Bernard Hickey thinks New Zealand should have a considered debate over a Guaranteed Minimum Income rather than just throw slogans around

By Bernard Hickey

It may be little too early to be fighting an election over it, or preparing a tax return for it, but the idea of a Guaranteed Minimum Income deserves a lot more thought and debate than the dismissal it got from the Prime Minister this week.

Mr Key described the idea suggested as one of many at Labour's Future of Work Commission as "barking mad" and "utterly unaffordable."

He also described Working For Families as "communism by stealth" in 2004, but has since pledged to keep it during his almost eight years as Prime Minister and it's been a long time since anyone suggested he might want to get rid of it. He is also a staunch defender, some would say too staunch, of several other limited versions of Guaranteed Minimum Income that New Zealand already has.

The biggest is the minimum income guaranteed to anyone over the age of 65. New Zealand Superannuation is actually the best advertisement for the idea in New Zealand. It's simple, it doesn't make anyone feel guilty or resentful and it keeps vulnerable people out of poverty. Some argue it is utterly unaffordable in the long run as the population ages, but Mr Key is not one of those.

Working For Families is the next nearest we have to a Guaranteed Minimum Income. It effectively guarantees a minimum income for families with children, albeit through a tax credit system that supplements earned income, rather than an untaxed benefit independent of income.

Then there are the benefits we pay to people who are chronically sick, disabled, unemployed or are single parents with young children. Many argue these benefits are not enough and the way they are indexed to CPI inflation rather than average wages is certainly not fair, particularly when New Zealand Superannuation is indexed to average wages. But it was Mr Key himself who last year increased these benefits faster than inflation to reduce poverty and improve the security of the most vulnerable.

The Government is also not shy of intervening to ensure a minimum pay level for work through the minimum wage system, which Mr Key has rightly trumpeted as one of the highest in the world relative to median wage. New Zealand is a laggard on many things in the OECD, but the new minimum wage of NZ$15.25/hour from April 1 is worth 66.8% of median wage. That would have put us at the top of the OECD hit parade in 2014, which is the most recent year for comparing such data.

So New Zealand has good form when it comes to trying to guarantee vulnerable people have a reasonable level of income, as does the Prime Minister. Many would argue that New Zealand's much better social safety net than, for example, the United States, is one of the reasons our economy coped much better through the Global Financial Crisis and why our levels of income inequality have not worsened nearly as much as some others in the developed world.

So why not take the final step and simply extend the entitlement of New Zealand Superannuation to everyone? Or at the least, extend Working For Families to all workers and ensure tax credits top everyone up to a reasonable level?

Mr Key is right that a true Guaranteed Minimum Income where the Government essentially paid everyone a version of New Zealand Superannuation could not be afforded with our current tax system. Gareth Morgan's 'Big Kahuna' proposal for a Universal Basic Income of NZ$11,000 per year per adult would cost NZ$18 billion, which he proposed would be paid for with major new tax on capital.

This is where the debate gets interesting, and where it starts to marry up with the very reason why so many other countries are seriously debating a Universal or Guaranteed Minimum Income. Finland and the Netherlands have launched trials and Switzerland will vote in a referendum on one later this year.

The appification and globalisation of the services economy is transforming the way we obtain and pay for all sorts of services from accommodation, taxis, accounting, telecommunications, media, education and healthcare. Middle class, white collar jobs that had seemed immune from the the job losses that hit blue collar, manufacturing jobs in the developed world over the last 30 years are now in the firing line. A new 'gig economy' is developing where work is insecure, subject to competition from much lower wage countries and unfettered by the usual rules about working hours, tea breaks, minimum wages or PAYE tax collection.

Many are rightly asking: who will buy all these goods and services if the apps and robots and algorithms do the work and fewer people are in secure and normal jobs that pay a salary with benefits such as holiday pay and a 40 hour work week? If a growing share of the wealth and income generated in a winner-takes-all economy is stuck in the bank account of a plutocrat who can't spend it all, how will the money go around to keep an economy going? If the bulk of incomes are generated by capital owned by a few rather than wages going to many, maybe capital or intellectual property taxes are a better way to support the machinery of Government and a civil society than just taxing consumption and wage incomes.

Henry Ford captured the idea best in 1914 when he doubled his wages to US$5 a day, partly so his workers could afford to buy his cars. He solved two problems by lifting wages -- he lowered his staff turnover and created buyers for his products.

New Zealand's issues with under/unemployment and extremely low and falling wages are less extreme than America or parts of Europe, but we are subject to exactly the same trends.

I am writing this from an apartment I hired through Airbnb and used Uber cars four times in the last three days. One of my Uber drivers in Auckland happily told me he drove from 4 am to 9 am every morning before going to his other job with an Internet startup that may or may not generate income. I use a host of other apps and devices every day to replace services that would have been vastly more expensive or unaffordable just a few years ago.

Some call this massive transformation a Fourth Industrial Revolution or a Second Machine Age. Whatever it is, New Zealand will not be immune from its stresses.

We would be better having a sensible debate over a decent amount of time than simply playing 'gotcha' politics with cheap slogans that ignore some fundamental changes in the way the global economy is changing the nature of work, wages and society.

There isn't an app for this debate that allows us to give a Guaranteed Minimum Income an easy star rating or thumbs up/thumbs down. We should do some proper work on it instead.  

A version of this article was also published in the Herald on Sunday. It is here with permission.