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 reduce 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 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 from basic income
Basic income means the provision of identical payments from a government to all of its citizens. Guaranteed minimum income is a system of payments (possibly 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.
In 1795, American revolutionary Thomas Paine advocated a citizen's dividend to all United States 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.
President Richard Nixon proposed reforms to the welfare program in 1969, where a minimum income would be paid to poor families. Contrary to popular belief, Nixon was critical of the idea of a guaranteed universal basic income. The proposal by Nixon passed in the House but never made it out of committee in the Senate.
In 1973, Daniel Patrick Moynihan wrote The Politics of a Guaranteed Income, in which he advocated the guaranteed minimum income and discussed Richard Nixon's Guaranteed Annual Income (GAI) proposal.
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.
In 2017, Harry A. Shamir (US) published a book "Consumerism, or Capitalism Without Crises" in which the concept was promoted by another label, as a way to enable our civilization to survive in an era of automation and computerization and large scale unemployment. The book also innovates a method to fund the process, tapping into the underground economy and volunteerism.
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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.
Another approach for funding is to acknowledge that all modern economies use fiat money and thus taxation is not necessary for funding; However, the fact that there are no financial constraints does not mean other constraints, such as on real resources, do not exist. A likely outcome based on the economic theory known as Modern Monetary Theory would be a moderate increase in taxation to ensure the extra income would not cause demand-pull inflation; This hypothetical Chartalist approach can be seen in the implementation of quantitative easing programs where, in the United States, over three trillion dollars were created without requiring taxes.
Examples around the world
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.
In 1988, France was one of the first countries 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-wage workers a complementary income; thus encouraging activity.
The United States has multiple social programs that provide guaranteed minimum incomes for individuals meeting certain criteria such as assets or disability. For instance, Supplemental Security Income (SSI) is a United States government program that provides stipends to low-income people who are either aged (65 or older), blind, or disabled. SSI was created in 1974 to replace federal-state adult assistance programs that served the same purpose. Today the program provides benefits to approximately eight million Americans. Another such program is Social Security Disability Insurance (SSD or SSDI), a payroll tax-funded, federal insurance program. It is managed by the Social Security Administration and is designed to provide income supplements to people who are physically restricted in their ability to be employed because of a notable disability, usually a physical disability. SSD can be supplied on either a temporary or permanent basis, usually directly correlated to whether the person's disability is temporary or permanent.
An early guaranteed minimum income program in the U.S. was the Aid to Families with Dependent Children (AFDC), established by the Social Security Act. Where previously the responsibility to assist needy children lay in the hands of the states, AFDC transferred that authority to the federal government. Over time, the AFDC was often criticized for creating disincentives to work, leading to many arguing for its replacement. In the 1970s, President Richard M. Nixon proposed the Family Assistance Program (FAP) which would replace the AFDC. FAP was designed to fix many of the problems that the AFDC suffered from, particularly the anti-work structure. Presidential nominee George McGovern also proposed a minimum income in the form of a Universal Tax Credit. Ultimately, neither of these programs were implemented. Throughout the decade, many other experimental minimum income programs were carried out in cities throughout the country, such as the Seattle-Denver Income Maintenance Experiments. In 1996, under President Bill Clinton, the AFDC was replaced with the Temporary Assistance for Needy Families program. This would block grant funds to the states to allow them to decide how aid would be distributed.
Another guaranteed minimum income program in the U.S. is the Earned Income Tax Credit. This is a refundable tax credit that gives poorer families cash assistance every year. The EITC avoids the welfare trap by subsidizing income, rather than replacing it.
Minimum income has been increasingly accepted by the Brazilian government. In 2004, President Lula da Silva signed into law a bill to establish a universal basic income. This law is primarily implemented through the Bolsa Família program. Under this program, poorer families will receive a direct cash payment via a government issued debit card. Bolsa Família is a conditional cash transfer program, meaning that beneficiaries will receive their aid if they accomplish certain actions. Families who receive the aid must put their children in school and participate in vaccination programs. If they do not meet these requirements, they will be cut off from aid. As of 2011, approximately 50 million people, or a quarter of Brazil's population, were participating in Bolsa Família.
Canada has experimented with minimum income trials, both in the past and in the present. The most prominent past example is the Mincome experiment, which ran in Manitoba in the 1970s. Mincome provided lower income families with cash transfers to keep them out of poverty. The researchers conducting Mincome found that it did not disincentivize work. The only recipients who reduced their number of hours worked were single mothers, who could now afford to stay at home and raise their children, and young men who preferred to stay in school rather than work. Budget shortfalls resulted in the shuttering of the program.
In 2017, the province of Ontario began an minimum income experiment. Approximately 4000 citizens began to receive a stipend based on their family situation and income. Recipients of this program can receive upwards of $10,000 per year. Government researchers are using this pilot as a way of testing to see if a minimum income can help people meet their basic needs.
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