Christian Engström, Pirat

29 september 2016

Basic Income — A concrete and financed proposal for Sweden

Filed under: basinkomst — Christian Engström @ 13:42

Download the full proposal in English

I have now translated my proposal for basic income for Sweden, which I presented in Swedish some time ago.

Although the proposal as such is strictly about Sweden and Swedish conditions, I am hoping that the reasoning and design principles I have applied may be of interest to basic income activists in other Nordic and European countries as well. In many ways, the welfare systems we have today are basically quite similar, and many of the problems we face are the same as well.

You can download the full proposal in English as a pdf. Here is the introduction:

Introduction — A concrete and financed proposal for basic income in Sweden

Can a country like Sweden introduce basic income, to guarantee everybody enough to survive on, whether they have a job or not? Yes, of course we can, if we want to.

We already have a number of welfare systems with exactly this goal, that we are already paying for. Nobody starves to death in Sweden, and very few people sleep outdoors for purely economic reasons. In one way or another, we are already allocating the resources necessary to provide everybody with food on the table and a roof over their head. In that sense, we already have basic income in Sweden.

But for anybody who loses their job and needs help from society, a Kafkaesque maze of bureaucracy and arbitrariness awaits at the job center or social service office. If we can afford that —and evidently we can, at least so far —then surely it cannot be impossible to redesign the system to reduce the insecurity and hassle. This is the underlying idea behind basic income.

A concrete proposal

I have developed a draft proposal for a basic income system for Sweden, specifically designed to be realistic both from an economic and a political perspective. The idea is to present a system that could actually become reality, and preferably as soon as possible. Very often, discussions about basic income have been very visionary. This is a good thing, because it means that we have a rather clear vision to aim for. But to move along we need to start discussing basic income in more concrete terms, including how it can be financed.

I propose that everybody between 19 and 65 who lives in Sweden and is covered by today’s welfare systems, would get an unconditional allowance corresponding to 900€ per month, tax free. In Swedish money this would be 8,333 SEK per month, or 100,000 SEK per year. When you start getting an income the allowance will be reduced, but slowly enough to make sure that it always pays to work if you get the opportunity.

An urgent reform

This is an urgent reform. We have about 400,000 unemployed people in Sweden today (out of a population of 10 million), and nobody thinks that this figure will drop significantly in the foreseeable future. On the contrary, there is a real risk that computers and automation will make even more jobs disappear in the future. Hoping that the politicians will create hundreds of thousands of jobs (as they promise every election year) is no solution, because they cannot. If they could, they already would have, but as we all know they haven’t. This means that we have an obligation to make sure that the welfare systems for the unemployed are secure, dignified and humane.

The unemployed are not to blame for the unemployment. The number of available jobs does not increase because we put more pressure on the unemployed, and force them to walk around with a knot of anxiety in the stomach, dreading the next meeting with the employment or social service officer.

Basic income replaces the insecurity and arbitrariness of today’s system with a straight-forward and predictable right for everybody to have their basic needs met. In the model that I have been looking at, I have assumed a benefit level of 900€ per month. This is roughly in line with Sweden’s current level for social assistance, so it is only just about what you need to survive. But unlike today’s social assistance, the basic income will not be tied to any demands that the recipient fulfills certain tasks, or submits to intrusive checks or arbitrary conditions by the welfare officer.

Negative income tax

All the practical administration of the basic income can be handled by the computers at the tax authority. The tax authority already keeps track of who lives in Sweden and is covered by the welfare system, and how much each of us earns. This is all that is needed. The only new element is to instruct the tax authority’s computers to make an automatic payment on a monthly basis to all those who are not making enough money on their own to support themselves. This way of administering basic income is called ”negative income tax”.

In the model that I am proposing, the basic income would be phased out with 33% when you start making money yourself, together with an income tax of 33% (which is the normal marginal tax rate for low and middle income earners in Sweden). Someone on basic income who manages to get an income of 300€ would  pay 100€ in income tax and get the basic income reduced by 100€, but would get to keep the remaining 100€ as extra money in the pocket.

This would be a literally infinite improvement over Sweden’s current social assistance system, where the benefits are reduced by 100% of any other income you may get, leaving you with nothing extra at all in your pocket. This is the welfare trap, since it removes the incentive to even try to make some money on your own. Basic income will be different, and solves this problem.

