As Finland, the new “sick man of Europe”, is on the verge of conducting the most methodologically rigorous and comprehensive test of basic income to date next year, we look at Switzerland, one of the world’s wealthiest countries, which will hold a vote in 2016 on whether to implement a basic income of 2,500 francs per month (about $2,800) for all citizens – whether they work or not.
Although the parliament in Switzerland voted strongly against a motion for a basic income in September, the discussion on basic income as a constitutional right has started a rare debate. Can Switzerland afford to pay its eight million inhabitants a universal basic income (UBI)? Is UBI fairer? Is it a policy that would make welfare payments obsolete? Would it save democracy or breed laziness? What if the right is abused?
Although, the debate about basic income in Switzerland began in the 1980s, the petition calling for a referendum on basic income as a constitutional right was started in April 2012. On October 4 2013, the Basic Income Initiative submitted 126,000 signatures in favor their proposal – meaning a referendum, to ensure that no Swiss ever had to live below the poverty line again, had to be held. Supporters of the initiative celebrated by dumping eight million five-cent coins – one for each citizen – outside the Swiss parliament.
Basic Income Earth Network – Switzerland (BEIN) claims neither employment nor capital income, or current social benefits can ensure the existence of everyone as defined in Article 25 of the Universal Declaration of Human Rights. The proposal is, in part, the brainchild of a German-born visual artist-turned-activist Enno Schmidt who believes basic income has an historical dimension akin to “the advent of democracy, the abolition of slavery, the introduction of human rights or the Christianization of Europe by Irish monks”.
“In Europe and the US, democracy is being dismantled. People are deprived of their rights. There is a growing oligarchy. An unconditional basic income gives democracy a fresh breeze, refreshes human rights and empowers people. In the wage-depending [economy], a residual of the mentality of slavery lives on. I sell my lifetime for a certain time; in return, I have free time. That has nothing to do with work and the meaning of work but with disciplining and power over others,” he told The Irish Times.
According to Bloomberg, unease about income inequality and concerns about out-of-control capitalism are rising in Switzerland. Between 1996 and 2010, Swiss trade unions say the top 1% saw their incomes rise by 39% while the incomes of the bottom earners rose less than 10%. Switzerland is without a minimum wage law and the country’s top 1% lay claim to over a third of the nation’s wealth. Swiss citizens are also upset with the rising disparity in compensation levels between company executives and their least paid employees. In mid-2015, Switzerland had the highest average wealth per adult, at $567,100. At the same time, wealth distribution of Switzerland has the high Gini coefficient of 0.8, indicating unequal distribution. The median wealth of a Swiss adult is five times lower than the average, at $107,600. Growing wealth disparity in the country has led to a referendum on UBI, which supporters of UBI believe could serve to narrow the gap.
Why Say No To UBI?
On September 23, the Swiss Parliament voted for a motion calling on the Swiss people to reject the Popular Initiative for Unconditional Basic Income. In a statement justifying its opposition, the Federal Council alleged many shortcomings of UBI, including: many low-paid jobs would probably disappear or be transferred abroad; women would be forced back into the housework and care work; taxes would rise considerably to finance the basic income and further weaken the incentive to work; the amount proposed is too large and cannot be financed; it contradicts the principle of subsidiarity; and that theexisting social system is sufficient to enable each citizen live a life in dignity.
Basic income was opposed by all political groups, but the harshest critics came from the Centre and Right-wing parties. Sebastian Frehner described the initiative as “the most dangerous and harmful initiative that has ever been submitted”, mentioning the risks of immigration, disincentive to work, and that the basic income proposed would not be financeable anyway.
The Liberal party spokesman Daniel Stolz described the initiative as “intellectually stimulating” but that it is also a “cocked hand grenade that threatens to tear the whole system to pieces”. His party colleague Ausserrhoden Andrea Caroni spoke of basic income as a “bomb in the heart of our society and our economy”.
Jean Christophe Schwaab, Socialist National Councilor, called the proposal a decoy that could have disastrous consequences on wages, working conditions, equal opportunities and social insurance.
“As these small amounts [2,500 francs] are not enough to achieve the first objective of the initiative, namely to ensure decent living conditions, their beneficiaries will be obliged to work anyway, despite the basic income. The pressure to accept any job does not disappear. Worse, basic income will encourage employers to drastically lower wages, arguing that the basic income is already guaranteed. Beneficiaries of basic income will not therefore be freed from “the obligation to make a living” and they will have to settle for lower wages. If wages fall because of basic income, the value of work will fall too.”
Schmidt denies that UBI could provide a major disincentive to working at all, saying the 2,500 francs a month is scarcely enough to survive on, and that anyway a society in which people work only because they have to have money is “no better than slavery”.
He told The New York Times that the basic income would provide some dignity and security to the poor, and would make Switzerland’s workers feel empowered to work the way they wanted to, rather than the way they had to just to get by.
Daniel Straub, co-founder of Basic Income Initiative, told True Activist why the change is so needed.“Imagine you are being born and society tells you, Welcome, you will be cared for, and asks you what you want to do with your life, what is your calling? Imagine that feeling, that’s a whole different atmosphere.”
The Big Q: Funding
While the country is debating whether it needs a UBI or not, there is little debate about whether Switzerland could afford it. Does it mean the measure would be doable?
A UBI of 2,500 francs/month for an adult and 625 francs/month for a child – 200 billion per year – would drain a third of Switzerland’s GDP. But BEIN calculates the government won’t have to fund the entire volume of UBI, because it’s essentially the same money, just spent otherwise. Though, no funding mechanism has been decided yet, if the proposal were to succeed, money would most likely come by cutting existing social services and increasing taxes on corporations and high-income individuals.
The Road Ahead
Plenty of thinkers argue that universal basic income would mean fewer productive people; therefore it certainly will not work in a country like Switzerland. Since basic income involves some degree of wealth distribution from the rich to the poor, Switzerland’s rich are likely to resist the radical change. Income tax would not necessarily rise, but value added tax could rise to 20% or even 30%; resulting in reduced consumer spending and plummeting retail sales. A UBI would make people less dependent on their jobs, giving them more leverage in negotiating wages; a negative for businesses, who would see their labor costs rise.
Despite the fear and negative vote, the supporters believe the debate marks progress in the movement for a basic income in Switzerland. “[My vision is] To get a good referendum result next year. I’d like the majority. But also more than 30% is a success. So when we go into the next round, basic income is taken really serious in Switzerland,” Schmidt noted.