but it would be such a large big bang changing the whole social model that its introduction would be extremely difficult to say the least.

To balance the numbers you would probably expect wage reductions and/or increased taxation on labour (either paid by employers or employees), as well as a complete overhaul of every other social benefits. All at the same time!

Here's how I see it if it was going to be 800 per month for someone someone who currently is making 1500 per month:
- The person's employer would be allowed to reduce the salary to 800 per month (new total income would be 800+800 = 1600, an increase of 100 to get their buy in).
- There would be a new tax of 700 euros attached to the job and payable by the employer, not changing the total cost of labor for them.
- Any means tested social benefits would disappear in exchange for the slight increase in total income for working persons and that guaranteed minimum income for unemployed people, simplifying (i.e. suppressing) administrative tasks to manage them. Of course any benefits which are not related to people's financial situation but rather other personal circompstances (for example disabilities) would not be touched.

melissak · 11-12-2015 11:10am

BoJack Horseman wrote: »

How do the numbers stack up?

13% of the population have a disability.
35% of the population have a chronic illness.

Is this true. Almost half the country is long term sick? Something very wrong there..
I think this basic income idea could work in theory. If there were provisions made for emergency and hardships etc and maybe food stamps or community garden schemes so people wouldn't go hungry it would be ok to reduce payments to some people. There would be a lot of money and resentment saved by not having to catch cheats. Also child benefit should be means tested and doctors should be taken to task for willy nilly prescription happiness but I imagine the introduction of generic drugs has disincentiveised this somewhat.

steddyeddy · 11-12-2015 11:12am

BoJack Horseman wrote: »

How do the numbers stack up?

13% of the population have a disability.
35% of the population have a chronic illness.

How much would you make schools charge?
This would surely be a juicy slice of the €9,600 income you will be giving an unemployed single parent, considering he/she is now paying €50 a pop to bring their child the GP.

I'll get back to you when I'm finished work but they're just two more variables to consider. There's plenty more.

melissak · 11-12-2015 11:12am

Also maybe the government can find another few billion down the back of the couch....

ancapailldorcha · 11-12-2015 11:13am

melissak wrote: »

13% of the population have a disability.
35% of the population have a chronic illness.

Hmm.... Those numbers seem awfully high. I wonder how they defined those terms.

steddyeddy · 11-12-2015 11:15am

1 in ten people in Ireland are disabled and more than a third have a chronic illness?

melissak · 11-12-2015 11:17am

And I imagine more people would take up part time or lower paid jobs and declare nitems r etc if they wouldn't lose out. This extra tax would help

Bob24 · 11-12-2015 11:18am

melissak wrote: »

Also child benefit should be means tested

To me if you are to bring a guaranteed income you should do away with means tested benefits. That's one of them points of having a minimum income in my opinion: you guarantee everyone has the means to lead a "simple" yet decent life on that income and make citizens more independent and accountable by letting them manage that income. Of course unforeseen circumstances such as severe illness should be treated separately, but I wouldn't classify having children as unforeseen circumstances (at least in most cases) so everyone should be incentived equally to raise children.

BoJack Horseman · 11-12-2015 11:21am

ancapailldorcha wrote: »

Hmm.... Those numbers seem awfully high. I wonder how they defined those terms.

The disability number is from the CSO, 2011 census.
The 'chronic illness' number is from the HSE

Now, 'chronic' does not necessarily mean 'long-term'... but you get the idea.

One can imagine how politically difficult it would be to eliminate the medical card (which covers more than half the population).

melissak · 11-12-2015 11:22am

ancapailldorcha wrote: »

Hmm.... Those numbers seem awfully high. I wonder how they defined those terms.

I wouldn't be altogether surprised. I heard on the radio that more than 1\3 of the population is on Medication for chronic pain. Probably same amount on valium ext must cost a fortune not to mention the health implications

Godge · 11-12-2015 11:23am

BoJack Horseman wrote: »

How do the numbers stack up?

13% of the population have a disability.
35% of the population have a chronic illness.

