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Guaranteed Incomes

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Seems there is more support for the idea of a basic income.

 

 

Finland's government is drawing up plans to give every one of its citizens a basic income of 800 euros (£576) a month and scrap benefits altogether.

 

 

http://www.independent.co.uk/news/world/europe/finland-plans-to-give-every-citizen-800-euros-a-month-and-scrap-benefits-a6762226.html

 

I like the basic income idea and have a suspicion that benefits might be viewed in the same way as debtors prison is now.

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Seems there is more support for the idea of a basic income.

 

 

http://www.independent.co.uk/news/world/europe/finland-plans-to-give-every-citizen-800-euros-a-month-and-scrap-benefits-a6762226.html

 

I like the basic income idea and have a suspicion that benefits might be viewed in the same way as debtors prison is now.

 

But can they afford even that much welfare?

 

 

 

...The proposal would entitle each Finn to 800 euros tax free each month, which according to Bloomberg, would cost the government 52.2 billion euros a year.

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5.5 million people, and 52 billion is about 10K each which would be the total of the new thing. But they say they are scrapping all other welfare so hard to say what the net impact to the government would be. Presumably a lot less admin compared to a complex welfare system such as Australia has.

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I had a following thought pattern recently.

 

I'm looking to at scaling down the number of days I work. If I do that, I would become eligible for middle class welfare like Family Tax Benefits and Child Care Benefit payments. I don't receive them at the moment because I earn too much. The payments are paid in a scaled way, so it's not a flat rate (the more you earn the less you get, up to zero if you earn above the threshold).

 

I played around with the figures and it seems that when you're eligible for these payments your post-tax income always seems to be about the same. At the same time it's also roughly the amount to get by with living expenses with not much to spare. It's almost like for the majority of people (in the sense of a bell curve) all have the same amount - a standardised income. Those who don't work or are highly paid don't have a standardised income, but income tax rates tend towards pulling them towards the standardised income.

 

I then turn my attention toward some things I've read. House prices are effectively set by credit availability (including foreign credit for foreigners). Child care fees are highly influenced by subsidies - in effect the subsidies increase the cost of child care. So I'm thinking the cost of living is set by middle-class welfare.

 

If that's the case, then cutting middle-class welfare would have a massive deflationary effect on the economy. Increase it and you get inflation (not higher living standards). Given debt levels, particularly mortgage debt levels, cutting middle-class welfare would be a bad choice from both an economic standpoint as well as a populist one. So only a brain-dead ministry would do so.

 

But because the public deficit is large and growing, it means that the standardised income will slowly reduce in value - hence living standards for the majority are in decline.

 

I don't follow MSM but it seems like the welfare tax cuts the Tories propose are not to impact the standardised income, but those below the standardised income - hence marginally reduce the cost of welfare programs without impacting the majority (who work).

 

So the only way to get ahead is to find a way out of it. One way is to listen to Joe Hockey - "get a better job". Not feasible for many and still income tax drags you back down to the standardised income. It seems the only way to escape the poverty of the middle-class is either to a.) stop being a wage earner (e.g., start a business), b.) leave the country (e.g., a different system), or c.) something else I haven't thought of. This makes sense as most well off people I know run businesses.

 

This may all be obvious and easily explained by those smarter than me. :)

 

Thoughts?

 

 

P.S. I wrote this straight after a three hour nap so not sure if it comes across in an articulate manner.

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I had a following thought pattern recently.

 

I'm looking to at scaling down the number of days I work. If I do that, I would become eligible for middle class welfare like Family Tax Benefits and Child Care Benefit payments. I don't receive them at the moment because I earn too much. The payments are paid in a scaled way, so it's not a flat rate (the more you earn the less you get, up to zero if you earn above the threshold).

 

I played around with the figures and it seems that when you're eligible for these payments your post-tax income always seems to be about the same. At the same time it's also roughly the amount to get by with living expenses with not much to spare. It's almost like for the majority of people (in the sense of a bell curve) all have the same amount - a standardised income. Those who don't work or are highly paid don't have a standardised income, but income tax rates tend towards pulling them towards the standardised income.