Possible to finance

In Sweden, as in all other Nordic and (I believe) European countries, there are publicly available statistics showing the income distribution for the adult population. We can use these statistics to estimate the cost of different proposals for basic income systems.

It turns out that the proposed system, with a level of 900€ per month, and 33% phasing out in addition to 33% income tax, would cost the Swedish government 132 billion SEK per year. Unless you are Swedish, this number as such probably won’t tell you very much, but it should be seen in relation to the total Swedish central government budget, which is just under 900 billion SEK. Compared to this, introducing basic income for 132 billion SEK would be a very large reform, but not impossibly large. It is possible to finance in a realistic way.

First of all, the basic income would make several of today’s systems obsolete. Basic income would replace social assistance, student aid, and the Public Employment Agency including current unemployment benefits. These are the only cuts I am proposing in the current Swedish welfare systems.

Keep child and sickness benefits

All child and family benefits, as well as the entire sickness insurance, and are left as they are in my proposal.

Those who have disability pension today that is higher (after tax) than the basic income would be, will simply keep their current disability pension and not get any basic income. In this way, we ensure that no chronically ill or disabled persons will be worse of after the reform than today. But those that have a disability pension that is lower than the basic income, will get the basic income instead of the disability pension. And anybody who loses their right to disability pension (because they got better, or because the authorities decided that they could work after all) would of course get the basic income if they do not immediately find a job. In this way, the basic income supports and strengthens the safety net for the disabled and the chronically ill, even though we make no direct changes to the sickness insurance system. More money in the pocket for the poorest disability pensioners, and more security for everybody.

The rest of the financing I propose that we solve by removing the VAT discounts that certain industries enjoy in Sweden today, especially the food and restaurant industry. Removing these tax discounts to companies would bring in an additional 50 billion SEK in tax revenues for the government.

With this, the entire basic income reform is financed, without any wishful thinking about positive dynamic effects or radically new (and untried) tax bases, and without raising the income tax at all. Basic income is completely realistic from an economic point of view. And the primary objection to basic is not economic, but emotional.

Emotional objection

”But what if everybody just quit their jobs and start loafing around doing nothing on basic income instead!”

”They never will, at least not at the same time,” is the obvious answer.

900€ a month is very little money to live on in Sweden. It is possible to do it (because people are doing it in today’s system), but it is no rose garden and not very fun, especially not in the long run. Economically, even a low-paying job is much better than  being forced to live on an income so close to the minimum subsistence level as 900€. If you have a middle income job, the difference will be even greater. If you are used to living on a salary of perhaps 2,500 to 3,000€ (before tax), you have to change you lifestyle drastically to survive on 900€ a month. This is not something most people want to do.

Jobs for the unemployed

But for the sake of argument, let us assume that a couple of hundred thousand people who have jobs today, would actually resign and voluntarily chose to live off the basic income instead. For all those of Sweden’s 400,000 unemployed people who desperately want an job, it would be fantastic news to have so many jobs becoming available!

The ones who didn’t want to work won’t have to, with no stigma and no hard feelings on anybody’s part. The ones who wanted a job will get one. And the companies that employ them will get co-workers who really want to work. This would be a win-win-win for everybody, in a way that few other political proposals even come close to.

A Nordic model for the 21st century

In many ways, basic income is not a very dramatic reform. It can be seen as a way of reducing bureaucracy and streamlining the welfare systems we have today. A renovation and modernization of the Nordic model to make it fit for a new century, if you want to put it like that.

But the underlying idea behind basic income still has great political potential, in a positive way. When people feel secure and get more power over their own lives, this will lead to positive effects for society in many ways, both big and small. How large these positive ”dynamic effects” will be is almost impossible to calculate beforehand. We can be pretty confident that they will appear.

But exactly how fast and in what way, we can only find out by trying. I think we should.

The next step in Sweden

The calculations I present in the proposal are estimates. I have done them in a spreadsheet, using public data from various sources, including income distribution statistics divided into percentiles. This is enough to make reasonable estimates about the costs and the financing, but estimates is all they are.

My reason for doing these calculations was to see if it would be meaningful to continue working with the model at all. I think they show that it is.

The next step in Sweden would be to make a more exact calculation of the cost. This would in fact be very easy to do. The Swedish government has a computer simulation system called FASIT, that can calculate in great detail what the cost would be. This system is available both to the government itself and to other parties, such as the political parties in the parliament, academics, or private entities that are prepared to pay a couple of thousand euros to use it. I hope that somebody gets interested enough in the proposal to make a more exact calculation.

