Guaranteed basic income for all?

By Fiona Gao and Rebecca Jeup, VISCHER
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What would you do if your income were taken care of? With this slogan recently spread across an 8,000-square-metre poster on Genevas Plainpalais Square, awareness was raised for the vote on a guaranteed basic income by its proponents. While the proposal did receive a fair amount of attention, Switzerlands voters clearly rejected it when it was put on the ballot in early June this year.

FIONA GAO Associate, China Desk VISCHER
FIONA GAO
Associate, China Desk
VISCHER

The proposal introduced the idea of a guaranteed income for all Swiss residents, no strings attached. This would mean that every resident of Switzerland would receive a basic income, whether or not they are employed and regardless of their age. The guaranteed income was intended to enable a life of dignity and support the ability to participate in public and cultural events without one’s financial security being solely dependent on employment.

Although the exact amount of the proposed income was not determined in the initiative itself, an untaxed monthly income of CHF2,500 (US$2,550) for each adult and CHF625 for each child under 18 was suggested as a basis for discussion.

The initiative was proposed by a dedicated committee of artists, writers and intellectuals. They made use of Switzerland’s direct democracy system, allowing any citizen to bring an issue to a vote by collecting 100,000 legitimate signatures on a petition. A majority vote on the adoption of the initiative would have triggered a long-term democratic process in which the Swiss government would be mandated to realize the concept of a guaranteed income and pass the necessary legislation.

The initiative committee’s intention was to encourage a discussion about fundamental questions and coherences of the Swiss social system. Their premise was that, with a guaranteed income, people would enjoy greater freedom in determining their lifestyle. In the opinion of the proponents, there would be an increase in people’s commitment and dedication to charity or care work.

It is difficult to predict to what extent the economy would be affected by the introduction of such a guaranteed income. Yet, initiators of the proposal were convinced that most people would remain employed due to the motivation of earning a salary as well as personal value and meaning beyond the amount provided by the guaranteed income. “It would lead to a more motivated workforce and a more humanized, stable and productive economy,” said Che Wagner, the initiative’s co-organizer and campaign manager. According to the initiators, a guaranteed income would further promote innovation, which would support increased productivity, keeping the Swiss economy at a competitive level in the global market.

The Swiss Federal Council, as well as most political parties, urged voters to reject the initiative. The Federal Council stated, in an official notice, that the introduction of a guaranteed basic income would “alter the successful economic and sociopolitical fundamentals of the country in such a profound way that it will result in an unpredictable risk concerning the solidarity and economic prosperity of the country”.

The initiative committee suggested the funds be arranged mainly through the transfer of earned income and rearrangements of social security benefits. The Swiss Federal Council, however, warned that it would require raising an additional CHF25 billion each year through spending cuts or tax increases in order to provide a guaranteed income for every resident.

Apart from the obscurity of the funding, opponents of the initiative feared significant changes in the job market. For certain people it would not be financially worthwhile to stay employed if they received a monthly basic income. Even those earning a higher income might feel more negatively towards their employment considering the possibility of a heavier tax burden.

Opponents of the initiative were reasonably concerned that those remaining employed would ultimately have to watch their pay go into the pockets of those being able, but deciding not, to be employed.

The initiative left the question of the impact on the social system unanswered. According to the initiators, the social benefits would partly be replaced by the guaranteed income. However, in many cases, social benefits exceed the minimal amount that would be guaranteed by a basic income. Further, social security institutions do not simply provide financial aid, but also individual guidance and mental support for people in need. Providing a basic income for everybody might bear the risk of making social security institutions redundant.

REBECCA JEUP Trainee Lawyer Corporate M&A Department VISCHER
REBECCA JEUP
Trainee Lawyer
Corporate M&A Department
VISCHER

On 5 June 2016, Swiss voters rejected the initiative by an overwhelming majority of 78%. Reacting to the results, Swiss Federal Council member Alain Berset stated that the outcome “demonstrates that voters are satisfied with the way our economy functions and do not think that it needs to be revolutionized”.

Although the clear denial of the proposal for a guaranteed basic income shows that the majority of Switzerland is not ready, the initiators have succeeded by at least launching a fundamental discussion about the utopian idea.

Although strongly rejected by Swiss voters, the idea of a basic income is not new to Europe, and it will not be the last time it is brought before local governments. In January 2017, the Dutch city of Utrecht will start a pilot project following the same idea as that of the Swiss initiative committee. Also, the Finland government is considering a similar trial for low-income groups.

Fiona Gao is an associate with VISCHER’s China Desk, and Rebecca Jeup is a trainee lawyer in VISCHER’s corporate M&A department

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