Basic income

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This article is about a system of unconditional income to every citizen. For more specific proposals financed on the returns on publicly owned enterprises, see social dividend. For social welfare based on means tests, see Guaranteed minimum income.
Not to be confused with minimum wage or living wage.
On 4 October 2013 Swiss activists from Generation Grundeinkommen organized a performance in Bern where 8 million coins were dumped on a public square, as a celebration of the successful collection of more than 125,000 signatures, which forced the government to hold a referendum on whether or not to incorporate the concept of basic income in the Federal constitution, a referendum resulting in 76.9% of the votes voting against basic income.[1]

A basic income (also called unconditional basic income, basic income guarantee, universal basic income or universal demogrant[2]) is a form of social security[3] in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

An unconditional income transfer of less than the poverty line is sometimes referred to as a partial basic income.

Basic income systems that are financed by the profits of publicly owned enterprises (often called social dividend or citizen's dividend) are major components in many proposed models of market socialism.[4] Basic income schemes have also been promoted within the context of capitalist systems, where they would be financed through various forms of taxation.[5]

Similar proposals for "capital grants provided at the age of majority" date to Thomas Paine's Agrarian Justice of 1795, there paired with asset-based egalitarianism. The phrase "social dividend" was commonly used as a synonym for basic income in the English-speaking world before 1986, after which the phrase "basic income" gained widespread currency.[6] Prominent advocates of the concept include Philippe Van Parijs, Ailsa McKay,[7] André Gorz, Hillel Steiner, Peter Vallentyne, and Guy Standing.

Policy aspects[edit]

Administrative efficiency[edit]

The lack of means test or similar administration would allow for some saving on social welfare which could be put towards the grant.

The Basic Income Earth Network (BIEN) describes one of the benefits of a basic income as having a lower overall cost than that of the current means-tested social welfare benefits,[8] and they have put forth proposals for implementation they claim to be financially viable.[9]

Work incentives and disincentives[edit]

The first advantage of the Basic Income Guarantee (BIG) is its financial transparency and simplicity. Instead of numerous welfare programs it would be one universal unconditional income. Next, it has the possibility to eradicate poverty, since everyone would have money for food, shelter, and basic necessities. Furthermore, the BIG allows for potential economic growth: people may decide to invest in themselves to earn higher degrees and get interesting and well-paid jobs that, in turn, could trigger growth.[10][11] Finally, Basic Income Guarantee will give the economic freedom to the people which, combined with the political freedom, freedom of speech, and religion, will mean real freedom to each individual. Without economic freedom, personal, political and religious freedom are worth little. People can consider themselves free only if they are not forced to spend all times thinking only about how to provide basic necessities to themselves and their families.[11]

A major objection is that basic income is not economically feasible.[10] For instance, the population of the US is about 323 million people. The United States Federal poverty level for every individual is $11,770.[12] Therefore, Basic Income Guarantee would cost taxpayers about 3.8 trillion dollars per year which is roughly equal to the total federal budget in 2015.[13] That, however, does not take into account that tax payers are also receiving basic income, and that basic income for tax payers is equivalent to tax reduction of the initial, higher, income tax.

There is also a belief among critics that if people have free and unconditional money they will not work (as much) and get lazy.[14][15][16] Less work means less tax revenue and hence less money for the state and cities to fund public projects. There are also concerns that some people will spend their basic income on alcohol and drugs.[11][17]

If there is a disincentive to employment because of basic income it is however expected that the magnitude of such a disincentive would depend on how generous the basic income were to be. Some campaigners in Switzerland have suggested a level that would only just be liveable, arguing that people would want to supplement it.[18]

Tim Worstall, a writer and blogger, has argued that traditional welfare schemes create a disincentive to work because such schemes typically cause people to lose benefits at around the same rate that their income rises (a form of welfare trap where the marginal tax rate is 100 percent). He has asserted that this particular disincentive is not a property shared by basic income as the rate of increase is positive at all incomes.[19]

In one study, even when the benefits are not permanent, the hours worked—by the recipients of the benefit—are observed to decline by 5 percent, a decrease of two hours in a typical 40-hour work week:

