Basic Income in Australia: A distant horizon

In Basic Income Worldwide: Horizons of Reform (2012) edited by Matthew C. Murray and Carole Pateman, Palgrave Macmilliam, Houndmills, pp 227-249

From the first decade following Federation until the late 1980s, Australia seemed to be moving inexorably towards an increasingly comprehensive and generous welfare state. On occasions, it seemed as if a form of Basic Income was firmly upon the political agenda of the incumbent government. Many sections of the society, such as the aged, are guaranteed their income won’t fall below the poverty line. Many people with severe impairments are guaranteed an income. As will be discussed, one group of people with a specific disability is guaranteed a Basic Income whilst others with severe impediments are not. In recent times, the Productivity Commission has recommended introducing a comprehensive income guarantee for all people with severe disabilities.

The issue plaguing the introduction of a universal Basic Income has been a desire by Australian governments to target benefits to specific categories of people. Such a practice creates problems of administrative simplicity at the edges of such categories and, as a consequence, some people miss out. Until the late 1970s, some groups of lone parents were excluded from Federal income support. But it is the intersection of disability and unemployment that has consistently created the most angst.

Social scientists have long known that there is little relationship between the extent of people’s assessed levels of impairment and their work histories. Governments, despite proclaiming they are introducing evidence based policies, exhibit attitudes more in tune with 14th century knowledge (Handler 2002). In 2011, the Prime Minister indicated that she wanted everyone (including lone parents and people with disabilities) “earning or learning” “for the simple dignity that work brings” (Four Corners 2011). Peter Butterworth from the Centre for Mental Health Research at the Australian National University has been following 7,000 Australians for a period of 7 years. He found that “moving from unemployment to a poor quality job was associated with a significant decline in mental health” and that moving into a low quality job didn’t increase the “likelihood of getting a higher quality job over someone who was unemployed” (PM 2011). Governments’ desire to target income support and other impediments to the introduction of a universal Basic Income will be discussed below.

Since the 1970s, Australian academics, government ministers, social welfare practitioners, welfare lobby groups, and political activists have frequently discussed universal income guarantees and alternative income support arrangements. The Basic Income Guarantee Australia website has collected many of these universal income support proposals.

In 1975, it seemed like an idea whose time had come. The Government seemed generally supportive. However, the dismissal of the Whitlam Government removed the impetus for change. The first Australian Commonwealth social security legislation dealing with age and invalid pensions was passed in 1908. Prior to that, the various state administrations handled welfare related issues. By 1947, when all social security payments were consolidated into one piece of legislation, the Commonwealth was paying unemployment and sickness benefits, age, widow, invalid and blind pensions, child endowment and other allowances.

Australian ministers of social welfare since the 1950s have claimed to assist those experiencing ‘the greatest need’. Often they have also claimed to assist ‘all in need’. Running in parallel with calculations of ‘need’ were deliberations about ‘desert’. People had to be considered to be of ‘good character’ in order to receive government assistance. In 1973, however, the requirement that recipients of social security had to be of ‘good moral character’ was removed from the legislation.

In Australia, income support is provided via tax credits or through the social security system. Those who have such assurance include the old, people with severe health problems, the blind, lone parents who have children in their custody, working families with children, ex-service personnel with disabilities, orphans, unemployed people with prior work experience and the temporarily incapacitated. The level of income support for beneficiaries is below the poverty line. Young people who are students or unemployed are paid as little as 40 percent of the poverty line. Age pensioners receive 25 percent of the average wage, which equates with the current poverty line.

In addition, the existence of minimum wage legislation and widespread privatized superannuation leads to an impression that most Australians are assured of some form of income in the event of old age, incapacity or misfortune. Many permanent residents, however, are refused any form of income support because of their length of residence, age, locality, race or the financial well-being of their partner.

It was not until the 1960s that Aboriginal people living in towns were paid income support. In rural and remote areas, even in the mid 1970s, Aboriginal people were seldom paid social security. Many social security payments require migrants to have lived in Australian for a number of years before they are eligible. Many young unemployed people find they are denied social security based on one ruse or other.

The tax credit payments made to families with children are paid in inverse proportion to other family income. Nearly all social security payments are means and/or asset tested. There is one exception. The blind pension is, without a means or asset test, paid to all ‘legally blind’ permanent residents who meet the resident requirement (Jordan, 1984, Mays forthcoming).

1. The Poverty Inquiry and its aftermath

A reformist Labor Party came to power in 1972 after 23 years of unbroken conservative rule. It was an exciting time for social policy advocates. Many government inquiries were established or expanded and there was a sense of change in the air. Reports of the various inquiries criticized the social welfare approach to income maintenance existing at the time.

