A basic income for all – the issue before Swiss voters

A basic income for all – the issue before Swiss voters

19th April 2016, Comments 0 comments

In a world first, the Swiss are voting in June on whether the state should pay a monthly basic income to every citizen. What will it mean for those living in Switzerland?

Is it the answer to the changing jobs landscape or a utopian concept?

The initiative, "for an unconditional basic income", is rooted in debate about a two-speed society where the pay gap continues to grow. Unlike other similar initiatives, it focuses on the digital revolution and the resulting loss of traditional jobs.

Wording of the proposal

The initiative proposes to insert the following article in the federal constitution:

1. The government will provide a basic income.

2. The basic income will allow the people to live in a dignified manner and participate in public life.

3. Legislation will determine the funding for the system and the actual amount of the basic income.

Supporters say giving everyone from the cradle to the grave an unconditional basic income to cover all essential needs would eradicate poverty and dependence on social welfare. It would allow people to choose a job they like, encourage training, creativity and volunteering. They believe it would free up more time for caring for children and elderly and infirm family members.

Put forward by an independent citizen group, the initiative doesn’t have much political backing. In parliament it was rejected by the centre-right majority and gathered little support, even among left-leaning parties. The House of Representatives voted it down by 157 to 19 with 16 abstentions. In the Senate its sole supporter was leftwing Social Democrat Anita Fetz.

"It is worthwhile to talk about this proposal, because it is an idea that could be a real solution, most likely in 20 or 30 years time, when the digitalisation of work will result in the loss of many jobs," says the Basel senator.

"It is a far-out idea that is not feasible," says Raymond Clottu, a conservative right Swiss People’s Party parliamentarian, pointing to the "enormous costs" it would bring.

The idea is to have an income by which all people could live in dignity. No specific amount has been set out; it would be up to the lawmakers to figure that out. But the promoters of the initiative have mentioned a monthly income of CHF2,500 ($2,600) for adults and CHF625 for minors.

"Based on population statistics from 2012, this means it would cost CHF208 billion a year to the country. This would come to about 35% of GDP. It is flabbergasting," says Clottu.

How it would work

Anyone who does not have a paid job would receive the unconditional basic income, and all paid work up to that amount would be replaced by this payment. To fund it, all earned income would be taxed to a maximum amount equal to the amount of the basic income. 

In practical terms, assuming a monthly basic income of CHF2,500, a person who has an income of CHF1,500 would receive another CHF1,000. Someone with CHF2,500 would not receive more. Someone earning CHF6,500 would be taxed on a net income of CHF4,000.

The same mechanism would be applied in the case of benefit payments from social welfare. Payments up to CHF2,500 would be replaced by the basic income, while anything over this amount would continue to be paid as a separate social welfare payment.

These arrangements would cover 88% of the funding requirements for a basic income. For the remaining 12%, other sources of funding would have to be found.

Nor does the intiative specify where the money would come from, so it would have to be worked out in legislation following a “yes” vote. According to the model suggested by the promoters, an unconditional basic income – known in some countries as a universal basic income – would be mainly funded from taxation on salaries and the transfer of social welfare benefits. For the remaining CHF25 billion or so, there would have to be more taxes or transfers within government.

"Finding CHF25 billion worth of additional taxes, the way things are now, seems impossible to me," says Clottu. One idea from the promoters would be to increase the current value added tax (VAT) of 8%. "This would mean purchasing power would go down and the country’s economy would be weakened," says Clottu.

"I too am against increasing VAT. But that is just one idea among many. Among the promoters, there are those who want a micro-tax on financial transactions. I think that would be the right way to go, as well as a tax on computers. Since the discussion is taking place in the context of the digitalisation of work, funding should be sought for it in the same area," Fetz believes.

Proactive approach

In any case, says Fetz, "it is a mistake to talk about funding now. The question is: what does society do if the traditional income gained from work is lacking? When automation and sophisticated computer programming have swallowed a lot of jobs in all fields, from the unskilled to the highly qualified, then we are going to need to find an answer.” So it is better to be proactive than to have to fix things after the fact, she says.

"This initiative isn’t proactive, it’s putting the cart before the horse,” notes Clottu. “In time we will have to examine how we can generate income, but in spite of pseudo-robotisation there will always be a need for the human being. Behind every computer there has to be a human being. There will be jobs that disappear, but new ones will appear. Being proactive means strengthening the links between training and industry. It is at the level of training that we should be aware and evolving to keep up with the needs of industry and technological developments."

One of the concerns from both from the left and the right is that the universal basic income calls into question the whole Swiss social security system.

But Fetz says: "It would not replace all social insurance schemes. Currently there are 13.  Reducing the number would be an opportunity to adapt the system to new challenges." She believes we cannot continue with a system based on the principle of full employment when major changes are on the horizon.

For Clottu, though, a basic income would "put at risk a system which is not perfect, but works well enough, and motivates people to work and get training. So we should try to improve it, consolidate it", not bring in a basic income which would burden wage-earners and businesses and "destroy the motivation to work".

What would you do?

Only 2% of Swiss would stop working if the government paid them a basic income of CHF2,500 per month; a further 8% would consider quitting work depending on the circumstances. That’s according to an opinion poll carried out on behalf of the promoters of the initiative, using a sample of 1,076 people.

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