Utopia, you are standing in it!

Before my two comments disappeared from Gareth Morgan’s Facebook page, I pointed out that his universal basic income of $11,000 per adult is as of last night at least triple pledged.

According to Gareth Morgan’s latest remark in the screenshot, people can use their universal basic income of $11,000 to pay their comprehensive capital tax bill. This new tax is proposed to fill the at least $10 billion gap in the funding of his universal basic income.

This is not possible because his universal basic income is already pledged to at least two other purposes that may use up a good part of the universal basic income of $11,000 per adult that he is proposing.

The first of these pledges is a by-product of adults under the age of 50 not being grandfathered in to the current level of generosity of New Zealand Superannuation – New Zealand’s universal old age pension.

Adults under the age of 50 under the Morgan Foundation’s universal basic income are expected to save part of their universal basic income. This saving is to make up for the $50 per week cut in New Zealand Superannuation when it is replaced by a universal basic income of $11,000 per adult. Gareth Morgan explains

Only people who are today under the age of 50 could be expected to retire under the UBI policy, the policy would not apply to existing superannuitants.

The key question is whether someone aged, say 40 today, would be better or worse off in retirement under the policy. And the answer is if they earn the average wage now, have an average house, they will tend to be neither better nor worse off.

For the 25 years prior to retirement they will receive the UBI on top of their wages. If they save a good portion of it they will have nest egg at retirement which they can use in retirement to supplement the UBI (which is more modest than today’s NZ Super).

In addition to this, the universal basic income makes those on a single parents benefit $150 a week worse off on the basic benefit that is not including lost accommodation supplements and additional child payments. The Morgan Foundation solution is to take part of the universal basic income of the other parent and give it to their children. Gareth Morgan explains again

It is totally feasible that the UBI of both parents could be required to be directed to support the children in the event of separation.

So in addition to the poor and ordinary families saving their universal basic income for as little as 15 years to making up for the $50 per week cut in support for old age pensioners, and the $150 plus cut in income support to single parents on a welfare benefit, the universal basic income also will be used to pay the comprehensive capital tax on the family home.

Somewhere buried in the universal basic income is it is the idea that it replaces existing welfare benefits. However, as most of the universal basic income has been pledged to other purposes such as saving for retirement, supporting children and paying the great big new tax in the family home, it will be very unwise to actually become unemployed, get sick, become a single parent or being invalid on the already meagre universal basic income as Geoff Simmons explains

With an unconditional basic income, most beneficiaries would be no better off than they are now (in fact sole parents would almost certainly receive a lower benefit).

There is a high risk that nothing will be left over from the Morgan foundation’s universal basic income to help you out when you fall in bad times because that universal basic income is already spoken for by your children, your retirement, and a capital tax bill.

Helping people out in times of misfortunes is the purpose of social insurance. The Morgan Foundation’s universal basic income fails this basic test set by Gareth Morgan

…let’s agree on what is a minimum income every adult should have in order to live a dignified life and then see what flows from that. We begin by specifying the income level below which we are not prepared to see anyone having to live.

At very best, and only very best, the Morgan Foundation’s universal basic income leaves some of those for whom social insurance was designed perhaps no worse. There are plenty of commonplace scenarios where individuals and families down on their luck are made much worse by a universal basic income replacing existing welfare benefits and plunged far deeper in poverty and hardship.