The basic income concept is becoming a reality

POLITICAL ECONOMY
Margarita Poluektova

In June 2016, Switzerland will be for voting on a radical plan, according to which adults will be paid 2,500 Swiss Francs (£1,764) on a monthly basis whether they work or not. According to this basic income concept, all citizens and residents are to be entitled to get this extra payment without exceptions, regardless of the level of income and without the necessity to work.

In the eyes of activists, the basic income is crucial for eradicating poverty. This entire concept is not new. In 1967, Martin Luther King Jr. wrote: "The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” There is no doubt that poverty alleviation has already taken place as a result of overall economic growth denoted after industrial revolution, with food shortages becoming less common as well since the development of modern agricultural technology. However, the issue still remains. Even though it has been successfully addressed by various economic and humanitarian means, 16.4 % of the population in the European Union, making 80 million people, live below the poverty threshold, whereas in Africa almost one out of every two people still lives in extreme poverty. At the same time it is notable that world GDP has quadrupled during the 20th century, so it is hence logical to assume that it is possible and even necessary to redistribute this increased amount of wealth between those who are in need. This is when the basic income system might appear an ideal solution. Indeed, the Basic Income Grant Pilot Project was already implemented in Otjivero-Omitara in Namibia in 2008-2009, where eventually the reduction of poverty level was denoted. If the strategy has already succeeded on this experimental level, putting a real basic income scheme to life seems extremely achievable.

Is it possible to finance this ambitious project? Recent studies show that it is not as unrealistic as it might seem. Any additional income would have to be taxed and made subject to social welfare contributions. The basic income is to be set at 60% of average income, and people would become net tax payers only if they earn more than the average income. This is how it would become a huge redistribution program: all people receiving less than average income would be entitled to both basic and other income. At the same time, for every citizen the incentive to work would be provided, for any additional income would significantly increase general income. So the potential concerns whether people would no longer want to engage in professional world because they allegedly would not need to work to make a living seem eventually unfounded and unlikely.

However, it is evident that the implementation of basic income cannot be achieved in one go, as there are still various complicating factors that need to be addressed. The concept itself appears to be too idealistic and perfectionist to be put into practice all over the world, since arguably only the wealthiest countries have the practical ability to operate with such an ambitious way of redistribution concerning sufficient amount of money. Switzerland is indeed the closest to put this strategy to use in the nearest future, with the guaranteed basic income making 55% of the average wage. However, it is very unlikely that the Swiss referendum will succeed this time around; on the other hand, even if the majority voted in favor of introducing basic income, its realization would take some time. Nevertheless, even if at least one country eventually implements this scheme, there is no doubt that it would become a policy model for other states and perhaps introduce a new era with a successful complete eradication of poverty.

Margarita Poluektova is a second-year Politics, Philosophy and Economics student at the University of Manchester