The earliest detailed blueprint for a guaranteed minimum income in Australia was provided by Professor Henderson in 1975 (Vol. 1, Ch. 6 & Vol. 2, Appendix 6). He wanted to provide all Australians with an income guarantee in order to reduce the emphasis on categories of assistance, provide an easily understandable retention rate on earned income, treat those with regular and those with fluctuating income equitably and lighten the administrative burden on both the taxation and social security departments. The amount of disposable income received by a family or an individual was to be determined by the formula:

‘Disposable income = guaranteed minimum + private income x income retention rate.’

Henderson proposed dividing the population between those who qualified for a pension or benefit whom he called the ‘categorical population’ and those who had not established they were eligible for social security who he termed ‘non-categorical’. He subsequently envisaged extending the ‘categorical population’ to include all people likely to be ‘at risk of poverty’.

He foreshadowed the possibility of paying unemployment and sickness beneficiaries less than age, invalid or widow pensioners and establishing an intermediate rate between the ‘categorical’ rate and the ‘non-categorical’ rate for people who were partially incapacitated. He argued that it might be necessary to pay farmers and self-employed people a lesser rate than the ‘non-categorical’ rate. Apart from individuals living alone, the family would be the unit of income. However, he did consider that older children might subsequently be paid in their own right. The Henderson income guarantee was designed as a social right – a flat rate, non- contributory demogrant.

In political terms, the essential strength of Henderson’s income guarantee proposals is that they grew out of and retained the essence of the existing social welfare system. They were in every sense a reform of that system. His suggestions for a guaranteed minimum income would make the income maintenance system more humane, less categorical and more comprehensive. Apart from the failure to tackle poverty in a systematic manner, the basic weakness in the proposals was that they failed to come to terms with the need to dismantle the existing system and restructure it in a way, which would have facilitated the complete integration of the income maintenance and taxation systems (italics in original Tomlinson 1989, p. 146).

Dividing the population into ‘categorical’ and ‘non-categorical’ groups and paying the ‘categorical’ group at the poverty line but only paying the latter group between 50 and 71 per cent of that line does little to decrease the ‘non-categorical’ groups desire to become ‘categorical’. Nor does it ensure that those who are not classed as ‘categorical’ can avoid poverty. Henderson’s desire to extend the coverage of the ‘categorical’ population stopped far short of including wives or husbands whose spouse (or children whose parents) inadequately support them. Henderson, whilst recognizing that intra-family transfers are often insufficient, offered no alternative.

Also in 1975, a group of senior Commonwealth bureaucrats (who called themselves the Priority Review Staff) published a plan to introduce a negative income tax or tax credit scheme. They too divided the population between those whom Henderson had termed ‘categorical’ and ‘non-categorical’. The ‘categorical’ population would be paid at 100 per cent of the poverty line (non-working) the ‘non-categorical’ population would be paid at 55 per cent of the poverty line (working). The Priorities Review Staff also adopted the family as the unit of payment.

The intention of both the Henderson Poverty Inquiry and the Priority Review Staff proposals was to rationalize the existing categorical social security system while also integrating the tax and social security systems. They also intended to find a way of assisting those less affluent Australians who received little or no help from government because they were unable to fit into the existing social security eligibility categories. Whilst Henderson was intent on retaining and expanding ancillary welfare services the Priority Review Staff, like the best-known proponent of negative income tax, Milton Friedman (1982), wanted to streamline welfare and abolish many ancillary services. Much the same criticism (made of the Poverty Inquiry’s proposals above) applies to the Priority Review Staff Report.

Both Henderson and the Priority Review Staff decided that adopting the individual as the unit of income for their suggested income guarantees would result in a greater drain on the budget. Neither seriously looked at the bureaucratic costs or the resulting inequities which result from adopting the family as the unit of income.

In 1974, the Woodhouse Inquiry had recommended a no fault comprehensive income support system to assist those who were sick, injured or who had severe impairments. A similar scheme currently operates successfully in New Zealand. In February 2011, the Australian Productivity Commission recommended the introduction of a National Disability Insurance Agency to ensure that all permanent residents with significant disabilities would receive appropriate services. In addition they recommended the establishment of a no-fault National Injury Insurance Scheme to cover all who experienced ‘catastrophic injuries’. The Commission argued it was necessary to create the National Disability Insurance Agency and a no-fault National Injury Insurance Scheme because:

The current disability support ‘system’ is inequitable, underfunded, fragmented and inefficient and gives people with a disability little choice. It provides no certainty that people will be able to access appropriate supports . . . Inadequate services can hit certain communities particularly hard – such as people in rural and remote areas, people from a non-English speaking background and Indigenous people (p. 5) . . . People with similar levels of functionality get access to quite different levels of support, depending on their location, timing, or the origin of the disability (p.6).

