Social Welfare

DS Danyl Strype Public Seen by 28

There has been some discussion in NZ Pirates forums about replacing/ underpinning existing welfare benefits with some kind of "universal basic income" or "citizens dividend". Both Mana and the New Economics Party have policies supporting this, and variants on the proposal have also been supported by economists like Gareth Morgan, and Keith Rankin.



Danyl Strype Sat 19 Apr 2014 2:56AM

The main argument against this is going to be that it creates a disincentive to work. While it's true that a UBI will mean people don't have to accept exploitative working conditions, most people who are physically and mentally able will want to do paid work so they can afford things the UBI doesn't pay for.

The 'disincentive to work' argument also ignores that a huge amount of the valuable and necessary work done in society is unpaid; everything from parenting and helping family/ neighbours to participating in democracy as we are doing here. For most people the UBI will just turn unpaid work into paid work.

No doubt when Labour wanted to introduce unemployment benefits in 1935, there would have been people like Mike making exactly the same arguments against that – that nobody would work if they could live on a benefit instead. Wrong in that case, and for the same reason, wrong in the case of the UBI.

The other argument, that the taxes required to pay for a UBI are unfair to business ignores a basic reality of economics; people with no money can't support businesses by spending it with them. The money paid out in UBI will increase the disposable income people can use to buy goods and services, increasing the amount of businesses that society can collectively support.


Bruce Kingsbury Sat 19 Apr 2014 7:26AM

So two points here; I'm a volunteer worker on invalids. I'm at the community house from 12 to 5pm five days a week, plus often weekends and often to 8pm.

I've been offered paid work a few times in the recent past. WINZ take about 60c off per dollar I earn. From the first dollar. True, it's not taken from 'the benefit' but they take it off the accomodation topup right from the first dollar. Then they make life hell about reporting, and then somehow conclude that because I worked one week partway through the year and another week towards the end of the year, I must have earned the same money for the entire period in between.

So the next time I get offered the same job I just do it for free and have the pay returned to the community. True story. Ring Frank and check. Luckily I'm on Invalids. If I was on unemployment they would cut my benefit off for doing this.

Sue is working part time cleaning and has the same problem, most of what she earns gets taken back off the benefit so she's effectively working for third-world pay. But it's better than nothing.

The current system is a huge DISINCENTIVE.


Bruce Kingsbury Sat 19 Apr 2014 7:28AM

Forgot to mention 33% secondary tax on top of about 60% clawback.. so you get to keep about 7% of what you earn.


Danyl Strype Sat 19 Apr 2014 8:15AM

Anyone who receives income above $70,000 - $1400 a week before tax - pays tax at 33%, only on the part of their income over that level (AFAIK). Ideologues who moan about this need to need to keep in mind two things:
* beneficiaries have to try and live on about $200 a week each, and subject themselves to constant humiliation and harassment to get even that
* although they are not doing paid work, they are often doing part-time or even fulltime unpaid work, as @brucekingsbury points out
* as @brucekingsbury also says, beneficiaries doing casual or part-time paid work pay about 97% tax on their first $200 pw

I would dearly love to have the first world problems that people paying 33% tax on any part of their income has.

Anyone who favours tax cuts for ideological reasons could look at a UBI as a 'flat rate tax cut' for every citizen. If any citizen is so poorly served by the labour 'free market' that this 'tax cut' puts more money in their pocket each week than they currently pay in tax, so be it.


Andrew Reitemeyer Sun 20 Apr 2014 6:34AM

Dignity is a human right and is, in fact, the basis of all human rights. The current system of subjecting recipients of welfare benefits to humiliation and degradation is an egregious breach of that right.

UBI also stands for Unconditional Basic Income. A basic income should be the right of all residents of all ages. Minors would have their income manged by their guardians.

It is also a policy in many Pirate Party manifestos.


Adam Bullen Tue 22 Apr 2014 2:27AM

It is an interesting idea, if every person were to recieve a UBI, how many millions of dollars would be saved by removing a significant portion of WINZ?

If every person (approx 4 million) were to receive, say $10,400/yr ($200/wk) as a basic income, that would cost approx $41,600,000,000 ~ $42Billion.

For the 2012/13 year NZ spent $26.3 Billion on social welfare. The difference of $18 Billion could easily be made up by the first $200/wk earned by wage earners going into the UBI fund, which would effectively get paid back to them so they would see no difference.

Lets say that of the 3.5 Million working age people in NZ half are actually getting paid, the yearly cost of the UBI fund to the 1.75 Million wage earners is approx $10,285. This is less of a cost then the $10,400 from above.

Assuming I haven't made a major error in my calculations, having a UBI could actually save the country money vs what we currently spend on welfare.


Adam Bullen Tue 22 Apr 2014 2:30AM

As to the removing part of WINZ to save some money, the UBI would have to be handled by either the IRD or some other agency set up specifically to handle it.