.

https://www.esri.ie/pubs/BKMNEXT259.pdf

From a comment in a column of page 22

" Recent prevalence data suggest that up to 25% of young people may have special educational needs as defined by the EPSEN Act (2004) – Banks & McCoy (2011)."

BoJack Horseman · 11-12-2015 11:24am

Bob24 wrote: »

To me if you are to bring a guaranteed income you should do away with means tested benefits. That's one of them points of having a minimum income in my opinion

Indeed that's the point.

With a basic universal income, there will be no such thing as child welfare.
The idea is to eliminate all ancillary benefits in order to incentivise the takeup of work.

It will be very tough for some people, but the idea is that it benefits the nation at large.

melissak · 11-12-2015 11:29am

Yes but like this min income there would have to be a line somewhere. The extremely wealthy don't need it. If they stopped paying it automatically to bank accounts and made people queue up and fill forms to get it every month those who didn't need it probably would not even bother.

Bob24 wrote: »

To me if you are to bring a guaranteed income you should do away with means tested benefits. That's one of them points of having a minimum income in my opinion: you guarantee everyone has the means to lead a "simple" yet decent life on that income and make citizens more independent and accountable by letting them manage that income. Of course unforeseen circumstances such as severe illness should be treated separately, but I wouldn't classify having children as unforeseen circumstances (at least in most cases) so everyone should be incentived equally to raise children.

BoJack Horseman · 11-12-2015 11:34am

melissak wrote: »

Yes but like this min income there would have to be a line somewhere. The extremely wealthy don't need it.

That's not the point though.
Finland is aiming for a universal basic income.

It isn't universal if there are caveats.... and if other benefits continue as normal then you are just describing what the status quo is.

melissak · 11-12-2015 11:37am

BoJack Horseman wrote: »

That's not the point though.
Finland is aiming for a universal basic income.

It isn't universal if there are caveats.... and if other benefits continue as normal then you are just describing what the status quo is.

Oh. I misunderstood it so. Then it only benefits companies and the well off at the expense of the worse off. Again status quo I suppose.. This may work in theory but the so called poor will only take so much.

Bob24 · 11-12-2015 11:38am

melissak wrote: »

Yes but like this min income there would have to be a line somewhere. The extremely wealthy don't need it. If they stopped paying it automatically to bank accounts and made people queue up and fill forms to get it every month those who didn't need it probably would not even bother.

But if you keep means tested benefits and that universal income is not paid to everyone (i.e. is not universal anymore), how different is it from the current welfare model in most European countries including Ireland?

melissak · 11-12-2015 11:40am

Bob24 wrote: »

But if you keep means tested benefits and that universal income is not paid to everyone (i.e. is not universal anymore), how different is it from the current welfare model in most European countries including Ireland?

If they made it slightly inconvenient to opt in for certain benefits those who really didn't need it wouldn't bother. I can't see bono waiting in line in the file office for 200e per week

BoJack Horseman · 11-12-2015 11:46am

melissak wrote: »

Oh. I misunderstood it so. Then it only benefits companies and the well off at the expense of the worse off. Again status quo I suppose.. This may work in theory but the so called poor will only take so much.

Finland seems to think it will benefit overall for them..
Its trickier in Ireland.... it would impact a lot of people disproportionately & would therefore be political nuclear waste, no one will touch it.

€400m on student grants would be gone.
School footware & uniform allowances would be gone (saving €44m)
No more rent supplement scheme (saving €300m).
Eliminating the medical card will save well over €2 billion, but will cause a lot of strife.

t'would be a brave politician to touch any of this.

BoJack Horseman · 11-12-2015 11:47am

melissak wrote: »

If they made it slightly inconvenient to opt in for certain benefits those who really didn't need it wouldn't bother. I can't see bono waiting in line in the file office for 200e per week

making the 2 million workers queue every wednesday in their PO to receive their universal income would not be practical from anyone's perspective.
It would harm businesses considerably.

Replacing social welfare with a basic income

Comments