Why the debate on unconditional basic income is relevant for Singapore

It sounds like Utopia: getting a fixed basic income every month for doing nothing.

Yet it’s something  being considered seriously. Switzerland votes this weekend (June 5) on a referendum on whether to give out  out an unconditional basic income (UBI) of SFr30,000 a year to every citizen, regardless of their wealth, or whether they are working.

The No vote is expected to win, with latest polls showing 60 per cent not in favour. They are  uncomfortable with what this will cost the public purse and what it will do to the work ethic.

But the Swiss aren’t the only ones considering such a universal basic income.

The Financial Times reported: “In countries as diverse as Brazil, Canada, Finland, the Netherlands and India, local and national governments are experimenting with the idea of introducing some form of basic income as they struggle to overhaul inefficient welfare states and manage the social disruption caused by technological change.”

The thinking goes like this: Robots and tech disrupters will cause jobs to disappear by the millions. A basic income is meant to help them adjust while this happens, giving them a breather to retrain, for example.

Meanwhile, the number of people lucky enough to get full-time paid work that comes with several weeks  of vacation leave and medical benefits, is likely to diminish. This is because disintermediating platforms like Uber, Task Rabbit and sites that match labour to jobs, see more employers and workers  give up full-time work contracts for  short-term work on demand.

The rise of this so-called “gig economy” can be said to be good for workers in that it offers more them more flexible work hours.

But it is terrible from a financial and employment security point of view. Such gigs usually don’t come with medical leave or healthcare benefits, paid vacation leave or retirement plans. Workers will become more vulnerable, exposed to the vagaries of long spells of joblessness, or illness, and could be left financially desolate  in old age.

It is against the backdrop of such fears that the idea of a universal basic income has arisen.  

The Economist, The New York Times and the FT have all reported on this in lengthy features in the last two weeks.

The FT reported: “Robert Reich, a former Labour secretary in the Clinton administration who teaches at University of California, Berkeley, said the digital revolution was increasing economic insecurity and inequality. The development of car-hailing apps, such as Uber and Lyft, had brought great convenience for consumers but was also creating a “spot auction market” for labour.

“This insecurity was also fuelling a crisis of aggregate demand in the economy, he said, adding that recently he had been visited by the boss of a giant tech company worried about who would have enough money to buy his company’s products in 10-15 years.

“A more equal division of the fruits of the technological revolution would revive that demand while providing a broader social good. The aim of all rich societies, Mr Reich said, should be to provide a basic level of subsistence, enabling people to do more of what they wanted and less of what they did not want to do. For all these reasons, he said: “I think that UBI is inevitable.”

While the Swiss are expected to defeat the referendum, other cities in Europe are going ahead with planned experiments.
In Finland, the social insurance body will pilot a scheme next year, giving up to 180,000 Finns a basic income of €500 to €700 a month – less than the average Finnish income of €2,700.

European cities which have generous welfare systems are keen to try out these pilot schemes to see how people respond to a basic income, and to test if a basic income that does not need monitoring might end up cheaper than a complex conditional system that needs constant monitoring.

We may think that giving an UBI will remove the work ethic. But will it?  After all, those on conditional welfare may lose benefits if they work and start to earn above a certain sum, so they may choose to shun work. But  someone with UBI who chooses to work gets to keep all his salary, plus his basic income, so may be more motivated to find work.

In other words, the effect of a UBI on work motivation is unclear.

In the Netherlands, a complex experiment will begin in Utrecht to test out these questions. 

According to The Guardian: “One group of benefit recipients will remain on the old workfare regime, under which people who live alone get €972.70 and couples €1,389.57. Another group will receive the same benefits unconditionally, without sanctions or obligations. 

“A third group will also receive the same benefits unconditionally, plus an extra monthly bonus of €125 if they choose to do volunteering work. A fourth group will be obliged to do volunteering work. If they fail to do so, they will lose their €125 bonus. A fifth group will receive unconditional benefits without the bonus, while being allowed earn additional income from other jobs.”
Similar experiments will be conducted in  other Dutch cities.

Opponents say such a UBI will be horrendously expensive. Switzerland’s proposed model will cost one third of GDP, about 13 percentage points more than  the current 19.4% of GDP it now spends on welfare.

An analysis in The Economist estimates that “a universal basic income worth a given percentage of the average income (measured as GDP per person) requires a proportional rise in tax collection as a share of GDP.”

It adds: “ In other words, a basic income of 15% of average income would require tax revenues of 15% of national income dedicated to it. That is a lot of tax for not much basic income (only about $8,000 in America, in this example).”

What’s this all got to do with Singapore?

I read the reports on this issue with great interest, because it signposts the kind of issues we in Singapore will have to grapple with.

To be sure, the idea of a UBI for all citizens sounds rather extreme to me. Most of us in Singapore who are working don’t need it, and may prefer state funds to be concentrated on those who need the help.

But the impetus behind this whole debate is important for Singapore.

Already, the Gig Economy is  upon us here. The dawn of the robot-led economy is probably not far off too.

Many people are turning to Uber and similar part-time, freelance, portfolio work, rather than going for full-time employment.

As Singapore restructures its economy, and embraces robots, autononmous vehicles, Big Data analytics, and any number of tech disrupters, the potential for changes to employment is immense. Many people will find themselves out of jobs.

Yet  our social security system remains so dependent on full-time employment.

The Central Provident Fund system assumes you have an employer who pays his share of contributions.

Many medical benefits are given by employers, which means workers lose them when they most need them - when they are middle-aged and old, and lose their jobs.

Even the Workfare Income Supplement for low-wage workers presupposes you have a job, before it can augment your wages.

In Singapore, if you are jobless for a month or two, hopefully your savings or family or friends can tide you over. You can also get some short-term assistance.

If you are jobless for a year, or two years, there is no real safety net for you, beyond that offered by subsidies for retraining. You’re lucky if you have a working spouse meanwhile; otherwise you may end up having to think about drastic measures like selling your home and downsizing.

While jobless, you can’t get Workfare. Your CPF payments  stop. And Singapore has  no unemployment benefits.

In Europe, the discussion has advanced to a point where they’re talking about a basic income for everyone regardless of need.

Over here in Singapore, we need to start talking, fast, about how to rework our social security systems so it is less employer-dependent, so we can better protect workers better from the churn and turn of the Gig Economy.

muihoong@sph.com.sg

Chua Mui Hoong blogs regularly on notable commentaries and issues.

She will be among The Straits Times journalists speaking at the Singapore Coffee Festival 2016  next weekend at the F1 Pit Building.

Her talk on covering politics in Singapore is on Saturday June 11 at 1 pm.