If the forecasters are right we are facing a jobs massacre. Unemployment is predicted to soar this autumn, and the only question is by how much (the Office for Budget Responsibility expects joblessness to triple from 3.9 per cent to 12 per cent). Once the Chancellor Rishi Sunak’s furlough scheme ends in October, many businesses will be unviable. The Job Retention Bonus, which offers £1,000 to employers for every worker retained until January, will only move the cliff edge, even if it works.
Just as in the 1930s, politicians are approaching a crunch point. There is a benefit system, but with 12 per cent unemployment it likely would not sustain demand. Extending the furlough scheme indefinitely would consume public finances needed to rebuild the economy. Even extending it sectorally, as Labour has argued, doesn’t solve the underlying problem, which is that to survive in a post-Covid-19 world we need a different economic structure.
According to conventional logic, it makes sense to stop paying people not to work and use the money to create new jobs, in new sectors, fundamentally restructuring the UK economy in the process. But job creation is no longer easy. The UK workforce is heavily concentrated in low-value, private service occupations. To move several million people from these into a revived green manufacturing industry, which expands solar and wind power capacity, and into new green transport systems is going to take time.
The arguments for a Universal Basic Income (UBI) are going to keep coming back. UBI involves the state paying every citizen, unconditionally, an annual income. There is no means test and no requirement to contribute beforehand. It is a wage for existing, not working.
The policy has almost no mainstream supporters (Labour rejected it at the start of the crisis), and its opponents rely on three main arguments: principle, cost and relative benefit.
Many in the Labour and trade union movement are opposed to UBI on principle: they see paid work as the fundamental route to a decent and prosperous life for working-class people, and object to anything that detaches income from employment. A GMB pamphlet, Everyday Work, co-authored by Rachel Reeves MP and Mary Reader of the Education Policy Institute, outlines the alternative vision: to accept that high-skilled and high-waged jobs are hard to create but to focus on raising wages and standards in the so-called “everyday economy”, where Britain’s unskilled workforce is concentrated.
Arguments on grounds of cost often focus on the gross amounts needed: multiplying the number of adults by the proposed wage. If you paid 36 million adults of working age £7,000 a year it would cost £252bn – compared to £851bn a year of total public spending.
Arguments against UBI on “bang for buck” grounds suggest that it might be better to use state funding to provide Universal Basic Services (UBS) – for example free transport systems, cheap housing, free education to degree level, and even a basic food supply. The Social Prosperity Network report in 2017 argued this could be achieved for as little as £45bn – without undermining the connection between work and wages.
However, research published in July by the Georgetown University economist Karl Widerquist radically revises downwards the cost of a full UBI for the United Kingdom. Using microsimulation models to depict net costs, Widerquist calculates that to provide £7,706 a year to all adults and £3,853 to all children could cost as little as £67bn a year. This is achieved by imposing an effective tax rate of 50 per cent on the beneficiaries – ie, getting them to “pay themselves” part of the UBI figure – and by protecting the incomes of the very poorest against any change. Widerquist calculates that all families earning below £32,000 a year would benefit – “most households in the lower 70% of UK income distribution”.
Obviously the findings will be open to challenge, but one of the benefits of the microsimulation model is that it departs from the “clean sweep” approach often advocated by libertarian UBI proponents – scrap all welfare payments and just hand out some money. Widerquist models a UBI scheme based on the UK’s existing tax and benefits system, retaining some means-tested payments (such as housing benefit) but abolishing Universal Credit.
As I argued in Postcapitalism: A Guide to Our Future, UBI is not the panacea that its most ardent activists believe it is. It should be conceived not as an anti-crisis measure, nor as a substitute benefit system, but as a one-time and temporary measure to promote the rapid automation of society, and the reduction of necessary work time.
Ultimately, whether it costs £67bn or £252bn, the future economic value created by a highly automated society will not be sufficient to generate a tax base that can sustain UBI: instead, large parts of the “everyday” economy will be provided outside the market, through collaboration and co-operation. The work we do for each other, and the money we live on, will have to be delinked.
However, as a short-term remedy, countries all over the world have already adopted “helicopter payments” – whether in the form of a cheque from the government, as in the US, or via the furlough scheme in the UK. The question is which anti-crisis measures should we build on, and towards what? In the 1930s the answer was easy: stop paying millions of people not to work and use the money to invest in road building, social housing and, eventually, rearmament.
In Britain, where the welfare system has become ugly, coercive and dehumanising, even a fairly meagre basic income scheme, which could be achieved through removing conditionality on tax credits and Universal Credit, would provide a much stronger and more socially just safety net for a population facing years of precarity in work.
Since, for me, the ultimate goal is to replace a model based on low-skilled, low-paid jobs with one that delivers high human welfare and shorter working hours, the universal services model would deliver greater social benefits than a meagre annual payment. But a true UBS scheme would have to be more radical than the one envisaged by the Social Prosperity Network report: free broadband and telephony, free commuter transport, and a vast programme of social house-building, with subsidised rents, would be the minimum.
One of my frustrations with those who propose, instead, policies to support the “everyday economy”, is that they don’t have an end state, nor indeed a clear idea of how the improvements actually happen. The implicit end state is a permanently insecure market economy, where labour market reforms make it more tolerable to be an Amazon driver or a care worker.
And how are we going to achieve this, with Covid-19 placing downward pressure on wages for both low-paid employees and the five million self-employed? The no-brainer, when it comes to post-crisis policy, is to raise and spend hundreds of billions on green energy, infrastructure and transport systems, and to redirect school- and college-leavers into the research and development needed to make it happen.
But in an economy such as ours, expecting the market (under state direction) to produce millions of high-paid, high-skilled jobs may be like pushing on a piece of string. A mix of UBI and UBS looks far more likely to underpin consumption and human well-being – and if Widerquist’s estimates are anything close to accurate, the net costs may be less than we imagined.