Falling through the net

22 June 2020 | Posted In: #135 Winter 2020,

COVID-19 has exposed the need for a reliable safety net should another disaster occur. As CHRISTOPHER KELLY reports, perhaps now is the time Australia embraced a universal basic income.

With industries tumbling like dominos overnight, the country’s social security system quickly cracked under the strain as hundreds of thousands of newly unemployed Aussies made benefit claims. Cumbersome and complex at the best of times, Australia’s welfare bureaucracy proved barely fit for purpose as the coronavirus hit. What with all the hoop jumping, form filling, and means testing — not to mention the Centrelink website crashing — claimants, many in urgent need of financial assistance, found themselves left hanging. Particularly thousands of temporary visa holders, including students and refugees, who were informed that they were entitled to nothing.

Since the Centrelink meltdown, the idea of a universal basic income (UBI) has emerged from the fringes and gained political traction. And it’s not just a pursuit of progressives: “The idea of a UBI has acquired a highly disparate group of supporters,” said Professor John Quiggin of the University of Queensland (UQ), a long-time advocate of the scheme.

Unlike the current welfare system, a UBI is simple and comprehensible. The idea is that every adult Australian citizen would receive an unconditional guaranteed income — no strings attached, no questions asked. UBI is a hand up, rather than a handout. Limited trials of variations of the scheme have been conducted around the world in Scotland, Kenya, Canada, the US, the Netherlands, India, Namibia and, most recently, in Finland where 2,000 citizens received a monthly tax-free income of €560 for two years, with no requirement to be working or looking for employment.

The results of the trial echoed findings from previous studies that showed that a secure income in times of need greatly improves a person’s quality of life. When financially stable, people find themselves free to return to more purposeful pursuits and creative activities denied them under the daily grind of nine-to-five. It also allows people to get more involved with their communities by volunteering, for example.

This, the Finnish researchers found, led to better mental health outcomes with participants adopting an optimistic outlook on the future. “The basic income recipients were more satisfied with their lives and experienced less mental strain than the control group. They also had a more positive perception of their economic welfare,” the researchers concluded.

Meanwhile, a similar guaranteed income scheme conducted in California undermined a common criticism of the UBI: that recipients would squander the “free money” on frivolous items. However, when the 290,000 residents of Stockton were given US$500 a month for a year, analysis showed they spent 40 percent of the cash on food, 25 percent on home goods and clothes, and around 12 percent on utilities.

Ahead of the 2019 federal election, the Greens released a policy initiative to launch Australia’s first-ever UBI trial in Nowra NSW. The Greens argued that a UBI would help “promote the idea that a person’s worth is not dependant on their economic productivity”. A UBI would also help “redefine the worth placed on traditionally unpaid labour like caring and childrearing and help break down the labour divide between genders”. Such a proposal has often been dismissed as far-out and utopian, but during the pandemic lockdowns many developed countries have introduced something similar to a UBI.

Such as Spain. With 900,000 jobs lost within the first two weeks of lockdown, Spain’s social security minister — Joes Luís Escriva — was quick to announce that a “minimum vital income” would be provided to more than a million vulnerable households, with at least 10 percent allocated to single-parent families. Importantly, the government pledged that the scheme would be perennial. “It is going to be structural, permanent — it’s here to stay,” said Escriva. “It will be something new that social security has not offered so far and that we are trying to accelerate to the maximum.”

As for Australia: “The government’s response to the pandemic has moved us much closer to a liveable income guarantee,” said Professor Quiggin. Although slated to end on September 27, the $130bn JobKeeper wage subsidy scheme may well be extended beyond that date. “This is supposed to be temporary, but temporary will turn out to be a long time.”

If the Jobkeeper scheme were to become something more permanent, it would need amending. As it stands, JobKeeper has its limitations. In an economy that champions casual employment and gig contracts, a “job” is difficult to define. And while JobKeeper allows workers to cling on to existing employment, it does nothing to assist the unemployed, nor people who resign.

And, of course, a wage subsidy is not the same as a guaranteed income. Perhaps the government will shift more favourably toward the idea of a UBI once the Australian economy tanks, as it is forecast to do. The International Monetary Fund expects Australia’s GDP to diminish by at least 6.8 percent throughout 2020. To find a deeper depression you’d have to go back to the 1930s. And it will be the disadvantaged that suffer the most such as people in less-protected and lower-paid jobs, particularly younger and older workers, as well as women and migrants.

“That is where basic income comes into the equation, moving from the desirable to essential,” said Professor Guy Standing of the World Economic Forum. “After years of intellectual loneliness, basic income is today finding converts and open advocates from across the political spectrum. We must hope that will result in more politicians showing more backbone in this debate. A basic income is much more sensible economically and socially than the alternative being implemented by some countries, namely providing substantial wage subsidies.”

As the coronavirus shakes economies around the globe, people are beginning to question neoliberal economic models. “The pandemic has really thrown up the existing levels of both injustice and inequality worldwide. So bolder ideas are needed, including some, that previously, were pushed aside,” said Kanni Wignaraja, Director of the United Nations bureau for Asia and the Pacific. “At the UN, we’re saying that, if there isn’t a minimum income floor to fall back on when this kind of massive shock hits, people literally have no options.” Speaking to UN News, Wignaraja argues that the cash needed to ensure people have a reliable safety net is much cheaper than the huge investments currently being made to bail out entire economies. “This is why it is so essential to bring back a conversation about UBI. And to make it a central part of the fiscal stimulus packages that countries are planning for,” she said.

Opponents of a UBI will say that the scheme would be impossible to implement as no country could regularly afford to dish out cash to every eligible citizen. But Wignaraja believes that by not investing in a UBI, the costs to communities would be far dearer. “If a large part of an entire generation loses its livelihood with no safety net to catch it, the social costs will be unbearably high. To put it bluntly: the question should no longer be whether resources for effective social protection can be found — but how they can be found.”

And, in Australia at least, the resources are there. “We have more than enough in this country to ensure that no one lives in chronic poverty and everyone has enough to eat and a safe home,” said Greens MP, David Shoebridge. “It’s politics not economics that punishes people for being poor. Government should be about solutions, about lifting up the most vulnerable and driving us towards a fairer society. We need to find innovative ways to more fairly share wealth in this country and when we look around for answers, a UBI is pretty much top of the list.”