In the year following the First Main Report, the Hancock Inquiry recommended comprehensive social insurance superannuation akin to European schemes. The Hancock superannuation recommendation was designed to replace the age pension and other forms of state funded income support for older citizens. Neither the Woodhouse nor Hancock proposal was implemented. This is unfortunate because had the Woodhouse proposal been adopted many people with disabling conditions and others who have less severe impairments would have secured financial assistance; as it is, many people with incapacities fail to obtain support because they don’t fit the eligibility categories. Three decades on, most of inequities, identified by the Woodhouse Inquiry and experienced by those who encounter serious illnesses or accidents, remain (Mays forthcoming, Tomlinson 2003 Ch. 7). Had Hancock’s proposals been accepted then many of the inequities caused by Australia’s privatized superannuation schemes could have been avoided (Hughes 2008).

2. The governmental income support policies – Late 1970s to mid 1990s

Following the dismissal of the Whitlam (Labor) Government in 1975, a conservative Coalition Government led by Malcolm Fraser was elected and remained in power until 1983. Unemployed people in particular found life harder under this Coalition Government. The Whitlam government had ended the system whereby married women with children, who had separated or whose partner had died, could in many circumstances claim a widow’s pension but non-married mothers had to depend on state government family assistance. Labor had introduced a supporting mothers benefit for mothers who were not married that was slightly less generous than the widows pension. The Fraser Government extended this benefit to lone fathers.

Whereas the Whitlam government had set up inquiries and gave the inquiry heads substantial independence, the Hawke Labor government, 1983-1991, maintained a tighter managerial role in the social inquiries it set up. A classic example was the Cass inquiry into Social security. Professor Bettina Cass was provided with Department of Social Security staff for her Inquiry. She often worked from Departmental offices and reported, not to the Parliament, but to the Minister. It is reasonable to conclude that her published reports did not contain ideas that the minister considered objectionable. The Minister at the time, Brian Howe, was preoccupied with what he termed the propensity of welfare recipients to become ‘dependent’ on welfare payments and consequently losing interest in finding work. When Cass looked at unemployment (1988) she recommended extending the activities which people were required to undertake in order to receive unemployment benefit. She termed her system an active employment model. It was not unlike the participation income model suggested, in1996, by Professor Anthony Atkinson.

By 1994, unemployment had become a significant political problem. The then Labor Prime Minister, Paul Keating set out his solutions in a monograph entitled Working Nation. It involved guaranteeing work to people who had experienced 18 months continuing joblessness. In addition the Commonwealth increased the requirements that people who were unemployed were expected to meet before they would be paid unemployment benefit. Keating termed such an arrangement a ‘reciprocal obligation’.

3. From ‘mutual obligation’ to the intervention

In 2000 a review committee on income support, established by a minister in the Howard (conservative) government, dutifully reported to the government that there was a need to insist that social security recipients met their obligations to work, study or engage in other ‘activation’ activities (McClure 2000).

Claus Offe (2008 p. 10) argues that the enthusiasm for the euphemism of ‘activation’ results in categorizations – caring for, managing, controlling, treatment, supervision and frequent stigmatization of recipients – which in turn ‘reduces them to the passive status of sheltered, paternalistically regulated objects’ who are denied meaningful choice in their lives. Furthermore, a 2003 report entitled Much Obliged, commissioned by the Brotherhood of St. Laurence and the St. Vincent de Paul Society, asserted that people who became long-term unemployed have so much of their time taken up just meeting the obligations imposed on them by the government that they do not have time to find work. The report further concludes the ‘mutual obligation’ regime was ‘failing the most disadvantaged job seekers. Overall the system operates…not as “welfare to work” but “welfare as work”’ (Ziguras, Dufty and Considine 2003, p.43).

The Howard Government’s assault on welfare provision depended on selecting target populations, which it held up to critical scrutiny. On coming to office, it coerced young unemployed people into ‘work for the dole’ and compulsory literacy programs. It became common to hear ministers say that welfare efforts should be directed at those who are ‘genuine’.

The Howard Government’s social policy sought to define ‘the genuine’ (as in the sense of ‘the genuinely needy’ or those who were ‘genuinely looking for work’ or ‘those who had a genuine disability’) more narrowly. This process developed a momentum such that ‘the genuine’ appeared to be an endangered species facing imminent extinction. It started with young people excluded from the labour market. It enveloped lone parents and Aborigines and within a decade of coming to office, the Howard Government was targeting people with disabilities.