 

I then turn my attention toward some things I've read. House prices are effectively set by credit availability (including foreign credit for foreigners). Child care fees are highly influenced by subsidies - in effect the subsidies increase the cost of child care. So I'm thinking the cost of living is set by middle-class welfare.

 

If that's the case, then cutting middle-class welfare would have a massive deflationary effect on the economy. Increase it and you get inflation (not higher living standards). Given debt levels, particularly mortgage debt levels, cutting middle-class welfare would be a bad choice from both an economic standpoint as well as a populist one. So only a brain-dead ministry would do so.

 

But because the public deficit is large and growing, it means that the standardised income will slowly reduce in value - hence living standards for the majority are in decline.

 

I don't follow MSM but it seems like the welfare tax cuts the Tories propose are not to impact the standardised income, but those below the standardised income - hence marginally reduce the cost of welfare programs without impacting the majority (who work).

 

So the only way to get ahead is to find a way out of it. One way is to listen to Joe Hockey - "get a better job". Not feasible for many and still income tax drags you back down to the standardised income. It seems the only way to escape the poverty of the middle-class is either to a.) stop being a wage earner (e.g., start a business), b.) leave the country (e.g., a different system), or c.) something else I haven't thought of. This makes sense as most well off people I know run businesses.

 

This may all be obvious and easily explained by those smarter than me. :)

 

Thoughts?

 

 

P.S. I wrote this straight after a three hour nap so not sure if it comes across in an articulate manner.

 

An increase in 'me time' and a decrease in work time always appeals to me!  :yes: 

Once when my children finish tertiary study and begin full time employment, I'll start scaling down myself.

Totally agree that high child care fees are impacted by the stupid government subsidies, in the same manner as the FHOG boosted RE prices.

If the government reduced welfare payments, including those to Howard's battlers, the deficit would be much smaller. Problem is that it takes a government with b@lls to do it.

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If the government reduced welfare payments, including those to Howard's battlers, the deficit would be much smaller. Problem is that it takes a government with b@lls to do it.

But that's the thing. I don't think things would be better off and not convinced the deficit would be materially any smaller (possibly larger).

 

Cut middle-class welfare and you'll have a massive wave of deflation which would be horrific given mortgage debt levels.

 

Cutting lower-class welfare either pushes people up into middle-class welfare or to living on the street, so I don't see great benefits there either.

 

To me wage earners really are wage slaves.

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Makes a fair bit of sense if your numbers are correct. From a personal perspective putting yourself in the herd makes you vulnerable. e.g. If negative gearing / welfare of some sort is your plan to prosperity and everyone is doing it you have a high risk in my opinion.

 

On the other hand if you take what looks like the riskier option you become an outlier and therefore less attractive to sweeping changes, if negative gearing gets reversed then a whole lot of people are going to need to restructure in the same way and the people that charge for that restructuring will up their fees. I think forced Super in Australia showed that quite conclusively (along with FHBG etc).

 

Being an outlier means accepting a bunch of risk though which almost by definition makes you not part of the population where socialism works out pretty well for everyone. I wonder if that is the next type of system; an honest acknowledgement that some people like the safe and secure life and some like the get rich or die trying life.

 

Interesting idea. Much more coherent than anything I come up with after an afternoon snooze...

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But that's the thing. I don't think things would be better off and not convinced the deficit would be materially any smaller (possibly larger).

 

Cut middle-class welfare and you'll have a massive wave of deflation which would be horrific given mortgage debt levels.

 

Cutting lower-class welfare either pushes people up into middle-class welfare or to living on the street, so I don't see great benefits there either.

 

To me wage earners really are wage slaves.

 

The government & economy either take a 'smaller' hit now or a bigger one later. Australia can't run deficits endlessly as we don't have the world's reserve currency like the yanks. Unless there is another boom around the corner for our rocks, the ledger will need to be balanced by reducing expenditure.

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Makes a fair bit of sense if your numbers are correct. From a personal perspective putting yourself in the herd makes you vulnerable. e.g. If negative gearing / welfare of some sort is your plan to prosperity and everyone is doing it you have a high risk in my opinion.

 

On the other hand if you take what looks like the riskier option you become an outlier and therefore less attractive to sweeping changes, if negative gearing gets reversed then a whole lot of people are going to need to restructure in the same way and the people that charge for that restructuring will up their fees. I think forced Super in Australia showed that quite conclusively (along with FHBG etc).

