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For official information on the 2020 Covid-19 pandemic see: NZ Government Official Website.       https://covid19.govt.nz/ 
& the  Ministry of Health website: https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-novel-coronavirus
 
 
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Pandemics​
and the need for
Basic Income

"If we ever needed proof that a universal basic income was a good idea
and tax cuts a bad idea, I think we’ve found it." 
 
 
 

Dr Siouxsie Wiles, responding to the Covid-19 pandemic on March 13, 2020.



"From a human perspective, I do not want my government to put the people of NZ at risk.
The economy doesn't matter."


Shamubeel Eaqub, economist, Sunday, April 19, 2020 


Covid-19 trends in most countries are available here.
 

This page outlines what is likely to happen during a global pandemic, why a Basic Income is needed, the action required to introduce a Basic Income, and how you can help.

With the Covid-19 pandemic, Action is needed now to introduce a Basic Income. Your help is needed. Read this page and scroll down to "Action you can take now" to see what you can do to help.

This page will be updated regularly so check back for the latest information.

Summary. 

 

  • A global pandemic is very likely to result in a significant global economic downturn, a collapsing world economy, business failures, and rapidly escalating unemployment.
     

  • Apart from the illness itself, there will be very severe financial impacts for many people.
     

  • Paying a Basic Income reduces the financial impacts of the economic decline on individuals, helps support businesses, helps stabilise the economy, reduces economic collapse, and helps economies recover faster when the pandemic passes.
     

  • There is an urgent need for all governments to introduce Basic Income in order to reduce personal hardship and overcome the economic collapse resulting from a global pandemic. 

On this page:

 

  • What happens when a new and dangerous illness becomes a pandemic?

  • Will a Basic Income help?

  • Other suggestions for boosting an economy.

  • Where will the money come from?

  • Conclusion. 

  • What action is required?

  • Action that you can take now.

  • Support for a Basic Income during a pandemic.

  • Articles in the media​ and broadcasts concerning Covid-19 and Basic Income.

  Scroll down to read.

What happens when a new and dangerous illness becomes a pandemic?

 

  • When a new and dangerous virus or other illness emerges and begins to spread rapidly, travel restrictions, both international and local, will be imposed. Many people will restrict their own travel and spend more time at home. Tourism will reduce and jobs will be lost in the tourist and travel industries.
     
  • People will avoid larger gatherings and events due to fear of catching the illness. Governments may ban meetings of more than a very small number of people. The entertainment industry will be hit hard as people avoid crowds, or when mass gatherings are banned, further reducing economic activity and increasing job losses.
     
  • Restaurants, cafes, and bars will be hit hard and lay off staff. All public meetings including sports activities, churches, clubs and societies will be curtailed. 
     
  • Sales and the price of essential goods are likely to rise initially as people stock up and there may be temporary shortages and panic buying. Supermarkets will stop offering specials on essential goods. After an initial surge in demand and prices,  sales and prices are likely to fall to previous levels as demand stabilises.
     
  • Sales of non-essential goods will fall as people attempt to save money or have insufficient income due to job losses. This will cause shops that sell such goods to reduce staff. Factory production of non-essential goods will reduce as people are impacted by the virus and travel restrictions. As demand falls, staff will be laid off. Overall economic activity will slow.
     
  • If the spread of the illness escalates a total lockdown may be imposed with all people, except those in essential employment or industries, restricted to their homes, except when purchasing food and essentials. Non-essential businesses will close. Without government support, many businesses will fail. All schools and universities will be closed.
     
  • With the future uncertain and despite interest rates falling, perhaps as low as zero, companies will be reluctant to increase debt and will begin to reduce staff.
     
  • The result is a slowing, contracting, or collapsing economy with many people losing their employment. As the impact of the illness escalates at an increasing rate, the rate of collapse will increase. 
     
