Executive Summary of Report
This post contains the executive summary of the report ‘Renewing the Welfare State; The Right Mix of Ensuring Jobs, Income and Services‘. The report was written by the chair of the think tank of young economists that is part of the Future Markets Consultation.
Over the last year the welfare state has been at the core of public debates as the coronavirus pandemic revealed existing weaknesses and required additional support for people. One idea in particular, namely unconditional universal basic income, has gotten a lot of attention. Nevertheless, this report argues that this is not the most promising social policy option. While such policy would reduce poverty and inequality, and improve the bargaining power and freedom of workers, it would generate a troublesome paradox. On the one hand, it would require an significant increase in government taxes – of about 25% of GDP in Europe -, or alternatively, cuts in existing public services. And on the other hand, it would strengthen market individualism, as it would provide people with money they can consume or invest according to their preferences.
Strengthen social cohesion
Therefore, the report ‘Renewing the Welfare State; The Right Mix of Ensuring Jobs, Income and Services‘ argues that other, more targeted policies are preferable. But rather than advocating another ‘silver bullet solution’, this report argues that innovative policy combinations, in which individual policies strengthen and complement each other, are more desirable. More specifically, it argues that a combination of extended basic services, a job guarantee and benefits as rights seems most promising.
Similar to unconditional universal basic income, these policies help reduce poverty and inequality, and improve the bargaining power and freedom of citizens and workers. In contrast to basic income, they, however, do not lead to more market individualism. Instead they strengthen social cohesion, as they are based on the reciprocal principle of enabling everyone to contribute to and benefit from the common good.
Furthermore, these policies have some additional advantages. While it is unclear whether an unconditional universal basic income would enable people to effectively meet their needs through the market, public provision has proven to be effective in providing universal access to basic services. Similarly, while fiscal stimuli and other job programs have been effective in reducing involuntary unemployment, they have not been able to eliminate it. A job guarantee, on the other hand, would be able to do so, thus providing the otherwise unemployed not only with income, but also with regular activity, time structure, social contact, a sense of purpose, status and identity. Additionally, the policies suggested would improve economic productivity as they help build and maintain ‘human capital’.
The policies would also have important ecological implications as they would contribute to a ‘just transition’. A job guarantee would create ‘green’ jobs, but more importantly reduce the need for economic growth to create jobs. Additionally, extended public services would increase human well-being without increased pollution, showing that the two do not have to be connected.
And finally, while being ambitious, these policies would be fiscally feasible. Extended basic services are estimated to require additional public investment of about 4% of GDP. A job guarantee is estimated to cost 1 to 2% of GDP – although it could be budget neutral by decreasing other social costs and public expenses, including less punitive and restrictive benefits. The policy mix could be financed through (higher) taxes on (net) wealth, land, data, inheritance, unhealthy consumption, financial transactions and pollution as these would contribute to making the economy more stable, fair, and sustainable.