May 25, 2016    5 minute read

Switzerland Is On The Brink Of A Social Reform Phenomenon

   May 25, 2016    5 minute read

Switzerland Is On The Brink Of A Social Reform Phenomenon

On the fifth of June, the people of Switzerland are to vote on whether or not to provide every citizen $2,500 per month. In Switzerland, this style of vote is a regular occurrence. They are called Plebiscites. They take place after a proposal gathers 100,000 signatures, much like how in the UK if a petition is signed by the same number it must be debated in the House of Commons, but with a bigger consequence.

This is called Unconditional Basic Income (UBI). The first mention of this idea was by Thomas More in his 16th-century novel, Utopia. A character in the book proposed that the best way to counter theft was to “provide everyone with means of livelihood.” The model adapted over the centuries, through input from many political, philosophical and religious leaders and activists, Abraham Lincoln, Bertrand Russell and Martin Luther King Jr., to name a few. The theory of providing everyone with a standardised level of income gained popularity as the ‘Social Dividend’ and in the 1980s, the term ‘Basic Income’ gained currency. UBI is seen as a socialist policy, but over the years has gained traction in right-wing circles. The policy has received endorsements from notable conservative figures, including Charles Murray, a right-winged political scientist.

Unconditional Basic Income aims to generate a fairer society, curtail inequality and eradicate extreme financial poverty. The underlying theory is that the state guarantees all citizens, both rich and poor, the same certain level of income. Recipients are free to spend their income as they wish. This removes the costly bureaucracy that inherently befalls means-tested benefits, removes the stigma attached to claimants and gives every citizen the ability to afford food and shelter, regardless of their circumstances. The wealthiest in society, of course, also receive the pay-out; a little something back from their taxes which they wouldn’t usually see.

A base salary gives people the ability to choose what work they wish to do and not feel forced to follow a particular path for financial reasons. This is theorised to drive up entrepreneurship, creativity and happiness, generating a more productive workforce. The salary does, however, also give people the ability to choose not to work.

Indeed, if all those in the labour market were to receive a basic level of income, the requirement to take on certain jobs and part time jobs would wane. The incentive to work is greatly diminished. For the economy to continue operating efficiently, these jobs would still be needed, from cleaners to shelf stackers. The lowest paid and most physically demanding jobs in society would see a swift and large-scale desertion, forcing employers to raise wages to a level where employees now value the additional income more than their recreation time. Along comes a significant pressure on prices, inflation. To negate the disincentive to work, the level of basic income must be low enough so that people are still required to work, annulling the entire premise of the policy.

The specification to which people qualify must then be argued. “Everyone” is too broad in a world so globalised. To take the UK as an example, exposed to the free movement of people from within the European Union, constraint and control must be enforced on who can prosper from it. If it were accessible to everyone domiciled in the EU, the result would be a staggering increase of immigration on top of a number which is argued to be too high already. The cost of living is much greater in the UK than in parts of Eastern Europe and the UBI would have to be proportionately higher. The only way to alleviate this dilemma is to introduce an EU-wide flat rate of UBI at a level about that of the country with the lowest cost of living. This would not provide the residents of the UK, France, Germany, etc. with a significant enough level of income to serve the purpose of the UBI. Once again, the whole premise of the UBI is nullified.

Despite the policy presenting one of the simplest tax/benefit schemes with an extensive cut in bureaucracy, governments would be compensating hordes of people that they would not have been before. Despite the bureaucratic cost savings, the outcome of this is a need for a higher level of tax. Incidentally, another disincentive to work. Surely it would be a better use of public money to actively direct funds to those who are in real need, opposed to giving every single person, including a vast many who don’t need it, the same.

From a personal point of view, I would like to see the Swiss vote for Unconditional Basic Income. Switzerland is a relatively small country that can afford it, and it would be a great experiment for the rest of the world to observe. If successful, it would also give the Swiss the glory of being at the cutting edge of social reform.

For now, though, in the UK, disincentives to work, EU-wide imbalances and higher taxes do not form a good cocktail.

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