Livable income guarantee

I’ve been working on the idea of a Livable Income Guarantee for some time. This is a version of the participation income idea put forward by the late Tony Atkinson. ANU has just published a policy brief on the idea, written jointly with Tim Dunlop, Jane Goodall, Troy Henderson and Elise Klein.

It’s not the ultimate theoretical ideal for ideas like Universal Basic Income or a Job Guarantee. Rather, it’s a policy that could be introduced now, within the existing fiscal framework. The key elements are

  • permanently setting the unemployment benefit (whatever it’s called after Jobseeker) equal to the age pension, and subject to the same income and asset tests
  • expanding eligibility to encompass a wide range of contributions including
    • voluntary work
    • child care
    • full-time study
    • artistic and cultural activity
    • starting a small business
  • replacing current compliance enforcement with an approach similar to that used in the tax system, with self-assessment backed by auditing

The estimated cost is $18 billion a year, and a range of financing options are included.

18 thoughts on “Livable income guarantee

  1. “The LIG will be paid at the level of the current Age Pension, which, at the time of writing this, is $944.30 for singles, and $1,423.60 for couples per fortnight, with additional payments outlined below. ”

    So the proposal is for a payment independent of any income earned? Presumably, there are reasons for favoring paid work. Would not a negative income tax provide what you seek but also provide incentives for individuals to participate to some degree in paid work?

    I have not been following this discussion so may have misunderstood.

  2. I read the paper by Quiggin et al, “Liveable income guarantee”, accessible via the link policy brief.
    I like it very much. It ticks all boxes regarding the fundamental economic problems of our time:
    a) It reduces income and wealth concentration (by how much has to be seen).
    b) Depending on what non-market contributions people chose, it at least potentially reduces environmental degradation.
    c) It reduces financial instability, at least on the individual or family level, including small businesses.

    Conceptually, the LIG idea is based on a notion of ‘work’ that is relevant when the theory of incomplete markets is taken into account, rather than the notion of ‘work’ as understood in commerce – the observable market with transactions recorded in the national accounts.

    I particularly like that people have at least a constrained choice between market and non-market work. It is a constrained choice in the sense that under extreme situations of unemployment and underemployment, there is no choice to speak of.

    One of my concerns with the UBI has been and still is the possibility of laying a foundation for a class society – those in the market and those outside. Of course I cannot exclude a priori that LIG will never result in some people becoming so to speak locked into non-market activities. However, in the context of the LIG with its notion of ‘work’, they are not really outside a ‘market’ (basic idea of exchange), they are merely outside commerce.

    I also particularly like the LIG proposal moving at least a step closer toward the concept of ”minimum wealth constraint” (as distinct from survival constraint, ie only an epsilon away from zero), a notion that is central to all GE models I know and about which I have been harping on about for a long time.

    For quite some time large and medium size corporations have complained about being unable to plan, given the pandemic. Well, from the perspective of individuals, the ‘competitive labour market’ we are in offers an unpredictable income stream as the norm for gig employees and beyond. The LIG would at least provide the working population with a lower bound of secure income. This in turn assists individuals planning their economic activities. (What is good for the goose is good for the gander!) I take this as a contribution toward financial stability on the micro level with possibly positive multiplier effects in the goods and services commercial market.

    Finally, I like the notion of ‘the economy’, as talked about in the media and elsewhere, being challenged.

    There are other social and health aspects, I suspect, such as reduction in anxiety, family breakdowns, etc. But this is merely my gut feeling.

    JQ, I’d like to ask a favour. I don’t have easy access to libraries at present. I’d like to know how Thorpe et al arrived at their estimate of 34% of the Australian economy being unpaid work. I don’t doubt the meaning of this estimate. I just don’t know the technical bit. If it is not too much trouble, could you give me a hint?

  3. I refer to Ernestine Gross’s statement.

    “I also particularly like the LIG proposal moving at least a step closer toward the concept of ”minimum wealth constraint” (as distinct from survival constraint, ie only an epsilon away from zero), a notion that is central to all GE models I know and about which I have been harping on about for a long time.”

