Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694232719492.pdf (Australia)
The future of work and social protection Technological Innovation and Social Policy Workshop, UNSW 9 February 2018 Peter Whiteford, Crawford School of Public Policy peter.whiteford@anu.edu.au Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Wages, work and welfare – the challenges • • Changes in the nature of work pose challenges to the social protection systems of high income countries, particularly those relying on contributory social insurance systems.
(They also challenge the extension of social security in middle and low income countries.)

These systems are based to varying degrees on workers satisfying contribution conditions that require or assume full-time engagement in paid work for the majority of years that individuals are in the labour force, together with formal arrangements for the payment and recording of contributions by employers and employees.

They also often distinguish between employees and the self-employed.
As temporary work and changing forms of employment contracts become more prevalent, the assumption of full-time, permanent formal employment threatens to become less common, potentially undermining welfare state finances as well as the social protection of workers and their families.

In contrast, in Australia, most of the system of social protection is not based on contributory social insurance principles.
This offers the opportunity to explore a case study where some of the apparent vulnerabilities of the social insurance state may not be so salient, but where other challenges and trade-offs may have arisen.

• • 2 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Outline • Exploratory analysis of links between changes in the nature of work and implications for social protection.

• Social policy regimes and the labour market – what are the links?
– Contributory vs non-contributory schemes – Social protection through the wage system • What are the challenges?

– Automation – The gig/platform economy – Care work – Migrant workers • Australia – is the future already here?
• Policy responses – from universal basic income, negative income taxes to individual accounts 3 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Wages, work and welfare – social policy regimes • Entitlements to social protection – Social Democratic – citizenship – Conservative – contributions – Liberal – income-testing • Welfare state institutions, employment structure, wage-setting, employment conditions and tax structure are co-produced – Different forms of social protection require/reflect and influence tax structure, employment structure etc.
– Hybrids – no systems are pure • Assumptions about gender, disability and care and migrants 4 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Challenges 1: Automation (computerisation) Frey and Osborne (2013): uses advances in Machine Learning (ML) and Mobile • Robotics (MR) to categorise occupations according to susceptibility to computerisation.

Look at 702 detailed occupations.


• About 47% of total US employment is “at risk” of becoming automated over next one to two decades.

Mainly routine intensive jobs – transportation, logistics, bulk of office and administrative support workers and labour in production.

Jobs with high wages and educational attainment less at risk.
• Durrant-Whyte et al (CEDA, 2015) estimate that 40% of jobs in Australia could be replaced by computers in two decades and further 18.4% have medium probability of having their roles eliminated.

Replicates Frey and Osborne with Australian occupational data.

• Artz, Gregory and Zierahn (OECD, 2016) take a task-based rather than occupation-based approach.

In 21 OECD countries, average risk is 9% of jobs, ranging from 6% in Korea to 12% in Austria.

Strong educational and wage gradient.


• Off-setting macro-economic adjustments: Development of jobs that complement computers.

New jobs in industries that produce labour-saving technologies and increased product demand.
5 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Challenges 2: The gig/platform economy • Digital labour markets: – Electronically transmittable services (Online Labour Markets (OLMs) - Amazon Mechanical Turk, Upwork, Freelancers) = “flat world” – Matching is digital but delivery of services is physical – Mobile labour markets (MLMs) – Deliveroo, Uber, Lyft, Airtasker, • Some is piece-work and/or on-call.

Related to outsourcing (of tasks) and offshoring.


Blurs distinction between employees and self-employed.

Regulatory arbitrage.

Pays less than the minimum wage, no workers compensation or sick leave.

• Are income tax/social insurance paid, GST/VAT?

