Individuals in society

Discussions of the advantages of a universal unconditional and nonwithdrawable benefits will generally list both the lower marginal deduction rates that individuals would experience compared with those imposed by means-tested benefits, and such social benefits as a greater social cohesion generated by everyone receiving the same Citizen’s Income. What is not always recognised is that changes experienced by one individual might cause changes for another.

Take an example from our current social security system. If a mixture of sanctions and incentives leads to someone previously unemployed finding employment, then, if the supply of jobs at the National Minimum Wage is relatively inelastic – that is, if the supply of jobs does not rise to match a rise in demand for jobs – someone else will not find employment who might otherwise have done so. 1 If the supply of jobs at any particular wage rate is instead elastic, then one person finding employment will not damage the chances of someone else doing so.

Let us now suppose that a Citizen’s Income scheme has been implemented. Lower marginal deduction rates will mean that individuals will be more likely to seek and to retain employment. Greater demand for jobs would mean that wages would tend to fall. As Anne Gray points out in her article, this might lead to the Government implementing a robust National Minimum Wage or a Living Wage. If employment at a particular wage rate is inelastic then there will be people seeking employment who cannot find it; but if it is elastic then there will be sufficient employment. The question for further research is therefore this: Would the existence of a Citizen’s Income make the supply of jobs more elastic? The Namibian pilot project found that the answer to this is ‘Yes’. Self-employment increased substantially in the context of a Citizen’s Income. The security of the Citizen’s Income had increased people’s willingness and ability to start small businesses. The same would be likely to happen in the UK if a Citizen’s Income were to be implemented. This suggests that employment at the National Minimum (or Living) Wage would indeed be elastic, that those who wanted employment would be able to find it, or they would be able to create self-employment, and that the kind of active labour market programmes to which we have become used would no longer be required and would no longer risk depriving of employment those seeking it.

  1. For instance, Richard Dorsett, Deborah Smeaton and Stefan Speckesser, in their ‘The Effect of Making a Voluntary Labour Market Programme Compulsory: Evidence from a UK Experiment’ (Fiscal Studies, vol. 34, no. 4, 2013, pp. 467-89), find that an individual is more likely to find work if labour market activation provisions are compulsory rather than voluntary, and they evaluate the cost-effectiveness of making the programme compulsory – but only in relation to the individuals subject to the programme. If the person who enters employment is a single person and was on Jobseeker’s Allowance and they deprived of employment someone with dependent children on Jobseeker’s Allowance, then their entering employment would not be cost-effective in the wider context.

Footnotes