Economics: Keith Rankin on Universal Basic Income and Covid‑19

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By Keith Rankin

Keith Rankin.

I keep hearing rather unfortunate ‘expert’ comments in response to questions asked about Universal Basic Income (UBI) as a way of responding to the Covid‑19 economic contraction. These comments all relate to a ‘straw man’ concept of UBI that is obviously unaffordable and impractical. It is not possible to offer any kind of Universal Basic Income (as an unconditional payment to all adult tax‑residents) at the level of New Zealand Superannuation.

What is both possible and necessary is to offer a basic universal income – initially set at $175 per week – in conjunction with a flat rate of income tax of 33 percent.

By doing what is possible and necessary, we provide bridging income guarantees to all New Zealanders who risk income losses, in in a way that requires no new bureaucratic input.

By doing this, all people with salaries or other earnings of more than $1,346 per week would receive exactly the same after tax as they do now. They already receive this benefit.

Further, all beneficiaries and superannuitants would continue to receive exactly the same as they already expect to receive after April 1. This $175 per week benefit is, in effect, the first part of their existing benefit.

Working people on incomes lower than $1,346 per week would receive more than they do now. All working people expecting to suffer a loss of income will be assured that they would continue to receive this $175 benefit as the market component their income falls.

If the $175 per week proves to be too low, then it can subsequently be adjusted upwards.

It’s simple. Really simple. And necessary. It is a way to maintain a high productivity economy that experiences a loss of gross domestic product. It is an easy way of ensuring that everybody gets a slice of a shrinking economic pie.

To avoid confusion, let’s call the $175 per week a Basic Universal Income (BUI).

See also: Keith Rankin Analysis – Economic Emergency 2020