The Howard Government’s Emergency Response , in June 2007, in relation to 73 Aboriginal communities in the Northern Territory is particularly noteworthy. The Government claimed to be acting to protect Aboriginal children from sexual exploitation and neglect. Five hundred pages of legislation were rushed through the House of Representatives with the support of the Labor Party on the afternoon it was tabled (Altman and Hinkson 2007 p.2). The legislation supporting the Northern Territory Intervention allowed the government to quarantine half the social security payment to each Aboriginal person by placing them on a Basics Card, which could only be used to buy food, clothing and pay for rent and electricity. Widespread alcohol restrictions were imposed. It allowed the suspension of the Racial Discrimination Act. Police were given new powers on Aboriginal communities, even entitling them to enter and search private houses as if they were operating in a public place. It threatened to withhold social security payments from parents whose children did not attend school. Lease conditions were imposed which meant that the government could compulsorily acquire Aboriginal land and even subsequently exclude traditional owners from the land it had acquired (Altman and Hinkson 2007).

4. Economic stimulation but business as usual on the welfare front

The worldwide recession presented the Government with a challenge. The Howard Government had left no Federal Government debt. China kept buying coal, gas and metals, and Labor, elected to office in 2007, determined to engage in stimulus spending which kept Australia from experiencing a technical recession and maintained employment at reasonable levels. The financial sector was provided with government-backed guarantees and it weathered the fiscal storm. Bank accounts of up to $1 million were guaranteed by the government.

The Labor leader, Kevin Rudd, had promised during the election that he would continue the Northern Territory Intervention for a further 12 months. It was generally assumed by progressive voters that, after a year, Labor would get on with implementing decent child welfare, housing, employment, community development and self-determination policies in Indigenous communities. After a year, Indigenous leader Peter Yu was appointed to head a review of the Intervention. The Review recommended winding back the hard-line aspects of the Intervention particularly ending the compulsory income management system and only quarantining welfare payments of those parents who actually neglected their children. It recommended the reinstatement of the Racial Discrimination Act and the payment of compensation to those communities whose land had been compulsorily acquired. The Rudd Government said it intended persevering with the Intervention for at least another year.

In August 2009, the UN’s Special Rapporteur on Human Rights, Professor James Anaya found that the measures of the NT Intervention:

‘overtly discriminate against Aboriginal peoples, infringe their right of self- determination and stigmatise already stigmatised communities’ and that ‘The emergency response is incompatible with Australia’s obligations under the Convention on the Elimination of all Forms of Racial Discrimination and the International Covenant of Civil and Political Rights; treaties to which Australia is a party’ (Hawley 2009).

Anaya’s report pointed out that all community members, whether or not they had children, or had had problems managing income in the past were forced to accept the income management of their social security(2010, p.5). In February 2010, Alistair Nicholson, the former Chief Justice of the Family Court of Australia condemned the Labor Government’s plan to extend the quarantining of half of welfare payments beyond the Northern Territory to other areas of disadvantage.

While the Rudd government and Howard Coalition government may well have acted in a racially discriminatory fashion, they were not cheapskates. It costs $3,000 per Aboriginal person per year to have government officials ‘income manage’ welfare payments of around $10,000 per annum (cited in Behrendt and McCausland 2008, p.17). If the government had money to spare, then raising the social security payment by 30 per cent would have substantially boosted the economy in Indigenous communities and conceivably would have allowed Aboriginal Territorians to take greater control of their lives. It may have gone some way to compensate Aboriginal residents of remote communities for the much higher cost of living there.

5. Private superannuation

In the 1930s and early 1940s, some conservative politicians attempted to introduce private superannuation schemes subsidized by government. Labor opposed the idea, arguing that such schemes would undermine age and invalid pension schemes. As noted, in 1976 the Hancock Inquiry recommended introducing a comprehensive government backed social insurance superannuation scheme as a replacement for age pensions. The conservative Fraser government, strongly supported by the private insurance industry, declined to implement it.

It was the Hawke Labor government, with Keating as treasurer, which, with considerable union support, opted to introduce compulsory superannuation. The Australian scheme is a private superannuation model, divided between the trade union based ‘industry’ funds, private insurance company funds and government workers’ retirement funds. The compulsory contributions paid by employers ensure that the occupational funds accumulate considerable money but they disproportionately reward those on the highest incomes. Some employers and other well off people voluntarily pay into private insurance or bank based superannuation funds. The income taxes forgone by governments on superannuation contributions invariably provide the greatest advantage to those who have the largest investment in superannuation. Many rich people obtain more from the government, in foregone tax on their superannuation investment, than age pensioners get from social security.

