When I first heard about the idea of an Unconditional Basic Income, I thought it was a classic left-wing socialist idea. In that light I can understand why it meets a lot of resistance.
However the more I think about it, the more it seems to be a right-wing ultra-liberal idea. All types of social protections can be eliminated if everybody has food and shelter. Minimum pay can be eliminated if a worker can afford to walk away from a job that doesn't pay enough.
An unconditional basic income could stimulate entrepreneurship. Someone with an interesting idea could convince friends to work for free for a trial period to launch a new product or service. This is particularly necessary today as we see automation destroying traditional jobs at an alarming rate.
From a taxation viewpoint, the basic income policy should or could be break-even. Salaries would always be taxed, there would be no tax-free income band. A basic income would make a flat tax rate act as a progressive tax, since the net taxation would be negative for very low incomes. The individual tax rate would be higher that previously so that at a certain salary your net tax would be the same as before the introduction of the basic income policy. This same tax rate would also apply to higher salaries, allowing the system to break even on average.
A flat tax with zero tax-free income would hugely simplify tax administration for companies and the government alike.
The basic income provides an automatic stimulus in periods of crisis, and establishes a lower bound for economic activity in the country, reducing volatility for companies servicing the economy.
The cost of manpower for manufacturing would be reduced, to the extent there would be a risk of creating international concern. If a company today employs 100 people at the national minimum wage, and tomorrow these workers receive a basic salary that is a large percentage of that salary while the minimum wage is abolished, them the manpower costs for the company will drop - either immediately or in a slow transition across the economy. This might prompt neighboring countries to implement trade barriers...
Debt and bankruptcy are always problematic. Obviously the basic income cannot be seized in a bankruptcy, since it represents the minimum amount needed to survive. By extension there should be no credit linked to the basic income - or at least banks won't want to issue credit based on it. This would cause "rent-to-buy" schemes to develop as a general alternative to personal indebtedness, however banks would still play their part of creating money. An example would be the Islamic banking rules.
Socially this policy could produce several outcomes, depending on implementation. Initially it appears to encourage immigration, however an illegal immigrant would not get the basic income, and there would not be any unfilled jobs at the low end to make up the difference. If legal immigrants are denied the basic income for 5 years, it would also be economically unattractive. Legal immigrants with a job would receive the basic income after a shorter period. The possibilities are endless.
The basic income could also be used to encourage large families depending on the amount given to parents for dependent minors.
I wish I had the tools to simulate the impact of this type of scheme on a real economy. What would the break-even tax rate be? What is the poverty-level income in each country?
