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Academic advocates universal basic income

NZ Newswire logoNZ Newswire 24/03/2017

An Auckland academic is advocating the idea of a universal basic income even though it has been dismissed as unaffordable and "barking mad" by some.

The idea is the state provides a basic income to people with no strings attached.

Auckland Business School economist Dr Ryan Greenaway-McGrevy says policymakers should give serious thought to how it could work in New Zealand.

In a trial in Finland 2000 people each get 560 euros ($860) a month and the payment continues even if they get a job. The hope is the financial security allows people to make life plans.

The idea has been shot down in New Zealand.

In 2016, the Labour Party expressed interest in something similar, pointing to a scheme proposed by economist Gareth Morgan in which every adult New Zealander would receive a basic income of $210 a week. The then Prime Minister John Key was quick to dismiss the concept as unaffordable and "barking mad".

The Auckland academic said a UBI would be a one-shot welfare policy that would replace the current complicated system. It would be less costly to administer.

"But the cost of paying every citizen a basic income would be substantial, and so it would need to be implemented as part of a broader restructuring of the taxation system," he says.

He says a flat income tax coupled with the UBI could be quite progressive, because the basic income would be tax-free.

Pilot UBI schemes have been run in Namibia, Ontario, Manitoba, Utrecht and elsewhere.

Dr Greenaway-McGrevy says many of the proposals to redistribute wealth have strings attached that cause people to change their behaviour.

The unemployment benefit, which is intended as a financial safety net and only paid while a person is unemployed, can act as a disincentive for people to take low-paid or temporary work.

A basic income, which is paid regardless of other income, would remove that barrier.

"If we agree that it is the state's job to help those who are less well off, let's do it directly, and not force firms to do it by default."

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