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Guaranteed minimum income

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This article is about a means-based model of social welfare. For the system of unconditional income provided to every citizen, see Basic income. For the system where citizens receive an income stream through the public ownership of industry, see Social dividend.

Guaranteed minimum income (GMI) (also called minimum income) is a system[1] 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.

Elements

A system of guaranteed minimum income can consist of several elements, most notably:

Differences between guaranteed minimum income and basic income

Main article: 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 (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.

Advocates

The first Muslim caliph, Abu Bakr, introduced a guaranteed minimum standard of income, granting each man, woman, and child ten dirhams annually; this was later increased to twenty dirhams.[2]

In 1795, 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 1962, economist Milton Friedman advocated a minimum guaranteed income via a “negative income tax.”[3]

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".

In his final book Where Do We Go from Here: Chaos or Community? (1967), Martin Luther King Jr. wrote[4]

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.[5]

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.[6][citation needed]

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.[7]

In his 1994 "autobiographical dialog," classical liberal Friedrich Hayek stated: "I have always said that I am in favor of a minimum income for every person in the country".[8]

In 2013, The Equal Life Foundation published the Living Income Guaranteed Proposal[9] illustrating a practical way to implement and fund a minimum guaranteed income.[10]

Other modern advocates include Hans-Werner Sinn (Germany), Ayşe Buğra (Turkey), The Green Economics Institute (GEI),[11] and Andrew Coyne (Canada).[12]

Funding

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 egalitarian proponents see the GMI as a component of a broader social welfare system.

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[13][14] were created without requiring taxes.

Minimum income examples around the world

United States

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.

Cyprus

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.[15]

France

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.

Other countries

See also

Further reading

References

  1. ^ History of Basic Income, Basic Income Earth Network (BIEN), retrieved on 18 June 2009
  2. ^ Grace Clark: Pakistan's Zakat and 'Ushr as a Welfare System
  3. ^ http://www.theatlantic.com/politics/archive/2014/08/why-arent-reformicons-pushing-a-guaranteed-basic-income/375600/
  4. ^ Martin Luther King jr., Where Do We Go from Here: Chaos or Community? (New York: Harper & Row, 1967)
  5. ^ 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
  6. ^ "Richard Nixon: Address to the Nation on Domestic Programs".
  7. ^ "New Zealand Is Jolted By a Speedy Decontrol", Seth Mydans, The New York Times (24 February 1988)
  8. ^ Hayek on Hayek: An Autobiographical Dialogue by F. A. Hayek, edited by Stephen Kresge and Leif Wenar (Chicago: University of Chicago Press, 1994)
  9. ^ "The Living Income Guaranteed Proposal".
  10. ^ "The Living Income Guaranteed Proposal". Living Income Guaranteed.
  11. ^ "Green Economics". GEI.
  12. ^ "A minimum income, not wage, is a fairer way to distribute wealth", Andrew Coyne, The Financial Post (8 April 2013)
  13. ^ https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2pXx
  14. ^ https://www.youtube.com/watch?v=y7Xh0hY3-sM&t=0m8s
  15. ^ "President announces 'Guaranteed Minimum Income' for all citizens". Cyprus Mail.
  16. ^ "Bolsa Família".
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