End the welfare state -- by giving everyone a base income?

The concept of paying people to sit around has an upside, writes Tim Harford in the Financial Times. The idea was endorsed by Oxford’s Sir Tony Atkinson as well as (the now decease) Milton Friedman, who reasoned a stipend to every adult would serve as an alternative to the current welfare state. Governments pay money to certain people of working age, but often only on the condition that they are not working. Then, in an attempt to overcome the obvious problem that we’re paying people not to work, the government badgers them to get a job -- efforts that are frequently demeaning and bureaucratic without being particularly effective. A basic income goes to all, whether they work or not.

But how would this be paid for? In Switzerland, it will depend on whether people withdraw en masse from the labor pool. If most people keep working, such a basic income could replace all sorts of benefits, and would also presumably replace the personal allowance for income tax. Harford see that, in some ways, the size of the state would have to rise. Some tax, such as VAT, income tax, or both, would have to increase to collect more money. In other ways the size of the state would shrink, appealing to some conservatives. Friedman believed that with a reasonable basic income for all, the welfare state as we know it would wither.

Fred Hubleur argues...

The important thing is that this revenue is fixed for everyone without there being a requirement to work; that's right, it is income without employment. This might seem shocking. But at its heart it is an entirely defensible idea. On the one hand, we are fighting against poverty and insecurity, there will no longer be a need for social security to bolster other incomes, and dozens of different and unwieldy benefits. This unconditional income is equally good news for innovation and creativity. (…) We have also made a paradigm shift that dyed-in-the-wool capitalists might find alarming: the liberation of working man, returning him to his status as homo sapiens over that of homo travaillus (ed's note: Homo travaillus is a play on word to describe the working man) which holds such sway in our society.

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