  • Without some form of financial assistance, severe hardship and unemployment will occur for many people. Many people will find that they are asked to take annual leave but may find that they have insufficient days to cover the period that their place of employment is closed or in lockdown. Others will have insufficient sick leave entitlements. Others will have insufficient income to be able to pay for both food and to pay their mortgages or rent. Without assistance, some people may default on their mortgages or rent payments and lose their accommodation. Severe poverty will occur and the economy will continue to spiral downward.
     
  • With the present welfare system, people who suddenly lose employment will find that there is a standdown period before they are eligible for support such as jobseeker support. With jobseeker support, they are required to attend weekly interviews to prove that they are seeking employment at a time when available jobs are rapidly declining. There will be a shortage of staff to carry out the required interviews.
     
  • Governments welfare organisations may be forced to employ extra staff to conduct pointless interviews and to administer an unproductive and needlessly cumbersome welfare system. Consequently, there will be a shift in employment from the production of useful goods and services to non-productive government services coupled with a need to increase taxes to pay for the extra government services. Living standards will fall significantly as a result. 
     
  • Those people who retain employment but are required to go into self-isolation due to the exposure to the illness or because they become ill, or because a lockdown is imposed, but cannot work from home may find that they have insufficient sick leave or annual leave to do so for the required time.
     
  • Self-employed people who cannot work from home will be unable to earn a living while they are required to be in self-isolation or because of a lockdown.
     
  • During a lockdown stress levels will rise and incidents of domestic violence will increase due to the enforced isolation or income shortages. There are likely to be increased numbers of women and children fleeing homes without any financial support.
     
  • Government tax revenues will fall as economic activity decreases but the demand for government payments, such as jobseeker support and other support packages, such as support for businesses, rises rapidly. 
     
  • Governments are likely to react to a contracting economy with measures intended to boost the money supply, to ensure that businesses do not fail, and to ensure that people have money for essential goods and services.
Will a Basic Income help?
 
  • Receiving a Basic Income ensures that those who suddenly lose their jobs still have some income available from the Basic Income that they can use immediately to buy essential goods and services and pay for accommodation.
     
  • People who remain in employment but cannot attend work or work from home and must take leave will have some income from Basic Income when their sick leave and annual leave entitlements are exhausted.
     
  • With a Basic Income, the self-employed will have some income when they are unable to work due to self-isolation or a lockdown.
     
  • Because of the Basic Income that they receive, sick people and those required to be in self-isolation have less need not go to work and endanger others.
     
  • A Basic Income will reduce domestic tensions and give those fleeing their homes due to domestic violence associated with an enforced lockdown some immediately available financial support.
     
  • People spending a Basic Income will help support businesses, including small and local business, and this will return Goods and Services Tax (GST) and other tax revenue to the government. A Basic Income coupled with an appropriate tax scheme such as a 33% uniform tax is an efficient way for a government to put money into the economy while ensuring that the money is targeted to those with low incomes and the greatest need.
     
  • During an economic downturn, paying money as a Basic Income directly to people is a more efficient way of ensuring that those in need have money for essentials than attempting to subsidise all businesses and hoping that the money will somehow trickle down to those in need. When people have no money it will be necessary to subsidise businesses for a very long time, including inefficient and non-essential businesses. Alternatively, when people have some money to spend through a Basic Income, they will spend the money where it is most needed and support those businesses that should survive. 
     
  • During the recovery from economic collapse, a Basic Income ensures that those who need the money most will have money to spend on essential goods and services and this will support essential businesses. With a Basic Income, each individual decides how to spend the money and this is more efficient than some government agency attempting to decide what is essential and how they should spend it. Basic Income trials show that some people receiving a Basic Income will see a need and start new businesses.  
     
  • Basic Income payments not only helps reduce hardship for individuals in need but slows the rate of economic collapse and increases the rate of economic recovery when the pandemic passes. This is economic stabilisation.
     
  • Following a recession, spending of a Basic Income by those in need boosts local economies, creating local employment, increasing the incomes and profits of local businesses, increasing GST and income and profit taxes and further boosting government tax revenues through an increase in the velocity of money.
     