…and in other countries

The reason I have translated this proposal into English is that I think the principles behind the proposal may be of interest in other countries as well. The numbers and the details about the existing welfare systems will be different in each country, but most European countries, and especially the Nordic ones, have welfare systems with a pretty similar structure.

This proposal for a basic income system for Sweden is explicitly designed to be both economically and politically realistic to implement. In the proposal itself, I describe the design decisions I have made at various points, and my reasoning behind them.

Please feel free to copy as little or as much from this proposal as you like, if you want to design a draft basic income system for your own country.

Sharing is Caring!


Read the full proposal in English as a pdf

5 kommentarer »

  1. Varför håller du fast vid 8333? Kan du inte föreslå att det kan eller bör vara någonstans mellan 8000 och 11000? Jag har redan påpekat flera gånger att socialen ger försörjningsstöd på ungefär det 8333 men att de ger extra för läkarvård, tandläkarvård, biljett för allmänna färdmedel typ månadskort på Uppsala-buss m.m. och då kommer slutbeloppet ofta upp till 10-11 tusen.
    Vill du stjälpa fördelarna med BI eller är du bara allmänt envis och vill inte vika dig för att du tycker att du varit så duktig då du räknade ut 8333?

    Kommentar av Bengt Numelin — 30 september 2016 @ 23:16

  2. […] Basic Income — A concrete and financed proposal for Sweden […]

    Pingback av Links 1/10/2016: Linux 4.7.6 and 4.4.23, Blender 2.78 | Techrights — 1 oktober 2016 @ 9:23

  3. I’ve shared this with a group of us working on basic income in Australia. You’ve pretty much proposed the exact thing I did to the group, negative income tax based with the only means test being the taxable threshold and computerised/automated delivery🙂 As the cost / inflation level in Australia has gotten out of control we’d only have half the revenue we need to fund it even if the existing welfare system was eliminated there and the cost of administration there recouped so most likely instead of a simple VAT adjustment like you’ve proposed, we would have to combine that with a land value tax and other substantial revenue raising. It’s a much steeper hill to climb vs what Sweden or the US will have to do judging from the numbers

    Kommentar av Munly Leong — 1 oktober 2016 @ 13:32

  4. @bengt: Tror 8333 kronor är ett belopp som är lätt att räkna på, varken mer eller mindre, och det är därför det beloppet kvarstår.

    Men det är bara ett förslag som skall passera många, många instanser innan det blir verklighet om det någonsin blir det, så om och när det närmar sig så kan det exakta beloppet justeras då.🙂

    Kommentar av Per "wertigon" Ekström — 1 oktober 2016 @ 21:32

  5. You could introduce BI in Sweden without increasing taxes by deciding that the lower part of income derived today from social security income or labour income gets the characteristic of ”basic income”. For example, the lowest 900 € of an old age pension of 1500 € is redefined as a basic inome, such that it is composed of 900 € basic income + 600 € ”pension”. Same for a wage income from labour of 2200 € per month for excample: you redefine the lower 900 € to be ”the basic income” and 1300 € to be ”income from labour”.

    The only gaps you then have to finance then are:
    – those who have nothing now
    – or less than 900 € per month which you need to move up to 900 €/month. Obviously, as you mention, for children, the basic income amount should be lower than 900 €, comparable to the child benefit currently such that there is no financing impact.

    You will find that the ”finance gap” with this approach will be maximum 10 billion € per year mainly due to adults which do not presently work , do not get unemployment or any other benefit and have no old age pension yet. There are not that many such individuals in Sweden

    These 10 billion € can be recovered by
    – the savings in public administration as a consequence of this simplification of social security
    – the increase in tax revenue due to the increased economic activity (mainly in proximity services) performed by those who previously did not work at all (because otherwise they would lose their ”replacement” income or because it then becomes possible to work a few hours per week for those who did previously choose not to work and not get benefits). The spending of the income derived from this additional work for example in a restaurant or at a hair dresser will yield income taxes and consumption taxes.
    – increased activity of retired people who now are free to earn money on top of their income by providing services without being afraid of being retaliated with a huge tax bill or the curtailing of their pension.

    Good luck and purrsue the good work.

    Kommentar av Roland Duchatelet — 2 oktober 2016 @ 11:25

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