Guaranteed minimum income
Guaranteed minimum income (GMI) also called minimum income, is a system of social welfare provision that guarantees that all citizens or families have an income sufficient to live on, provided they meet certain conditions. Eligibility is typically determined by citizenship, a means test and either availability for the labour market or a willingness to perform community services. The primary goal of a guaranteed minimum income is to combat poverty. If citizenship is the only requirement, the system turns into a universal basic income.
A system of guaranteed minimum income can consist of several elements, most notably:
- a minimum wage, either set by law or resulting from negotiations of employers or their organizations with trade unions;
- a calculation of the social minimum, usually below the minimum wage;
- a social safety net, to help citizens or families without sufficient financial means survive at the social minimum. This may be a transfer or, in some cases, a loan, and is generally conditional to availability for work, performance of community services, some kind of social contract, or commitment to a reintegration trajectory;
- child support by the state;
- Student loan and grants;
- state pension for the elderly;
- disability pension for the persons with disability.
Differences with basic income
Basic income means the provision of identical payments from a government to all of its citizens. Guaranteed minimum income a system of payments (perhaps only one) by a government to citizens who fail to meet one or more means tests. While most modern countries have some form of GMI, a basic income is rare.
American revolutionary Thomas Paine advocated a Citizen's Dividend to all US citizens as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property" (Agrarian Justice, 1795).
French Emperor Napoleon Bonaparte echoed Paine's sentiments and commented that 'man is entitled by birthright to a share of the Earth's produce sufficient to fill the needs of his existence' (Herold, 1955).
In 1963, Robert Theobald published the book Free Men and Free Markets, in which he advocated a guaranteed minimum income (the origin of the modern version of the phrase).
In 1966 the Cloward–Piven strategy advocated "overloading" the US welfare system to force its collapse in the hopes that it would be replaced by "a guaranteed annual income and thus an end to poverty".
I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.—from the chapter titled "Where We Are Going"
In 1968, James Tobin, Paul Samuelson, John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements.
In 1987, New Zealand's Labour Finance Minister Roger Douglas announced a Guaranteed Minimum Family Income Scheme to accompany a new flat tax. Both were quashed by then Prime Minister David Lange, who sacked Douglas.
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Tax revenues would fund the majority of any GMI proposal. As most GMI proposals seek to create an earnings floor close to or above poverty lines amongst all citizens, the fiscal burden would require equally broad tax sources, such as income taxes or VATs, in order to fund such expenditures. To varying degrees, a GMI might be funded through the reduction or elimination of other social security programs such as unemployment insurance. Though neutral with respect to government finance, Milton Friedman also proposed a GMI in the context of abolishing minimum wages, which he argued unduly distorted labor market economics. The extent to which a GMI is designed to reduce or supplement existing social security programs can be seen as one of the unresolved cleavages amongst GMI advocates; more economically conservative seeking to replace the bulk of welfare spending with a GMI while more social or egaliarian proponents see the GMI as a component of a broader social welfare system.
Minimum income schemes around the world
In 1988, France was one of the first country to implement a minimum income, called the Revenu minimum d'insertion. In 2009, it was turned into Revenu de solidarité active (RSA), a new system which aimed at solving the Poverty trap by providing low wages workers a complementary income; thus encouraging activity.
In July 2013, the Cypriot government unveiled a plan to reform the welfare system in Cyprus and create a ‘Guaranteed Minimum Income’ for all citizens.
- UK: Income Support
- Ireland: Supplementary Welfare Allowance
- Germany, Liechtenstein, Austria: Sozialhilfe
- Switzerland: fr:revenu minimal de réinsertion
- Netherlands: Algemene Bijstand
- Sweden: Socialbidrag
- Denmark: Social Bistand
- Finland: Toimeentulotuki
- Norway: Stønad til livsopphold
- Iceland: Félagsleg aðstoð
- Portugal: Rendimento mínimo garantido
- Luxembourg: revenu minimum garanti (RMG)
- Spain: several schemes exist depending on the region (Renta Básica, Renta Mínima de Inserción, etc…)
- Constitutional economics
- Guaranteed Income Supplement
- Guaranteed Minimum Pension
- Homelessness in the United States
- living wage
- Revenu minimum d'insertion
- Social Credit
- Wage slavery
- History of Basic Income, Basic Income Earth Network (BIEN), retrieved on 18 June 2009
- Grace Clark: Pakistan's Zakat and 'Ushr as a Welfare System
- Martin Luther King jr., Where Do We Go from Here: Chaos or Community? (New York: Harper & Row, 1967)
- Economists' Statement on Guaranteed Annual Income, 1/15/1968-4/18/1969 folder, General Correspondence Series, Papers of John Kenneth Galbraith, John F. Kennedy Presidential Library. Cited in: Jyotsna Sreenivasan, "Poverty and the Government in America: A Historical Encyclopedia." (Santa Barbara: ABC-CLIO, 2009), page 269
- "New Zealand Is Jolted By a Speedy Decontrol", Seth Mydans, The New York Times (24 February 1988)
- Hayek on Hayek: An Autobiographical Dialogue by F. A. Hayek, edited by Stephen Kresge and Leif Wenar (Chicago: University of Chicago Press, 1994)
- "A minimum income, not wage, is a fairer way to distribute wealth", Andrew Coyne, The Financial Post (8 April 2013)