Inequalities

‘Inequality’ is often taken to mean ‘income inequality’, or possibly ‘wealth inequality’; and the claim is often made that a Citizen’s Basic Income would help to solve that problem. To which the answer has to be: maybe. The particular Citizen’s Basic Income published in the Citizen’s Basic Income Trust’s introductory booklet, and in the new student poster, would reduce the Gini coefficient, which is a measure of income inequality: but there would be schemes that would have the opposite effect. Schemes that abolished Working Tax Credits, Child Tax Credits, and Universal Credit, and charged higher Income Tax rates, would create sizeable net income losses for far too many houses, and could significantly increase inequality. The detail of the scheme matters.

But there are other kinds of inequality to which any Basic Income scheme would make a useful response.

For instance: Marginal deduction rates ( – the rate at which additional earned income does not result in additional household disposable income) are currently much higher for households on means-tested benefits (including in-work benefits such as Working Tax Credits and Universal Credit) than they are for households not on means-tested benefits. A Citizen’s Basic Income would help to address that inequity by reducing the marginal deduction rates experienced by households for which their Citizen’s Basic Incomes took them off means-tested benefits.

If the wages of individuals on means-tested benefits fall, then those benefits rise, providing little incentive for employers to maintain the value of wages, and too little incentive for trades unions to organise employees to enable them to negotiate for higher wages. This is not a problem faced by individuals not on means-tested benefits. Citizen’s Basic Incomes would not rise if wages fell, providing less of an incentive for employers to reduce wages, and more of an incentive for employees to organise to defend and raise wage levels.

Households on means-tested benefits face intrusive enquiries about their personal relationships, their savings and incomes, and their employment market behaviour, and evidence often has to be provided before they are believed. Households not on means-tested benefits face no intrusive enquiries about their personal relationships, incomes, assets, or employment market behaviours, and evidence is normally not required when tax returns are completed. In the Income Tax world, individuals are treated as individuals, and the administrative burdens that they face are minimal: but in relation to means-tested benefits, individuals are treated as members of households, and no longer as individuals, and the administrative burden can be substantial. The more households can be taken off means-tested benefits by their Citizen’s Basic Incomes, the more equal individuals will become.

There are many kinds of inequality, and, as we can see, a Citizen’s Basic Income of any kind would begin to reduce several different inequalities; and a Citizen’s Basic Income with the right levels of Citizen’s Basic Incomes, and with the right accompanying changes to the current tax and benefits systems, would take care of some of the rest.

 

 

 

 

Footnotes

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