Are earnings declared for social security or social assistance income tests?
• EU studies – 1-2% of labour force in USA and UK 6 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Airtasker jobs Australia 2017 7 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Challenges 3 and 4: Care work, the ageing population and migration • Growth of social assistance and health care occupations in OECD countries – Polarised labour force • International migration and temporary migrant workers – In 2014-15 entry to Australia of more than 1 million temporary migrants with rights to work (Wright et al, 2016) (students, working holiday visas, 457/TSS visas, New Zealanders) – limited access to social protection and possibility of employer evasion of standards.
8 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Australia – is the future already here?
9 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Defining “good jobs” (macro-wise) • Population aged 16 to 64 years • - Not in the labour force • - Unemployed • - Under-employed • - Other part-time • - Full-time, low paid (<2/3rds of median wage) • = “Good jobs” – full-time workers, not low paid as % of “working-age” population 10 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Trends in share of “good jobs”, Australia for women, 1978 to 2016 11 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Trends in share of “good jobs” for men, Australia, 1978 to 2016 12 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Employment to population ratio, OECD countries, by type of employment, 2013 Share of full-time permanent workers Share of temporary workers 13 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Poverty rates for working-age households by employment patterns, OECD countries, 2012 Standard work Non-standard work 14 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 UBI – some links https://www.policyforum.net/basicincome/ • UBI becomes a consolation prize for those whose lives are disrupted?
• Basic Income Earth Network http://basicincome.org/ • • Charles Murray: A Guaranteed Income for Every American • Charles Murray: Guaranteed Income as a Replacement for the Welfare State • • Why Murray’s Big Idea Won’t Work • Olli Kangas, “Experimenting Basic Income in Finland” (Slideshow) • Could a basic income help poor countries?
• Why a universal basic income is a step too far • You’ll have to choose sooner than you think: Basic Income or Dystopian The Pragmatic Libertarian Case for a Basic Income Guarantee Slavery • Universal Basic Income, Job Killing Robots, and the Washington Post • https://www.nytimes.com/2017/02/23/magazine/universal-income-global- inequality.html?_r=0 15 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 What is meant by UBI/BI/ GMI/ NIT • Universal Basic Income, Unconditional Basic Income, Guaranteed Minimum Income – no income test, no categories • Social Dividend – smaller payment (?
), sometimes funded by natural resource revenues (Alaska) • Demogrant – income-test free payment to all people in a specified demographic group e.g.

people over 65 (New Zealand), children (Family Allowances) Noun.

(plural demogrants) a grant based on purely demographic principals such as age and sex.
• Negative Income Tax – payment withdrawn as other income rises at a single (linear) rate – the net amount is paid Interactions between the tax and transfer systems – cashing out the tax threshold; Refundable tax credit (Asset- based welfare – UK Child Trust Fund 2005-2011) • • 16 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 UBI – some links https://www.policyforum.net/basicincome/ • Basic Income Earth Network http://basicincome.org/ • • Charles Murray: A Guaranteed Income for Every American • Charles Murray: Guaranteed Income as a Replacement for the Welfare State • The Pragmatic Libertarian Case for a Basic Income Guarantee • Why Murray’s Big Idea Won’t Work • Olli Kangas, “Experimenting Basic Income in Finland” (Slideshow) • Could a basic income help poor countries?
• Why a universal basic income is a step too far • You’ll have to choose sooner than you think: Basic Income or Dystopian Slavery • Universal Basic Income, Job Killing Robots, and the Washington Post • https://www.nytimes.com/2017/02/23/magazine/universal-income-global- inequality.html?_r=0 17 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The growing interest in Universal Basic Income: Finland • • Under the two-year, nationwide pilot scheme, which began on 1 January 2017, 2,000 unemployed Finns aged 25 to 58 will receive a guaranteed monthly sum of €560.
The income will replace their existing social benefits and will be paid even if they find work.

Kela, Finland’s social security body, said the present system can discourage jobless people from working since even low earnings trigger a big cut in benefits.

(Effective marginal tax rates 80% and over) “For someone receiving a basic income, there are no repercussions if they work a few days or a couple of weeks ...
Working and self-employment are worthwhile no matter what.” http://www.kela.fi/web/en/experimental-study-on-a-universal-basic-income • • 18 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The growing interest in Universal Basic Income: Europe • • • • • Basic income experiments are due to take place in several cities in the Netherlands, including Utrecht, Tilburg, Nijmegen, Wageningen and Groningen.
In Utrecht’s version, called Know What Works, several test groups will get a basic monthly income of €970 under slightly different conditions.

