Free and Equal by Daniel Chandler

Author:Daniel Chandler [Chandler, Daniel]
Language: eng
Format: epub
ISBN: 9780241428399
Publisher: Penguin Random House UK
Published: 2023-03-09T00:00:00+00:00

MEETING BASIC NEEDS: THE CASE FOR A UNIVERSAL BASIC INCOME

The most fundamental requirement of a fair economy is that everyone can meet their basic needs, and we cannot rely on markets for this task. We can see this by looking at people’s ‘pretax’ or ‘market’ incomes – that is, their incomes before taxes and transfers, which for most people are mainly earnings from work. In most countries, if people had to rely on their market income alone, somewhere between 20 per cent and 30 per cent of households would be living in ‘relative income poverty’, defined as having less than 60 per cent of average income.35

One way to address this is to help people to increase their earnings, say by investing in education or establishing mandatory minimum wages, and we will look in detail at how we might do this in the next section. But there is a limit to how far we can raise minimum wages without creating unemployment, and in any society some citizens will be unable to support themselves through work because they have caring responsibilities, or because of sickness or disability. As a result, we will always need some system for topping up people’s market incomes.

What should this system look like? Most rich countries have adopted some combination of ‘social insurance’ and ‘means-tested’ benefits. The basic idea of social insurance is that individual citizens pay taxes (or make insurance ‘contributions’) in return for receiving an income during periods when they are unable to work because of sickness, involuntary unemployment, or old age.36 Means-tested benefits, by contrast, are paid on the basis of need rather than prior contributions, usually to people whose incomes fall below a certain threshold. They are also typically conditional on the recipient proving that either they are actively taking steps to find employment or are unable to work. The balance between these two systems varies from one country to the next – social insurance plays the primary role in most continental European countries; while in the UK, USA and other anglophone countries, means-tested benefits tend to be more important.37

The most pressing problem with existing welfare systems is that benefits are typically well below what people need to meet their basic needs. In the UK, the standard unemployment benefit for a single adult is around £75 per week, barely above what is considered to be a ‘destitution’ income of £70, and far below the £230 per week that most people consider to be the minimum for a socially acceptable standard of living.38 Across the OECD as a whole, minimum-income benefits for a single person, including benefits related to housing, amount to about 35 per cent of median household income.39 As a result, even after we account for taxes and transfers, about 17 per cent of people live in relative income poverty in both the UK and the EU, rising to about a quarter of the population in America.40 Poverty rates tend to be even higher among households with children – in the UK, around

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