Swiss set to reject unconditional basic income plan

June 03, 2016 16:18
Polls show that most citizens would continue to work if the unconditional basic income plan is implemented. Photo: Bloomberg

On Sunday the people of Switzerland will vote in a referendum on a proposal to grant everyone in the country a no-strings-attached monthly payment of 2,500 Swiss francs (US$2,523).

Every citizen aged 18 years old and above will be eligible for the basic income regardless of whether or not they have an existing income.

However, the universal income plan is opposed by over 70 percent of the people, according to latest poll.

The basic income proposal was initiated against the backdrop of technological advancements in recent years.

Technological developments have helped reduce the cost of goods and services.

For developed economies like Switzerland, its national product is sufficient for all its citizens to live a comfortable life.

Meanwhile, the advancement of technology has led to the replacement of human workers by robots. It has become more difficult for people to find jobs.

This, in turn, has resulted in rising inequality in society and polarization between the rich and the poor. Most ordinary households are struggling while the rich are becoming richer.

Basic Income Switzerland (BIS), a group set up specifically to campaign for the initiative, said the government should guarantee people's livelihood so that they could enjoy economic security and be able to choose the job they want or pursue their dreams. 

Certainly, such utopian proposal requires a lot of funding. BIS estimates the government  would need 180 billion Swiss francs per year to provide the basic income for more than six million adult citizens.

The government has trillions in fiscal reserves and social security funds, as well as tax revenue to finance the proposal.

This sort of populist proposal should easily win public support. However, the latest polls show that 71 percent of the electorate would turn it down and only 26 percent were in favor.

The country's two political parties are against the initiative.

Switzerland has a system whereby referendums can be called if more than 100,000 eligible voters sign a petition calling for change.

The BIS has spent nearly three years to gather 120,000 signatures to push for a referendum on the proposal.

However, the initiative lacks solid political and public support right from the start.

One reason the people are opposed to the plan is that the proposed amount of 2,500 Swiss francs is far below the average income of 6,400 Swiss francs.

Currently, only 5 percent of all employees in the country earn less than 2,500 Swiss francs.

That means the amount is way below than the current monthly wage of over 90 percent of the populace.

The proposed income could only support their basic needs, and most people would need to adjust to a sharp decline in their living standards if they wanted to quit their jobs and live on the basic income.

The polls show that most citizens would continue to work if the unconditional basic income is implemented.

Also, the initiative is likely to cause considerable cutbacks in other government expenditures or tax rises in the long run.

Both the economy and the social security system would be hit if the proposal made it attractive to stay out of work.

As such, it’s quite sensible for most middle-class citizens in Switzerland to turn down the plan.

It can’t support their current living standards without them having to work, and instead it could lead to considerable tax increases in the future.

This article appeared in the Hong Kong Economic Journal on June 3.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist