Viimased uudised

Unconditional Basic Income

Definition of UBI

 

Unconditional Basic Income is a guaranteed regular income aimed to cover people's compulsory expenditures and to be payed to everyone no matter he/she got salary for working or is jobless, company owner, pensioner or a child. 

The main goal of an UBI is to end the poverty fear along with poverty itself from our life, guaranteeing this way the life in dignity and personal freedom to maike life decisions for everyone. Nobody has to eat from anybody's hand - everyone will be unchained from from the employer's or family member's wallet.

UBI will replace most of the traditional social security instruments, transforming the social security system as "emancipatory" - nobody has to prove anything to receive this universal income.

About this film created in 2008 by Daniel Häni & Enno Schmidt: read more in "Implementation" section

Case 1: every legal resident

Unconditional Basic Income itself is considered as a human right being really fully unconditional. Anyone who lives in European Union as a legal resident would be egilible to the basic income paid from country's authorities. That means not only E.U citizens but also people from outside. 

Pro: very humanist approach

Con: attractivity for immigrants

Case 2: every EU citizen everywhere

UBI is considered as a civil right and restricted to the people who has obtained any EU country's citizenship. In any EU country, no matter from which EU member the resident is, he/hse is egilible for the public basic income in a local amount. 

Pro: encourages the free movement of workers inside EU, making the union less attractive for immigrants

Con: encouratges the "mixdown" of population that would lead to etnical and cultural assimilation; in case of unequal purchase power of UBI-s the richer countries would its attractivity for workers from poorer countries.

Case 3: only the current country's citizens

In each EU member country only this countrie's citizens are egilible for UBI. Employers needing workers who are other countries citizens (no matter from EU or elsewhere) should pay them salary in amount that would correspond to the sum including regular amount for this job and the amount of national UBI. Where a national minimum wage is available, there the minimum wage for strangers would be minimum wage + national UBI. 

Pros: keeping low the import of workers

Cons: hardest conditions for employers

Soft landing: no fear of poverty

Fear of poverty = fear of failure = stress = bad work

UBI is aimed to guarantee a soft landing for everyone regardless whether to a simple worker or entrepreneur. That would eliminate the fear of poverty, so anyone could be fully dedicated to the work and its results. In case of failure the soft landing pad just exists - no need to do anything special to get it. 

Fear of poverty = wallet chains inside family = keeping alive unsupportable marriage

Often it's very hard for the victims of family violence to quit their bad marriage because of the economical dependence of violent family member. UBI would break such wallet chains. 

Feeding enterprises via people

Principally, the Unconditional Basic Income means that the public sector would finance one part of national economy, funding particular kind of enterprises, but not directly - via the citizens instead. 

Those particular enterprises are providing goods and services that the people could not live in dignity and participate in society without - food and clothes production and selling, telecommunication services, housing related services and public transport. 

So the money's itinerary in national economy would have just one additional stop in the citizens' bank accounts. This is not any kind of black hole - anyone is consuming the necessary things, so the money will continue its way to enterprises, salaries and taxes.

Obvious decreasing of public sector

As due to the implementation of UBI there are no longer need for verifying the egilibility of people for social assistance, there will be no longer need for the officers whose job was related to this. So they would have to find another work or just "enjoy" the UBI: 

Work - not to survive but to get richer

While today people are working to survive, with UBI this would no longer be a motivation. However, job would mean much better life than just an existence as the salary would be paid along with UBI and its amount should be higher. 

That means also that the role of employer changes. They would be just partners, not someone who we have to be thankful for job. 

Good bye, alimony

One issue that will obviously remain in past - paying alimony for children after divorce and hunting those who don't pay. With UBI, everyone just pay them for every child and every child receive an UBI.

In case when the divorced marriage was accompanied with violence, it would be psychologially better that the victims would not have any relationship with the violent counterpart. Today however, the alimony is like unsolicited money bridge between former family members. With UBI they will get 100% free from this. 

Wage pressure up and down

Implementation of the basic income may trigger a pressure both for raising and cutting salaries depending on the wages before and how one's net income would change without changing the gross wage. Raising or cutting wages may have the following goals:

  • to preserve the competitiveness of the minimum wage and other wages for low-paid jobs and keep them motivating
  • to minimize or avoid the immediate raising of total labor costs
  • to preserve workers net income at least in the previous level
  • to keep the salaries hiararchy unchanged

Possible model 2020 if implemented independently in Estonia (UBI 343 eur/m)

To make the picture clearer, let's use a possible sample model. The size of the citizen's salary in this model is the average standard expenditure per month per child. They were calculated in the study "Minimum needs-based aliments for children" commissioned by the Ministry of Justice and conducted by the University of Tartu. According to the study, the average standard cost in 2020 is 343 euros per month, the average cost is 388 euros per month. We assume that a citizen's salary is for a person from birth to death, and it is an equal amount. We also assume that the citizen's salary and the related additional tax layer only apply to citizens. NB! This possible model is described only to illustrate the effect on wages.

