Tuesday, 7 June 2016

Swiss voters reject 'money for nothing' income plan

Swiss say 'no' to basic income for all
Voters reject plan for government to pay a guaranteed monthly income without any conditions
The Straits Times, 6 Jun 2016

ZURICH/BERN • Swiss voters yesterday rejected by a wide margin a proposal to introduce a guaranteed basic income for everyone living in the wealthy country after an uneasy debate about the future of work at a time of increasing automation.

Supporters of the plan said that introducing a monthly income of 2,500 Swiss francs (S$3,500) per adult and 625 francs per child under 18 no matter how much they work would promote human dignity and public service.

Opponents, including the government, said it would cost too much and weaken the economy.

Projections by the GFS polling outfit for Swiss broadcaster SRF showed that nearly four out of five voters opposed the bold social experiment launched by Basel cafe owner Daniel Haeni and allies in a vote under the Swiss system of direct democracy.

Mr Haeni acknowledged defeat but claimed a moral victory. "As a businessman, I am a realist and had reckoned with 15 per cent support. Now, it looks like more than 20 per cent or maybe even 25 per cent. I find that fabulous and sensational," he told SRF. "When I see the media interest, from abroad as well, then I say we are setting a trend."

Conservative Switzerland is the first country to hold a national referendum on an unconditional basic income, but others are examining similar plans.

In Finland, the government is considering a trial to give a basic income to about 8,000 people from low-income groups. And the Dutch city of Utrecht is also developing a pilot project which will begin in January next year, the BBC reported yesterday.

A Swiss voter who gave his name only as Olivier said he voted "yes" to the initiative. The 26-year-old, who works on construction sites and runs a small business where he designs and builds furniture, said: "For me, it would be a great opportunity to put my focus on my passion and not go to work just for a living."

Champions of the plan painted just such a future in a large poster, asking: "What would you do if your income was secure?"

They also marched as robots down Zurich's high street and handed out free 10-franc notes.

A Bern resident, who gave his name only as Stephan, said he supported the idea as a "sustainable solution for society".

A woman named Meleanie said she reluctantly voted "no". "I find that it is a real danger that once people just get their basic needs covered, society doesn't feel responsible any more to look after the ones who can't really handle the situation on their own," she said.

The Swiss government had urged voters to reject the campaign, saying the scheme would cost too much and undermine societal cohesion. The plan included replacing in full or in part what people receive in social benefits.

In a separate vote yesterday, Swiss voters also clearly rejected a proposal to require state-controlled companies, such as Swisscom, not to seek to make a profit.


Money for nothing
As anxiety grows about technological disruption, the idea of a guaranteed basic income is being embraced by union leaders, libertarians and Silicon Valley executives. Is this the future of welfare?
By John Thornhill and Ralph Atkins, Published The Sunday Times, 5 Jun 2016

Switzerland's traditionally conservative electorate will vote tomorrow on the superficially preposterous idea of handing out an unconditional basic income of 30,000 Swiss francs (about S$42,000) a year to every citizen, regardless of work, wealth or their social contribution.

Opinion polls suggest the referendum will be heavily defeated. And even if some kind of electoral convulsion results in the proposal being unexpectedly approved by voters, it is certain to be shot down by the 26 cantons that would have to implement it.

But the fact that one of the world's most prosperous countries is holding such a vote highlights how a centuries-old dream of radical thinkers is seeping into the political mainstream. In countries as diverse as Brazil, Canada, Finland, India and the Netherlands, 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.

Mr Daniel Hani, a chirpy Basel entrepreneur who is one of the Swiss initiative's main supporters, said modern welfare states provide basic social support but are failing to adapt to the needs and values of our times. The trouble is that they are too costly and cumbersome, assume that a citizen's worth is determined solely by their value as an employee and rely on means testing by an overly intrusive state.

"Our social system is 150 years old and is based on Bismarck's response to Industrialisation 1.0," he said. "Our idea is simple. We want to render the conditional unconditional. (Unconditional basic income or UBI) is about shifting power back to the citizen."


The idea of providing money for nothing to all citizens dates back centuries and was nurtured by a radical cult before resurfacing in recent times. In the 20th century, it was championed by thinkers on the left, like John Kenneth Galbraith and Martin Luther King, as a means of promoting social justice and equal opportunity. But it was also backed by libertarians and economists on the right, including Milton Friedman, as a way of restricting the coercive state and restoring individual choice and freedom.

Incredible as it seems today, president Richard Nixon came very close to implementing a negative income tax (a variant of basic income) across the United States in 1970. Nixon's initiative, part of his Family Assistance Plan, was strongly backed by the House of Representatives but failed in the Senate, where some Democrats considered it unambitious, and several Republicans considered it too bold.