While experiments have been conducted in the United States and Canada, those participating knew that their benefits were not permanent and, consequently, they were not likely to change their behaviour as much or in the same manner had the GAI been ongoing. As a result, total hours worked fell by about five percent on average. The work reduction was largest for second earners in two-earner households and weakest for the main earner. Further, the negative work effect was higher the more generous the benefit level.[15]

However, in studies of the Mincome experiment in rural Dauphin, Manitoba, in the 1970s, the only two groups who worked significantly less were new mothers and teenagers working to support their families. New mothers spent this time with their infant children, and working teenagers put significant additional time into their schooling.[20] Under Mincome, "the reduction of work effort was modest: about one per cent for men, three per cent for wives, and five per cent for unmarried women."[21]

Another study that contradicted such decline in work incentive was a pilot project implemented in 2008 and 2009 in the Namibian village of Omitara; the assessment of the project after its conclusion found that economic activity actually increased, particularly through the launch of small businesses, and reinforcement of the local market by increasing households' buying power.[22] However the residents of Omitara were described as suffering "dehumanising levels of poverty" before the introduction of the pilot,[23] and as such the project's relevance to potential implementations in developed economies is not known.

Funding[edit]

When Milton Friedman and other economists proposed negative income tax in the 1960s, the idea was that it could be financed by a flat tax, reduced bureaucracy and that the income guarantee would slowly be phased out. The idea was to have a simpler welfare system and to make it easier for unemployed people to get into the workforce. Since then the main advocacy for the reform has come from other political camps than the right wing, such as the Greens, but also some socialists, feminists and most recently the Pirates.

People from different ideological backgrounds have over the years proposed different models, including both different financing and different levels. Socialists and other people who believe in the idea of common resource ownership have proposed funding on the basis of social ownership of the means of production and/or natural resources. People to the right, such as Friedman, are usually inclined to finance only by flat tax, or a flat tax and some other traditional taxes. Greens are keen on "green financing", whether it be environmental taxes or in some other ways.

Other alternatives involve mainly or partly financing with VAT and concurrently initiating monetary reform, which might supply a large portion of the requisite funding. The system of VAT and negative income tax is known as "Progressive Value Added Tax" and considered by some economists, post Friedman (e.g. Prof. Robert Hall), as the optimal progressive consumption tax.

Affordability[edit]

The affordability of a basic income proposal relies on many factors such as the costs of any public services it replaces, tax increases required, and less tangible auxiliary effects on government revenue and/or spending (for example a successful basic income scheme may reduce crime, thereby reducing required expenditure on policing and justice.)

A 2012 affordability study done in the Republic of Ireland by Social Justice Ireland found that basic income would be affordable with a 45 percent income tax rate. This would lead to an improvement in income for the majority of the population.[24]

Paul Mason stated that universal basic income would increase social security costs, but that it would also reduce the high medical costs associated with diseases of poverty, by reducing stress, diseases like high blood pressure, type II diabetes etc. would become less common.[25]

Difference from guaranteed income[edit]

Basic income and traditional welfare systems both share goals of achieving some level of economic equity. Guaranteed income puts preconditions on the payment of income.

Potential sources for funding[edit]

Taxation[edit]

Public money creation[edit]

Only suitable on fiat money

Profiting by common ownership and collecting money[edit]

Integration of social welfare[edit]

  • Elimination of current income support programs and tax deductions
  • Integration of current social welfare, include income support, unemployment support, subsidies, pensions and etc.
  • Reduce and eliminate concession and subsides, for a few of peoples and legal entity only, replace for this, issuing for whole citizens instead
  • Reduced bureaucracy, reduce cost of personnel and raise effective; it is cost and waste by means test and eligibility checking for a welfare, including documents, offices, air-conditional and other consumption
  • Repayment of the grant at death or retirement

Pilot programs[edit]

Main article: Basic income pilots

The Permanent Fund of Alaska is well established and is perhaps to be seen as a permanent system, rather than a basic income pilot. The same could perhaps be said about Bolsa Família also. Leaving those two big systems apart, these are some of the most well known basic income pilots up to date.

