In
1795 the magistrates of Speenhamland in Berkshire, England started a
system under which farm labourers on poverty wages had their income
supplemented from the poor-rates. The result was predictable. Farmers
were encouraged to keep, and even to extend, paying low wages. The
payment from the poor-rates became a wage subsidy to employers.
Today, the Green Party, among others, wants to revive this under the
name of “Citizen’s Income”, which they describe as “an
automatic, unconditional payment sufficient to cover basic needs of
every individual, working or not”.
This
is more commonly called a “Basic Income”. Daniel Raventós, a
keen advocate of the proposal, goes into more detail:
“Basic
Income is an income paid by the state to each full member or
accredited resident of a society, regardless of whether or not he or
she wishes to engage in paid employment, or is rich or poor or, in
other words, independently of any other sources of income that person
might have, and irrespective of cohabitation arrangements in the
domestic sphere” (Basic
Income: The Material Conditions of Freedom).
He
lists various things in its favour: that it would abolish poverty,
enable us to better balance our lives between voluntary, domestic and
paid work, empower women, and “offer workers a resistance fund to
maintain strikes that are presently difficult to sustain because of
the salary cuts they involve”.
Maybe
it would do some of these things, but two linked questions arise.
Where’s the money going to come from, and how likely is it to be
introduced in the form its advocates want?
Abolishing
means-tested benefits such as income support (in Britain) and paying
every citizen a state income equal to the official poverty line (of
60 percent of average after-tax income) would not be cheap. Raventós,
basing himself on income tax returns in his native Catalonia,
calculates that it could be done by means of a 50 percent flat-rate
tax on all incomes. Others have suggested that it might be financed
by a wealth tax or by a tax on pollution, but Raventós wants to show
that his scheme could be financed merely by redistributing the money
the state already collects and spends on family allowances, pensions
and means-tested benefits,
without any extra taxes. In other words: that the total amount of
money paid by the state either as benefits or tax concessions would
remain the same, merely distributed differently amongst workers. In
short, it would amount to little more than a “reorganisation of
poverty”.
Raventós
lists various objections to the Basic Income scheme, basically that
it would reduce the incentive to work, an argument he is able to
refute; but he misses the main objection that, like the Speenhamland
system, it would be a wage subsidy to employers. To understand this,
we need to look at the economics of wage labour in some detail.
Labour
market forces bring it about that the income of workers is more or
less what they need to keep their working skills up to scratch and to
raise a new generation of workers. At one time, in the early days of
capitalism, workers’ incomes were made up exclusively of what their
employer paid them. Since the introduction of pay-as-you-earn income
tax and the “Welfare State” matters have become more complicated.
The income of many workers is now made up not only of their take-home
pay from their employers but also of various payments from the state,
mainly family allowances but also tax credits for the worst paid.
If
a basic state income of say, £200 a week (or £10,400 a year), was
brought in, this would upset the balance: market forces would tend to
bring about a new equilibrium, with those workers who currently get
no extra income from the state (those without a dependant family)
seeing their take-home pay from employers tend to fall by £10,000.
Of course it wouldn’t be as simple as this since in many cases the
extra state payment would be compensating for the abolition of family
allowances, but there would in general be a strong downward pressure
on wages and salaries.
That
there would be a tendency for something like this to happen has been
recognised by less naïve advocates of Basic Income than Raventós.
When
there was a referendum in Switzerland in June 2016 on the principle
of introducing UBI (which was lost with 77 percent against and only
23 percent in favour) its advocates did not disguise the fact that
its introduction would reduce wages.
In
fact they openly admitted, actually they even proposed it:
“Wages
are going to adapt themselves to become a complement to Basic Income.
For example with an Unconditional Basic Income of 2,500 Swiss Francs,
someone who at present gets 8000 Swiss francs from their employer
will not get more than about 5,500 or so wages which will come to be
added to their Basic Income” (rbi-oui.ch/laboratoire-sur-le-
inancement-du-revenu-de-baseinconditionnel).
