Guaranteed minimum income (GMI), also called minimum income (or mincome for short), is a social-welfare system that guarantees all citizens or families an income sufficient to live on, provided that certain eligibility conditions are met, typically: citizenship; a means test; and either availability to participate in the labor market, or willingness to perform community services.
The primary goal of a guaranteed minimum income is reduction of poverty. In circumstances when citizenship is the sole qualification, the program becomes a universal basic income system.
Elements
A system of guaranteed minimum income can consist of several elements, most notably:
- Calculation of the social minimum, usually below the minimum wage
- Social safety net that helps those without sufficient financial means survive at the social minimum through payments or a loan, generally conditional on availability for work, performance of community services, some kind of social contract, or commitment to a social integration trajectory
- State child support
- Student loan and grants
- State pensions for the elderly
- Disability pensions for those who physically can't work
Differences from basic income
Basic income means the provision of identical payments from a government to all of its citizens. Guaranteed minimum income is a system of payments (possibly only one) by a government to citizens who fail to meet one or more means tests. While most modern countries have some form of GMI, a basic income is rare.
History
Pre-modern antecedents
Persian monarch Cyrus the Great ( ca 590-ca 529 B.C.), whose government used a regulated minimum wage, also provided special rations to families when a child was born.
The Roman Republic and Empire offered the Cura Annonae, a regular distribution of free or subsidized grain or bread to poorer residents. The grain subsidy was first introduced by Gaius Gracchus in 123 B.C., then further institutionalized by Julius Caesar and Augustus Caesar.
The first Sunni Muslim Caliph Abu Bakr, who came to power in 632 C.E., introduced a guaranteed minimum standard of income, granting each man, woman and child ten dirhams annually. This was later increased to twenty dirhams.
Modern proposals
In 1795, American revolutionary Thomas Paine advocated a citizen's dividend to all United States citizens as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property" (Agrarian Justice, 1795).
French Emperor Napoleon Bonaparte echoed Paine's sentiments and commented that 'man is entitled by birthright to a share of the Earth's produce sufficient to fill the needs of his existence' (Herold, 1955).
The American economist Henry George advocated for a dividend paid to all citizens from the revenue generated by a land value tax.
In 1963, Robert Theobald published the book Free Men and Free Markets, in which he advocated a guaranteed minimum income (the origin of the modern version of the phrase).
In 1966, the Cloward–Piven strategy advocated "overloading" the US welfare system to force its collapse in the hopes that it would be replaced by "a guaranteed annual income and thus an end to poverty".
In his final book Where Do We Go from Here: Chaos or Community? (1967), Martin Luther King Jr. wrote
I am now convinced that the simplest approach will prove to be the most effective—the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.
— from the chapter titled "Where We Are Going"
In 1968, James Tobin, Paul Samuelson, John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements.
In 1969, President Richard Nixon's Family Assistance Plan would have paid a minimum income to poor families. The proposal by Nixon passed in the House but never made it out of committee in the Senate.
In 1973, Daniel Patrick Moynihan wrote The Politics of a Guaranteed Income, in which he advocated the guaranteed minimum income and discussed Richard Nixon's Guaranteed Annual Income (GAI) proposal.
In 1987, New Zealand's Labour Finance Minister Roger Douglas announced a Guaranteed Minimum Family Income Scheme to accompany a new flat tax. Both were quashed by then Prime Minister David Lange, who sacked Douglas.
In his 1994 "autobiographical dialog", classical liberal Friedrich Hayek stated: "I have always said that I am in favor of a minimum income for every person in the country".
In 2013, the Equal Life Foundation published the Living Income Guaranteed Proposal, illustrating a practical way to implement and fund a minimum guaranteed income.
In 2017, Harry A. Shamir (US) published the book Consumerism, or Capitalism Without Crises, in which the concept was promoted by another label, as a way to enable our civilization to survive in an era of automation and computerization and large scale unemployment. The book also innovates a method to fund the process, tapping into the underground economy and volunteerism.
Other modern advocates include Ayşe Buğra (Turkey), The Green Economics Institute (GEI), and Andrew Coyne (Canada).
Funding
Tax revenues would fund the majority of GMI proposals. As most GMI proposals seek to create an earnings floor close to or above poverty lines amongst all citizens, the fiscal burden would require equally broad tax sources, such as income taxes or VATs. To varying degrees, a GMI might be funded through the reduction or elimination of other social security programs, such as unemployment insurance.
Another approach for funding is to acknowledge that all modern economies use fiat money and thus taxation is not necessary for funding. However, the fact that there are no financial constraints does not mean other constraints, such as on real resources, do not exist. A likely outcome based on the economic theory known as Modern Monetary Theory would be a moderate increase in taxation to ensure the extra income would not cause demand-pull inflation. This hypothetical Chartalist approach can be seen in the implementation of quantitative easing programs where, in the United States, over three trillion dollars were created without requiring taxes.
