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Basic income and international competitiveness

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A nation that replaces the minimum wage with a Basic Income should enjoy a strong advantage in international competitiveness for labour-intensive businesses (i.e. should help to import unskilled work). The UK's current combination of tax, benefits and minimum wage means that the cost of employing an unskilled UK worker is many times higher than the cost of employing an unskilled worker in the developing world.

All countries have people who need unskilled jobs

Much nonsense is talked by rich-world intellectuals about how the breadth and depth of education will improve so much that the vast majority of the population will be engaged in higher-skilled, better-paid jobs. This is unrealistic and callous towards the significant minority of people in their countries who, regardless of education, will always have a greater aptitude for manual than intellectual work. And it is patronizing to the developing world to imply that our people are fit for the intellectually-demanding jobs and theirs for the menial jobs, and to assume that they aren't already educating large numbers of their populace to be as capable of the "good" jobs as the products of our education system.

The damage done by high costs of employment

The effect of the institutional barriers under the current system has been to destroy many unskilled and semi-skilled jobs, and to encourage the use of immigrant labour for the remainder. The natives who would formerly have done those jobs find themselves unemployable, as the costs of employing them legitimately (taking account of all tax and benefit constraints and the minimum wage) are so much higher than the costs of employing immigrants with equal skills, lower standards of living, and greater flexibility. These natives naturally blame the people who take their jobs, rather than the system that causes the situation. The result is serious ethnic tension.

Basic Income allows unskilled workers to sustain quality of life at low cost

With a Basic Income + Flat Tax system, native unskilled workers should be able to compete on a more equal footing with immigrant labour, and with workers in other countries. Any pay they receive would be additional (after tax) to the Basic Income. Relatively low wages ought therefore to offer a level of disposable income for which a much higher nominal wage is required under the current system. As the cost (including taxes) of employment is broadly proportional to, but greater than the employee's wage, reductions in the nominal levels of unskilled wages should yield even greater benefits in terms of the gross cost to the employer, and therefore the cost of engaging in labour-intensive activities in this country. The result should be the gainful employment of many people who would otherwise not be employed.

Some personal contribution to household income and taxes is better than none

At low wages, there would be a net cost to society from the balance of the small amount of tax paid relative to the amount of Basic Income received, but that cost would not be as great as if these people did and earned nothing.



Dr. Radut Consulting