The Australian Capital Territory Council of Social Service (ACTCOSS) in 1991 produced a monograph, The Super Tax Rort, in which it pointed out that whilst those in secure full time work would generally benefit from privatized superannuation there were many losers; namely, low paid employees, casual seasonal and itinerant workers, people in poorly unionized sectors of the workforce, those nearing retirement who would not have been able to contribute to superannuation schemes for any length of time, women who leave employment to care for family members or to have children, people with disabilities and older migrants who had not been long in Australia.

One group of people who are likely to gain little from privatized superannuation are Aboriginal people living in rural and remote Australia. From 1977 until 2010, about half the Aboriginal adults of working age living in these regions were engaged in a scheme called the Community Development Employment Program (CDEP). This involved their working on projects, which their communities decided were necessary. It could involve working in the health clinic, collecting garbage, driving the school bus, building houses, working with cattle, making artifacts or being wildlife rangers. Many of the jobs were a couple of days a week. The positions were seldom full time. Even if workers were working a five-day week, they were not entitled to superannuation from their employer. Their local CDEP organization received the bulk of its funds from the Commonwealth Government. That is, the Commonwealth Government was ultimately their employer. This same government, which insisted all other employers that CDEP workers were provided with superannuation contributions.

The irony is that even if Aboriginal people living in rural and remote parts of Australia had had superannuation contributions made on their behalf few of them would have been able to gain much benefit. Aboriginal people in those areas die on average 17 to 20 years younger than other Australians. In these regions approximately ‘three-quarters of Indigenous male and two- thirds of Indigenous females die before the age of 65 years compared with the Australian population as a whole where one-quarter of males and one-sixth of females deaths occur before that age’ (Madden and Trewin 2003, p183). Although these statics are some years old, there has been little if any improvement in Aboriginal health in rural and remote Australia in the last decade and some researchers have suggested the situation is worsening.

Whilst the Fraser Coalition Government tightened the eligibility for unemployment benefit, it commissioned a report which suggested that Aborigines living on their traditional lands be provided with a sustainable minimum income paid from mining royalties (Turnbull 1980). Unfortunately, governments persevered with the Community Development Employment Program from 1977 until 2010.

6. Division and downward envy

The main ideological underpinning of ‘work for the dole’ or other ‘participation income’ schemes is a belief that unemployed people need to be coerced to work. The idea that many people who receive a disability support pension exaggerate their impairments or are straight out ‘malingers’ has been around at least since the 1348 Statute of Labourers injunction forbidding assistance to ‘sturdy beggars’ (Handler 2002, p. 56, footnote No. 217). The Howard Government was able to convince a substantial proportion of low waged workers that many welfare recipients were defrauding the system and that the money they received caused the tax rates paid by low income employees to remain unnecessarily high.

The Australian categorical means-tested income maintenance system divides one category of recipients against another. It atomizes social solidarity and the idea of ‘a community of recipients’ evaporates in its wake. Unemployed people are paid at a different level from those who are age pensioners. Young beneficiaries are paid at lower rates than older beneficiaries.

If the working class and social welfare recipients are to build social solidarity and renounce downward envy, then they will need to let go of the ideological constraints which Australian governments and vested interest groups have used in the past to weaken social bonds between disparate groups of permanent residents. Indigenous Australians can no longer be consigned to the fringes of white society, nor various ethnic groups to particular suburbs. The population as a whole has to find a place at the table for sole parents and their children, those who are unemployed, homeless or who suffer impairments.

The bureaucratically sophisticated easily maneuver their way around Commonwealth requirements and are paid their benefits. Those who are poorly educated, people with severe mental health or addiction difficulties and those who are less bureaucratically sophisticated (even though they are often suffering greater financial hardship) are frequently breached for 8 weeks or have their payments indefinitely withheld.

Often there are considerable similarities between people who have a combination of a partial physical impairment, a minor mental health or personality problem and a recent poor work history. Yet the type of benefit they are paid can vary widely depending on who they see and how they are assessed. They could be:

  • rejected on the grounds they haven’t met their participation requirements,
  • considered as not capable of working 15 hours a week and provided with a disability support pension,
  • found to have a temporary illness and placed on sickness benefit,
  • paid an unemployment benefit, and
  • if they have just had their 65th birthday, they could be paid an age pension.

The disability lobby often finds itself caught in the cleft stick of need and desert. When governments attack unemployed people and some disability support pensioners for not looking hard enough for work, disability activists, instead of building a united front with welfare activists, tend to argue that those with a disability are in greater need of the income support than are able bodied unemployed workers. Lone parent organizations often plead their special needs over other groups. In 2010, the Liberal opposition leader, Tony Abbott,  announced plans to make it compulsory for all people under 50 years of age who are unemployed for 3 months to ‘work for the dole’. The incoming Gillard Labor minority government insists that from 2012 one third of all disability support pensioners will take annual medical check-ups and be interviewed by departmental officers twice a year ‘to encourage them into employment’.

