About UBI

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

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 used in examples - BI 435 euros

To explain more clearly let's use a possible example model. The amount of basic income in this model is the same that Portugese activists have proposed for their country - 435 euros. They believe this amount would be executable for Portugal. Estonian figures like GDP per capita and price level are very close to Portugal's ones. Tax levels are a little bit higher here than in their model. Additionally we assume that the basic income and related additional taxes are for those only who have the citizenship. Note: this is only an example model described especially for this article.

  • minimum wage before the basic income – 430 euros per month (2016, Estonia)
  • post-transition minimum wage as a result of wage pressure - 558 euros per month
    • foreigner's amount: national minimum wage + addition equal to the basic income (558+435, paid only by employer)
  • basic income - 435 eurot
    • not taken in account as an income
    • only for citizens and also those foreigners whose countries of origin have implemented the basic income as well (regardless of their amounts)
    • essentially this is a tax return (being until some point higher than paid taxes)
  • personal income tax amount 20%
    • retained form all income of citizens
    • tax allowance for non-citizens eqals to the basic income amount
  • citizen's social contribution 33%
    • a new tax to help cover the basic income costs
    • only for those who are eligible to get the basic income
    • allowance equals to the whole minimum wage to minimize the pressure on lower wages
  • pension insurance 2%
  • foreigner's unemployment insurance 1,6%

Pressure on the minimum wage and all low wages

 

GW 2016 Net 2016 Pressure GW@BI435 Net+435
430 363 +128 558 870
575 473 +70 645 909
730 592 0 730 948

To ensure that the net mnimum wage would be equal or bigger than the basic income it has to be raised by at least 128 euros from the initial level. (430) until 558 euroni. The whole net income would be 870 euros.

Higher wages than 430 euros could be increased by smaller and smaller amount until the wage ca 730 euros that would be unchanged.

Pressure for salary cutoff

 

GW 2016 Net 2016 Pressure GW@BI435 Net+435
730 592 0 730 948
859 690 -70 789 974
1352 1067 -357 995 1067
1763 1381 -70 1693 1381
1864 1458 0 1864 1458

The following salary range could be available for decreasing. The range is approximately between 730 and 1864 eurot. The cutoff amount varies between 0 and 357 eurros. The peak point is at 1352 euros gross wage that would be 995 euros. 

After that the possibilty for any salary cutoff decreases as the taxes became very quickly "positive" for income bigger than 1125 per month. Warning: the real tax amount increases step by step.

Salary advance for well-payed

 

GW 2016 Net 2016 Pressure GW@BI435 Net+435
1864 1458 0 1864 1458
1964 1534 +70 2033 1534
2375 1849 +357 2732 1849
3440 2662 +1100 4540 2662
6880 5290 +3500 10380 5290
13760 10547 +8301 22061 10547

The workers with initial salaries of 1850 euros could well start to demand higher salary. The real tax burden increases progressively and now it's about 22%.

Those who have earned 1964 euros per month could demand to add 70 euros. 3440 euros per month should be increased by 1100 euros to not to loose in net income. 

If the gross salary of 13760 euros would increased proportionally with the minimum wage then the gross wage would be increased to 17856 eurons, However, to keep the living level untouched then the neow salary should bee 22061 euros.

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.

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. 

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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. 

Popular measure - rising the taxless income

Ideally and logically the amount of nontaxable income would be equal to the UBI. In most cases that would mean the raising of this free amount. When someone wouldn't be egilible for an UBI then he's/she's income would still have the same nontaxable part. 

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. 

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. 

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. 

 

GW 2016 Net 2016 Pressure GW@BI435 Net+435
1864 1458 0 1864 1458
1964 1534 +70 2033 1534
2375 1849 +357 2732 1849
3440 2662 +1100 4540 2662
6880 5290 +3500 10380 5290
13760 10547 +8301 22061 10547

The workers with initial salaries of 1850 euros could well start to demand higher salary. The real tax burden increases progressively and now it's about 22%.

Those who have earned 1964 euros per month could demand to add 70 euros. 3440 euros per month should be increased by 1100 euros to not to loose in net income. 

If the gross salary of 13760 euros would increased proportionally with the minimum wage then the gross wage would be increased to 17856 eurons, However, to keep the living level untouched then the neow salary should bee 22061 euros.