Opinion |

The Coronavirus Crisis Shows It's Time for Universal Basic Income

Amir Barnea
Send in e-mailSend in e-mail
Israelis queuing at the entrance to the National Insurance Institute offices in Jerusalem, March 15, 2020.
Israelis queuing at the entrance to the National Insurance Institute offices in Jerusalem, March 15, 2020.Credit: Emil Salman
Amir Barnea

Try to imagine how the present coronavirus crisis would look if Israel, and other places in the world, had a universal basic income program. According to such a plan, every adult would receive a regular monthly payment from the government, independent of his employment situation. Without questions and without forms to fill out. A direct deposit to his bank account.

Think what a payment of $1,000 a month would do for an adult. Such a sum could remove a significant part of the pressure to survive that many people are experiencing now. In light of massive waves of dismissals, the closing of every non-essential business and a serious recession around the corner, a basic income, even if modest, would guarantee that bills would be paid and that there would be food in the refrigerator.

The idea of the universal basic income is not new at all. One of the first pilot programs was introduced in Canada, in the town of Dauphin in the province of Manitoba, between 1974 and 1979. According to the program, which was called Mincome, every person and family living below the poverty line received a monthly cash payment.

Haredi leaders learn harsh corona lesson as Israel sends in the troops

-- : --

Evelyn Forget, a professor from the University of Manitoba, recently analyzed the data from that program, and concluded that the idea is still as feasible as it was then. She recommended that it be implemented to complement existing welfare programs.

Forget cites the personal stories of citizens whose lives were greatly affected by the Mincome program. Those who became seriously ill, those who were fired when the company they worked for began to lose money, and those who, thanks to the modest sum, were able to open a small business or devote time and resources to a career change.

Surprisingly, a universal basic income is one of the ideas that attracts economists on both the right and the left. Some of the reasons for that are quite different, yet the basic agreement could increase the chances that policymakers will adopt the idea too.

Among socially oriented economists, the main argument in favor of a basic income is a total elimination of poverty. Poverty in Israel, as in many other countries, is defined by relative criteria. A poor person is one whose income is less than 50 percent of the median income in the country, with the sum of course varying depending on the size of the family.

The annual report of the National Insurance Institute for 2018 evaluated these sums. Someone living alone, with a monthly income of less than 3,593 shekels ($990), is poor according to the official definition. The same is true of a couple whose income is lower than 5,750 shekels a month. That means a payment of about $1,000 a month per adult would lift the country’s entire population above the poverty line, and would enable every person to live in dignity.

Another argument is that the basic income is essential in the era of “technological unemployment” that we are about to experience. In the coming years robots and other machines will take over many jobs performed until now by humans. Two examples: workers on an factory assembly line, and drivers. It’s not clear how many of these people who lose their jobs will be able to find new ones.

In addition, a basic income would instill the idea that all of us – including parents of young children (mainly mothers) – make an economic contribution that can be quantified. After all, every parent knows that sometimes work at home with the children is at least as difficult as work in an office, but receives no monetary compensation.

Annie Lowrey, a journalist with The Atlantic magazine, stresses in her book “Give People Money” that aside from all these things, a basic income would guarantee that everyone had a minimal level of capital, and therefore a minimal level of choice. Today there are still many households where the person who controls the money (usually the man) is the one who makes the decisions. Granting a degree of financial independence to the weaker party is therefore a very important step.

For right-wing economists, on the other hand, the idea of the basic income is attractive mainly because they see it as an opportunity to get rid of governmental bureaucracy, with its accompanying inefficiency. Substituting complex allotment programs, which were constructed during decades, with an efficient solution of paying a single check is an idea than many on the right support, especially if its implementation made it possible to lay off employees in the public sector, who will no longer be necessary.

Dr. Ori Katz and Dr. Michael Sarel, researchers at the conservative Kohelet Economic Forum, recently published a comprehensive position paper on the subject, with recommendations for implementing a basic income in Israel, many of which I agree with. For example, that nowadays the system sometimes creates distorted incentives, and that there is a social stigma attached to receiving allowances. They are also correct in noting that a basic income is more suited to a modern and dynamic job market, in which workers switch jobs at a high rate, compared to the present welfare system.

But Katz and Sarel are not concerned about the financing of the program, since according to them it won’t cost anything. Katz explained in his blog in Haaretz: “For most of the population we would raise taxes in approximately the same amount that they receive as an allowance, and for the population receiving allowances we would cancel the present allowances, constructing the allowances of the basic income so that this amount will be approximately the same.” It’s hard to disagree with such a statement.

A basic income is an opportunity to achieve social objectives, and nothing illustrates that better than the present crisis. The program has to cost money, and its financing must come from progressive taxation – higher tax brackets and higher rates of taxation for those with high incomes, a wealth tax, and perhaps higher taxation of commercial companies. Finally, should we worry that people won’t want to work when there is a basic income? Likely not the payments are not high enough to eliminate the incentive to work.

The idea of the basic income is receiving a great deal of attention worldwide, with many enthusiastic supporters, including among politicians and the wealthy. The coronovirus crisis only emphasizes its necessity even further. The finance minister’s promise to transfer 6,000 shekels to the self-employed who were harmed by the crisis is an example of a temporary basic income program. But the government must provide its citizens with a safety net at all times, not only during times of crisis. When the coronavirus crisis is over, the idea of the universal basic income should be promoted in Israel.

Dr. Barnea is an associate professor of finance at HEC Montreal in Quebec, Canada.