One hundred years of Commonwealth means-tested and targeted social security payments have not resulted in a system capable of paying ‘all the poor and only the poor’; nor has it been able to ensure that no one is left without the means to survive. Commonwealth participation income and tax credits have not resulted in equitable or even equal treatment of all permanent residents. Even if it were fair to insist that fully fit unemployed people meet certain participation requirements before they are paid an unemployment benefit, there is no equity in insisting that someone who is only considered capable of working 15 hours a week meets identical participation requirements. It is nonsense to suggest that the inordinate complexity, invasion of privacy and stigma inducing practices of the Australian social welfare system have resulted in a fair distribution of payments in line with need. It is not possible to know if what occurs is equitable or reasonable. Nevertheless, we do know that the Australian social welfare system does not treat all applicants for assistance equally or equitably.

Because the Australian social security system uses the family as the unit of income, even if a person meets all the requirements for payment of a benefit or pension but is living with a partner, the partner’s income and assets will determine whether the person actually receives any payment. Given such disparity in possible outcomes for applicants, there is no way that Australian governments can claim they are capable of eradicating poverty whilst they persevere with the existing system of income maintenance.

7. Basic income as an alternative to the existing income maintenance system

Fully elaborated guaranteed minimum income schemes (Henderson 1975) and negative income tax proposals Priorities Review Staff (1975) were suggested 35 years ago. Alan McDonald (1995) proposed a detailed blue print for an Australian Basic Income a decade and a half ago. Various reforms to Australia’s income support system continue to be advanced by academics, government agencies and the welfare and disability lobbyists. Paul Spicker (2007) notes that many of the Northern European welfare systems which deal most effectively with poverty are social protection systems rather than poverty alleviation schemes, and he assert that ‘If a system is based on support for everyone, poor people will also be helped. If it supports only the poor, some are likely to be excluded (p.136).’ Robert Goodin and Julian Le Grand came to a similar conclusion in 1987, as have many others in the intervening years.

A Basic Income makes an equal payment to all permanent residents without regard to desert. Such schemes, because they are universal and entail no conditionality apart from establishing residency, are unlike participation income schemes and many targeted social welfare programs in that they avoid the problem of having to define standards of eligibility tightly (De Wispelaere and Stirton, 2008, p. 5).

Is a Basic Income capable of treating all applicants for assistance equitably? The answer is of course ‘No’. However, it is capable of treating everybody equally. A Basic Income, provided it was paid (using the individual as the unit of income) at a rate above the poverty line, would abolish poverty. Governments would be in a position to know how much income support they are paying to each and every permanent resident and would be far better placed than they are now to work out what extra goods and services are required in order to promote equity and social justice throughout the land.

In 2006, I wrote that a universal Basic Income has many advantages when compared with the existing Australian residual, means-tested, categorical system of income support. The main gains which would flow from changing to a universal income support system can be grouped into five major themes. A Basic Income would:

(1) be economically sustainable,
(2) be easy to administer,
(3) be ethically sound,
(4) be non-discriminatory, and
(5) enhance citizenship.

A Basic Income provides a foundation stone on which to build an advanced civilization precisely because it legitimizes both the gift of giving and the joy of receiving. It embodies a sense of social solidarity through engaging in a form of mutuality that goes beyond ‘tit for tat reciprocity’. It provides a minimum income floor beyond which no one can fall but has no ceiling that prevents people rising (Rhys-Williams 1965 p. 163, Milner 1920 p. 117). Basic Income brings an inclusive citizenship: the duty that each of us owes to all and the equally pressing duty that all of us owe to each. Henning Melber (2009, p. 18) writes that a Basic Income:

seeks to restore human dignity and (self-)respect through a modest but nonetheless enabling financial transfer which allows recipients to become active and to make spending options they otherwise would not have. In that sense, it also fosters ownership over matters and creates an identity of belonging and citizenship as opposed to isolated destitution. … (It) allows the marginalized to make use of opportunities to actively participate in the society.

A Basic Income would ensure that people have access to money when they are in financial need. It does not interfere with incentives to increase income and it rewards self-help. It inculcates in the young, and reminds the middle aged and the old of, the need to ensure that no one goes to bed hungry and encourages inter generational transfers by underlining the importance of social solidarity. It stigmatizes no one because it treats all permanent residents equally. It converts the meaningless phrases of ‘increasing social capital’ or ‘ensuring social insertion /inclusion’ into a substantial process by encouraging sharing whilst allowing an equal taking from society’s income pool. It is a universal program, and because it does all these things, it enhances the quality of community life.

