If this comes to pass, it will be very interesting to see the results. From Grant Williams:
Switzerland May Give Every Citizen $2,600 a MonthSwitzerland could soon be the world’s first national case study in basic income. Instead ofproviding a traditional social net—unemployment payments, food stamps, or housing credits—the government would pay every citizen a fixed stipend.The idea of a living wage has been brewing in the country for over a year and last month,supporters of the movement dumped a truckload of eight million coins outside the Parliamentbuilding in Bern. The publicity stunt, which included a five-cent coin for every citizen,came attached with 125,000 signatures. Only 100,000 are necessary for any constitutionalamendment to be put to a national vote, since Switzerland is a direct democracy.The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 asof November 2014. That means that every family (consisting of two adults) can expect anunconditional yearly income of $62,400 without having to work, with no strings attached. WhileSwitzerland’s cost of living is significantly higher than the US—a Big Mac there costs $6.72—it’scertainly not chump change. It’s reasonable income that could provide, at the minimum, acomfortable bare bones existence.The benefits are obvious. Such policy would, in one fell swoop, wipe out poverty. By replacingexisting government programs, it would reduce government bureaucracy. Lower skilled workerswould also have more bargaining power against employers, eliminating the need for a minimumwage. Creative types would then have a platform to focus on the arts, without worrying aboutthe bare necessities. And those fallen on hard times have a constant safety net to find theirfeet again.Detractors of the divisive plan also have a point. The effects on potential productivity arenebulous at best. Will people still choose to work if they don’t have to? What if they spendtheir government checks on sneakers and drugs instead of food and education? Scrappy abusersof the system could take their spoils to spend in foreign countries where their money has morepurchasing power, thus providing little to no benefit to Switzerland’s own economy. There’s alsoworries about the program’s cost and long term sustainability. It helps that Switzerland happensto be one of the richest countries in the world by per capita income.The problem, as with many issues economic, is that there is no historical precedent for sucha plan, especially at this scale, although there have been isolated incidents. In the 1970s, theCanadian town of Dauphin provided 1,000 families in need with a guaranteed income for a shortperiod of time. Not only did the social experiment end poverty, high school completion went upand hospitalizations went down.“If you have a social program like this, community values themselves start to change,” EvelynForget, a health economist at the University of Manitoba, toldThe New York Times.
Similar plans have been proposed in the past. In 1968, American economist MiltonFriedman discussed the idea of a negative income tax, where those earning below a certainpredetermined threshold would receive supplementary income instead of paying taxes.Friedman suggested his plan could eliminate the 72 percent of the welfare budget spent onadministration. But nothing ever came to fruition.It’s what makes the potential experiment in Switzerland so compelling. Developed countriesaround the world are struggling to address the issues of depressed wages for low-skilled workersunder the dual weight of automation and globalization.For German-born artist Enno Schmidt, one of the founders of the proposal, a living wagerepresents continued cultural progress along the lines of women’s suffrage or the civil rightsmovement by providing dignity and security to the poor, while unleashing creativity andentrepreneurial spirit.“I tell people not to think about it for others, but think about it for themselves,” Schmidt toldthe Times. “What would you do if you had that income?
Does this cause inflation due to increase in velocity of money?