According to an aphorism attributed to Confucius, \u2018The\neasiest way out is through the door. Why do so few use it?\u2019 A modern\ninterpretation is, \u2018Do not complicate matters just to distinguish yourself.\u2019<\/p>\n\n\n\n
This seemed relevant in reflecting on the Chancellor\u2019s\npanicky reactions over the past few days. There has never been a budget openly\npronounced a failure within three days. To have had three budgets in nine days\ndoes not suggest careful planning or preparation for dealing with what was\nknown to be coming for weeks. One can expect more budgets in the next few days.\nThe Chancellor\u2019s inexperience and lack of appropriate qualifications have been\nglaring. Yet one distinguished journalist has called for him to become Prime\nMinister. <\/p>\n\n\n\n
Be that as it may. Do the measures that have been\nintroduced make economic and social sense? In trying to answer that, full\ndeclaration is merited. I write as an economist with \u2018green-left\u2019 values. So, I\nask of any economic policy: Does it increase or decrease inequality? Is it ecologically\nsustainable and promote a greener future? And does it distort labour markets or\nmake them more efficient? <\/p>\n\n\n\n
One may find that the policies do not do well on those\nscores, but admit they are better than any alternatives. But at least one\nshould try to answer them.<\/p>\n\n\n\n
Take the Coronavirus Job Retention Scheme, whereby\nfirms with retained regular employees can apply for a grant covering 80% of the\naverage wage up to \u00a32,500 a month, roughly the median wage. The TUC General\nSecretary, Frances O\u2019Grady, is enthusiastic about this, as are some in the\nLabour Party.<\/p>\n\n\n\n
This scheme deliberately will pay salaried employees\nnot to do the labour they supposedly have been doing. This is the first time a\ngovernment will pay people on condition that they do not work and do not try to\nwork. I am not sure my economics training prepares me for justifying such a\npolicy. <\/p>\n\n\n\n
So, it will pay a firm to lay off workers rather than\nhave them working part-time, and it will pay employees to stop working rather\nthan do part-time labour. It will also pay both firm and employee to claim he\nor she is not working. Of course, everybody will be honest. <\/p>\n\n\n\n
The scheme will lock the economy and labour market in\na planning gridlock, impeding the adjustment process that economists of all\npersuasions favour. Even a huge demand shock requires mobility of factors of\nproduction and moves of people from sectors where there is no demand to sectors\nwhere there is. This will impede that. <\/p>\n\n\n\n
But the most extraordinary feature of this scheme is\nits distributional design. When the dust settles and the empirical analysis has\nbeen done by a host of economists and \u2018think tanks\u2019, I predict it will be seen\nas the most regressive labour market policy of the past century.<\/p>\n\n\n\n
An apologist might splutter that it should not be seen\nin isolation. We will come to that. First, note that someone with a salary of\n\u00a32,500 per month will, if his employer plays straight, receive \u00a32,000, or\n\u00a324,000 a year. Someone on \u00a31,000 will receive \u00a3800 a month. Someone in the\nprecariat will receive nothing. If that is not organised inequality, then I am\na duck.<\/p>\n\n\n\n
Those on Universal Credit will be given an extra \u00a380 a\nmonth, if they can pass through the conditionality hoops. This means that a\nmedian wage earner will get 24 times as much as an unemployed person. But\nperversely the person receiving the much larger amount must not work, whereas\nthe person with the pittance must do everything he can to obtain work. Again,\nmy economics training has not prepared me for rationalising this.<\/p>\n\n\n\n
At the time of writing, there are rumours that in a\nfourth budget, compensation will be coming for the self-employed and possibly\nothers who are not PAYE employees, beyond what has been done in the form of\nproviding \u00a394.25 in sick pay for those self-employed with minimal savings. Let\nus hope.<\/p>\n\n\n\n