 

Being an outlier means accepting a bunch of risk though which almost by definition makes you not part of the population where socialism works out pretty well for everyone. I wonder if that is the next type of system; an honest acknowledgement that some people like the safe and secure life and some like the get rich or die trying life.

 

Interesting idea. Much more coherent than anything I come up with after an afternoon snooze...

 

The numbers don't converge to a single figure, so the term standardised income should be considered as a range. But to me it wasn't that big in variance.

 

I seem to recall @wulfgar writing about the middle class acting as bourgeois when more resembling peasants. I think that is the trend. Michael Hudson has written about neo-serfdom and that's how I kind of view Australia. The serfs (middle class) are tied to the land (through mortgages) serving a local lord (socialist government) controlled by a monarch (banking system/oligarchs).

 

In some ways it is a communistic-like system with an ability to get out. The trick for those in powers is to provide the illusion that the masses are wealthy when in fact they are not - and with declining living standards. I think the end state will be tradable goods will being off-shored (including labour) reducing national income to the point of collapse. The idea of following an anti-pattern (outlier) is probably a good one and one that I'm working towards.

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The government & economy either take a 'smaller' hit now or a bigger one later. Australia can't run deficits endlessly as we don't have the world's reserve currency like the yanks. Unless there is another boom around the corner for our rocks, the ledger will need to be balanced by reducing expenditure.

IMO if you reduce middle class welfare the result will be deflation, resulting in lower income tax receipts, higher unemployment, and greater social dislocation.

 

There is no way out of the mess that is Australia's collective balance sheet without a severe recession (or depression). That's why you need to adopt an anti-pattern to escape the status quo.

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In some ways it is a communistic-like system with an ability to get out. The trick for those in powers is to provide the illusion that the masses are wealthy when in fact they are not - and with declining living standards. I think the end state will be tradable goods will being off-shored (including labour) reducing national income to the point of collapse. The idea of following an anti-pattern (outlier) is probably a good one and one that I'm working towards.

 

The thing is that I have found in our wandering that most people do seem damn happy in their level of "bourgeois as slave". They all complain about it but _any_ solution I offer is regarded as nonsense. Despite the fact I am standing there in front of them having done that solution.

 

When we left Aus we engaged a real estate agent to rent the (seriously over the top) house out but told her that if any of my friends wanted to live there for the same rent they were paying for their apartments they could have it. Not a single friend took the offer. They all live in comparative sh*tholes and many of them are within 20 minutes walk from our house. If you have a 2 room apartment and you can upgrade to a seriously kitted out house for the same price all through an agent (no "let's be friends about this" sh*t) I can not for the life of me understand why they didn't take it.

 

From memory I even offered it to Cobran who lives 1 train stop away and he didn't take it either. (I might be a prick about his ideas but he is a person after all).

 

My current tenants are leaving to go back home and I have loaned them 1 months rent and forgiven another months rent to help them get back home. At the moment I feel making the same offer to my friends would be embarrassing for them and me so I probably won't, they didn't want it, offering it again seems kind of dickish. Cobran of course I am always a dick to so he can have the offer. Whatever he pays in rent he can have my house for through the rental agency.

 

I don't know if it is that people assume I must be a sneaky bastard with a "screw you over" plan or if people are just so resistant to change.

 

If it is change then I guess socialism is the best system for them to work under, Certainly works for the scansinavian countries unless you are someone like me as far as I can tell.

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IMO if you reduce middle class welfare the result will be deflation, resulting in lower income tax receipts, higher unemployment, and greater social dislocation.

 

There is no way out of the mess that is Australia's collective balance sheet without a severe recession (or depression). That's why you need to adopt an anti-pattern to escape the status quo.

I have suspicion your idea could be interesting if it wasn't for the fact that the largest sector in america is likely to be automated in the next 3 - 5 years.

 

Nice to care about a mild deflation and it's impacts but when 20% is the normal unemployment rate if automated cars get off the ground I think that is something to plan for now.

 

Think about just how much money the first successful automated car company will make, if those taxes aren't in place before they get the gig it is over. If you make the rules and they don't actually stifle the industry then everyone wins.