Net+343 vana TM = kogu netotulu, kui standardse tulumaksu süsteem viidaks endisele kujule, st loobutakse maksuvaba osa kahanemisest. 
Näide: bruto 4200, ühtekuuluvusmaks 25%*4200=1050, tulumaks 20%*(4200-500)=740, maksud kokku 1050+740=1790, reaalne maksukoormus 1790-343=1447 (34,45%), neto 4200-1447=2753
Võit-kaotus = kogu netotulu suurenemine või vähenemine juhul, kui tulud (nt töötasu) jäävad samaks, kahaneva maksuvaba tulu lahendusest aga loobutakse. 
Palgasurve. "Kaotuse" vältimiseks tuleks praegust 2100 euro suurust brutopalka tõsta 180 euro võrra. Kuupalka 8400 aga ca 3015 euro võrra. 
Palgakärpesurve. Kui miinimumpalka vähendataks kuni netopalga võrdsustumiseni kodanikupalgaga, siis saaks MP suuruseks 457,33 eurot kuus, MP saaja aga võidaks sellegipoolest 119 eurot kuus.
BP 2020 Net 2020 win-loose BP KP343 Net+343

Net+343
vana TM
584 567 +201 584 785 785
1000 900 +93 1000 993 993
1200 1060 +43 1200 1103 1103
1372 1179 +19 1372 1179 1198
1510 1274 0 1510 1240 1274
2100 1680 -81 2100 1499 1599
4200 3360 -607 4200 2653 2753
8400 6721 -1657 8400 4964 5064
  • minimum wage before UBI – 584 eur/month (2020)
    • foreign citizens amount - minimum wage + UBI amount, paid fully by employer
  • UBI- 343 eurot
    • not a taxable income
    • only for citizens and those foreign citizens which country has also introduced an UBI (not depending on their domestic amount)
    • for citizens from 0 years to teath 
    • UBI is a refund of taxes by its nature (until some income level you get more than you pay)
  • standard income tax 20%
    • allowance 500 euro/month
  • citizen's cohesion tax 25%
    • new tax covering partially UBI
    • only for citizens as they get UBI
    • without allowance, starts from the first euro
  • total tax marginal for citizens: until 500 eur/month 25%, since the 501-st euro 45%
    • we suppose that today's income tax model with the decreasing allowance between incomes 1200 ja 2100 euro/m (with a real marginal of 31,1%) will be rejected
  • real tax burden: paid taxes minus UBI
  • pension contribution 2%
  • foreigner's jobless insurance 1,6% 

Popular measure - rising the taxless income

So-called helicopter money is seen as one of the so far only theoretical financing methods - the central bank's seeding of money directly to citizens instead of commercial banks. If this way of financing turns out to be possible, the implementation of the citizen's wage should not result in the need to raise taxes.

According to skeptics, the seeding of money can fuel price increases "if no new values are created". At the same time, the emergence of such a situation is unlikely, considering the competition, the preservation of people's price sensitivity and even the continuous creation of various "startups". If there are consumers, the creator of new values will receive income, which will be added to the income received "just like that" and, if successful, will exceed it many times over. It should not be forgotten that the amount of "helicopter money" is limited not only by the number of residents (citizens), but also by the volume and composition of basic benefits.

Lobbying for helicopter money is taking place in the European Union anyway. In the direction of the European Central Bank, for example, PositiveMoney, an association operating in France, deals with this.

Possible unpopular measure - rising of taxes

It seems to be clear that the appearance of UBI and rising of tax-free income part will need a rising of some tax percentages as well. In may concern in first order the personal income taxes. Althought people with low incomes may not even feel the change, the reaction may be negative, at least in beginning. 

Alternatives - Negative Income Tax or tax credit

Technically different, but with the same parameters, alternatives to the UBI are the negative income tax and the so-called tax credit. In addition to tax reform (and simplification of the tax system), either solution of the guaranteed minimum requires a technical reorganization of the redistribution system.

In the event of a negative income tax, the state pays proportionally more money to the recipient of gross income below the tax-free limit. Ideally, a uniform tax rate will then apply. If a person does not receive taxable income at all, the state receives the part of the tax-free limit corresponding to the tax rate. For example, if 1,250 euros per month is tax-free and the income tax rate is 40%, the non-recipient of the income will receive 500 euros from the state, while a person with a gross income of 1,200 euros will receive 20 euros. From 1300 euros, 20 euros goes to the state.

