A Response to Steve Keen on the Problem of Poverty in the Context of a Calibrated Basic Income. 

If you haven’t done so yet, you should really watch the most recent Steve Keen and Friends livestream .  

His guest, Alex Howlett, proposed a “calibrated” basic income. That means one used as a demand side macroeconomic lever, not a poverty elimination plan.  This allows monetary policy to be tighter, meaning fewer loans are originated and for smaller amounts, shrinking the overall size of the financial system relative to the real economy – a goal Steve supports. 

Steve’s problem with this (perhaps unsurprisingly) was that it wouldn’t reduce poverty, and would leave workers vulnerable to exploitative employers, without a sufficiently viable exit option. His argument centred on the idea that, If you calibrate the basic income all the way up to the poverty line, or beyond, then it would be too large a cost to bear.

So instead he supports what is usually called a guaranteed basic income, or just a guaranteed income, though he calls it a “universally available” income meaning there would be no conditionality apart from the fact you don’t have another source of income such as a job – essentially the dole with fewer conditions. But since people wouldn’t get it if they had a job, it would not be “universally received”.

It was at this point I found myself yelling at the screen of my smartphone, causing the other people at the gym to look at me funny. My frustration was due to the fact that this issue has been addressed specifically by Basic Income Australia, with a policy framework I helped draft, which squares the circle between these two approaches.

Steve’s position relies on an implicit assumption that existing welfare systems are removed, right at the start of the transition, as soon as the calibration process begins. And there’s no reason to do that. If a basic income isn’t a poverty eradication tool, primarily, then that doesn’t have to be the first thing it does. But other policies, existing ones, designed for that purpose, can be in place simultaneously.

It works like this:

1. The payment is introduced universally, but at a very low level.
   1. Existing welfare payments are maintained.
      1. In the Basic Income Australia policy, payments were kept at the same level, with the goal of topping up the existing payments, to the poverty line as soon as possible. I supported this at the time.
      2. Since then I’ve changed my mind on this, and I think it would be better to immediately raise the level of existing welfare payments, and reduce conditionality, as a first step, then start the ramping process. I am no longer active in Basic Income Australia, though, and am not up to date on the details of their most recent proposals. 
2. The Basic Income is counted towards an individual’s taxable income.
3. Welfare payments automatically reduce according to (an improved version of) the current means testing system, which depends on taxable income, as the payments increase, and are only phased out if and when that payment reaches a livable amount. 

[I suggested the Fair Go Payment as branding for the policy, to match our “Fair Go” discussion groups. The branding has since been dropped but the essence of the approach remains. ]

This allows us to calibrate basic income as a macroeconomic tool without throwing those dependent on existing welfare payments under the bus, by asking them to live on less than the sub-poverty incomes they currently receive. 

As far as I can tell, this neatly addresses Steve’s objection, and should get him on board with Team Calibrated (and of Team Targeted).  If he still needs more convincing, he should reach out to Basic Income Australia directly, and hear how they – in particular the main policy author there, Michael Haines, who probably should get primary credit for this particular approach – are working to introduce a universal payment that’s specifically tailored to the Australian context.