Could a liveable income guarantee cure COVID-19’s economic chaos?

Genevieve Jacobs 5 April 2020 23
Tim Hollo

Tim Hollo and a group of other eminent Australians are calling for a basic income guarantee. Photo: File.

A group of 100 prominent Australians has signed a letter calling for the introduction of a liveable income guarantee – or basic income – as COVID-19 lays waste to many sectors of the economy.

The letter has been signed by prominent economic, social and public policy experts, unionists, consultants, writers, business people and religious leaders, and is addressed to the Commonwealth Government and National Cabinet.

Former ACT Greens candidate Tim Hollo, who is the Executive Director of the Green Institute and a visiting fellow at the Australian National University’s RegNet, coordinated the letter.

“I think one of the critical things is that at a time of extraordinary crisis things become possible that nobody thought possible – indeed they start to become obvious,” he said. “That applies to a whole range of ideas – like banning evictions, wage subsidies, doubling the jobseeker allowance – that were thought not to be politically possible.

“There will be extraordinary numbers of people who can’t take part in the labour force for an extended period of time. That dramatically shifts the conversation away from the role of the welfare system in driving people back into the workforce and towards the role of government in taking care of people.

“It changes the whole dynamic. We are not there quite yet but I think we will get there.”

The letter says that the COVID-19 crisis has triggered an unprecedented situation where millions of Australians are likely to find themselves suddenly not only unemployed but unable to be employed during the vital period of physical distancing.

“Many more are finding their precarious situation even more precarious, and most are in more demanding caring positions,” the letter says.

“As the long and dangerous queues at Centrelink offices and the unmanageable demand on the MyGov website demonstrate, the current approach, even with these important shifts, is insufficient in the face of the economic crisis we are entering.

“With economists forecasting official unemployment rates of 10 to 15 per cent in the near future, and many more in the informal economy in dire straits, there is a clear and urgent need to introduce a Liveable Income Guarantee without delay to make vital support easily accessible to all in need.”

The signatories are calling on the government to:

  • Remove conditionality requirements to make access to the Jobseeker Payment and related payments, including coronavirus supplement, administratively fast and simple
  • Remove all mutual obligation requirements, which will be both impossible to comply with and impossible to manage
  • Unify all payments, including the Aged Pension, Disability Support Pension, Youth Allowance, etc, at the same full Liveable Income Guarantee rate of the Jobseeker Allowance plus coronavirus supplement (without prejudicing any additional payments such as Disability Support Pension, Rent Assistance or the Remote Area Allowance), and
  • Introduce these measures with immediate effect.

The signatories acknowledge that a Liveable Income Guarantee alone will not be sufficient to meet need.

“In particular, we call for measures to ensure stable housing for all, including suspension of mortgage and rent payments, a freeze on repossession and evictions, and provision of accommodation for the homeless. We also call for a suspension of utility bills, including internet service provision and telephony. We call for a suspension of the cashless welfare card,” they said.

While there has been no response yet from government to the open letter, Tim Hollo says that he’s been delighted to see a strong reaction from economic and social policy leaders.

“Lots of people who were sceptical are really starting to think seriously about the advantages of an approach like this.

“We’re seeing tremendous numbers of people who will have caring responsibilities [but] who cannot automatically participate in the economy. That shifts the idea of what our role is participating in, and contributing to, society.

“We are not being paid to teach our kids, for example, but we should be supporting people to take on that role and supporting us all to stay at home. Income guarantees incentivise staying at home. We say that, as a society, we will take care of you.”

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23 Responses to Could a liveable income guarantee cure COVID-19’s economic chaos?
Bill Gemmell Bill Gemmell 9:21 pm 07 Apr 20

It is a nice idea which I fully support. However, it is called a tax-transfer system for a reason. The tax system funds the $ returned to the recipients via the welfare system. To introduce UBI a massive reform program is required: this could be a learning from the economic downturn we are spiralling into.

chewy14 chewy14 5:22 pm 07 Apr 20

A permanent UBI is a woeful idea that would only exacerbate already ridiculously large intergenerational wealth transfers when we should be trying to minimise and remove them where possible.

Even ignoring the disincentive it creates for individuals to work and take care of themselves, how would you ever implement it?

How could you possible give it to existing elderly people who haven’t paid a cent towards it?

Why should poorer, younger people pay welfare to older, far wealthier people?

And how do you deal with major demographic shifts such is occurring now with far less working age people who would be required to support and ever growing amount of older people who wouldn’t be paying tax?

It’s just unbelievably stupid.

Alan Carlyle Alan Carlyle 5:15 pm 07 Apr 20

This is seriously worth considering for the simple reason that the Australia (and the World) is becoming a far more dynamic and changeable place with traditional social welfare unable to keep up. Even the concept of welfare is becoming quite a problem as we are seeing now with what is happening. Are those on Job Keeper and Businesses getting support on Welfare paid from the public purse (and all that that traditionally implies) or are they getting something else? If your an Business owner getting government paid public money to setup and maintain your business, now or any time, does this make you a Welfare bludger?

I would say definitely not what your getting is the rotational draw down that ensure money does not just rise to the top and get trap there where it service little use other than skewing the macroeconomic models in ways they are not adequately designed to describe. The make a nation look well off with when in reality it is stagnating and fragile.

The traditional welfare system was once adequate to the task of draws down and distributing money before it became trapped yet this is not the case any more. The tools to draw it up and keep it there have just gotten effective and dynamic.
These same tools also create costs for those needing welfare style support at far to rapid a pace for any traditional government to keep up with. Increasing reliance on paid training and qualifications that is now must be done online in nice safe home using good quality computer resources is just one example. And in an information technology driven world tomorrow will bring new essentials need to get going and live life effectively.
The whole concept of welfare is just too slow to keep up with this.

