Guaranteed Minimum Income

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 Month
Switzerland could soon be the world’s first national case study in basic income. Instead of
providing 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 P
building 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 constitutional
amendment 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 as
of November 2014. That means that every family (consisting of two adults) can expect an
unconditional yearly income of $62,400 without having to work, with no strings attached. While
Switzerland’s cost of living is significantly higher than the US—a Big Mac there costs $6.72—it’s
certainly not chump change. It’s reasonable income that could provide, at the minimum, a
comfortable bare bones existence.
The benefits are obvious. Such policy would, in one fell swoop, wipe out poverty. By replacing
existing government programs, it would reduce government bureaucracy. Lower skilled workers
would also have more bargaining power against employers, eliminating the need for a minimum
wage. Creative types would then have a platform to focus on the arts, without worrying about
the bare necessities. And those fallen on hard times have a constant safety net to find their
feet again.
Detractors of the divisive plan also have a point. The effects on potential productivity are
nebulous at best. Will people still choose to work if they don’t have to? What if they spend
their government checks on sneakers and drugs instead of food and education? Scrappy abusers
of the system could take their spoils to spend in foreign countries where their money has more
purchasing power, thus providing little to no benefit to Switzerland’s own economy. There’s also
worries about the program’s cost and long term sustainability. It helps that Switzerland happens
to 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 such
a plan, especially at this scale, although there have been isolated incidents. In the 1970s, the
Canadian town of Dauphin provided 1,000 families in need with a guaranteed income for a short
period of time. Not only did the social experiment end poverty, high school completion went up
and hospitalizations went down.
“If you have a social program like this, community values themselves start to change,” Evelyn
Forget, a health economist at the University of Manitoba, told
The New York Times.

Similar plans have been proposed in the past. In 1968, American economist Milton

Friedman discussed the idea of a negative income tax, where those earning below a certain
predetermined threshold would receive supplementary income instead of paying taxes.
Friedman suggested his plan could eliminate the 72 percent of the welfare budget spent on
administration. But nothing ever came to fruition.
It’s what makes the potential experiment in Switzerland so compelling. Developed countries
around the world are struggling to address the issues of depressed wages for low-skilled workers
under the dual weight of automation and globalization.
For German-born artist Enno Schmidt, one of the founders of the proposal, a living wage
represents continued cultural progress along the lines of women’
s suffrage or the civil rights
movement by providing dignity and security to the poor, while unleashing creativity and
entrepreneurial spirit.
“I tell people not to think about it for others, but think about it for themselves,” Schmidt told
the Times. “What would you do if you had that income?
Does this cause inflation due to increase in velocity of money?

Leave a comment

Filed under Financial, Government

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s