How does more money get you to no money?

We're swamped by pro-universal basic income messages and the enthusiasm requires to be dampened down. There will be  trial in Scotland. Four councils are faced with the task of turning basic income from a utopian fantasy to contemporary reality as they build the first pilot schemes in the UK, with the support of a £250,000 grant announced by the Scottish government last month  The independent think-tank Reform Scotland, which published a briefing earlier this month setting out a suggested basic income of £5,200 for every adult, has calculated that much of the cost could be met through a combination of making work-related benefits obsolete and changes to the tax system, including scrapping the personal allowance and merging national insurance and income tax.

The Socialist Party analysis of UBI is that it would be a subsidy to employers. Indeed, in the Swiss referendum on the matter in June 2016, the advocates of a UBI openly stated that everybody’s wages would and should be reduced by the amount of 'free money' from the state. The other socialist objection is that ignores the economic imperative of capitalism, enforced through competition, to accumulate more and more capital out of profits, and so profits must come first before meeting the consumption needs of the population. Catering for these is kept to the minimum to maintain productive efficiency or, in the case of 'free money' payments to the poor, to the minimum needed to avoid bread riots. The basic income scheme will be used to undermine social and public services.

Those left-leaning liberals should ask themselves why the right-wing Adam Smith Institutes promotes UBI

“UBI is politically feasible, socially desirable and financially sustainable,” the report says...Even if it gets implemented, UBI won’t solve all our problems. Its parameters, scope and size will have to be fiddled with for a long time to come. But no one can deny that it’s a feasible reform that can nudge our society forward.” their report's Otto Lehto, explained, 

Sam Dumitriu, the head of research at the Adam Smith Institute, said “A UBI streamlines the provision of welfare services and improves the autonomy and incentives of individuals. Allowing poor people to spend their money as they see fit stimulates a bottom-up market solutions and cuts down on the bureaucratic red tape. All this pulls resources away from wasteful rent-seeking into wealth creation Attempts to protect jobs through Luddite regulation will backfire and mass retraining schemes have a shaky track record. Cash transfers are our best bet at ensuring the benefits from coming technological change are felt by everyone. We now need to experiment with different ways of doing it”

And always in search of votes, the Labour Party has leapt upon the bandwagon and considering proposing a universal basic income that would be paid unconditionally to all citizens.

The Fabian Society endorses a compromise alternative, not the full idea. 

Tax-free allowances should be scrapped and the money used to pay a flat-rate benefit to all adults...The report’s authors reject the idea of a “fully-fledged” universal basic income –... They warn such a plan would create too “many losers and not reduce poverty or improve the incomes of those with the least”. But the Society’s researchers say a similar flat-rate “individual credit” for all adults that sat alongside the existing benefits system could “significantly reduce poverty and increase low and middle incomes”. They say child benefit could also be integrated into the same system, with a “child credit” paid to a child’s main carer.

“At this time there is not a good case for integrating universal credit, tax allowances and child benefit into a single flat-rate payment for each individual (ie a ‘basic income’),” the report’s authors write. “There is growing interest in the idea, which has the merit of reducing the employment disincentives, complexity and intrusion associated with means-testing. “But a basic income has significant disadvantages – any revenue neutral reform would create many losers and would not reduce poverty or improve the incomes of those with least today. Reform would be very unlikely to eliminate the need for means testing and conditionality.

“Instead, the tax-free allowances and child benefit should be converted into an ‘individual credit’ for all adults and a ‘child credit’ paid to the main carer. Unlike a basic income, this payment would sit alongside universal credit and as a result would significantly reduce poverty and increase low and middle incomes.”

As many have always suspected, the idea of UBI is merely tax structure reform.

While many projects got glowing headlines, the devil was in the details. These pilot schemes are not testing a "universal basic income" but a reform of the poor law system.

Finland plans to give every citizen 800 euros a month and scrap benefits. Prime Minister Juha Sipila was quoted, “For me, a basic income means simplifying the social security system”

“It’s not really what people are portraying it as,” said Markus Kanerva, an applied social and behavioural sciences specialist working in the prime minister’s office in Helsinki. “A full-scale universal income trial would need to study different target groups, not just the unemployed. It would have to test different basic income levels, look at local factors. This is really about seeing how a basic unconditional income affects the employment of unemployed people.” Kanerva describes the trial as “an experiment in smoothing out the system”
Marjukka Turunen, who heads the legal unit at Finland’s social security agency, Kela, which is running the experiment explains that the Finnish benefit system is simply “not suited to modern working patterns”, Turunen said. “We have too many benefits. People don’t understand what they’re entitled to or how they can get it. Even experts don’t understand. For example, it’s very hard to be in the benefit system in Finland if you are self-employed – you have to prove your income time and time and time again.”