Denby Angus Denby Angus 9:11 pm 06 Apr 20

The current crisis demands a commensurate response to prevent real immediate suffering. It’s a pity that it took this to remind people that government should be nurturing its citizens rather than punishing them. To afford the services that provide a simple dignified life can be achieved with sensible tax reform and prioritisation of programs to the well being of the majority rather than the servicing of rent seeking vested interests. If you want consumers to spend, spread the wealth; if you want people to live in dignity, spread the wealth. Many studies have shown how the economy will prosper overall with a LIG. This is not socialism, it’s a rational policy response to social and economic need.

grim123 grim123 9:29 am 06 Apr 20

UBI has been cancelled as an absolute failure everywhere it has been tried. Socialism doesn’t work.

HiddenDragon HiddenDragon 8:28 pm 05 Apr 20

The open letter is not entirely clear on whether the signatories want an unconditional income to be a permanent feature of the Australian welfare system, although it’s probably safe to assume that the answer to that question is a resounding “yes”.

A strong “bounce back” / “spring back” after the worst of the virus is behind us may prove to be wishful thinking, and that will likely mean significant ongoing changes to welfare and skill development programs, but the scope of what is being sought in that letter is truly revolutionary, and there’s no hint about how it would be paid for.

The glib solution of hitting the “big end of town” to pay for guaranteed income (and housing etc.) overlooks the fact that some of the biggest businesses which currently operate in Australia could simply decamp if they were faced with tax obligations in Australia which went well beyond what they face in other countries. Even if they don’t disappear, those companies are absolute masters at minimising tax, in spite of the best efforts of national governments to extract desired levels of funding from them.

That would mean a heavy burden on Australian households and individual taxpayers through a much higher GST, and other taxes, and very significant redistribution away from those currently enjoying higher incomes.

Many would quite reasonably say “bring it on” (mainly to the latter point), but senior academics etc. who are demanding a guaranteed income for all might want to acquaint themselves with what life was like for all but the most favoured academics in the Soviet era.

    dcollins dcollins 12:51 pm 07 Apr 20

    “some of the biggest businesses which currently operate in Australia could simply decamp if they were faced with tax obligations in Australia which went well beyond what they face in other countries”

    Name some. The big four banks? (nope); the mining companies? (nope) the US tech companies? (nope) the gas companies (nope). It’s a familiar threat but doesn’t much apply in Australia. What is more, you’ll see the whole world moving in this direct. You think Europe isn’t going to make foreign multinationals start paying tax? After this crisis, their budgets will depend on it.

    As for references to the Soviet era: red herring. No-one is calling for democratic institutions to be dismantled, so calm down and carry on.

    chewy14 chewy14 3:57 pm 07 Apr 20

    Mining companies can most definitely leave Australia if taxes become so higher as to make projects less viable than comparative overseas projects. The same goes for gas.

    US tech companies already offshore much of the business because they can do so and Its cheaper.

    We have a very service oriented economy, unless you are providing value, foreign companies won’t come here or base themselves here because there are cheaper alternatives overseas.

Steven Harris Steven Harris 5:01 pm 05 Apr 20

I've been advocating for universal basic income for years. Approaching retirement age, and I don't want to have administrators snooping about my affairs, how much cash I might have and who I might be sleeping with. Besides, if everyone is entitled then a whole layer of bureaucracy and associated expense is eliminated at a stroke. Combine it with a fair and inescapable tax system and we'd be much better off as a society.

Karen Feng Karen Feng 3:13 pm 05 Apr 20

I'm also wondering how is the government able to pay for all those special payments.

I have nothing against it.

Im just hoping that after the Coronavirus there isn't going to be any drastic cuts to healthcare or schools

Pascale Boulanger Pascale Boulanger 2:47 pm 05 Apr 20

With everyone receiving a basis income, labour costs become much lower - that would help kick start the economy post pandemic.

Raising the GST only hurts people on low income - bad idea. Increased taxes for those earning more than 3 times the average income? yes!

    Tara Maree McInnes Tara Maree McInnes 4:18 pm 05 Apr 20

    Pascale happy to pay more tax for a basic income like in Finland

Bill Pappas Bill Pappas 2:03 pm 05 Apr 20

Maybe we should have a serious bi-partisan debate on a switch to a 15% GST, have another higher tax bracket for those earning over $250k, and really looking at taxing multinational companies.

David Murn David Murn 1:02 pm 05 Apr 20

What about a high tax on people earning above a threshold, with that tax money put into a pool to be distributed among those earning less. Say, anyone earning over 300k, gets taxed at 80% above that level.

    Lauryn Roberts Lauryn Roberts 1:08 pm 05 Apr 20

    if there’s a minimum wage I’m all for a maximum wage. What some people take home a year sickens me....

    Lisa Bishop Lisa Bishop 1:23 pm 05 Apr 20

    David Murn 😂 Socialism or Communism. Which is your preference.

    James Ballard James Ballard 11:06 am 06 Apr 20

    David Murn just like the UK in the 70s. 83% tax on income over 20k quid (160k quid these days).

Christopher Mawbey Christopher Mawbey 12:48 pm 05 Apr 20

Half a million each for 2 yrs

Nick James Nick James 12:31 pm 05 Apr 20

I'm not sure everyone is going to want to pay the tax bill. We're going to have a big enough debt hangover after this crisis, with all sorts of tax increases expected already.

    Ross Hamilton Ross Hamilton 9:55 am 06 Apr 20

    Nick James Yes Nick - all of this money has to come from somewhere. Can’t borrow it on the never-never.

Carol Gainey Carol Gainey 12:11 pm 05 Apr 20

Yes it is. Perhaps there will be some positives out of this crisis.

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