    I have not noticed any heterodox critic of G.E. even mention the ”minimum wealth constraint”. Maybe my reading is too limited but if critics of G.E. don’t mention the M.W.C. are they not critiquing a straw man, at the theoretical level at least? At the same time, I don’t see bowdlerized orthodox economics saying anything about it either. Nor does bowdlerized orthodox economics (meaning what’s done in practice in government and business economics) implement it. The idea seems to have been entirely lost from 99.9% of public economic discourse (or never found to begin with).

    Livable incomes and minimum wealth constraints call into question the issue of picking farm produce, to take this as an example. I mean that such farm produce is in essence a test case. If we can’t get resident members of our own political economy (meaning resident Australians and not exploited back packers and migrant workers) to pick fruit and vegetables, then what is wrong with the market system? It raises a number of questions.

    (1) With a guaranteed minimum income would anyone pick fruit and vegetables?
    (2) Without a guaranteed minimum income must we use immiseration to enforce fruit and vegetable picking?
    (3) Why doesn’t the market for fruit and vegetable picking work as a market should?
    (4) Is the market saying we don’t value fruit and vegetables enough to pay enough for them to be picked by resident Australians? (Even when we would get scurvy etc. without them?)

    Or, is the market telling us something else? Is it saying we should invent machines for all sowing, cultivation and picking? Is it saying that crops which have to be hand-picked should be phased out entirely or else re-bred until their cultivation and harvest can be fully automated?

    Or is the market saying, “Since I don’t function properly, you need special measures (like poor immigrant workers) to pick fruit and vegetables, so that well-off people can eat strawberries and cream at Wimbledon, while still ensuring nobody domestically resident is immiserated.” This last suggests a set of contradictions and inequalities in the domestic and international system. I suspect these contradictions include not only the lack of a minimum wealth condition but also the lack of a maximum wealth condition: i.e. the lack of a tolerable and equable wealth distribution.

    There also appears to be a technologically heightened pyramid of hedonic value levels whereby wages and profits for base production are out of balance with wages and profits for apex production. The distance from strawberry production to barouche production is less than the distance from strawberry production to Lear jet production. (There’s a complex set of issues contained in this which I haven’t been able to think through.)

    Finally, if people don’t have a role and place in the production of their society they won’t feel any connection to it. That’s why I would recommend roles and tasks for everyone. Getting something for nothing is really bad for people. This applies to people living on share income as well as living on dole income.

  4. Ikonclast, there is a belief version of GE (free market forces, …) and there are theoretical models in the analytical area. It is the latter where the condition for ‘freedom of choice’ is made precise by assuming each individual has enough ‘wealth’ to chose at least a little bit of what is on offer, if they want to. This idea is made precise in one statement, which in words reads, ‘the endowment of each individual is an element in the strictly positive orthant of the choice space (usually a multidimensional commodity space). In symbolic language this statement doesn’t take more space than the words ‘the endowment ‘. (The Arrow version is to assume each individual owns at least one commodity the price of which is such that wealth is at least equivalent to owning a bit of everything, given prices.) So, the phrase minimum wealth constraint isn’t necessarily used in the technical papers. But it is an adequate verbal description of the technical assumption that ensures ‘freedom of choice’ and people who work in this area do use it.

    The idea of a Liveable Income Guarantee, if I understand correctly, isn’t quite the same as guaranteed minimum income.

  5. JQ, I understand linking the level of LIG to the Age Pension makes sense at present. But how do you prevent this link being used in the future to lower both, the LIG and the Age Pension, relative to the cost of living, which is influenced by the income and wealth distribution?

  6. Ernestine Gross,

    I would pair the minimum wealth condition with a maximum wealth condition. I see no reason or necessity for the upper bound of individual wealth accumulation to be unlimited.

    On your post at September 15, 2020 at 8:58 am. How do we give a guarantee against any future regress of any kind? We cannot. No policy can be future-proofed against all possible kinds of future regress. The future is too much of an unknown, or rather a huge set of unknowns. But we may be able to envision some policies which would be harder to retrench than others.

    Economists talk about sticky prices. I would guess we can also talk about “sticky expectations” and “sticky rights”. Once something becomes an expectation or a “right”, which too is an expectation, then it does become harder to retrench same. People resist retrenchment of expectations and rights to which they have become accustomed.

