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Monday, February 13, 2017

Thomas Piketty: A Credible and Bold Basic Income [feedly]

A Credible and Bold Basic Income
http://economistsview.typepad.com/economistsview/2017/02/a-credible-and-bold-basic-income.html

Is our basic income really universal?

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After our call « For a credible and bold basic income » launched by a group of ten researchers  (Antoine Bozio, Thomas Breda, Julia Cagé, Lucas Chancel, Elise Huillery, Camille Landais, Dominique Méda, Emmanuel Saez, Tancrède Voituriez), we received considerable support and also, of course, questions and requests for clarification. The first question was: Given that the system of a basic income which we propose does not defend the idea of an identical monthly allowance paid to each individual, is it really universal? The question is legitimate and I would like to reply here as clearly as possible.

Our proposal is based on a strong conviction: it is crucial to broaden the discussion and to explicitly link the question of a basic income (sometimes referred to as a « revenu universel' or « revenu de base » in French) with that of fiscal reform and a fair wage. In real terms, we propose that for all those who are in steady employment, the income support provided by the system of a basic income should be paid in the most automatic manner possible, that is, directly on the pay-slip, in the same way as social contributions and the CSG (deducted at source from the outset) are paid and also in the same way as income tax (which will be deducted at source as from January 2018). In this way, less will be deducted at source from low wage earners and their net wage will be raised.

Let's take a specific example. At present, an employee earning the minimum wage is paid 1150 Euros net per month, after the automatic deduction of 310 Euros for the CSG (Contribution sociale generalisée) and various social contributions from a gross salary of 1460 Euros. If he or she makes an application to the social security authorities, several months later they are entitled to an activity bonus of 130 Euros per month (or approximately 1550 Euros per annum for a single person). The outcome of this complex and costly system is that many people who are eligible for the activity bonus do not apply for it. It would be infinitely preferable, and the budgetary cost would be the same, to deduct 130 Euros less at source and to raise the net salary by an equivalent amount. In our opinion, this is how the basic income should function. This is therefore in practice the reform which we propose as a first step in implementing the basic income for low wage earners. The activity bonus will be replaced by an automatic payment on the pay slip. The result would be an immediate rise in net minimum wage from1130 Euros net to 1280 Euros net. Obviously, there would be nothing to prevent us from raising the amount of this additional income thereafter.

It is in effect a special form of payment of the basic incomeand we fully acknowledge this. For, although some may not like to hear this, there has always been several ways of conceptualizing the basic income: it may take the form of an allowance, or of a tax credit, or a mix of both (allowance for some, tax credit for others). We consider that it is more than time to leave behind these simple abstractions which are too frequently characteristic of this discussion and to finally say, specifically, how it is possible to advance. In this case, the solution which we propose is to pay the basic incomein a combination of forms.

For all unemployed persons, or for those who only have a part-time job or who are employed by several small employers or contractors, the only solution is to pay the basic income in the form of an allowance managed by one of the social administrations, as is the case at the moment with the RSA (the 'revenu de solidarité active' or active solidarity income) paid by the CAF (Family Allowance fund) or the student grants paid by the CROUS (Centres régionaux des oeuvres universitaires et scolaires – (Regional University Student Welfare Centres). The issue is then one of simplifying the payments and the procedures, in particular by promoting the transmission of information between social and fiscal administrations, to render them as automatic and efficient as possible. Another major challenge is to extend the rights of the 18-25 years old to promote self-reliance and the acquisition of qualifications. This poses a whole series of material questions, particularly in relation to the age at which parental incomes are no longer taken into consideration, as well as the sensitive question of the counterparts in terms of study programmes and more generally, career plans.

On the other hand, for all those who have a stable job, we consider it is infinitely preferable to pay the basic income automatically on the pay slip, in order to increase the net wage. This system can be seen as a form of tax credit, in so far as the taxes and other compulsory deductions withheld at source (social contributions, the CSG and, in a few months, income tax itself) are in practice higher than the income support likely to be paid; with the exception of very part-time jobs. In real terms, this system of direct payment on the pay slip could be applied to all those who are paid by a single employer at a salary at least equivalent to 80% of the SMIC, or minimum wage, full time (as well as to all those who receive an equivalent replacement income – old-age or unemployment pension).

Of course, in a world in which this form of employment would have totally disappeared, and where only extreme forms of scattered and 'uberised' employment remained, in which each worker would be paid for a few hours' work by a multitude of employers and clients, then this second method of payment on the pay slip would disappear; it would be necessary to resort to a payment of an allowance by social services. But the fact is (fortunately) that we are not in this situation and for the time being preference should be given to payment on the pay slip wherever this is possible.

The issue of the automatic payment on the pay slip is anything but a technical one: it is on the contrary profoundly political and philosophical. This is because in the first instance this enables the crucial link to be made between the basic income and the concept of the fair wage and fair pay for labour. From a practical point of view, automatic payment on a pay slip is obviously much more simple and efficient and also more gratifying, as is illustrated by the example of the worker paid the SMIC referred to above. What sense is there in deducting 300 Euros a month from a net wage paid to millions of low paid workers, and then asking them to go and make an application to the CAF (family allowance fund) for the reimbursement of 130 Euros per month several months later?