  • The experiments with negative income tax in United States and Canada in the 1960s and 1970s.
  • The experiments in Namibia (starting 2008)
  • The experiment in Brazil (starting 2008)[28]
  • The experiments in India (starting 2011)
  • The GiveDirectly experiment[29]
  • The study in rural North Carolina[30]
  • Utrecht, Netherlands, 2015 experiment

Basic income and ideology[edit]

Left-wing views[edit]

Socialist and left-wing economists and sociologists have advocated a form of basic income as a means for distributing the economic profits of publicly owned enterprises to benefit the entire population (also referred to as a social dividend), where the basic income payment represents the return to each citizen on the capital owned by society. These systems would be directly financed out of returns on publicly owned assets and are featured as major components of many models of market socialism.[4] Erik Olin Wright, for example, characterizes basic income as a project for reforming capitalism into a socialist system by empowering labor in relation to capital, granting labor greater bargaining power with employers in labor markets, which can gradually de-commodify labor by decoupling work from income. This would allow for an expansion in scope of the "social economy", by granting citizens greater means to pursue activities (such as the pursuit of the arts) that do not yield strong financial returns.[31] Other theorists leaning towards different kinds of socialism who have advocated basic income include James Meade, Bertrand Russell, Frances Fox Piven and Harry Shutt. Meade states that a return to full employment can only be achieved if, among other things, workers offer their services at a low enough price that the required wage for unskilled labor would be too low to generate a socially desirable distribution of income. He therefore concludes that a citizen's income is necessary to achieve full employment without suffering stagnant or negative growth in wages.[32] James Meade advocated for a social dividend scheme to be funded by publicly owned productive assets.[33] Russell argued for a basic income alongside public ownership as a means to decrease the average length of the working day and to achieve full employment.[34] Fox Piven holds the view that an income guarantee would benefit all workers by liberating them from the anxiety that results from the "tyranny of wage slavery" and provide opportunities for people to pursue different occupations and develop untapped potentials for creativity.[35] Gorz saw basic income as a necessary adaptation to the increasing automation of work, but also a way to overcome the alienation in work and life and to increase the amount of leisure time available to each individual.[36] Harry Shutt proposed basic income along with reforms to make all or most of the enterprises collective in nature, rather than private. Together, he argued, these measures would constitute the make-up of a post-capitalist economic system.[37]

Georgist views[edit]

Geolibertarians seek to synthesize propertarian libertarianism and a geoist (or Georgist) philosophy of land as unowned commons or equally owned by all people, citing the classical economic distinction between unimproved land and private property. The rental value of land is produced by the labors of the community and, as such, rightly belongs to the community at large and not solely to the landholder. A land value tax (LVT) is levied as an annual fee for exclusive access to a section of earth, which is collected and redistributed to the community either through public goods, such as public security or a court system, or in the form of a basic guaranteed income called a citizen's dividend. Geolibertarians view the LVT as a single tax to replace all other methods of taxation, which are deemed unjust violations of the non-aggression principle.

Right-wing views[edit]

Support for basic income has been expressed by several people associated with right-wing political views. While adherents of such views generally favor minimization or abolition of the public provision of welfare services, some have cited basic income as a viable strategy to reduce the amount of bureaucratic administration that is prevalent in many contemporary welfare systems. Others have contended that it could also act as a form of compensation for fiat currency inflation.[38][39][40]

Feminist views[edit]

As with other issues, feminists hold different views on the basic income, but these views can be loosely divided in two opposing views: one view which supports basic income, seeing it as a way of guaranteeing a minimum financial independence for women, and recognizing women's unpaid work in the home; and another view which opposes basic income, seeing it as having the potential to discourage women from participating in the workforce, and to reinforce traditional gender roles of women belonging in the private area and men in the public area.[41][42]

Technological unemployment[edit]

Concerns about automation and other causes of technological unemployment have caused many in the high-tech industry to turn to basic income proposals as a necessary implication of their business models. Journalist Nathan Schneider first highlighted the turn of the "tech elite" to these ideas with an article in Vice magazine, which cited figures such as Marc Andreessen, Sam Altman, Peter Diamandis, and others.[43] The White House, in a report to Congress, has put the probability at 83 percent that a worker making less than $20 an hour in 2010 will eventually lose their job to a machine. Even workers making as much as $40 an hour face odds of 31 percent.[44]

Criticism[edit]