On the other hand, the existing Australian social security system is categorical, means- tested, and hedged around with contractual obligations (such as the requirement to apply for 10 jobs a fortnight and ensure one’s children attend school). The Commonwealth Government has been running one such school attendance study involving 6,600 parents and 5,000 children in Aboriginal communities in Queensland and the Northern Territory and some low income suburban areas. Though it threatened all families that their income support payments would be suspended for poor school attendance, in the first year it only suspended 95 families’ payments and all of those have been restored (Harrison 2011 p.16).

Behrendt and McCausland (2008) studied the withholding of social welfare payments from parents whose children did not attend school. They noted that Coalition and Labor Governments had been attracted to such policies (p.4), but found no evidence within Australia or overseas to suggest that such a policy on its own increased school attendance (pp.18-26).

If a government wished to increase school attendance, it might look at a Basic Income experiment recently carried out in the Otjivero-Omitara area of Namibia (See Ch. 2 in this volume). A Basic Income monthly grant of $100 (Namibian) was provided to every person under the age of 60 who had lived in the area for a year. No conditionality was attached to receiving the money. Within one year of receiving the grant:

  • school attendance and visits to the health clinic rose dramatically,
  • crime, poverty and child malnutrition all decreased,
  • the rate of those (above the age of 15 years) engaged in income generating activities increased from 44 to 55% of the population, and
  • household debt had dropped significantly while household savings had risen
    (Haarmann, C., Haarmann, D., Jauch, Shindondola-Mote, Nattrass, van Niekerk and Samson (2009, Executive Summary, pp. 13-17).

8. What would an Australian Basic Income look like?

Milton Friedman, who wanted to introduce a negative income tax (because he claimed that ‘it would assist the poor and only the poor’ and that once such a tax was implemented it would allow much of the welfare assistance machinery to be dismantled), was of the view that:

Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable (Friedman and Friedman 1982, p. ix).

Australian governments have not perceived there is a crisis so far. Many poor people who go to sleep in cold houses, on the streets or in cars in back alleyways worrying about their children’s hunger or lack of shelter, understand there is a real crisis in their lives. Aboriginal people whose relatives die too young realize there is a crisis. A million people’s personal crises are a national crisis even if governments refuse to recognize it as such.

The most likely form of basic income I envisage being introduced in Australia would be paid to each permanent resident, irrespective of whether they were employed or not, regardless of their ethnic background or marital status. It would be paid to individuals whether they lived alone or with others, there would be identical payments made to city and country dwellers and receipt would not impose any social obligation upon the recipient. The Basic Income would take no account of a person’s income or assets. It would be a payment that neither governments nor commercial enterprises could garnishee. Income tax would be paid on each and every other dollar earned or received from investments.

The Basic Income would be paid to every permanent resident at a rate slightly above the single age pension rate. An amount of five hundred dollars per annum above the age pension rate would be needed to cash out the tax deductibility concession currently provided to age pensioners who have additional income, if they are not to be disadvantaged in the transition to a Basic Income. A Basic Income at this level would ensure that no current social security pensioner or beneficiary would be disadvantaged by the shift to a Basic Income whilst most social security recipients and low-income earners up to the average full time male wage would be financially better off. Two thirds of Australian workers earn less than the average wage.

It is true that people with disabilities often have far greater mobility costs than do able- bodied people, and people who are ill often have to spend a lot on pharmaceuticals. These extra costs need to be supplied by means of disability and health programs supplementing a Basic Income. It costs widows, young unemployed people, disability support pensioners and age pensioners much the same to buy food and pay rent. They have similar living costs and so should receive identical Basic Income payments.

In the short term, until subsidies on childcare and education are adjusted, the Basic Income for children under the age of 16 years (living in the family home) might need to be paid at half the adult rate.

9. Is a Basic Income affordable?

Australia is an affluent country, which could easily afford to introduce a Basic Income paid to every permanent resident at a rate slightly above the age pension for single pensioners. Australia exports huge amounts of natural gas, coal, iron ore, alumina, wheat and other farm products and if it is incapable of providing a Basic Income at the rate of 25 per cent of the average wage to all permanent residents then there is something drastically wrong with the system of income distribution. In 2010, the Reserve Bank estimated that the mining boom was likely to continue for at least 15 to 20 years.

In 2010, the Henry Review recommended substantially increasing the tax paid by large mining companies and making superannuation more equitable. The Government put the superannuation recommendation in the too hard basket. Prime Minister Rudd unsuccessfully attempted to impose higher taxes on miners. He was replaced by his Deputy, Julia Gillard, who settled for only modest resource tax increases.

In the 5 years leading up to the 2009 worldwide recession, Australia repaid its Federal Government debt. Even taking into account the recent stimulus spending, it is in a comfortable debt position when compared with other developed nations.