Interest in the idea has surged in recent years largely thanks to the technological revolution, which is convulsing labour markets worldwide. The decoupling in many countries of median household income growth from expansion in gross domestic product has created a sense of middle-class crisis, fuelling anger over inequality and the rise of populism in the US and Europe. Whether it is because of a sense of guilt at the upheavals they are causing in society or simply a celebration of innovative thinking, some Silicon Valley entrepreneurs have taken to the idea of a UBI, describing it as a "digital dividend".

At a recent conference in Zurich on technological disruption and social change, a succession of speakers from the US warned about further turmoil in the job market resulting from the automation of routine tasks, the application of machine learning and the rise of robots.

Citing just one of many examples, Mr Andy Stern, the former president of the Service Employees International Union, said the introduction of self-driving trucks and cars would eliminate millions of jobs. There are about 3.5 million truck drivers in the US, forming the largest job category in 29 states.

"There is the potential for the greatest disruption of jobs in the history of the world," said Mr Stern, author of Raising The Floor, a forthcoming book advocating UBI as a partial solution.

MIT professor Erik Brynjolfsson, co-author of The Second Machine Age, said a convulsive "tech surge" was under way that was rapidly turning the promise of science fiction into a reality. But he insisted that technology remained the tool of humans and could be an enormous benefit so long as it was properly managed. With robots doing most of the work, he painted a picture of a "digital Athens" in which people would have time to focus on sport and the arts.

He also warned of the potential for enormous upheaval if societies did not anticipate these challenges and adequately respond to them. "I can see revolution and violence and the failure of a lot of big companies. Our economy and political system have not adapted to this new world at all and we need to get out in front of it," he said.

Mr 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 fuelling too a crisis of aggregate demand in the economy, he said, adding that he had recently been visited by the boss of a tech group worried about who would have enough money to buy his company's products in 10 to 15 years.


A more equal division of the fruits of the tech revolution would revive that demand while providing a broader social good. The aim of all wealthy 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."

Even if many experts agree about the scale and intensity of the technological and economic challenge, they remain divided about the appropriate social and political response. There is still less consensus about how it could be implemented and funded.

The resistance to the idea of introducing UBI in Switzerland - a recent GFS poll found 71 per cent of respondents were inclined to reject it - is instructive. It is far from obvious that the Swiss social model is broken and in need of repair. Switzerland remains one of the richest and most productive economies in the world. Its much-praised apprenticeship system generates a steady stream of well-trained employees and provides opportunities for all. Its unemployment rate is just 3.6 per cent.

Ms Vania Alleva, a Swiss trade union leader, said it is worth debating the possible benefits of UBI and the principles of a just society but there was no need for such radical change. "We are critical of UBI. We have a social system in Switzerland that works," she said.

Labour leaders elsewhere remain equally wary of introducing UBI, fearing it might only be used by rightwing politicians to shred the existing welfare state. By setting the rate too low and withdrawing other welfare benefits, it could end up hurting the very people it was designed to help most. As one participant in the Zurich conference put it, there was a danger of "fattening the frogs to feed the snakes".

Many executives are also lukewarm about the idea, objecting to the delinkage of economic reward and effort. It is notable that support for UBI is lowest in the predominantly German-speaking cantons of Switzerland where the work ethic is particularly strong.

Mr Ulrich Spiesshofer, chief executive of the engineering company ABB, said: "There has to be a basic level of social provision for people in need but beyond that, economic rewards should be based on actually creating economic value."


The Swiss government estimates full implementation of UBI would cost 208 billion Swiss francs, about three times the current annual federal spending of about 67 billion Swiss francs. Even then, it would not replace all existing social services, such as healthcare for the elderly.

Mr Alain Berset, a Social Democrat member of the Swiss Cabinet, has described the UBI initiative as "utopian", saying it would require significant extra funding of at least 25 billion Swiss francs.

"The unconditional basic income would be a risky experiment. It's not clear how this basic income would be designed by Parliament or how it would be financed. The precise implications are unknown," he said in an interview.

Supporters of UBI accept many of these criticisms and are launching pilot projects to help answer the objections. One of the most interesting initiatives is in Finland, and basic income will be rolled out on a national scale if the experiment proves effective.

The centre-right government will this year begin making tax-free monthly payments of about €550 (S$850) to a random sample of 10,000 adults of working age as part of a two-year experiment. The intention is to see what effect a basic income has on work incentives and life choices and how it interacts with the existing welfare model. The city of Utrecht, and 19 other municipalities across the Netherlands, are doing similar experiments.

Mr Matthew Taylor is chief executive of the RSA, a British institution that looks for practical solutions to social challenges, that recently published a study on the viability of UBI. He said societies will need to become a lot more innovative in the face of the latest technological revolution. In particular, far more flexible ways will have to be found to support part-time workers or those who wish to retrain or look after their children or elderly parents.

"What excites me about UBI is that it could act as a catalyst for a broader shift in public attitudes," he said. "I think that UBI can potentially help overcome the attitudes that we have between strivers and skivers. It can help the state enable people to have autonomous lives."