But the scheme will also be incredibly inefficient.\nEmployers must apply, forms must be filled, be checked, and so on. There will\nbe no rush to check the veracity of claims. Not too many questions will be asked.\nThis is not the time to check on corporate honesty. Or so it will be said\nbehind the scenes. Clever accountants will be over-worked. No names \u2013 all are as\nhonest as the day is long, aren\u2019t they. One can expect lots of salary\nadjustments and promotions. Somebody previously paid \u00a31,000 may have a nice pay\nrise, possibly backdated.<\/p>\n\n\n\n
Economists deplore subsidies because they encourage\nand reward inefficiency as well as resource misallocation. This will be worse\nthan most, because there is little interest in achieving efficiency right now. <\/p>\n\n\n\n
So, in the end, we have a regressive, inefficient,\ndistortionary system. The question is whether something more equitable, less\ninefficient and less distortionary exists. There is.<\/p>\n\n\n\n
If the same amount of money were used as is likely to\nbe used on the existing measures, the government could pay every legal resident\nin the country a modest basic income. This would be a stimulus to aggregate\ndemand, and would induce spending on basic goods and services. <\/p>\n\n\n\n
This attractive would be more comprehensive than the\nhotch-potch being put in place. That is vital, since if some groups are not\nhelped, they will become more of a danger not only to themselves but to the\nwhole community, including every reader of this article.<\/p>\n\n\n\n
A basic income paid to nearly everyone \u2013 I hesitate to\nsay \u2018universal\u2019, since for pragmatic reasons non-resident citizens and new\nmigrants would have to be excluded \u2013 would have one advantage that does not\nseem to worry the TUC and Chancellor. It would automatically be progressive,\nunlike what they favour.<\/p>\n\n\n\n
It would also be far less expensive to administer. No\napplication process, no form filling all the time, no checking beyond\nidentification, no checking on payrolls, no adjusting the amount for different\ngroups at different times. This means exclusion<\/em> errors should be much\nsmaller.<\/p>\n\n\n\n We are not proposing that a basic income replace other\nbenefits. But we must maintain demand for basic goods and services. Unlike\ncurrent measures, paying a basic income to everybody without requiring anybody\nto stop working or to resist working would encourage people to spend more time\nin care work rather than resource-depleting labour or producing public and\nprivate bads. <\/p>\n\n\n\n By contrast, what the government is doing is paying\npeople engaged in producing bads while excluding some doing good. Suppose you\nare an employee in a gambling shop owned by an employer who earned \u00a3200 million\nlast year and were paid the median wage of \u00a32,500. While one should not be too\nmoralistic, does it make sense that the government will give a non-working\ngambling shop employee \u00a32,000, while the three workers doing 8-hour shifts\ncaring for my 95-year-old mother-in-law will receive nothing? A basic income\nwould compensate them equally, and as it would be a higher proportion of the\ncarers\u2019 incomes it would reduce inequality. Some of us think that caring for\npeople at this time is rather valuable.<\/p>\n\n\n\n There is also evidence that paying a basic income\nwould have beneficial feedback effects, helping people keep debts under\ncontrol, lessening stress that is a major cause of demands on the NHS, and\nstrengthening social solidarity at a time when it is sorely needed. The\ngovernment, if it were wise, should set up a Basic Income Commission so as to\ndepoliticise what could be a great means of giving us all enhanced resilience\nthat will be vital in the months ahead. \n <\/p>\n\n\n\n Guy Standing is author of Basic Income: And how we can make it happen <\/em>(Pelican), and Battling Eight Giants: Basic Income Now<\/a> <\/em>(Bloomsbury, March 2020). <\/p>\n\n\n\n Photo credit: Flickr\/Generation Grundeinkommen<\/a><\/em>.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Guy Standing writes for the PEF blog, arguing that the government’s Job Retention Scheme is a poor and inegalitarian alternative to a basic income. <\/p>\n","protected":false},"author":11,"featured_media":7665,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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