Paid Work and Basic Income

PAID WORK AND BASIC INCOME

Basic Income instead of Hartz IV. Securing Existence and Protection from Poverty are Central, not Leveling

By Michael Opielka

[This article originally published in: Freitag 41, 10/1/2004 is translated from the German on the World Wide Web, http://www.freitag.de/2004/41/04410601.php. Michael Opielka directs the Institute for Social Ecology in Konigswinter.]



For a long time reforms have changed their meaning from the first post-war years. Once reforms were improvements for those in the shadows of society. Hartz IV proposed by red-green and promoted by black-yellow is the temporary climax of the social-political counter-reformation. The Monday demonstrations accomplished many things but have not stopped the poverty program. Perhaps bringing our own project in the debate would be good for the future, not only protesting against exactions or unreasonable demands. This magical keyword – basic income – has fallen again and again. How can it be revived? Michael Opielka who has focused on this question for a long while names the hurdles to be overcome.

Amid adverse conditions, social reformers scattered here and there find themselves as in a Gallic village under Roman occupation. In Germany, a “Basic Income Network” was recently founded (http://www.grundeinkommen.de) that as part of an international movement (http://www.basicincome.org) urges a radical reform of the conditions of the labor market and social policy. The goal of basic income advocates is to neutralize capitalism in one of its central premises: the generalization of paid labor as the only or at least dominant path of securing existence. An individual basic income securing existence and paid independent of the labor market would not infringe private ownership of the means of production, the second pillar of capitalism. However paid labor can no longer be the eye of the needle that must be passed through in the interest of livelihood. Paid labor should be only one option for additional income that can provide comfort and luxury.

The opposite is increasingly practiced in all western welfare states instead of limiting the commodity character of labor. Since the 1990s, “welfare retrenchment” or withdrawal of social-political claims makes the rounds. The motto “workfare instead of welfare”, more simply work pressure instead of the hammock, is at the heart of this process. Unionists, social democrats and many Greens do not see a moral or political problem in a forced work obligation. All paths for securing existence according to the still dominant version of the welfare state must be closely tied to the labor market.

The advocates of a basic income take a different path. They seek a basic right to an existence-supporting income independent of the labor market. The spectrum of the friends of basic income is wide and includes Andre Gorz, Claus Offe, Erich Fromm, Milton Friedman, Rudolf Steiner and many feminists like Gisela Notz. Whoever is for a basic income usually has an optimistic view of humankind. He or she assumes that a person can be better motivated through incentives than through pressure, strives for happiness and wishes to share this happiness with others. This optimistic view of things is supported by psychological and macro-economic research and is even at the heart of the capitalist utopia. Incentives and happiness (“pursuit of happiness”) are part of that utopia. Thus the basic income is not anti-capitalist.

Two essential objections are raised again and again: Can labor markets function without pressure? Can a basic income be financed? The defenders of a “workfare ethic”, a direct work obligation more or less, may agree that a person reacts better to incentives than to coercion. However their argument is that general morality falls when the unemployed are supported by the general public. Shortly after the proclamation of “Agenda 2110) in the summer of 2003, the tabloid press highlighted the case of “Florida Rolf”, a German social security recipient with a residence in the US. Foreign income support was instantly restricted.

“Florida Rolf” was welcome above all to those with a radically pessimistic view of human nature. Unemployment first arises, they insist, through income support and unemployment benefits. The assumption of market-friendly wages stands behind this thesis. As soon as a guaranteed minimum income is withdrawn as a base, the market laws become distorted and the social state produces unemployment. This argumentation is ultimately behind the “workfare” ethic. This cannot be proven. On the contrary, there are far more unemployed in countries without the state guarantee of existence. The strategy “workfare instead of welfare” has still not proven successful in international comparative studies.

Causal connections between workfare and better labor market data were long argued theoretically but not empirically proven. For example, the “jobs wonder” in the Netherlands has practically nothing to do with the restrictions there and very much to do with the increase of part-time work and forcing the unemployed into a hidden unemployment. Thus the first objection of basic income skeptics is weak. If labor markets do not function better with more pressure, why should they function worse with less pressure?