 

I am fairly certain that GST and so on effectively cripples single cab rivers from really cheating. But it has minimal impact on an IT company.

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http://www.zerohedge.com/news/2017-01-02/basic-income-arrives-finland-give-2000-citizens-guaranteed-income-€560-month

Basic Income Arrives: Finland To Hand Out Guaranteed Income Of €560 To Lucky Citizens

Just over a year ago, we reported that in what was set to be a pilot experiment in "universal basic income", Finland would become the first nation to hand out "helicopter money" in the form of cash directly to a select group of citizens.

As of January 1, 2017, the experiment in "basic income" has officially begun, with Finland becoming the first country in Europe to pay its unemployed citizens the guaranteed monthly sum of 560 euros ($587), in a "unique social experiment which is hoped to cut government red tape, reduce poverty and boost employment." According to Olli Kangas from the Finnish government agency KELA, which is responsible for the country's social benefits, the two-year trial with the 2,000 randomly picked citizens who starting on the first day of the year, will receive a guaranteed income, with funds that will keep flowing whether participants work or not.

The money, which is guaranteed regardless of income, wealth or employment status, is well below the average private sector income in Finland of €3,500 per month, but is still revolutionary in its broad-sweeping approach and will be closely watched by economists around the globe for its social consequences.

The idea, at least in theory, is that a universal income offers workers greater security, especially as technological advances reduce the need for human labor. It will also allow unemployed people to pick up odd jobs without losing their benefits. The 2,000 lucky participants in the trial were randomly selected, but had to be receiving unemployment benefits or an income subsidy. The money they are paid through the program will not be taxed.  

According to Kangas, the scheme's idea is to abolish the "disincentive problem" among the unemployed. Cited by AP, he said that the trial aims to discourage people's fears "of losing out something", adding that the selected persons would continue to receive the 560 euros even after receiving a job.

The change could also encourage more jobless people to look for work, because they won't have to worry about losing unemployment benefits. Some unemployed workers currently avoid part time jobs because even a small income boost could result in their unemployment benefits being canceled.

In the Finnish case, recipients will not need to prove they are looking for work and the money will be given regardless of any other income the person earns.

"Incidental earnings do not reduce the basic income, so working and ... self-employment are worthwhile no matter what," said Marjukka Turunen, the head of the legal unit at Kela, Finland's social insurance agency.

A jobless person may currently refuse a low-income or short-term job in the fear of having his financial benefits reduced drastically under Finland's generous but complex social security system.

As a result, the Finnish government is planning to study whether the policy will recipients find work as it suspects many unemployed people are put off getting a job because they will lose unemployment benefits and therefore be worse off financially - a similar problem to that which tax credits were designed to solve in the UK.

"It's highly interesting to see how it makes people behave," Kangas said. "Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?"

The unemployment rate of Finland, a nation of 5.5 million, stood at 8.1 percent in November with some 213,000 people without a job, unchanged from the previous year.

The radical scheme in income security is part of the measures by the center-right government of Prime Minister Juha Sipila to tackle Finland's joblessness problem. Kangas said the basic income experiment may be expanded later to other low-income groups such as freelancers, small-scale entrepreneurs and part-time workers. Ultimately, it could be expanded to include all adult Finns.

Should the Finnish experiment prove successful, it will likely be extended to other developed, and developing, nations as the idea is not unique to Finland.

Advocates point to the Italian city of Livorno, which started a guaranteed basic income for the city's 100 poorest families in June. The scheme was extended to further 100 families starting Sunday. They are receiving €500 ($525) per month. Pilot programs are also being discussed in Canada, Iceland, Uganda and Brazil.

Last year Switzerland considered giving every adult citizen a guaranteed income of $2,500 per month, but the plan was scrapped in a nationwide referendum when more than 75% of voters were against the measure. According to the IMF and the World Bank, Switzerland is currently the second wealthiest nation in the world on a GDP per capita basis.

However, as CNN notes, the best example of a guaranteed income program might be in the state of Alaska, which has been giving out annual cash payments to all residents since the 1980s, a dividend from the state's oil revenue.