A similar solution to the above in the form of a tax credit works as follows. The redistribution system calculates a person's nominal income tax based on their income and subtracts the tax credit from it. If the difference is negative, the difference is transferred to the person, if positive, to the state. Using the above sample parameters - a tax credit of 500 euros is subtracted from the 40% income tax. If there is nothing to withhold income tax, the person gets the entire tax credit. If the gross income is 1200 euros, the nominal income tax is 480 euros, but it stays with the person and he gets another 20 euros for himself (480 - 500 = -20). However, in the case of a gross income of 1,300 euros, 20 euros go to the state.

The principle of "diminishing support", similar to the negative income tax, has been tested in experiments in the 1970s in the USA and Canada and also used when the "stimulus checks" were introduced in USA due to the Covid crise. The tax credit solution was discussed in the French parliament in 2021, while the autonomous Corsica hoped to organize an experiment in this regard on the island as a whole, using an already functioning redistribution system (with a tax rate of 35%).

Super radical taxation reform in "Grundeinkommen - ein Kulturimpuls"

The authors of the film, Daniel Häni and Enno Schmidt, made in 2008, provide a comprehensive overview of the historical background and sources of the idea of unconditional basic income, and also propose measures for its implementation.

According to their idea, the tax system should also be reformed, consolidating all existing taxes into VAT, so that the cashier's check clearly shows the buyer's real contribution to society. As a result of the merger, the net price of the goods decreases significantly and the share of VAT increases significantly. As a result, the latter can be equal to or higher than the net price (if VAT is equal to the net price, it is 100%). However, the retail price of the goods may not change at all - only the proportions of the price components change.

The film also gives an example that assumes the VAT rate is 100%. A working citizen fully covers the costs of the UBI paid to him by consuming goods and services, if his salary is at least equal to the UBI. For example, if the UBI is equal to the Estonian "child standard" of 2023 (499.56 euros per month) and the person's salary is the same, then he receives a total of 999.12 euros per month. By consuming goods and services in this amount, he pays VAT in the amount of EUR 499.56, which is again paid back to him as basic income. However, if you want to feel that you have "earned" a UBI only for your salary, then your salary should be at least 999.12 euros per month. However, a monthly salary of 1498.68 euros + a UBI of 499.56 euros would mean that this person can also pay the UBI of one of his fellow citizens.

The communists already tried to make all people equal

The basic income can't make all people equal. Generally, it reduces the inequality. 

But in some cases it could even ensure an inequality - where needed to keep alive people's work incentive. Namely, it ensures that the income of active and inactive working age people would remain inequal in favour of those who have job or enterprise. Current traditional social welfare systems could, in worst cases create a "reversed" inequality which means that receiving social transfers is more useful than having job. Literally, one has a choice - to stay home and receive social transfers 500 euros per month or to have a job and get 500 euros per month. With a basic income, the choice with the same numbers would be - to stay home and get 500 euros per month or to have and job and get 500+500=1000 euros per month.

Inversely, the communists tried to build a money-free society where all people would work according to their abilities and get the goods according to their needs. I other words the amount of goods would not depend on their work at all. The Commune of the Working People of Estonia, an unrecognized communist state with short lifetime (Nov 1918-Jan 1919) even found the salary being a "capitalist hangover" and therefore paid a "living wage" that depended on the profession (but not on the real work). In Soviet Union that tried to build communism, having a job was compulsory, people without job were punished with short term imprisonment. At the same time, people with job often spent their working time in queues fearing otherwise not to get different goods. Private enterpreneurship wasn't allowed, there were no concurrence and many other things that are usual in market economy. 

Unconditional basic income would still use the money and keep alive the market economy. 

General principle: enough for living in dignity

The general principle says that everyone should have an income that is high enough to allow them live in dignity. It's considered to be at least 60% of the median of national net income.

But in many cases the 60% doesn't fit the term "enough" as it won't actually cover all compulsory expenses, especially in most of so-called ex-socialist countries. The proportions between price levels and people's income aren't in 1:1 correlation in EU countries - gaps between income are bigger than between the prices of goods and services. 

{lang}

Case: sum of standard basket of goods and services

The amount of UBI would be a sum that depend on the total price of standard basket of goods and services in each country. This basket should be a general EU wide standard and contain

  • monthly basket of food
  • reasonable monthly expenses for clothes
  • expenses for an urban transport in capital city
  • reasonable expenses for phone, internet and cable tv connection
  • housing expenses (incl. rent) in 2 rooms+kitchen in capital city's suburb, in most common house type

For adolescents, of course, at least the housing expenses may not included.

Case: standard percent of GDP per capita

The possible amount of UBI could be considered also as some standard percent of national Gross Domestic Product per capita.

Equal percentage of GDP would make fit the UBI equally to each country's economy. But the purchase power will then be inequal between national UBI-s.

