In March, the federal government announced Australians left without an income due to coronavirus will have access to increased welfare payments, dubbed the Coronavirus Supplement.
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In the last few weeks, the government has spent $320 billion to keep the country afloat. For reference, the last federal budget was $500 billion.
While the outlay is jaw-dropping, the spending presents an opportunity to rethink the way we deliver welfare and function as an economy, according to senior research fellow at the University of Queensland’s School of Economics, Professor John Quiggin.
He’s one of 100 signatories to an open letter calling for the introduction of a Liveable Income Guarantee, also signed by business leaders, policy exports, business people and religious leaders.
“As we see in the context of this crisis, the economic system we have is one that periodically generates high levels of unemployment and often has large numbers of people unable to find work,” he told Yahoo Finance.
“In these circumstances, paying people a living income with no conditionality or much less conditionality than we've tried to impose in the recent past… makes a lot more sense and is a lot more equitable than the policies we've been pursuing with increasing severity over the last 20-30 years.”
According to Quiggin, the Coronavirus Supplement essentially is a Universal Basic Income (UBI). The question now, he said, is what if we tried a UBI in a non-emergency period?
“Why go back to an approach [to welfare] which had to be abandoned at the moment we had a crisis?”
The “punitive approach” to unemployment needs to change, he said, noting that few Australians are looking forward to collecting an income to sit on the couch.
And a future UBI would be a baseline pay, with Australians encouraged to seek gainful employment. But where it was difficult, there would be volunteering channels.
“Given some encouragement, people who can't find paid work will be happy to make contributions in other ways,” he said.
“What we need to get rid of completely is the punitive approach which says ‘if you're unemployed it's your own fault’.”
The problems with Australia’s social security program have been widespread and on display in recent days, as images of hours-long queues outside Centrelink were beamed around the country and the MyGov website crashed under the huge demand.
Tens-of-thousands of Australians have been stood down since February, with companies like Qantas, Virgin Australia and Myer alone pushing thousands into the welfare system.
According to the last census, 10.6 million Australians are employed. Prime Minister Scott Morrison believes as many as 6 million Australians will receive the $1,500 wage subsidies over the coming six months.
One of the recognised benefits of a UBI is that it takes the strain off existing systems: no questions asked means no forms to fill out our hoops to jump through.
How much would it cost?
Professor Quiggin said the cost will depend on the level of the UBI.
One way to deliver it would be to return to a system where the main benefits including unemployment benefits and the pension are delivered at the same rate.
“My estimate is that to deliver this comprehensively we'd need something between 5 and 10 per cent of national income, that's essentially an increase in effective tax rates of between 5 and 10 cents in the dollar, taking account of income tax and the GST.
“So it would be a very significant expansion... but not something impossible.”
Australia’s United Workers Union is calling for a UBI that’s equal to the minimum wage of $740 a week, which comes close to the $1,500 fortnightly subsidy announced by the government on Monday.
Spain takes steps
Spanish minister for economic affairs Nadia Calviño recently announced Spain is moving to introduce a permanent UBI as the already struggling European nation buckles under the pressure of coronavirus.
"We're going to do it as soon as possible," she said. "So it can be useful, not just for this extraordinary situation, and that it remains forever."
She said she hopes the scheme will be permanent, and that a basic income will be mainly aimed at families.
What do we know about Universal Basic Incomes?
A large scale UBI experiment has not yet been carried out, with the coronavirus crisis the first time such payments have been deployed at such scale.
Finland carried out an experiment between 2016 and 2018 to measure the effects of a UBI and found that it didn’t boost employment, but did lead to increased well-being.
The researchers had begun with a hypothesis that no-strings-attached income would encourage people to seek out work.
"The recipients of a basic income were no better or worse than the control group at finding employment in the open labour market," research coordinator at the Labour Institute for Economic Research Ohto Kanninen said.
Finland’s social affair’s minister Pirkko Mattila said the experiment was successful.
"We can use the data from the experiment to redesign our social security system; that is going to be the next major reform.”
Another test in the 1970s in Manitoba, Canada found that a UBI boosted high school completion rates, pushed hospitalisation rates lower and also lightened the load on the healthcare system.
And billionaires including Elon Musk and Richard Branson have also described a UBI as a potential way into the future.
"A lot of exciting new innovations are going to be created, which will generate a lot of opportunities and a lot of wealth, but there is a real danger it could also reduce the amount of jobs," Branson said in 2017.
"This will make experimenting with ideas like basic income even more important in the years to come.”
The fine points
In 2018, then-Greens leader Richard Di Natale proposed a UBI, although met with criticism that such a scheme actually boosts inequality given billionaires and minimum income workers would receive the same funds, and claims that a well-targeted welfare system was more effective.
US congresswoman Alexandria Ocasio-Cortez has also voiced support for a UBI, but warned that the schemes need to be designed effectively.
BE CAREFUL with UBI proposals you see popping up.
They are not all created equal, & they can have large macroeconomic, inflationary & systemic effects.
Proposals should be weighed in a larger policy mix incl paymnt suspensions, jobs guarantee, unemp. expansion, paid leave,etc.
— Alexandria Ocasio-Cortez (@AOC) March 16, 2020
She said it’s worth considering whether a UBI will impact paid leave, access to publicly funded healthcare, and other taxpayer-funded programs already in place.
But according to consulting firm KPMG, a UBI could be inevitable.
“UBI represents one option for reinvesting profit created by technology back into society. It would be paid to all, irrespective of income, employment or savings, and would provide enough money to live on,” KPMG Innovate national leader James Mabbott said in January this year.
Speaking in the context of a robot and artificial intelligence revolution, Mabbott said the future will require Australia to rethink its approach to displaced workers.
“What is the right balance between tax on capital, on profits and on incomes to make this possible?
“UBI is one potential solution, though in most countries it would require major tax reform; in the Australian context, an evolution of our century old targeted income support system is more likely in the shorter term at least.”
As Professor Quiggin noted, Australia already has something very similar to a UBI.
“If we get back to a situation where we're not in a near-lockdown that we have, but we still have this [income], we will have a good chance to try it out, see what works and what doesn't.”
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