$2,700 A Month No Matter What? Some Swiss Ask Government To Assure Income

on November 12 2013 12:48 PM
No. 3 Switzerland
No. 3 Switzerland Reuters

Minimum wage has been a hot topic this year. As fast-food workers in the U.S. occasionally strike en masse and President Obama talks about raising the current rate of $7.25 hour, the working poor here and abroad are demanding more compensation for the work they do -- but what if they, and everyone else, got paid just for being citizens?

This could become a reality in Switzerland after Basic Income Initiative, a grassroots organization, submitted a petition with 125,000 signatures proposing an unconditional 2,500 swiss francs (about $2,730) annual payment for every citizen. Swiss officials are now in the process of organizing a referendum on the matter, which could take place as soon as next year.  

“It’s not as kooky as it sounds,” said Karl Widerquist, Georgetown University professor and a basic income policy expert on Public Radio International. “It’s the idea of putting a floor under people’s income, the idea that income doesn’t start at zero.”

The idea isn’t a new one. Thomas Paine advocated in 1795 for a national fund to give everyone over 21 fifteen pounds sterling, “as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property.” 

In the 1960s, Milton Friedman advocated for a negative income tax, where the state would pay the difference if your pay fell below a minimum amount.

Conditional cash transfers, money given to people if they meet certain requirements, have been popular in poverty-stricken areas in the developing world for more than a decade.  

Joining other major backers, Google has donated $2.4 million dollars to an organization called Give Directly, which facilitates conditional regular cash transfers to poor households in Kenya.   

The Madhya Pradesh Unconditional Cash Transfer Initiative was a similar project in India, through which funds from UNICEF were used to give 4,000 people in eight villages a minimum monthly income for a period of 18 months. As a result, more people started their own businesses, and children attended more days of school, than previously. 

“They told us the men would use the money to get drunk and the women [would use it] to buy jewelry and saris,” Sara Dewala, the project’s research director, told Le Monde Diplomatique

 “It’s a middle-class prejudice that the poor don’t know how to use money sensibly,” said Dewala.

According to a World Bank Report, there have been over 100 of these programs implemented in Sub-Saharan Africa. 

But the idea has yet to gain popularity in the developed world, where countries spend billions of tax dollars on a variety of social security programs.

Critics argue that handouts like this in developed countries will deter people from working and cost the government much more than is necessary. Proponents say that people spend reasonably, and programs such as this one would be cheaper and less complicated than the current patchwork of various social security food stamp and voucher programs.

In 1974, the Canadian government conducted a trial with 1,000 poor families in Dauphin, Manitoba, and a recent study of the experiment's data shows that participants didn’t waste the cash.

“Politically, there was a concern that if you began a guaranteed annual income, people would stop working and start having large families,” health economist Evelyn Forget, a professor at the University of Manitoba, told the CBC

Forget studied the results of the experiment decades after it was concluded. She found that besides the obvious advantage of a decreased poverty level, high-school completion rates also increased, and hospitalizations went down by 8.5 percent.

“It does a much better job of supplementing the incomes of the working poor than other kinds of social assistance,” she said in a recent Q&A with Basic Income UK.

The movement isn't exactly taking the world by storm, but as corporate earnings increase amid slowing household income, the movement is gaining steam.

For now, the Swiss government has a year to research its own universal program and give its citizens a chance to voice their opinion in a referendum. But according to Reuters, later this month, there will be another vote on a proposal to cap compensation for executives at large companies so their monthly pay cannot be more than what the lowest-paid staff members earn in a year.

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