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Swiss rejection shouldn't doom universal basic income

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(Bloomberg View) – Nobody expected the conservative Swiss to approve the idea of a hefty monthly payout to everyone in the country without exception. The proposal for a universal basic income (UBI) — a monthly payout of 2,500 francs ($2,560) — was rejected by 77 percent of Swiss voters in Sunday’s referendum, just as their government recommended.

That’s a shame, because the idea of a UBI is not necessarily utopian; it just may be a bit before its time. With a less hasty, radical approach, it might still gain traction.

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The issue is now politically dead in Switzerland for many years to come, and its opponents want to put the idea to rest for good. “The organizers wanted a vote of principle,” Socialist politician Jean Chistophe Schwaab tweeted after the results came in. “So it’s the principle of UBI that has been summarily rejected.”

QuickTake universal basic income

That may be, but the Swiss initiative wasn’t a good test of the idea to begin with. For the average Swiss — with the highest income in Europe, not counting the tiny principality of Liechtenstein next door — voting against the universal basic income was a no-brainer.

The Swiss government had made clear that the scheme would be financially unfeasible. It would have required 153 billion francs ($157.3 billion) in additional taxes, a number comparable with three months’ economic output.

As Pierre Novello pointed out in the Swiss weekly L’Hebdo, “It may not have been reasonable to put such an upheaval of the nation’s entire social security system to a popular vote without any testing and at such a high cost.”

The basic income campaigners tried to sell their proposal as insurance for those who might be displaced by technology. Switzerland, however, is one of the worst countries in the world for this kind of argument. Its unemployment rate, at 3.5 percent, is evidence that nobody is being displaced, at least not yet. Even if it starts happening anytime soon, Switzerland’s hedonic goods — the cheese, the chocolate, the watches — are likely to survive any tech disruption. And the country’s biggest export sectors (its chemical and pharmaceutical industries) are already using far more intellectual than manual inputs.

The temptation for UBI activists to put the matter to a vote in Switzerland was understandable: No other country provides its citizens with such easy access to direct democracy. Grumbling is already heard about the need to make calling a referendum more difficult.

Last Sunday, a total of five measures were roundly defeated, including a bizarre proposal to run state companies as nonprofits, slashing executive pay. It’s a piece of cake to gather the requisite 100,000 signatures and put any badly thought-out proposal on the ballot.

There are better ways to put the UBI idea on the agenda. They are being tried out in some Dutch cities this year, and Finland and the Canadian province of Ontario are planning trials soon. The major obstacle to popular approval of UBI is the worry that many people would simply stop working — or even stop looking for work — if they started receiving regular checks from the government.

There’s no way to dispel that worry without running well-designed trial schemes. And even then voters may only be convinced if the tests take place in their own country. Few people in the developed world will be convinced by an experiment in Kenya; the social systems and living standards there are too different.

It also makes sense to start relatively small in terms of the UBI’s size and its cost to taxpayers. A recent paper by British economists Howard Reed and Stewart Lansley, which piqued the interest of the U.K. Labour Party, proposes an income of 71 pounds a week ($102) to every working-age adult (less for children and retirees, who’d get to keep their pensions) at the net cost of 8.2 billion pounds.

The scheme requires an end to the lower bound for income taxation and a progressive income tax scale with rates ranging from 25 percent to 50 percent, up from 20 percent to 45 percent today, but unlike other UBI projects it keeps all the current benefit programs except child benefits.

Demanding high payouts immediately is bad for UBI’s political support. Voters immediately start thinking of hundreds of thousands of immigrants flooding to a country generous enough to pay people just for living there. And it’s hard for them to accept that some jobs will pay less than the universal income. Who would want to do them then?

Governments need help from academics in designing experiments for various forms of UBI. What happens if the income is higher but it replaces most existing benefits?

What do people do if the benefit programs are still there but everyone also gets enough money for food and simple lodgings? Would it work to stop paying the UBI to people who attain a certain income level, or would they deliberately underachieve to keep it?

There are plenty of questions, the answers to which would probably differ by country and even by community. There’s little point to big tests like the Swiss referendum until data have been collected and thoroughly discussed. Jumping the gun can only produce dismissive comments like this one from Thierry Mayer, editor of the Swiss paper 24 Heures:

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“The interest and the debate to which the unconditional income proposal have given rise show that part of the population, often young people, no longer believe in the virtues of society as it is organized today, and built on the achievements of the second half of last century. The question remains what Model 4.0 — to use digital-speak — could amend, if not replace, the system of values that puts work at the heart of individual recognition.”

If UBI acquires the reputation of a harebrained idea advocated by people with no understanding of the value of work, the baby may be thrown out with the bathwater. The character of work is changing, and people often need time to rethink their careers, retrain, take a sabbatical from daily drudgery to think more clearly about how, and where, they can be productive.

UBI is a chance to make this possible for everyone, if people are willing to pay for it. Testing that willingness, as well as recipients’ willingness to work, should be a major objective of any experimental programs. The results may surprise even the practical Swiss voters —eventually, just not today.

See also:

Why you should use FIAs in retirement income planning

4 reasons income annuities might be the retirement equivalent of Airbnb


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