  • It is important to note that a Basic Income of this nature does not prevent the payment of additional supplements such as accommodation supplements and supplements for invalids and those with special needs to ensure that those with very low incomes continue to receive the same or improved income levels.
     
Other Suggestions for boosting an economy.
Pandemics can lead to a recession or to the collapse of a national or the world economy. Governments will act to protect and stimulate the economy. Basic Income provides some answers but does not necessarily provide all the answers and other measures may be adopted in addition to a Basic Income. A number of alternatives to Basic Income are often suggested as ways to boost the economy during an economic downturn. However, when compared to Basic Income, Basic Income works better at relieving hardship and boosting economies than most alternatives and the alternatives may sometimes be counter-productive.

Some of the more common suggestions are: 
 
  • Changes to the current welfare system
  • Negative Income tax
  • One-off payments to all citizens.  
  • Helicopter Money
  • Tax cuts.
  • Infrastructure projects.  
  • Quantitative easing
  • Reducing Interest Rates and Negative Interest Rates
  • Subsidising small businesses
  • Tax relief and refunds for small businesses
  • Increasing Student Loan limits.  
     
For ​discussion on each of these alternatives and why a Basic Income works better see our Other alternatives to Basic Income page.
 
Where will the money come from?
  • ​In the beginning, governments create and spend money. Money is also created by commercial banks when they lend money and more through the use of credit and credit cards. 
     
  • During a severe economic downturn resulting from a pandemic, the amount of money in circulation is likely to contract, economic activity slow, and unemployment rise. To boost the economy and ensure that employment rates are maintained, governments need to spend more money rather than less. This ensures that the amount of money in circulation is maintained and that people have some income for necessities. New money will be created.
     
  • When extra money is created, the best way to distribute the money equitably to ensure the wellbeing of all citizens is by paying the money out as a Basic Income.
     
  • To understand more about how money is created and why it should be distributed as a Basic Income read the page: Where does money come from?
Conclusion.
 ​
  • A Basic Income not only supports people in need and businesses through a difficult time, but it is also a very efficient way to stabilise the economy and help the economy recover from the downturn induced by a global pandemic. It will do this more efficiently and with fewer administrative costs than any form of targeted assistance or assistance to businesses.
 
What action is required? 
 
  • Apart from other actions that a government may take to support the economy, there is a need for a Basic Income. 
     
  • This section outlines action that governments need to take to implement a Basic Income. A step by step process is outlined to implement a Basic Income progressively with those most in need first but governments could take any number of steps simultaneously.
     
  • As the economic downturn progresses, the number of people losing employment will increase rapidly if not exponentially.
     
  • Work and Income New Zealand (WINZ) staff registering people for jobseeker support are likely to be overwhelmed. The increase in workload will coincide with a loss of staff members as they are impacted by the illness and further complicated by the need for people to maintain physical distances between them or remain at home during a lockdown.
     
  • The present jobseeker support system requires a lot of administration to implement and monitor. The system has long standdown periods before payments begin, low thresholds before abatement begins, and punitively high abatement rates when people begin to earn income that start with an effective marginal tax rate (EMT) of 80.5% - 70% abatement plus 10.5% tax. The system was designed to try and force people into full-time employment and was not designed to cope with an economic downturn resulting from a pandemic.
     
  •  There is a need to introduce an alternative version of the jobseeker support, an emergency benefit. As a first step, the payment should be made available immediately, without a standdown period, to all those who have lost their employment due to the pandemic or resulting economic downturn. Rather than apply abatements, those who receive this emergency payment should be taxed on all other income at the current maximum tax rate of 33%. This will allow them to take up part-time employment or job-sharing once a lockdown is lifted. Taking up this emergency benefit should be on a voluntary basis. Only those who want to receive the new benefit need apply.
     