Examples around the world
Brazil
Minimum income has been increasingly accepted by the Brazilian government. In 2004, President Lula da Silva signed into law a bill to establish a universal basic income. This law is primarily implemented through the Bolsa Família program. Under this program, poorer families receive a direct cash payment via a government issued debit card. Bolsa Família is a conditional cash transfer program, meaning that beneficiaries receive their aid if they accomplish certain actions. Families who receive the aid must put their children in school and participate in vaccination programs. If they do not meet these requirements, they are cut off from aid. The program has been criticised as vote-buying, trading productive individuals' earning for the votes of welfare recipients As of 2011, approximately 50 million people, or a quarter of Brazil's population, were participating in Bolsa Família.
Canada
Canada has experimented with minimum income trials. During the Mincome experiment in Manitoba in the 1970s, Mincome provided lower-income families with cash transfers to keep them out of poverty. The trial was eventually ended but this was due to budget shortfalls and a change in government.
The province of Ontario began a minimum income experiment in 2017. Approximately 4000 citizens began to receive a stipend based on their family situation and income. Recipients of this program could receive upwards of $10,000 per year. Government researchers used this pilot as a way of testing to see if a minimum income can help people meet their basic needs. On August 31, 2018, following a change in government, incoming Premier Doug Ford announced that the pilot would be cancelled at the end of the current fiscal year.
China
China's Minimum Livelihood Guarantee also called dibao, is a means-tested social assistance scheme introduced in 1993 and expanded to all Chinese cities in 1999.
Cyprus
In July 2013, the Cypriot government unveiled a plan to reform the welfare system in Cyprus and create a 'Guaranteed Minimum Income' for all citizens.
France
In 1988, France was one of the first countries to implement a minimum income, called the Revenu minimum d'insertion. In 2009, it was turned into Revenu de solidarité active (RSA), a new system that aimed to solve the poverty trap by providing low-wage workers a complementary income to encourage activity.
India
Modern independent India developed many means and livelihood tested cash transfer programs through Direct Benefit Transfer at both the federal and the state level. At the federal level, these include minimum income social pension programs such as National Social Assistance Scheme, guaranteed employment program like National Rural Employment Guarantee Act, 2005 or a disability aid like Deendayal Disabled Rehabilitation Scheme. At the state level, there can be additional minimum income programs, one such being "Laksmir Bhandar" run by the state of West Bengal that transfers a minimum aid to families without work in the state.
Saudi Arabia
Saudi Arabia has a Citizen’s Account Program which provides a basic income to registered citizens. In December 2017, immediately before the program began, more than 3.7 million households had registered, representing 13 million people, or more than half the population as of 2013, between one fifth and one third of Saudi residents are estimated to be non-citizens.
Spain
In Spain, the ingreso mínimo vital is an economic benefit guaranteed by the Social security in Spain in its modality no contributory. The IMV is defined as a "subjective right" and is intended to prevent poverty and social exclusion of people who live alone or integrated into a coexistence unit when they are in a situation of vulnerability due to lack of sufficient financial resources to cover their basic needs. The benefit, which is not fixed and varies depending on various factors, ranges between 462 and 1015 euros per month, is expected to cover 850,000 households (approximately 2.5 million people) and will cost the government 3 billion euros per year.
United States
No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.
The United States has multiple social programs that provide guaranteed minimum incomes for individuals meeting certain criteria such as assets or disability. For instance, Supplemental Security Income (SSI) is a United States government program that provides stipends to low-income people who are either aged (65 or older), blind, or disabled. SSI was created in 1974 to replace federal-state adult assistance programs that served the same purpose. Today the program provides benefits to approximately eight million Americans. Another such program is Social Security Disability Insurance (SSD or SSDI), a payroll tax-funded, federal insurance program. It is managed by the Social Security Administration and is designed to provide income supplements to people who are restricted in their ability to work because of a disability, usually a physical disability. SSD can be supplied on either a temporary or permanent basis, usually directly correlated to whether the person's disability is temporary or permanent.
An early guaranteed minimum income program in the U.S. was the Aid to Families with Dependent Children (AFDC), established by the Social Security Act. Where previously the responsibility to assist needy children lay in the hands of the states, AFDC transferred that authority to the federal government. Over time, the AFDC was often criticized for creating disincentives to work, leading to many arguing for its replacement. In the 1970s, President Richard M. Nixon proposed the Family Assistance Program (FAP), which would replace the AFDC. FAP was intended to fix many of the problems of the AFDC, particularly the anti-work structure. Presidential nominee George McGovern also proposed a minimum income—in the form of a Universal Tax Credit. Ultimately, neither of these programs was implemented. Throughout the decade, many other experimental minimum income programs were carried out in cities throughout the country, such as the Seattle-Denver Income Maintenance Experiments. In 1996, under President Bill Clinton, the AFDC was replaced with the Temporary Assistance for Needy Families program. This would block grant funds to the states to allow them to decide how aid would be distributed.
Another guaranteed minimum income program in the U.S. is the Earned Income Tax Credit. This is a refundable tax credit that gives poorer families cash assistance every year. The EITC avoids the welfare trap by subsidizing income, rather than replacing it.
