Who is talking about guaranteed minimum income?
I heard that the Green Party is advocating a guaranteed minimum income. It would be more interesting than most of what we are hearing. All parties seem to be dusting off tried – or tired? – old polices. This could be radical.
What is a guaranteed minimum income?
If adopted, it would mean the government would guarantee everyone got a certain income. Anyone earning less than that amount would get the difference paid to them, whether they were in work or not. Different schemes have been suggested over the years by economists in various countries. Since I haven’t seen any details, I can’t comment on the latest proposals but here are my thoughts on the idea in general.
What are the risks of a minimum income?
- It would cost a lot, depending on the level at which the minimum was set.
- The more it cost, the more it would fuel inflation, depending on other factors such as taxation and interest rates.
- It would reduce the incentive to work, especially where a dependency culture exists. Addressing that could be a challenge, but not impossible. People would still benefit if they could earn more than the minimum.
What would be the benefits of a minimum income?
- Depending on the level and other details, it could eradicate poverty.
- It would reduce the stigma of poverty as so many people would receive it.
- It would save the cost of existing benefits, possibly to zero if the level was set high enough.
- The cost of administering benefits would be much less.
A minimum income would create some opportunities (positive risks)
- If everyone had an adequate income, there would be less need (zero?) for the numerous public services to be provided free or on a mean-tested basis. Most could be charged at an economic rate.
- That would save administration costs.
- It would also enable authorities to make provision based on effective demand rather than assumed needs.
- The one-size-fits-all approach would go.
- The Market would be able to function as it should, without the distortion of subsidies or overprovision, except where there a good policy reason for intervention remained. This would be true capitalism!
- Nobody would need to be exempt from Council Tax
What is the worst risk of a minimum income policy?
- Doing it by half measures. Setting the level too low. That would mean retaining most of the existing benefits system. There would also be a risk of authorities continuing to subsidise some services and means-test others unnecessarily.
- There would also be the risk that some people would fail to adapt to managing their own affairs. Perhaps an educational programme would be needed.
David Lloyd-George once said , “You can’t cross a chasm in two leaps”. And some people think poverty is a good thing. They tend not to be poor.
How about your risks?
Want to learn how to manage the risks in your business? Contact me or just read my book, Load The Dice. It could save you a lot of money.