A commission of the German parliament has discussed basic income in 2013 and concluded that it is "unrealizable" because:[45][46]

  • it would cause a significant decrease in the motivation to work among citizens, with unforeseen consequences for the national economy
  • it would require a complete restructuring of the taxation, social insurance and pension systems, which will cost a significant amount of money
  • the current system of social help in Germany is regarded more effective because it's more personalized: the amount of help provided is not fixed and depends on the financial situation of the person; for some socially vulnerable groups the basic income could be not sufficient
  • it would cause a vast increase in immigration
  • it would cause a rise of the shadow economy
  • the corresponding rise of taxes would cause more inequality: higher taxes would translate themselves into higher prices of everyday products, harming the finances of poor people
  • no viable way to finance basic income in Germany was found

Economists have expressed concern about the basic income. Daron Acemoğlu, who has expressed uncertainty about his views on basic income has stated "Current US status quo is horrible. A more efficient and generous social safety net is needed. But UBI is expensive and not generous enough."[47] Eric Maskin has stated that "a minimum income makes sense, but not at the cost of eliminating Social Security and Medicare."[48] The Economist notes that raising the income floor would have no impact on the wealth gap. While cash transfers would make the most difference to those on the bottom of the pile, they posit it would be instead of existing welfare benefits.[49]

Worldwide[edit]

Generally the discussion on basic income developed in Europe in the 1970s and 1980s, partly inspired by the debate in United States and Canada somewhat earlier, and has since then broadened to most of the developed world, to Latin America, Middle East, and to at least some countries in Africa and Asia. The Alaska Permanent Fund is regarded as one of the best examples of an existing basic income, even though it's only a partial basic income. Other examples of existing basic income, or similar welfare programs, include the partial basic income in Macao and the basic income in Iran. Basic income pilots have been conducted in United States and Canada in the 1960s and 1970s, Namibia (from 2008) and in India (from 2011). In Europe there are political decisions in France, Netherlands and Finland to start up some basic income pilots. Voters in Switzerland strongly defeated a referendum on the topic in 2016 with 77 percent voting against the proposal.[50]

In 2016, a poll showed that 58 percent of the European people are aware about basic income and 65 percent would vote in favor of the idea.[51]

Advocates[edit]

Europe[edit]

European advocates of basic income system are for example Philippe Van Parijs,[52] Ailsa McKay (until 2004),[53] Götz Werner, Saar Boerlage,[54] André Gorz,[55] Antonio Negri,[56] Osmo Soininvaara,[57] Guy Standing.[58][59]

Some individuals who support introduction of basic income in Germany include activist Susanne Wiest, Green politician Sabine Niels, CDU politician Dieter Althaus, businessman Götz Werner, CDU politician Thoma Dörflinger,[60] leader of the Left Party Katja Kipping.

In 2015 the London-based RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) launched its own proposal for Basic Income entitled[61] which advocated replacing a swathe of UK means-tested benefits with a single universal payment as a response to the changing landscape of work and an ageing population.

In 2016, Yanis Varoufakis declared the basic income approach was "absolutely essential."[62]

North and South America[edit]

Advocates of basic income from North and South America include Charles Murray,[63] Eduardo Suplicy[64] and Hugh Segal, Canada.

Asia, Africa and Oceania[edit]

Advocates from Oceania include Gareth Morgan.[65]

Political initiatives[edit]

in 1976, the Alaska Permanent Fund was created, a constitutionally established permanent fund managed by a state-owned corporation, the Alaska Permanent Fund Corporation. The Fund pays a partial basic income to all its residents.[66]

In 2008 an official petition for basic income was started in Germany by Susanne Wiest.[67] The petition was accepted and Susanne Wiest was invited for a hearing at the German parliament's Commission of Petitions. After the hearing, the petition was closed as "unrealizable".[45]

In 2015, a citizen's initiative in Spain received 185,000 signatures, short of the required amount for the proposal to be discussed in parliament.[68]

The world's first universal basic income referendum in Switzerland on 5 June 2016 was rejected with a 76.9 percent majority.[1][69]

See also[edit]

References[edit]