So, as Finland begins testing out one of Milton Friedman's favorite ideas, it is worth recalling that Friedman also realized that it wouldn't work in the 1950s America in which he lived, so instead it became a negative income tax. Also too expensive for the time so, as Forbes notes, it became again the Earned Income Tax Credit instead: the EITC derives from Milton Friedman.

And while economists are curious about the social implications of "universal basic income", another interesting observation from this experiment will be whether the Laffer Curve is indeed applicable in practice. How so? This is how Forbes' Tim Worstall summarizes the Finnish experiment in the context of taxonomics:

 
 

"What I think will be a much more important lesson is that the Laffer Curve really works. No, stop, it does not mean that all tax cuts pay for themselves. It just means that there are tax rates which, if you lower them, produce more revenue, just as there are other rates which if you raise them they produce more revenue. And one of the mechanisms by which this works is that at higher wages (and wages which attract lower taxes are indeed higher to the recipient) people will work more. This idea is generally thought of as applying only to rich people--I do not, I think that it applies to human beings.

 

Thus I look at the tax and benefit withdrawal rates faced by poor people. And in my native UK it is rather shocking. Income tax kicks in around about and near the levels at which income support is withdrawn. Thus there are millions of people who face marginal tax rates of 60%, some hundreds of thousands of over 80% and tens of thousands of unfortunates of more than 100%. It's unlikely that people will work more for only 20% of the extra wages, isn't it?

 

This is what the unconditional part of this trial gets around. You will indeed face a rising tax rate as more is earned. But not the benefit withdrawal rate at the same time meaning that the effective marginal tax rate is lower. Thus I expect more of those on this benefit to work more hours than those on the traditional benefit system. That is, I expect us to be able to prove that high marginal taxation rates are a disincentive to work for the poor just as much as they are for the rich. This is something I believe to be true right now but it would be nice to be able to wave the evidence around.

So while economists will be delighted to watch the outcome of this particular socio-economic experiment, few are as happy at this moment as the formerly unemployed 2,000 very lucky Finnish citizens who going forward will collect an additional €560 per month for at least the next two years, with no strings attached.

Incidentally, for one reason why this experiment is likely doomed to fail, read "The Flaws In "Basic Income for Everyone"

 

 

 

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If this works and is rolled out for all how will it work? Does every person get this basic income for life or only those who are unemployed? If the later then do they get it for life? Is this on top of any dole payment? If it's only for unemployed and then for life everyone is going to spend the first x time period of their 'working life' not working to ensure they get this payment. 

Australia's dole system needs an overhaul. Not the sort of overhaul that shock jocks and chest beating politicians would want - the normal let's punish the dole bludgers line. A purely pragmatic overhaul. We spend around $1B pa on job agencies and work for the dole. I have a friend who works for a govt funded job agency. He reckons that a lot of their work is making people who don't want to work turn up to meaningless workshops and appointments. We could save a lot of money by just paying these people who don't want to work the dole and not having this expensive ticking box crap. 

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3 hours ago, zaph said:

If this works and is rolled out for all how will it work? Does every person get this basic income for life or only those who are unemployed? If the later then do they get it for life? Is this on top of any dole payment? If it's only for unemployed and then for life everyone is going to spend the first x time period of their 'working life' not working to ensure they get this payment. 

Australia's dole system needs an overhaul. Not the sort of overhaul that shock jocks and chest beating politicians would want - the normal let's punish the dole bludgers line. A purely pragmatic overhaul. We spend around $1B pa on job agencies and work for the dole. I have a friend who works for a govt funded job agency. He reckons that a lot of their work is making people who don't want to work turn up to meaningless workshops and appointments. We could save a lot of money by just paying these people who don't want to work the dole and not having this expensive ticking box crap. 

Then all the people that do the ticking the boxes crap would be out of a job as well and increase the number of people needing the benefit :)

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3 hours ago, tor said:

Then all the people that do the ticking the boxes crap would be out of a job as well and increase the number of people needing the benefit :)

At least the govt would be shelling out $15k per employee fired vs 75 + costs. 

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I think that is actually one of the arguments for basic income. Removing an expensive and effectively pointless task (deciding who gets the dole) and thereby freeing up those people to maybe do something productive.

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