Authorities believe it will shed light on whether unemployed Finns, as experts believe, are put off taking up a job by the fear that a higher marginal tax rate may leave them worse off. Many are also deterred by having to reapply for benefits after every casual or short-term contract. “It’s partly about removing disincentives,” explained Marjukka Turunen, who heads the legal unit at Finland’s social security agency, Kela, which is running the experiment. The benefit system is simply “not suited to modern working patterns”, Turunen said. “We have too many benefits. People don’t understand what they’re entitled to or how they can get it. Even experts don’t understand. For example, it’s very hard to be in the benefit system in Finland if you are self-employed – you have to prove your income time and time and time again.” For UBI purists, the fact that the monthly Finnish payment – roughly equivalent to basic unemployment benefit – is going to a strictly limited group, and is not enough to live on, disqualifies the Finnish scheme. The Finnish experiment’s design and objectives mean it should perhaps not really be seen as a full-blown UBI trial at all, cautioned Kanerva: “People think we’re launching universal basic income. We’re not. We’re just trialling one kind of model, with one income level and one target group.”

The provincial government of Ontario is to run a pilot project aimed at providing every citizen a minimum basic income of $1,320 (£773) a month. People with disabilities will receive $500 (£292) more under the scheme, and individuals who earn less than $22,000 (£13,000) a year after tax will have their incomes topped up to reach that threshold.

$25m (£15m) project over the next two months, which could replace social assistance payments administered by the province for people aged 18 to 65.

Inside the article it clarifies that it is only a pilot project of $25m (£15m) over the next two months, which could replace social assistance payments administered by the province for people aged 18 to 65 on three distinct sites: in the north, south and among the indigenous community of Ontario determined by high levels of poverty and food insecurity should be chosen for the test project. It is due to launch in spring 2017, will be voluntary and promised “no one would be financially worse off as a result of the pilot”.

 Unconditional monthly payments will begin to flow this summer; single people will receive up to C$16,989 ($12,570) while couples will receive C$24,027. All participants will continue to receive child or disability benefits, if applicable, to 4000 folk, in a 3 year three-year, C$150m pilot program drawn from the cities of Hamilton, Thunder Bay and Lindsay. 

Kathleen Wynne, Ontario’s premier said “It’s not an extravagant sum by any means,” 

The new Canadian pilot project is not really about a universal basic income. It's about an unconditional basic income for people who would otherwise be on some other, means-tested state handout, i.e. it doesn't apply to everybody but only to those on below poverty line incomes. And although the payments won't be means-tested the recipients will be pre-selected on this basis. So, more a reform of the poor law than a step towards breaking the link between work and consumption. Which is the most "UBI" will amount to if it is ever implemented.

Why do all these sympathetic articles assume that if the government gives everybody, working or not, a regular income this is going to have no effect on wage levels? They seem to be assuming that this would be in addition to income from work whereas what is likely to happen is that it would exert a huge downward pressure on wages and that over time real wages would on average fall by the amount of the "basic" income.

In other words, that it would be essentially a subsidy to employers. It would be "basic" in the sense of being a minimum income that employers would top up to the level people needed to be able to reproduce and maintain their particular working skill. Don't they understand how their much-vaunted law of supply and demand works.

In the name of realism these radical supporters of a Universal Basic Income want to end capitalism while presupposing its continued existence. If people are free from any compulsion to work for a capitalist company, this would destroy the capitalist mode of production. This, after all, relies on the workers to produce the products which are turned into profits. It also relies on the exclusion of workers from these products so that they can become profits. However, at the same time, the same supporters also ask the same capitalist firms to produce the profits to pay for freedom from them in the form of a Universal Basic Income. They want both: the continued existence — for now — of the capitalist mode of production where the reproduction of each and everyone is subjugated to profit and the end of this subjugation by providing everyone with what they need. They want companies to make profits, which relies on and produces the poverty of workers, while at the same time ending mass poverty. They want to maintain the exclusion from social wealth through the institution of private property and end this exclusion by giving everyone enough money. Not possible of course.