"Basic Income" and "Basic Services"

2021/04/21

Why is income inequality bad? It is because it creates people who cannot access the services necessary for living and daily life. A society where one cannot go to a hospital or university simply because they were born into a poor family is irrational. As a scholar whose role is to live according to reason, I cannot stand by and watch such a society in silence.

This is the reason I proposed "Basic Services (BS)" in my book, "A Theory of Tax Increases for Happiness." I define BS as the services that everyone needs or may need—medical care, nursing care, education, and welfare for the disabled—and provide them to everyone without income limits. In other words, it is a proposal to make kindergartens, nurseries, universities, medical care, nursing care, and welfare for the disabled all free of charge.

This is not just a random idea. In early modern communities, all members worked together to provide various "services" such as policing, firefighting, primary education, and nursing care. The basic philosophy of BS is to realize this principle of "collective fulfillment of collective needs" at the national level.

Readers might be confused about the difference between this and "Basic Income (BI)." BI provides "cash" to everyone without income limits. It can eliminate the plight of those who hesitate to apply for public assistance and endure poverty, or those who have applied but suffer from a sense of guilt.

However, this is a benefit of being "Basic"—meaning a benefit targeted at everyone—and not a merit of "Income." BS, which enables everyone to go to universities, hospitals, and nursing facilities, has the same effect. Education, medical, and nursing assistance would no longer be necessary, the guilt of being rescued would disappear, and the cost of living would be dramatically reduced.

So what is the difference? It is "feasibility." Let's recall last year's Special Fixed-Sum Cash Benefit. The flat 100,000 yen payment required a budget of 13 trillion yen. On the other hand, making early childhood education and care free the year before last cost about 900 billion yen. Unlike BI, BS is only used by those who need it, so it costs much less.

Consider a "single-parent household" with one mother and one child. With 13 trillion yen, a BI of 200,000 yen per year could be provided. However, university tuition averages 4 million yen. It would take 20 years of savings to cover the tuition for just one person. Cash is also distributed to those who don't need it. People who have graduated from kindergarten or university do not re-enter them. This difference results in a massive gap in the required financial resources.

With BS, it would look like this: make university, nursing care, and welfare for the disabled free, and reduce the out-of-pocket medical expenses from the current 30% to 20%. Establish a housing allowance of 20,000 yen per month for 20% of all households (12 million households), and provide 50,000 yen per month for the unemployed, keeping in mind the 3.5 million people reached during the Lehman crisis. This totals 13 trillion yen. Which is more rational: a policy that thoroughly guarantees a minimum standard of living while drastically reducing the overall cost of survival and daily life, or a policy that hands out 100,000 yen even to the wealthy?

The ILO announced that implementing BI would cost 20% to 30% of GDP. In fact, providing a monthly benefit of 70,000 yen would require 100 trillion yen in financial resources, which is almost the same as the national budget. If funded by consumption tax, the rate would jump to 45%. What about replacing existing social security with BI? Medical and nursing costs would become 100% out-of-pocket. Pensions would disappear and be replaced by the 70,000 yen benefit, and public assistance might drop from 120,000 yen to 70,000 yen. What about the plan to borrow 100 trillion yen every year? The yen would depreciate rapidly, and the "invisible tax increase" of hyperinflation would hit the next generation directly.

Making services free through BS would only require raising the consumption tax by 6%. A 100-yen juice would go from the current 110 yen to 116 yen. In exchange, society would be liberated from the anxieties of daily life. Instead of a society that hands out money until the finances collapse and imposes self-responsibility in the name of freedom, we can create a thick society with a human face—one where we stand in solidarity, share pain, and harmonize our own happiness with that of others.

There is an argument for BI because AI will take away jobs. This originated from the Frey & Osborne paper, which showed the possibility that 47% of the working population in the US would be replaced by machines within 10 to 20 years. But this argument is outdated. Even the authors have acknowledged the limits of the discussion, and the mainstream view now is that the total volume of employment will not change because humans will take on high-level tasks that machines cannot replace.

Seiji Yamada, former president of the Japanese Society for Artificial Intelligence, criticized the argument that AI will steal jobs as "laughable." He argued that the idea that machines could overcome the rationality we acquired over billions of years in just a few decades lacks respect for humanity.

A while ago, BI dominated politics, but recently, both ruling and opposition parties have begun to place BS as a pillar of their policies. The term "Universal Basic Services" is also spreading rapidly worldwide. The difference between an "unfeasible grand reform" and a "feasible grand reform" is a difference in practical policy thinking, but it is also a decisive difference in the underlying views of humanity and society.