470. Corona will lead to a basic income

I predict that the Corona crisis will lead to a Basic Income (BI).

To recall: a BI is unconditional, accorded to every citizen of a certain nationality above a certain age, say 18, regardless of work or property. Immigrants receive it after a certain time. It has been discussed in earlier items of this blog (items 154, 226)..

It has been experimented with in a number of countries, and was introduced in Iran (2011) and the Spanish government announced its intention to itroduce it ‘as soon as possible .

The arguments in favour of a BI are as follows;

1.      1. It eliminates the ‘poverty trap’ for people who receive a benefit and lose it when they start to earn an income, leaving no incentive to do that.

2.      2. It can be seen as a ‘social dividend’ on what past generations have produced, yielding  economic, social and cultural infrastructures that yield benefits that business builds on and profits from and that should but should yield benefits not only to them.

3.      It saves much on measures that are in place to support the poor, old or ill, and on the costs to administrate them.

4.      It will reduce current inequality of income and wealth which is socially destructive and has even been shown to be economically harmful. Currently, a number of high incomes are undeserved rents from monopolies, market entry barriers, tax evasion, and inheritance.

5.      4. It lowers the threshold for entry into self-employment and independent entrepreneurship, since one can fall back on the BI, to reduce risk and survive especially in the early years a venture, when the novelty aimed at is not yet available as collateral for a loan.

6.      It shifts negotiation power from employer to employee, to improve labour conditions and reduce risks of unemployment, because he can fall back on the BI.

7.      It provides more basis for volunteer social services, in caring for the elderly and the sick, or community services, as in sports clubs. This also contributes to public savings that helps to finance the BI.      

8.      It allows for a ‘flat tax’, without progression, up to  a high level of income

The arguments against are:

a.       1. It is morally wrong to give and receive an income without earning it with employment or entrepreneurship

b.      2. It will discourage people to work

c.       3, It cannot be financed; taxes would rise too much, further discouraging work

Arguments for my prediction are as follows:

1.                  1. Evidence from experiments and actual introduction shows that people receiving a BI will not work less, and sometimes even more. When they do work less, it is often for more schooling, with a reduction of child labour, and a prolongation of study (as shown in an experiment in India).

2.                  2. It is used also for investment, such as a sewing machine for making clothes and for  bringing them to market, fishing nets, a fishing boat, a well (in experiments in Africa and India).

3.                  3. There are other bases for finance than higher tax on personal income, such as tax on the use of robots. The usual argument against tax on capital is that it will drive its use abroad. But the tax would be on the use of robots, in services such as transport, delivery, health care, care and company for the elderly, cleaning.  That does not apply here, since the tax is on the use of robots locally.

4.                  4. It is, I grant, uncertain how much employment robots will destroy, given that in the past new technology has also created new jobs. However, previous inventions did not concern the production of the goods embodying those inventions. Lightbulbs did not produce lightbulbs, and steam machines did not produce steam machines, while robots will produce robots. So I expect that this time it will be different and there will be a large net increase in unemployment, necessitating a BI. The use of robots will accelerate after and during Corona, because they are not infectious, in activities that require interaction, such as health care, other personal care such as hair dressing, nail clipping, foot care, massage, and delivery, provision of company for the elderly. They will have to be cleaned against infection, perhaps by specialist cleaners.

5.                  5. The ideological obstacle to the ‘free handout’ of a BI erodes with the financial support now given as a handout to the unemployed and stagnating businesses, as a result of the crisis.       

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