One will get the sum as unemployment benefit, with an obligation to seek work – and sanctions – attached.

Another will get it unconditionally, whether or not they seek work.

A third will get an extra €125 providing they volunteer for community service.

Another will get the extra €125 automatically, but must give it back if they do not volunteer.
Livorno began giving a guaranteed basic income of just over €500 a month to the city’s 100 poorest families last June, and expanded the scheme to take in a further 100 families on 1 January.

Ragusa and Naples considering similar trials.

(Is this a basic income?)


A survey last year by Dalia Research found that 68% of people across all 28 EU member states would “definitely or probably” vote in favour of some form of universal basic income, also known as a citizens’ wage, granted to everyone with no means test or requirement to work.
In a 2016 referendum 75% of Swiss voters rejected a basic income scheme, but that proposal – to give every adult an unconditional minimum monthly income of SFr2,500 (£1,980) – would have meant increasing welfare spending from 19.4% to around a third of the country’s GDP.
19 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The growing interest in Universal Basic Income: North America • • • • • • Finding a Better Way: A Basic Income Pilot for Ontario https://news.ontario.ca/mcss/en/2017/04/ontarios-basic-income-pilot.html In June 2016, the government asked long-time basic income advocate Hugh Segal to provide advice on how to best design a made-in-Ontario pilot.
His report, Finding a Better Way: A Basic Income Pilot for Ontario, was released in November 2016.

The three-year OBIP, beginning in late spring 2017, will study whether a basic income can better support vulnerable workers and give people the security and opportunity they need to achieve their potential.

It will also study whether giving people a basic income can be a simpler and more economically effective way to provide income security support to people living on low incomes.
The pilot will measure outcomes in areas such as: Food security; Stress and anxiety; Mental health; Health and healthcare usage; Housing stability; Education and training; Employment and labour market participation.

Study participants will be: Randomly selected; 18 to 64 years old; Living in one of the three selected test locations for the past 12 months or longer; Living on a lower income.
Following a tax credit model, the Ontario Basic Income Pilot will ensure that participants receive: Up to $16,989 per year for a single person, less 50 per cent of any earned income; Up to $24,027 per year for a couple, less 50 per cent of any earned income; Up to an additional $6,000 per year for a person with a disability.

(Existing Child Benefits continue to be paid).


Participants on Employment Insurance (EI) or on the Canada Pension Plan (CPP) will have their monthly basic income payment reduced dollar for dollar.

Roughly CAN$ 5,000 a year more in disposable income for beneficiaries and those working at minimum wage.
20 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The growing interest in Universal Basic Income: North America • • • American tech incubator Y Combinator announced it would launch its own experiment in basic income with a pilot study of 100 families in Oakland, California.

Y Combinator will give each family between $1,000 and $2,000 a month, for between six months to a year, to be spent on anything anywhere.
Venture capitalist Marc Andreessen, web guru Tim O’Reilly and a cadre of other Silicon Valley denizens have expressed support for the “social vaccine of the 21st century”.

• UBI subsidizes disruptive technologies.

“The motivation behind the project is to begin exploring alternatives to the existing social safety net .
…If technology eliminates jobs or jobs continue to become less secure, an increasing number of people will be unable to make ends meet with earnings from employment.” UBI becomes a consolation prize for those whose lives are disrupted.

Support for UBI is framed in terms of human capital.

Steve Waldman, a well-known programmer and economics writer, praises UBI by referring to it as “VC for the people”.
VC, venture capital, invites people to embrace their inner entrepreneurs • 21 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Basic Income – the Australian Debate • In Australia the most notable proposal was the Henderson proposal for a Guaranteed Minimum Income (GMI).

This was a major recommendation from the Royal Commission into Poverty, established in 1972 under the chairmanship of Professor Ronald Henderson.
• Henderson analysed the cost of a GMI set at the poverty line and estimated that the cost of financing such a scheme would require a proportional tax over 50%, regarded as unacceptable.

• Henderson therefore proposed a two-tiered structure, using the family as the unit of income, which distinguished between those in receipt of benefits or pensions and those who did not then qualify.