The second advantage of payment on the pay slip is that it enables the question of the funding to be dealt with immediately and in a perfectly transparent manner, because it is precisely on the pay slip that the major part of the financial contributions and deductions likely to finance the basic income (social contributions, CSG, income tax) are deducted. In other words, it obliges system operators to immediately specify the funding arrangements and the net effect on the salaries effectively paid to the different levels of salary.

This can be done in a number of ways. We could decide to insert a line indicating an identical payment of 600 Euros per month on all pay slips under the heading « basic income » (or « revenu universel« ) or basic income, regardless of level of salary. But in this case, we would also have to include a very substantial line corresponding to the funding of the whole which could be called « RUE tax » (or « universal tax »). For the high and average salaries, for example, between 2000 Euros and 5000 Euros per month; it is obvious that this line of funding will be at least as high as the line « income support », therefore there will be no increase in net salary.

Personally, I do not see the interest in this formal operation (note that this means a line +600 Euros and a line -600 Euros on the payslips of millions of employees) and it seems to me clearer, instead, to have a line with a smaller amount under the heading « income support », in order to reduce the headings corresponding to funding as far as possible. Income support restricted to the lowest salaries (let's say below 2000 Euros gross) and varying with wage level, therefore seems to me to be simpler and more legible. But in any event it is simply an accounting operation: once one accepts the fundamental principle of an automatic payment on the payslip, and the fact that the funding demanded of each individual must be specified, then all that counts is the level of net wage received by those concerned.

In real terms, the present system of an activity bonus ensures – to those who apply for it, but many do not –a supplement to their income in the range of 130 Euros per month at full-time minimum wage (SMIC) level (for a single person). As a start, we propose to transform this somewhat random bonus into an automatic payment on the payslip which would enable an immediate rise in net minimum wage (the SMIC) from 1150 Euros net to 1280 Euros net. We could decide to raise the line for income support from 130 Euros to 600 Euros per month, but in this case it is clear that we would have to increase the funding requirements not only from the highest salaries but also at minimum wage (SMIC) level, with the result that the increase in the net minimum wage (SMIC) would be distinctly below 600 Euros. An aim which would be more intelligible – and perfectly feasible in a few years – would be to raise income support to 250 Euros. The minimum wage (SMIC) would then amount to 1400 Euros net which, in total, would represent an appreciable improvement in standards of living for millions of low wage-earners.

To sum up: the system of an automatic payment on the pay slip is more practical and efficient for employees; it also means the question of financing and tax reform has to be dealt with immediately which is an excellent thing. More generally, the advantage of our approach is that it enables us to set the question of basic income in a much broader context, that of the debate on social justice which concerns the distribution of income and property as a whole, and not uniquely the basic income. The question of social justice is not restricted to 600 Euros or even 800 Euros per month. Our fear is that we are spending too much time and energy on discussing the introduction of an income of 800 Euros formally paid to everyone – which can ultimately be reduced to an accounting operation on pay slips, and that this obscures the major issues of social justice. Our aim is more ambitious and must be that of a society based on a fair remuneration for labour, in other words, a fair wage and not simply a basic income.

This implies re-thinking a whole set of institutions and policies which complement one another. These include a new system of basic income (revenue universel) which is more automatic and more efficient, in particular for the 18-25 year age group; improved public services which involves in particular genuine equality of access to education and health (these fundamental goods should not be subsidiary to monetary payments); labour law and the rights of organizations, (the fragmentation of work is not inevitable and new spaces for protection and power-sharing have still to be invented in firms, associations and administrations); and, of course the tax system (which also enables the perpetuation of positions of power to be limited and, obviously, the financing of the totality of our shared aims). It is to be hoped that the campaign for both the Presidential and the legislative/parliamentary elections which has at last begun will afford the opportunity for challenging discussions on these questions.

PS. I realise after reading several reactions, that some people consider that the term 'revenu universel' of necessity implies the direct payment by a social administration of a monthly allowance to all adults which would be the same for all. I do not share this conception, which seems to me to be excessively rigid but, it is, of course, legitimate and respectable. I would simply like to add two points: (1) the terms 'revenu universel' and 'revenu de base' have always been used interchangeably and are polysemous in meaning (in English, the preferred term is 'basic income' while in French 'revenu universel' tends to be used). Sometimes these refer to a system of allocating an allowance, sometimes to a tax credit and sometimes to a combination. Authors do not always take the time to clarify their meaning in this respect. The aim of this forum is precisely to formulate a specific proposition but, obviously, each participant is free to formulate others; (2) the main point in my opinion is the automatic payment on the pay slip for all those in a steady job; once this has been accepted, then I am not opposed to the insertion on the pay slip of a line entitled 'revenu universel' equivalent to 600 Euros for all employees, regardless of the level of their salary. However it will immediately be necessary to specify the amount in the budgetary line to finance this, an amount which will doubtless not be as 'universal' as the preceding line and will vary with level of salary (to be specified by each person). It does seem to me easier to understand if there is a budgetary line for income support which consolidates the payment and the funding; but in the last resort this accounting operation is relatively secondary once we accept the principle of automatic payment on the pay slip.


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