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  2. ^ "Improving Social Security in Canada Guaranteed Annual Income: A Supplementary Paper". Government of Canada. 1994. Retrieved 30 November 2013. 
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  15. ^ a b Gilles Séguin. "Improving Social Security in Canada – Guaranteed Annual Income: A Supplementary Paper, Government of Canada, 1994". Canadiansocialresearch.net. Retrieved 16 August 2013. 
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  17. ^ Koga, Kenya. "Pennies From Heaven." Economist 409.8859 (2013): 67-68. Academic Search Complete. Web. 12 April 2016.
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  26. ^ On the Economic Theory of Socialism, by Lange, Oskar. 1936. The Review of Economic Studies, Vol. 4, No. 1: "It seems, therefore, convenient to regard the income of consumers as being composed of two parts: one part being the receipts for the labour services performed and the other part being a social dividend constituting the individual's share in the income derived from the capital and the natural resources owned by society."
  27. ^ A Future for Socialism, by Roemer, John. 1994. Harvard University Press: "Stock prices are quoted not in currency but in coupons, issued to citizens on attaining their majority, not convertible to cash, and reverting to the treasury at death."
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  29. ^ "Research at GiveDirectly". Givedirectly.org. Retrieved 5 June 2016. 
  30. ^ Ferdman, Roberto A. (8 October 2015). "The remarkable thing that happens to poor kids when you give their parents a little money". The Washington Post. Retrieved 5 June 2016. 
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  32. ^ Meade, James Edward. Full Employment Regained?, Cambridge University Press, 1995, ISBN 0-521-55697-X
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  37. ^ Shutt, Harry (15 March 2010). Beyond the Profits System: Possibilities for the Post-Capitalist Era. Zed Books. p. 124. ISBN 978-1-84813-417-1. a flat rate payment as of right to all resident citizens over the school leaving age, irrespective of means of employment status...it would in principle replace all existing social-security entitlements with the exception of child benefits. 
  38. ^ Dolan, Ed (27 January 2014). "A Universal Basic Income: Conservative, Progressive, and Libertarian Perspectives". EconoMonitor. Retrieved 29 September 2014. 
  39. ^ Weisenthal, Joe (13 May 2013). "There's A Way To Give Everyone In America An Income That Conservatives And Liberals Can Both Love". Business Insider. Retrieved 29 September 2014. 
  40. ^ Gordon, Noah (6 August 2014). "The Conservative Case for a Guaranteed Basic Income". The Atlantic. Retrieved 29 September 2014. 
  41. ^ http://www.basicincome.org/bien/pdf/munich2012/katada.pdf
  42. ^ https://www.gcu.ac.uk/wise/media/gcalwebv2/theuniversity/centresprojects/wise/90324WiSE_BriefingSheet.pdf
  43. ^ Schneider, Nathan (6 January 2015). "Why the Tech Elite Is Getting Behind Universal Basic Income". Vice. 
  44. ^ https://www.whitehouse.gov/sites/default/files/docs/ERP_2016_Book_Complete%20JA.pdf whitehouse
  45. ^ a b "Deutscher Bundestag – Problematische Auswirkungen auf Arbeitsanreize" (in German). Bundestag.de. Retrieved 5 June 2016. 
  46. ^ Petitionen: Verwendung von Cookies nicht aktiviert
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  58. ^ Guy Standing and Michael Samson (eds.), "A Basic Income Grant for South Africa", University of Cape Town Press, Cape Town, 2003
  59. ^ Standing, Guy (ed.). "Promoting Income Security as a Right: Europe and North America", Anthem Press, London, 2005
  60. ^ A Basic Income for Rural Areas?
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  67. ^ "Bundestag will Petition zum bedingungslosen Grundeinkommen ohne Diskussion abschließen › Piratenpartei Deutschland". Piratenpartei.de. Retrieved 5 June 2016. 
  68. ^ "Spanish Popular initiative for basic income collects 185.000 signatures". Basicincome.org. 10 October 2015. Retrieved 5 June 2016. 
  69. ^ Ben Schiller 02.05.16 7:00 AM (5 February 2016). "Switzerland Will Hold The World's First Universal Basic Income Referendum | Co.Exist | ideas + impact". Fastcoexist.com. Retrieved 5 June 2016. 

Further reading[edit]

External links[edit]