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A new political party was launched in New Zealand today, called The Opportunities Party. It's been founded by Gareth Morgan, who's very well known in NZ for his economic opinions and such.

No policies have been announced yet, but it's a good bet a basic income and a flat tax will be one of them, given Morgan was one of the writers of "The Big Kahuna", which you can read about here...

It's early days yet, but I suspect the party will gain enough traction to get the 5% or more needed to get into parliament. This seems a reasonable assumption, given 25% of Switzerland's voters gave a yes to a basic income in their referendum. It's become a popular idea globally in the last few years. Couple that with both NZ's Greens and Labour parties liking the idea, (despite Labour rejecting it as a policy), and it's just possible it might be tried in NZ.

Here's Gareth Morgan announcing the party...
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It seems the New Zealand Labour Party would do a test-run of a Universal Basic Income in a town or region before deciding if it should go nation-wide. I doubt it'll even get to that, but curiously, the NZ Treasury did some sums on a Guaranteed Minimum Income in 2010.

The numbers they came up with look pretty grim, they saying it'd probably increase poverty and would require about a 50% personal tax rate. It was based on company taxes staying the same though. (Note I've not ploughed though the details of that PDF.)

It was also based on a $300 minimum income, that being about the average for beneficiaries and superannuitants then. By contrast, the minimum wage was about $13 an hour then, or about $500 a week. Assuming a 50% tax on that $500 (and none on the $300 minimum income), a worker on the minimum wage would be almost twice as well off as someone not working. ($300 vs $550). So better off than before even if the tax rate was zero for someone on the minimum wage, which it wasn't.

The perceived carnage for those on middle-incomes and higher will make this a political non-starter though. Or at least until it's shown to work elsewhere - such as in Switzerland, Finland or Canada, all of who are going to give it a go in one form or another.
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Details, such as they are, can be found here...

I doubt it'll become policy though, and even if it did, I'm sure it'd be a stuffed-up policy - because Labour Party.

Arguments against can be read here...

"The obvious problem is the cost. A serious UBI would almost certainly consume most existing state revenues. Some would argue the answer would be to fund it through massive tax hikes. The trouble is that you can only do that so much before government revenue actually decreases as the productive sector disintegrates under the weight of ever increasing taxation."

This is in fact a big unknown, as we have no way of knowing how people actually will behave under a UBI. Let's assume for instance that the UBI is set at the current minimum wage and the minimum wage is halved when it's introduced. Under that scenario, those on the minimum wage would have their income increase by a half (before tax), while businesses paying the minimum wage will have their wages bill halved. Given results like that, it means trying to model how an economy will behave under a UBI is probably a fruitless exercise.

"Then there's what could be called the 'Goldilocks' issue. Set the payments too low, and people simply wouldn't stand for the difficulties that would then befall seniors, single mothers and everyone else who would effectively see their income cut by the move. Set the UBI too high, and why would people bother getting out bed in the morning? In practice, it would almost certainly be impossible to strike the right balance."

As if it couldn't be adjusted. In fact it should be adjusted regularly, with quarterly seeming to be about right. (The suggestion the UBI should be an annual payment is absurd. Fortnightly seems the sensible period.) How should it be calculated? I'd suggest two methods. One based on the cost of living and the other on a percentage of the country's total income, the payment being the greater of the two. This would mean it'd rise when times are good but never go unacceptably low when times are bad.
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According to this BBC article, four out of five Finns support a basic income. That seems an extraordinarily high percentage. The Finns must be one of the least self-righteous peoples on the planet!

Anyway, it seems like they may be doing a trial: "The prime minister has expressed support for a limited, geographical experiment. Participants would be selected from a variety of residential areas. Mr Kanninen [of the Tank research centre] proposes testing the idea by paying 8,000 people from low income groups four different monthly amounts, perhaps from €400 to €700."

My guess is that won't tell you anything useful - such as what it would do to the overall economy. A basic income would be revolutionary, not just a tinkering with the system, and there'd be lots of non-intuitive consequences.

And, as with every time I've seen it proposed, there's always a monetary value suggested for what the basic income should be, as apposed to a way to automatically arrive at it.

How should a basic income be viewed? As a good accumulated by society over time - a bit like the roads everyone gets to use. And how should it be calculated? Perhaps as a percentage of the country's total income. That would have the advantage of being self-correcting. As if the country's total income started to decrease because of an increase in the numbers not working, the incentive to work would increase due to the standard of living decreasing for those on just the basic income.


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