The second objection targets costs. A basic income at the level of the average per-capita income would undeniably involve an enormous redistribution since everyone would receive the same amount. This would be genuine communism. In such a world of equality, the state share would no longer amount to 49.2 percent (as in Germany in 2003) but practically 100 percent. To that extent, basic income would be “expensive”. However an average income is not a basic income. Securing existence and protection from poverty are central, not radical leveling.

The “costs” of a basic income depend above all on three variables: the level of basic income, the question whether all household members have a claim (individual- or household principle) and what must be paid out of basic income.

Up to the eighties, the so-called “shopping basket” principle was in effect in Germany. The subsistence level was determined according to household- and food data. Because that was too “expensive” to the conservative-liberal government at that time, the “shopping basket” was first suspended and then replaced by a “statistics” model. Since then, poverty is defined by the lowest income groups. Despite considerable criticism from poverty researchers, the red-green German government holds fast to this definition of the income support level in “Unemployment Benefits II”: 345 euro for adults in West Germany or 331 euro in the East plus an average 306 euro for housing costs.

Both components taken together equal the current basic tax allowance in the income tax law: 640 euro monthly or 7,664 euro a year. This seems to be the absolute minimum. Higher contributions could be justified by defining 50 or 60% of the average income as the poverty line as occurs in many other countries. According to this calculation, a subsistence level would amount to 1,080 euro for a single person.

The second cost-effective variable, the decision between the individual- and household principle, is more complex. German tax-, social-, and family-law is based on the model of the maintenance community, the family. The family is often privileged – for example through independent taxation of husbands and wives, gifts- and inheritance tax allowances, free joint legal insurance, survivor’s benefits and pensions. In a countermove, spouses are obligated to support each other, parents are obligated for their children and children (partly) for their parents as in nursing care costs. A basic income must fit in this system – or the whole social system must be thoroughly individualized.

Individualization seems positive in several respects from a female perspective. However some feminists warn: Whether the women who always feel more responsible for their children than the fathers are better at the end is hardly clear. Given that more than 50 percent are non-working wives in West Germany (and 30 percent in East Germany), one can imagine the cost effect when each and every one independent of the partner claims a basic income. Thirdly, the costs of basic income depend on whether one must pay his or her health insurance, whether and how much one receives in housing subsidies with high housing costs and above all how additional incomes are counted.

When these variables are first clarified, serious statements are possible on the costs of a basic income. Some attempt this. An Austrian representative of attac (“attac is vision”) presents a mathematical model for a “social dividend”, that is for a basic income in which every Austrian citizen of working age receives 1,166 euro (plus graduated subsidies for children) and every pensioner 1,333 euro per month independent of other income. To finance this, citizens must dig deep in their pockets with 50 percent income tax and a doubling or tripling of taxes on capital transactions, inheritance tax and market sales tax. In addition, there are subsidies for health insurance.

These accounting models are politically important. They show one thing above all: the idea of basic income is not completely ripe. The great design, the sudden introduction of a basic income independent of the labor market, is not feasible. It is hard to convince the citizens in general and the elites in particular when people cannot imagine the basic income. Are there pragmatic steps to a basic income that breathe its spirit? One model would be “basic income insurance”, a citizen insurance against sickness and for all income risks. Whoever is unemployed and ready for work, whoever is sick, old or disabled and whoever has to care for little children would have a claim to a basic income.

The idea of basic income insurance could be based on the Swiss basic pension insurance. Every Swiss citizen pays 10.1% of his or her income – without an upper limit – and receives at least a basic pension in old age or a maximum of twice the basic pension. According to the earlier contributions to basic income insurance, one would receive the basic income or twice the contribution. Children would be entitled to a children’s allowance like today and a child benefit award up to half of the basic income. Pensioners would be allowed an increase to the basic income. Whoever does not want to register as unemployed would still receive a basic income but half as a loan (student financial assistance for everyone) as today among students.

If this basic income amounted to 640 euro, the costs of this new system would be manageable: 17.5% on all incomes of private households without contribution limits. A kind of “social tax” would result – comparable with the uniform rate that all working Swiss pay into pension insurance without contribution limits. In a countermove, the present income tax could be clearly reduced. Whether a basic income can be financed depends on its organization. It depends first of all on setting basic social rights on the daily agenda against the current political climate.