  • In a second stage, those already on jobseeker support may be allowed to transition to the new emergency benefit with a fixed 33% tax rate on all other income. There is no point in persisting with the dubious belief that those on jobseeker support can be forced into full-time employment or persist with costly regular interviews and punitively high abatement rates when the total number of full-time employment positions are in rapid decline or people are prevented from working due to a lockdown.
     
  • For the third stage, the emergency benefit scheme is extended to all those in employment but on incomes below $70,000 with the proviso that they change to the uniform 33% tax rate. This will result in net, after-tax, increases in income for all those in this group. With a Basic Income and 33% uniform tax, the increase in net income will vary and reduce progressively as other income increases toward the $70,000 mark.
     
  • In the final stage, the emergency benefit may be extended to all members of the population.
     
  • With a Basic Income and a uniform tax of 33%, those earning over $70,000 will receive a significantly smaller net increase in income after-tax than those earning less than $70,000. They will also receive a smaller increase than they would if they were on a progressive tax. The benefit is thus targeted to those on lower incomes, and this targeting is better with a uniform tax of 33% than it would be with a progressive tax. Those on lower incomes will spend the money more rapidly than those on higher incomes and thus enhance government tax revenues.  See Tax and Basic Income and "Velocity of money" on the FAQ page.
     
  • This emergency benefit is now a Basic Income, available for all. It need not be called a Basic Income, it might be called the New Zealand Dividend or one of several other names that have been suggested. However, as a Basic Income, it will ensure that those most in need have some income while boosting and stabilising the economy and ensuring that government tax revenues are enhanced.
     
  • Again, it is important to note that a Basic Income of this nature, which is a small minimal payment, does not prevent the payment of additional supplements such as accommodation supplements and supplements for invalids and those with special needs to ensure that all people on the lowest incomes will still receive the same or improved levels of income.
Action that you can take now. 
 
  • Write in your own words to your MP and ask your MP to support the introduction of a fair Basic Income to help overcome personal hardship problems and problems in the economy caused by the current pandemic, and to promote economic recovery when the pandemic has passed. You may also write to other senior politicians including the prime minister, the minister of finance, the minister of social development, leaders of political parties, other senior politicians, or other politicians who may be interested.

    A fair Basic Income allows supplementary payments to be paid as or when necessary to those with special needs and the Basic Income should be paid with appropriate tax adjustments to ensure that those on high incomes do not receive unnecessary and unneeded increases in income.

    Contact details for MPs are available here.

     
  • The combination of a Basic Income with a uniform tax ensures that everyone will receive some additional income from a Basic Income with the greatest increases in the low-income bracket. Appropriate tax adjustments will ensure that the Basic Income is targeted to those most in need while minimising the overall cost of the scheme. A uniform tax of 33% or a little more on all other income is considered an appropriate tax adjustment. Those who apply for and receive a Basic Income will have all their other income taxed at no less than 33%. A uniform tax rate of less than 33% is not recommended as this will give a tax cut to those on high incomes and make a Basic Income more difficult to finance in the long term.

    We do not ask for a Universal Basic Income (UBI) as this is often perceived as a system where all people will receive exactly the same amount after tax with no exceptions, regardless of need, and with no supplementary payments for those with special needs. This means that with a smaller UBI, those with special needs will receive less income than they do at present and increases in hardship will result. Alternatively, if the UBI is large enough to cover the additional costs associated with special needs, the overall cost of the UBI increases significantly because those without special needs will receive the same amount. As a consequence, the element of fairness is also removed as those with special needs and no other income will not receive higher incomes than those without special needs and no other income.

    Contact details for MPs are available here.

     
  • Sign a petition. ​You can show support for a Basic Income by signing a petition. See links in the section below.
Support for a Basic Income during a Pandemic. 
  Click on a link below to read an article or to hear a broadcast.
   Articles in the media​ and broadcasts concerning Covid-19 and Basic Income:
 
Click on a title or underlined link to read the articles. New articles are added at regular intervals, including some articles that are less recent, so check the list carefully for articles that you may not have read.
200321. Last revision 28 May 2020.

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