The added bureaucracy would probably offset the savings made from removing WINZ


Hubat McJuhes Tue 22 Apr 2014 6:54AM

I am passionate about the UBI. I just would like to point out that any implementation of the UBI necessarily requires a far reaching reform of the tax system. And there is reason to believe that it won't work without taxing land ownership as well.


Hubat McJuhes Tue 22 Apr 2014 7:33AM

@strypey There is one other strong argument against the UBI that is commonly put forward, even by those who find the general idea charming.
That is that such a fundamental change in the distribution of money would necessarily destabilise the money system as inflation would inadvertently explode and other harsh effects.

These effects can be contained if it is implemented in a cost-neutral fashion. Gareth Morgan has done the math.

In earlier discussions about the UBI I have stated that a UBI at about the current benefit rate would be useless. For the above and other reasons I have to revoke that statement. I am by now convinced that this is actually exactly the right amount (at least to start with).


Danyl Strype Wed 30 Apr 2014 6:05AM

Thanks for throwing some numbers into the mix @adambullen , how would your calculations be affected if abolishing Working for Families was also factored in? A couple of things to keep in mind:

  • the cost of unemployment and invalids benefits are often overstated by including pensions, which would be continue to be paid even if we had full employment
  • the cost of benefits is sometimes further overstated by simply giving the full budget of the Ministry of Social Development, which covers many social service departments other than Work and Income, including Child, Youth and Family

I agree with @hubatmcjuhes that a citizens dividend of $200pw (tax-free of course) would be a fair place to start. Nobody would be worse off than they are now, and it would make it much easier for people to take part-time and casual work to top it up, as explain by @brucekingsbury.

The inflation argument is complex, but my hunch is that citizens dividend would not cause it, because there are many goods and (especially) services theoretically available, which people currently can't afford to spend money on. Think about all the edible food supermarkets, bakeries, and cafes throw in dumpsters every week. Think about all the hospitality and entertainment businesses (cinemas, music venues, crowdfunding campaigns for artists) struggling to pay the bills and keep their doors open. Think about all the unemployed people who would start service-based small businesses if people could afford their services etc etc.

Considering all this, it seems to me that we are actually in a situation of real deflation. The only reason we have inflation on paper is because of the high proportion of the total money supply being sucked out of the productive economy and recycled around and around in the finance "industry".


Adam Bullen Wed 30 Apr 2014 8:17AM

@strypey I'm not really sure, I just took the numbers off the government website, though I did assume the full $200/wk for all New Zealanders including children. This would probably work out as more money then many families are getting currently.

I think the biggest benefit would be, as has already been stated, that people would be able to work part time as they wanted without being discriminated against.


David Peterson Wed 30 Apr 2014 11:07AM

The problem with UBI is it starts out nice enough in theory, but in practise it would be impossible to implement like that and would get quickly distorted out of recognition, leaving us in a much much worse situation in the long run. Thus I'm quite against the idea of a UBI. Not unless we can get a iron fisted dictator to keep it on track, but none of us want that kind of compromise!


Andrew Reitemeyer Thu 1 May 2014 5:08AM

@davidpeterson so you disagree with Hayek and Friedman on this? Or do you prefer negative income tax?

Could you please give more information on how UBI would get distorted.The implementations of UBI, so far in the world.. are either still going or stopped for ideological reasons, The only time a dictator was needed was in ancient Rome.


David Peterson Thu 1 May 2014 5:17AM

Seems you don't follow Milton Friedman closely enough.... sure, in the early days he supported this due to how nice it could be theoretically. But later he came to oppose it completely as he realised how in practise it would get twisted far beyond its intentions.


Andrew Reitemeyer Thu 1 May 2014 7:33AM

At least you are basing your argument on something :)


Andrew Reitemeyer Thu 1 May 2014 8:03AM

@davidpeterson Could you give me a reference for Friedman's flipflop on negative income tax please?


Andrew Reitemeyer Thu 1 May 2014 8:16AM

This NYT article says just the opposite. Congress was the one that did not want to implement negative income tax for the reasons you state. So you support the state over Mr Friedman?


David Peterson Thu 1 May 2014 8:31AM

Hmmm... doing a quick google search and can't quite seem to put my finger on the reference :-/ If I recall it was just in his much later years that he changed his mind. But perhaps I'm wrong, it does happen now and then ;-)

Anyway, I thought it is pretty clear to those who know my views that I'm not simply a follower of Milton Friedman? He is Chicago School, I'm Austrian. Big difference! :-P

Anyway, read these:

You'll see two things, why I don't see UBI/NIT/whatever as a particularly great idea, and what a huge gulf there is between what typically get seen floating around the internet (such as this thread) vs what Milton Friedman was actually proposing. So is utterly ridiculous to bring him up as an example in "support" of these proposals.