C.
M. A. Clark, who wrote a study of the effects of the introduction of
a partial Basic Income scheme in Ireland (The
Basic Income Guarantee: Ensuring Progress and Prosperity in the 21st
Century,
2002), admitted this as a possibility. In a previous article in the
American Journal
of Economic Issues
in June 1996 he and fellow author Catherine Kavanagh had gone into
more detail. They described part of the “conservative case for a
Basic Income” as follows:
“By
partially separating income from work, the incentive of workers to
fight against wage reductions is considerably reduced, thus making
labour markets more flexible. This allows wages, and hence labor
costs, to adjust more readily to changing economic conditions”
(http:// hss.fullerton.edu/sociology/orleans/basic.htm).
And
“the liberal argument” against Basic Income is that:
“If
a UBI policy is seen as a substitute for a full employment policy in
the traditional Keynesian sense, then it is a major step backward and
would harm all workers. UBI would, in effect, subsidize employers,
allowing them to lower wages . . .”.
Clark
and Kavanagh conclude, rather optimistically:
“Whether
a Basic Income policy would weaken or strengthen workers’ power in
the labor market is a more difficult question to answer. It would
depend on the context in which the Basic Income policy was instituted
and the support workers already received from the state. The
existence of a minimum wage, strong unions, and enforced pro-labor
legislation might be essential to preventing the Basic Income from
becoming a wage subsidization policy”.
Clark
and Kavanagh are being over-optimistic because no union can be that
strong and because no state could sustain “pro-labor legislation”
for any length of time that adversely affected profits.
Unions
do have some power, but it is limited to working with favourable
labour market forces to get higher wages and better working
conditions. When, however, labour market conditions are against them
the most they can do is to slow down the worsening of wages and
working conditions. If all workers got a basic income from the state
of £5000, let alone £10,400, a year, this would change labour
market conditions in favour of employers. In pay negotiations they
would point to the state payment as evidence that they did not need
to pay so much in wages or salaries to maintain their employees’
accustomed standard of living. The workers and their unions would
realise this and the negotiations would be about what the reduction
in wages and salaries should be. If the reduction was less than the
Basic Income then the unions would be able to cry victory, but a
reduction there would be. It is just inconceivable that a state
payment to everybody in work would not adversely affect wages and
salaries.
As
to “pro-labor legislation”, this presumably means that the state
should take the side of workers against employers. Many Labour and
similar governments have come into office promising to benefit wage
and salary earners, and all of them have left office without doing
this; most in fact have done the opposite and have ended up
restraining wages and cutting state benefits. Why? It is not because
they were sell-outs or were not determined or resolute enough. It was
because they were attempting the impossible: to make capitalism work
in the interest of the wage and salary working class.
Capitalism
runs on profits, derived from the unpaid labour of workers, and can
only run as a profit-making and profit-accumulating system in the
interest of those who live off profits (i.e. the capitalist class who
own the means of production and employ others to operate them). Any
government has to accept this and that, if it’s not to provoke an
artificial economic crisis, it has to give priority to profit-making
over “pro-labor” legislation.
In
fact, insofar as Basic Income is seen as a “pro-labor” measure as
it is by Raventós, then that is a reason why it is never likely to
be introduced, at least not in the form that people like him want. As
we saw, Raventós puts forward as an argument for Basic Income that
would “offer workers a resistance fund to maintain strikes that are
presently difficult to sustain because of the salary cuts they
involve”. But can anyone realistically imagine that any government
would bring in a measure that would make striking easier for workers?
Already, today, there are provisions to cut state benefits paid to
strikers. No state is going to shoot itself in the foot by
undermining in this way the profitability and so the competitiveness
of enterprises operating from within its borders.
So,
if a Basic Income scheme is ever introduced, it’s not likely to be
more than some limited reform of the tax and benefits system. But
even it were to be introduced in full it could turn out to be
counter-productive for the working class by leading to an
across-the-board decrease in wages.
Adam
Buick
Taken
from here
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