While acknowledging the near- certainty of defeat in tomorrow's referendum, the Swiss backers of UBI believe their campaign signals the beginning of a global debate on basic income, rather than its end. It may be premature to introduce UBI today but its appeal will grow as societies learn to prize creativity over productivity.

Mr Hani said that, irrespective of the result, he is delighted that every Swiss newspaper has been furiously discussing the principles of a basic income. He said the Swiss debate is like a movie trailer for the main event and "trailers always end with the phrase: coming soon..."



DEMAND BOOST: UBI's proponents say a more equal division of the gains made by technology would lift demand

MODEL SYSTEM: Although the Swiss will vote on a UBI, many insist that the country's social model works well

TESTS IN EUROPE: Finland is running a pilot scheme; Utrecht and other Dutch municipalities are holding similar trials

Back to basics: An idea long in the making

The Basic Income Earth Network (Bien), which links campaigners around the world, traces the original concept of basic income back to Thomas More, the 15th-century humanist scholar and author of Utopia, who wrote about the need for a minimum income.

But Bien suggests that the true father of the idea of a guaranteed minimum income was Johannes Ludovicus Vives, a Spanish-born humanist and close friend of More.

After fleeing the Spanish Inquisition, Vives moved to Bruges, where he wrote tracts in support of the poor. "Even those who have dissipated their fortunes in dissolute living - through gaming, harlots, excessive luxury, gluttony and gambling - should be given food, for no one should die of hunger," he wrote.

The idea was developed by the 18th-century radical Thomas Paine, who argued that every person should receive £15 on their 21st birthday and £10 a year thereafter to be paid out of "ground rent".

John Stuart Mill, the 19th-century utilitarian philosopher, wrote sympathetically about the idea of a basic income in his Principles Of Political Economy, although he did not develop the concept.

The Nobel Prize-winning economist James Meade argued for a "social dividend" in the 1930s as a means of alleviating poverty and creating a just and efficient economy. In 1962, the American economist and Nobel laureate Milton Friedman argued for a radical simplification of the welfare state and introduction of a "negative income tax".

Jay Hammond, the Republican governor of Alaska, created the Alaska Permanent Fund in 1976 to distribute some of the proceeds of the state's oil wealth to all its residents.

Every Alaskan still receives a dividend of about US$2,000 (S$2,750) a year in what is arguably the only full universal basic income system in operation.

The poverty and inequality levels in Alaska are among the lowest in the US.

Why the debate on unconditional basic income is relevant for Singapore
Technological disruption is expected to cause massive job losses - which is why some European states are debating giving citizens a basic income that can see them through such changes. This may sound extreme to Singaporeans, but the debate highlights the need for social welfare systems to move away from being too dependent on employment.
By Chua Mui Hoong, Opinion Editor, The Straits Times, 7 Jun 2016

On Sunday, the Swiss voted against a proposal to give every citizen a basic income, regardless of their wealth or whether they are working.

The proposal was to give a monthly income of 2,500 Swiss francs (S$3,500) to each adult and 625 Swiss francs to each child. The plan was defeated, with 77 per cent opposed to it and 23 per cent backing it.

Despite its defeat, the significance of the referendum - and the idea of a universal basic income (UBI) for all - reverberated across developed countries.

In fact, the Swiss aren't the only ones considering such a universal basic income. The Financial Times (FT) 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. 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 disintermediation platforms like Uber and Task Rabbit, as well as 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 of 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 an unconditional or universal basic income has arisen.

The Economist, The New York Times and the FT have all reported on this in lengthy features in recent weeks, and traced the intellectual arguments underpinning this seemingly radical idea.

One recent advocate is Mr Robert Reich, a labour secretary in the Clinton administration who teaches at the University of California, Berkeley. The FT reported him as saying 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.

The FT report continued: "This insecurity was also fuelling a crisis of aggregate demand in the economy.... 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."

Just as the birth of the industrialised society eventually led governments to create the welfare state, with disability, unemployment and health insurance that protects workers when they can't work, so the birth of today's post-industrial society is seeding debate on how social welfare systems need to change.


UBI is emerging as a possible system to augment or even replace the welfare state.

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 (S$770 to S$1,000) 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 it does not need monitoring and might end up cheaper than a complex conditional system that needs constant monitoring.

We may think that giving a UBI will remove the work ethic. But will it? After all, those on conditional welfare may lose their 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 the effect of a UBI on work motivation is unclear.

In the Netherlands, a complex experiment will begin in Utrecht and several other cities to test out these questions. 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 gets the benefits with no conditions. A third group gets an extra bonus if they do volunteer work. Yet another group is allowed to find work and keep the extra income. How people behave under each scheme is what the authorities want to know.

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 19.4 per cent of GDP it now spends on welfare.

An analysis in The Economist estimates that "a basic income of 15 per cent of average income would require tax revenues of 15 per cent of national income dedicated to it. That is a lot of tax for not much basic income (about US$8,000 in America, in this example)."


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 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. 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, autonomous 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 or 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 to protect workers better from the churn and turn of the Gig Economy.

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