David Peterson Thu 1 May 2014 8:40AM

To give you an idea of just how badly out of whack every other proposal I read is, in comparison to what Milton Friedman proposed:

[[[[The problem that the NIT (negative income tax) evades or glosses over is the problem of the individual or family with zero income. If an individual were given only $300 (the figure suggested in Professor Friedman's original proposal in 1962), nobody would regard this as nearly adequate — particularly if, as Professor Friedman also proposed, NIT were made a complete substitute for all other forms of relief and welfare. If the NIT payment for a family of zero income is set at $1,700, no advocate of the guaranteed income would regard it as adequate to live on in "decency and dignity." So if the NIT were ever adopted, the political pressure would be irresistible to make it provide the minimum "poverty-line" income of $3,400 even to families with zero earned income.]]]]


So about NZ$2730 in our dollars today.

Anybody here wants to propose that we set a universal income for everybody of less than $3k and in return we abolish ALL social welfare?

Well, then.... just maybe, maybe... maybe I might support that! (though I still feel it is a rather bad idea to go off track from the core tech policies of PPNZ)

Anything else too far from this, can not, and should stop, referring to Milton Friedman as "support" for their ideas.


David Peterson Thu 1 May 2014 8:44AM

Oh, and as well as abolishing social welfare, we'd also abolish the minimum wage.

I expect I won't hear any takers for this proposal....

As otherwise you simply can not pick and choose those bits and pieces you like from what they said, which you like, then distort them to fit what you want.

You need to see the whole bigger picture.

Which is to have some form of universal income, that is intended to replace completely the existing welfare state, and the minimum wage would get abolished. Without those last two key components, doing the first is completely pointless, and instead very hazardous and destructive.


David Peterson Thu 1 May 2014 8:48AM

One viewpoint on this (not necessarily mine):
But take this quote from Hayek:
It is unfortunate that the endeavor to secure a uniform minimum for all who cannot provide for themselves has become connected with the wholly different aims of securing a ‘just’ distribution of incomes (55).


Hubat McJuhes Thu 1 May 2014 9:10AM

booooring... 1962 ... soooo old school.
Let's bring on some actual numbers that are about our millenium. Gareth has been doing some serious work in ‘The Big Kahuna’ and offers a calculator to get the numbers
right for aotearoa today. Have a play:



Andrew Reitemeyer Thu 1 May 2014 7:29PM

@Davidpeterson Thanks for the references. I will read them and get back to you. As for UBI replacing all welfare benefits - that is the idea in most UBI proposals. It not only is more efficient, reducing a huge amount of bureaucracy and surveillance, it has the added benefit of shrinking the state.


Andrew Reitemeyer Fri 2 May 2014 9:06PM

I have read the article and don't find that he has rejected the idea of a minimum income Rather he is objecting to the concept being hijacked by some as a way to ensure a just income. This does not mean that Hayek thought that UBI was unworkable, as you claim,

In Volume 2 of Law, Legislation and Liberty he states
"There is no reason why in a free society government should not assure to all protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need to descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organized community, those who cannot help themselves."

There can be no doubt that he wanted a bare minimum for subsistence, which in line with his moral ambivalence to the poor and disadvantaged
“there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody.”.

I also read the articles from the Ludwig von Mise Institute and the main one is a straw man fallacy. I have a problem with the Institute and that is its adherence to the wonderfully named "paleoliberalsim". Then again the Koch brothers and the Cato Institute seem to be against it so it must have some redeeming features :)
Von Mise is much more interesting auf Deutsch als Englisch ;)


Rob Ueberfeldt Tue 6 May 2014 10:20PM

Being able to become a student and not have to go through hoops and jumps is appealing to me. IE student benefit, sickness and unemployment would be covered. The have that is ACC might also be addressed by some of this. I would support dropping the minimum wage under a UBI scheme. Dropping the minimum wage might be a good idea anyway if WINZ powers to punish those who refuse work was removed and benefits were raised to a live able standard.


[deactivated account] Thu 8 May 2014 11:36AM

  1. The UBI is reasonable to have set @ $500 per week for all citizens 18 years or older.
  2. The DPB can be replaced by having children's UBI paid to the parents/caregiver in full to age 15, then 50/50 to age 18.
  3. I would prefer that the minimum wage be negotiable down to $5 per hour by UBI recipients and non-negotiable by non-citizens, as that would effectively allow increased employment while maintaining basic conditions.
  4. Redeploy WINZ budget to Kiwi business and research funds, which will redefine "corporate welfare" as "you are free to draw a UBI and startup a business and let it grow without worrying about personal finances." - something my former employer always worried about, no chance to setup a small business without having to rely on the cash float for personal expenses.
  5. complete forgiveness and abolishment of student loans and student fees, no more forcing our unfortunate students to live overseas after studying.
  6. Decent fully funded restoration of CHCH for earthquake and flood prone buildings. If that means shifting some centres to new areas nearby, then fine.