The proportional tax would be supplemented by a surtax at a higher rate.
http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_ Library/pubs/rp/rp1617/BasicIncome • 22 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Winners and losers?

Current benefit distribution, 2015-16 Same cost UBI?

23 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The simple arithmetic of a Universal Basic Income • How many people are there to a receive a UBI?
(1) • How much should they be paid (2) • Cost = (1) X (2) • Do we pay individuals or couples?

• Cost depends on what we want to achieve – replace the welfare system or not?

24 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The simple arithmetic of a Universal Basic Income • In 2016, there were 19.3 million people 16 and over and 4.8 million 0 to 15 year old.
• Newstart for single person is $535.60 per fortnight (just under $14,000 per year) • Pension is $888 per fortnight (just over $23,000 per year) • Maximum rate of FTB is $5,500 to $6,900 per year.

25 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The simple arithmetic of a Universal Basic Income • Paying all adults Newstart would have a “gross cost” of $270 billion.

• Paying all adults pension rates would have a “gross cost” of $444 billion.
• Paying all children $5,500 per year would have a gross cost of $26.4 billion.

• Current spending on social security and welfare is $166.7 billion (including all services such as NDIS, child care, homelessness services, aged care), about $110 billion on cash payments.

• Other spending – education, health, defence, general government services are around $300 billion.
• A UBI to replace cash benefits would multiply gross cash benefit spending by between 3 and 4.7 times 26 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The simple arithmetic of a Universal Basic Income • Total Commonwealth government revenue is currently about $433 billion and individual income tax about $205 billion.

• A GMI to replace all cash payments and leave other spending the same would imply total “spending” of around $770 billion or around 42% of GDP.
• What is the tax base?

• The Henderson GMI would have required a linear tax of over 50% on all other income; Age and disability pensions now about 75% higher in real terms than in 1975 (2.1 times the level in 1972) 27 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 The simple arithmetic of a Universal Basic Income • Gross cost is not the same as net cost!
• A UBI would give lots of money to individuals, and for many would be the same in terms of disposable income as a very large tax cut.

• A single person does not pay $23,000 in tax until they earn around $95,000.
28 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Policy responses: the spectrum of income maintenance programmes Type of programme Examples Coverage/Eligibility Social Assistance Most OECD countries, China Citizens/residents; Income and assets-tested Refundable Tax Credit Negative Income Tax Demogrant Canada GST/HST Tax Credit United States EITC Citizens, taxpayers; May be income-tested Categorical – Australia General – UK Universal Credit New Zealand Superannuation Child benefits Alaska Fund Dividend Citizens/residents; Income-tested Age group/ citizens State/ residents Universal Basic Income None Citizenship Social insurance More than 20 OECD countries Contributions Notional Defined Contribution Scheme Italy, Latvia, Poland, Norway, Sweden, China Mandatory Private Pensions Australia Individual Savings Accounts Proposed Contributions Contributions Contributions 29 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Stages on the way?
• Cash-out the tax threshold to give a UBI of around $3,500: distributionally neutral for most income taxpayers, but not everyone is an income taxpayer – cost between $20 and $30 billion.

• Divide existing cash benefits among adult population would give all adults around $5,800 per year.

(Many losers!)

• Universality by category?


Children and older people • UK Universal Credit model – a non-categorical NIT (but do it right) • Common working-age payment with uniform withdrawal rate (NZ and Keating proposals – neither implemented due to cost) • Reduce existing withdrawal rates to 40% or lower and continue over time.

• Very large free areas or earnings disregards or set fixed payment periods.
30 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2 Conclusion – what problems are we trying to solve?

• Do we want to strengthen welfare or phase it out?

• If complexity is the problem, is simplicity the solution?

(see H.L.

Mencken, 1917) • What is the future of work?

Does Silicon Valley have workers’ best interests at heart?

• UBI and the gender divisions of labour and family work – paying for care at home.

• Where is the Zeitgeist heading?


(Techno-optimism vs income management, Cashless welfare cards; drug- testing claimants) • Further research 31 Senate Select Committee on the Future of Work and WorkersSubmission 155 - Attachment 2