A Universal Basic Income may be a good idea – but we will still need social security that works
Strong arguments, both philosophical and practical
, can be made for incorporating a UBI into our tax-benefit system. But if our objectives include social security –
ensuring an adequate minimum living standard for all and minimising poverty – then we will still need an effective
social assistance system sitting alongside it. We don’t need welfare that is run the way it is at present – but we do
need welfare and will continue to do so whatever the ‘future of work’ holds. Supporters of the UBI idea should not see
this as a failure to grasp the full potential of a UBI, or as an argument against having one; it is simply that the
utopian, ‘one ring to rule them all’ versions of the UBI cannot realistically be expected to achieve the multiple goals
some claim for them. In particular, they risk doing relatively little to improve poverty, especially among sole parent
The reason for this is the huge variation in different households’ needs depending on family structure, number of
children, accommodation and other costs. Picture this variation as an uneven city skyline with buildings of different
heights. New Zealand governments have spent 30 years attempting to save money by tightly targeting the level of
assistance to exactly match the height of each building. The result is a high rate of poverty, particularly among
beneficiaries, poverty traps that make it hard for people to improve their circumstances, increasing numbers missing out
entirely and complex mess of assistance measures that very few can understand, let alone fully access.
However, a UBI that would do away with all that with a single instrument and adequately meet basic needs is the
equivalent of providing everyone with a level of assistance that matches the height of the tallest buildings. A UBI set
to the height of the tallest buildings would give too much to many, therefore be too expensive, and risk undermining
In this respect, Gareth Morgan and Susan Guthrie’s book, The Big Kahuna and its associated media publicity did a huge disservice to the New Zealand UBI debate. They put forward a world where
there was no need for any welfare benefits, or even for WINZ itself. Indeed, their proposal was partly funded by savings
from abolishing WINZ. Unfortunately their numbers just don’t stack up – at least, not if you care about the impact on
poverty and child poverty. To give one example, the most generous version of Morgan and Guthrie’s scheme (a UBI of
$11,000 per adult and $4,000 per child) would have resulted in a sole parent beneficiary with one child and no other
income receiving $15,000pa. Even now, that family, if living in one of the main urban areas and getting full
Accommodation Supplement, would receive $26,900 (and up to $1,820 more if paying higher rent in inner-city Auckland or
the North Shore). Morgan and Guthrie put up a proposal that would have seen many of sole parent beneficiaries – as well
as a considerable number of superannuitants and people with disabilities – worse off. Their suggested solutions to the
problems their proposal creates for sole parents families (buried in Chapter 9) amounted to either privatising or
undermining social security. These included making their ‘unconditional’ basic income conditional on parents taking out
private life insurance; compulsorily docking the basic minimum for a non-custodial parent even though it was set as the
minimum one person should have to live on; and suggesting that sole parents and others who cannot afford the rent should
simply find cheaper accommodation. Their line is drawn across the skyline part way up; and the rest is just explained
The issue of adequacy is highlighted by Table 1 below. It shows the level of income different household types need to
just meet two poverty measures. These are the 60 percent and 50 percent of current median relative poverty lines.
I would argue that any reform of social security should have as one of its guiding principles that all people, whatever
their circumstances, have an income that at least meets the lower 50 percent relative poverty threshold, or its
equivalent after housing costs have been paid. Against these two poverty measures, Table One shows the level of income
each family would receive under three possible UBI scenarios and from current benefit entitlements, on the assumption of
full receipt of entitlements including Accommodation Supplement at the maximum rate for someone living in one of the
main urban areas. (The amount would be more in inner-Auckland or the North Shore and less in rural areas. While not all
beneficiaries receive the maximum AS, a substantial proportion do and, indeed, a growing number also qualify for
Temporary Additional Supplement to help with high rent costs.)
Several points come through from the table. First, it would not be too difficult to construct a UBI that does as well by
couples, with or without children, as our current welfare system does. Note though, that unless they have other income,
these household types are and would continue to be well below the lower 50 percent poverty line.
Second, single adults, except in the case of multiple singles living together and sharing costs, would be below the
current level of assistance (depending on their housing costs) and considerably below the poverty lines.
Third, sole parent households would fare particularly poorly, compared to both current assistance and poverty measures.
Simply increasing the rate of the UBI could of course solve the adequacy problem for single people and sole parents.
Doubling it to $400 per week ($20,800pa) would bring most sole parent households up to or above the 50 percent of median
income poverty line. Perhaps a case can be made for a UBI set at around this level – after all the single rate of
National Superannuation is presently about $18,500pa – but it would be dramatically more expensive and that case would
have to take into account the disadvantages of higher taxes, and that many with lower housing costs would receive more
than they need for as a basic income while others would still require additional assistance to meet essential needs.
Even then, the end result is a level of income not much above the current amounts for sole parent households with no
Once we accept that welfare assistance will need to continue to be part of the system, it is possible to see the
directions real tax-welfare reform, potentially including a UBI, could go. For example, in a Briefing Paper
published last week, Keith Rankin – easily New Zealand’s foremost expert on UBIs – pointed out that our current
graduated tax scale pays an effective benefit of around $175 per week to anyone earning over $70,000 (where the top 33
percent rate cuts in) – so, if every dollar of income was taxed at 33 percent but there was also a $175pw UBI all those
with incomes over $70,000pa would be unaffected. If the first $175pw of a beneficiary’s benefit income was renamed a
UBI, and they had no other earnings they too would be neither better nor worse off.
If this base was then combined with a) decent payments in respect of children, irrespective of their parents’ situation
and b) a reformed housing benefit system that recognised all individuals’ housing costs (including children’s) then it
may be possible to develop a 21st Century welfare system that minimised poverty and provided greater uncertainty in the
face of fluctuating weekly earnings. It may also be possible to include within such a system the extension of ACC-like
weekly compensation to those unable to earn due to illness and disability, thereby doing away with another of the
inequitable anomalies in our current system.
Yes, we would still need income-testing, and probably asset-testing, for supplementary and housing assistance. We may or
may not have work-testing in certain situations, and WINZ or an equivalent would still exist in some form, but there is
the potential for a fairer system, that provides greater protection from poverty, greater certainty and which, like the
income tax, is based on the individual and so avoids the current out-dated relationship-status testing
Our tax-benefit and social security system urgently needs radical reform. The current system is inefficient in its
operation and ineffective in its outcomes, leaving many people, including children, in poverty. At the moment is also
being administered in a way that is often stigmatising and disrespectful to many when they need to use it. A UBI could
well be a key part of a much better system. But it will need to be part of a package – a package that meets the
fundamental goals of social security which is capable of recognising the range of needs people in different
circumstances have at different times of their lives.
The available after-housing-cost measures reported in Perry 2015
are based on deducting a 25 percent allowance from the BHC threshold, rather than on actual housing costs.
This paper was first published on the Briefing Papers site under a Creative Commons License. The original version is
available at this link: http://briefingpapers.co.nz/a-universal-basic-income-may-be-a-good-idea-but-we-will-still-need-social-security-that-works/