More equal approach towards citizens would be the same percentage in real euros from the GDP per capita in PPS. 

Possible model 2020 if implemented independently in Estonia (UBI 343 eur/m)

Details
Written by: Jaanus Nurmoja
Category: Amounts
Hits: 5514

To make the picture clearer, let's use a possible sample model. The size of the citizen's salary in this model is the average standard expenditure per month per child. They were calculated in the study "Minimum needs-based aliments for children" commissioned by the Ministry of Justice and conducted by the University of Tartu. According to the study, the average standard cost in 2020 is 343 euros per month, the average cost is 388 euros per month. We assume that a citizen's salary is for a person from birth to death, and it is an equal amount. We also assume that the citizen's salary and the related additional tax layer only apply to citizens. NB! This possible model is described only to illustrate the effect on wages.

Net+343 vana TM = kogu netotulu, kui standardse tulumaksu süsteem viidaks endisele kujule, st loobutakse maksuvaba osa kahanemisest. 
Näide: bruto 4200, ühtekuuluvusmaks 25%*4200=1050, tulumaks 20%*(4200-500)=740, maksud kokku 1050+740=1790, reaalne maksukoormus 1790-343=1447 (34,45%), neto 4200-1447=2753
Võit-kaotus = kogu netotulu suurenemine või vähenemine juhul, kui tulud (nt töötasu) jäävad samaks, kahaneva maksuvaba tulu lahendusest aga loobutakse. 
Palgasurve. "Kaotuse" vältimiseks tuleks praegust 2100 euro suurust brutopalka tõsta 180 euro võrra. Kuupalka 8400 aga ca 3015 euro võrra. 
Palgakärpesurve. Kui miinimumpalka vähendataks kuni netopalga võrdsustumiseni kodanikupalgaga, siis saaks MP suuruseks 457,33 eurot kuus, MP saaja aga võidaks sellegipoolest 119 eurot kuus.
BP 2020 Net 2020 win-loose BP KP343 Net+343

Net+343
vana TM
584 567 +201 584 785 785
1000 900 +93 1000 993 993
1200 1060 +43 1200 1103 1103
1372 1179 +19 1372 1179 1198
1510 1274 0 1510 1240 1274
2100 1680 -81 2100 1499 1599
4200 3360 -607 4200 2653 2753
8400 6721 -1657 8400 4964 5064
  • minimum wage before UBI – 584 eur/month (2020)
    • foreign citizens amount - minimum wage + UBI amount, paid fully by employer
  • UBI- 343 eurot
    • not a taxable income
    • only for citizens and those foreign citizens which country has also introduced an UBI (not depending on their domestic amount)
    • for citizens from 0 years to teath 
    • UBI is a refund of taxes by its nature (until some income level you get more than you pay)
  • standard income tax 20%
    • allowance 500 euro/month
  • citizen's cohesion tax 25%
    • new tax covering partially UBI
    • only for citizens as they get UBI
    • without allowance, starts from the first euro
  • total tax marginal for citizens: until 500 eur/month 25%, since the 501-st euro 45%
    • we suppose that today's income tax model with the decreasing allowance between incomes 1200 ja 2100 euro/m (with a real marginal of 31,1%) will be rejected
  • real tax burden: paid taxes minus UBI
  • pension contribution 2%
  • foreigner's jobless insurance 1,6% 
 

499,56

eur/month

- the smallest possible UBI amount worth to be discussed in Estonia from April 2023 until the next indexation in March 2024

which is the amount of standard average expenses per child - see i.e. alimony calculator

 

Sentences and UBI answers

The task of helping the drowning people is in the hands of the drowning people themselves (literary classic - Ilf & Petrov).

  • There is no one to save with a life jacket like Unconditional Basic Income, because there is no drowning person, but getting out is still up to the person who has fallen into the water, unless there is a health problem or a terrible storm.

Benefits need to be well targeted, not sown from an airplane (politicians' watchword).

  • An unconditional basic income means "automatic" need-based targeting of financial benefits without an army of state-paid targeters. The actual support of the state is just as much as how much the UBI is higher than income taxes, thus well need-based.

Why do you give a man a fish, teach him fish instead!

  • Basic Income is is not a fish for the poor, but a hook for everyone. With feed. And with preserves so that the angler can stay alive while learning and trying to catch his fresh trout. 

If a man will not work, he shall not eat! (The moral code of the builder of communism, the Soviet constitution of 1918 and 1936, V.I. Lenin and others - according to the apostle Paul)

  • The idea of a UBI is based on the principle that everyone must "eat" and the state must guarantee it, because success in the labor market or business is not guaranteed to anyone, but every citizen is necessary for the state, entrepreneurs and each other. However, everyone has to work hard for extra benefits, luxurious life and wealth.

Viimased veebilehejutud