Australia could easily afford to provide a universal Basic Income paid to each permanent resident at slightly above 25 per cent of average weekly male earnings (approximately the current age pension level). The extra money needed could be obtained by imposing or increasing resource taxes, carbon taxes, a Tobin tax on financial dealings, consumption and excise taxes. It would be a wise equity measure to initiate a wealth tax on all wealth, including any equity in the family home, and on private superannuation. If superannuation were to be excluded from such a wealth tax then all existing tax advantages accruing to superannuation should be abolished. In Australia over $25 billion is provided to business by the Federal Government annually. Once a universal Basic Income was in place there would be far less need to bribe industry to create jobs and several billion dollars could then be retained in the government’s coffers. This could be used to help pay for the Basic Income (Standing 2009 pp.303-305).
10. Conclusions – Is a Universal Basic Income Likely to be Introduced in Australia?

From 1908 until the late 1980s, the Australian social security system gradually became more generous and comprehensive. Older permanent residents who had live here for at least ten years were guaranteed an income, lone parents with children were assured of income support and those who were considered permanently incapacitated were provided with an income guarantee. If the person was “legally blind” they were guaranteed a Basic Income. Orphans were provided with an income guarantee. Those who were temporarily sick were granted income support for the duration of their illness. Unemployed people who met set obligations were also granted a benefit. There also existed a “special benefit” paid at the rate of the unemployment benefit to those permanent residents who did not meet the residency or other requirements necessary to obtain the standard social security pension or benefit. This special benefit operated much like the minimum income schemes in France and other parts of Europe. In recent years, the use of the special benefit has been drastically curtailed.

The main obstacles to the introduction of a universal Basic Income in 2010 would seem to fall into two categories: self-interest and ideological preconceptions. An initial privileged position does not guarantee long-term privilege as many lone parents and disability support pensioners have painfully learned in the last decade. Low paid workers need to discover what they have in common with social security recipients and concentrate on these rather than the things that divide them. Once they accept that inordinate superannuation tax concessions provided to higher paid workers is a more obvious cause of higher income tax rates than the provision of a poverty line benefit to those without other income this might help cement working class solidarity.

Workers and social security recipients will need to jettison ideological preconceptions about ‘bludgers’, ‘malingerers’, the need to compel welfare recipients to meet obligations, racist ideas about the descendents of the original owners of this country and often equally racist ideas about recently arrived migrants and refugees. They will need to reexamine patriarchical ideas about retaining the family as the unit of income as the best way of maintaining the family as a social support system.

When one looks at the current social security system in Australia in terms of the potential for generalized income guarantees there is much to be optimistic about. Since the mid-1980s governments of both persuasions have significantly increased the family tax credit system whilst simultaneously tightening the eligibility requirements on the benefit and pension systems.

It has not been a one way street, the 2010 Henry Review into taxation suggested cutting back on the windfall gains which some rich people receive from the foregone tax on superannuation and increasing the benefits derived by lower income earners. In February 2011, the Australian Productivity Commission recommended establishing a no-fault National Injury Insurance Scheme and an agency to ensure that all permanent residents with significant disabilities would receive appropriate services. In mid-2011, the Gillard Government announced support in principle for such a scheme. If these recommendations are implemented, then, when taken together with the blind pension and the disability support pension, this will ensure that all permanent residents, who can establish they have a significant disability, will be guaranteed an above the poverty line income. Older residents and lone parents with children have a similar guarantee now.

It would not require much movement in the national accounts to extend the existing system of income support from its present income guarantees for substantial sections of the population to one which provided a universal Basic Income to every permanent resident. In Brazil, there are moves afoot to extend their family assistance program from serving the poorest to include most of the population. There the slogan is “For everybody – the poor first.” The biggest obstacle currently to such a move in Australia is the desire on the part of both the Labor and conservative sides of the parliament to retain the right to impose conditionality, obligations and sanctions upon some of the poorest citizens. Some working class organizations also consider that such requirements discipline the unemployed and stop welfare fraud.

Essentially, a better-informed ‘self-interest’ would allow workers to see the many advantages they would obtain once a universal Basic Income was in place. They will come to see that by providing income security for all it is possible to build a better society and move in the direction of even greater equity without the conflict, which such efforts sometimes evoke.

The self-interest of the better off and the privatized superannuation industry constitute a formidable but not insurmountable obstacle. It will be the job of up and coming Basic Income advocates to point out the inherent unfairness of the present income support and taxation systems which disproportionately advantage an affluent minority while, at the same time, are incapable of assisting all permanent residents who are in severe financial need.


I wish to thank Penny Harrington for her continuing encouragement and editorial advice.


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