  7. Having a maximum wealth limit only encourages evasion – it’s never worked in the past and won’t in the future.

  8. akarog,

    Humbug. We have evasion anyway, even without a wealth limit. Just need to toughen up the laws AND the punishments… a lot.

  9. Ikon

    You need to a) find a political party to support this policy and b) find sufficient voters to elect such a party to power.

  10. Apart from the odd angry shout, people are too comfortable to revolt.

    The conditions for a revolution need to be catastrophic and we aren’t there yet.

  11. You have to calculate wealth in the first place for that sort of thing. Before you can do that you’ve got to dissolve all of these trusts, lean away from corporations, and get the wealth in real person hands so that it can be calculated. You also need to bring debt levels and asset price volatility down. Since wealth is the difference between asset values and debt. So this is no one-off affair Ikonoclast. This is a decades long pursuit.

    The best starting point would be to have a generous threshold for a land tax that only applies for real persons. Not trusts or limited liability companies. Forcing all the land into the hands of real persons or government should happen first, or a wealth tax is a bit of a non-starter. But I think you are right to react against akarog on this matter. He may have some sort of hidden agenda.

  12. There’s a real campaign on right now to mobilise people for demands that overlap considerably with this LIG proposal. That campaign is Living Incomes For Everyone (LIFE) –

    The difficulty of winning these demands is an indicator of the priorities both of public policy and of employers who have much greater weight than the rest of the population in influencing policy.

    We desperately need a much stronger labour movement, able and willing to flex some industrial muscle, and disrupt business as usual, in order to be able to shift the policy priority away from cheap labour supply, to meeting people’s needs.

    The dollar figures do matter, and I tend to agree with Ernestine that some kind of built in relativity to other incomes is needed. But hey, if only we could win some serious and permanent increase in unemployment benefits, close to the $1100 a fortnight coronavirus supplement +JobSeeker, then we would be in a position of strength to keep contesting what is a minimum liveable income. Meanwhile if you’r for a LIG, please check out our demands, campaign, and think about joining LIFE

  13. You don’t need to dissolve trusts etc, just require them to name their owners and consequently require them to be owned. In theory some places require “beneficial owners” to be named, but often enforcement is lax to non-existent. One fairly easy way to enforce that is for the government to become the owner of last resort… if no-one claims the trust/company/etc then it is transferred to the government. You also need to reduce or bypass “corporate personhood” to some extent, and I favour requiring that beneficial owners be capable of imprisonment. It’s a pretty simple test, and it’s clearly linked to a necessary outcome of the process: if taxes aren’t paid, someone is going to jail.

    That already happens with liabilities, so I don’t see why we can’t do the same with assets.

  14. No thats not right Moz. You are going to have to do all the things I said in order to have a functioning wealth tax. These trusts and so forth. They are legal entities. You have to find a way to make these legal entities less attractive then having that wealth as a simple self-owning human being. You can’t just be glib about it and say ho ho, just make them give me a few names. Thats never going to fly. Also you’ve hinted at how obnoxious a wealth tax with trusts would be. You are already talking about arbitrary punishments and pushing people around. I would have thought the Victorian experience would have turned you off that kind of Bolshevism and arbitrary tyranny. But then perhaps not hey?

    The idea is to have sound money, wealth in government hands or in the hands of real human beings. That way you can fashion a fair tax. Its really about that simple. I saw in a seminar, about ten years ago, a tax accountant was saying that no-one in Australia needs to pay more than 70,000 dollars a year in tax unless they really want to. The way to avoid being taxed more is all these convoluted trusts and things. So they need to go. Because while few people should pay more than 10 000 a year in taxes, the reality is that so many people suck more than 70 000 dollars out of the system doing basically nothing at all. Some people can earn that much during a trip to the toilet, so dysfunctional has our system become.

    The system is rigged in favour of the very very rich and the high salaried public servants. They have built up all these wonderful lurks and gyps and we have to get rid of them in order to have a fair system. And that means being prepared to not tax your average person all that much. So as to incentivise the retreat from artificial persons to real persons only.

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