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Guaranteed Income: The Way of the Future?

Nancy IsensonMarch 3, 2006

Germany is in search of recipes to thin the ranks of its over 5 million jobless. It's the country's main problem, Chancellor Angela Merkel said this week. And entrepreneur Götz W. Werner thinks he's found the answer.

The cogs in the machine should have a choiceImage: AP

"We are still living under the impression that full employment can be achieved," said Götz W. Werner, whose national drugstore chain, dm-drogerie markt, has made him a millionaire. "The big problem is that many people don't have a work place, they have an income place."

According to Werner, who also holds a professorship at an entrepreneurial institute at the University of Karlsruhe, Berlin should provide people with a tax-financed basic income that would free people from the need to earn money, rather than create jobs for the 12.2 percent of Germans who are unemployed.

Society can fulfill its needs without full employment, Werner said, and it would be better off if it did.

Götz Werner
Werner has a reputation as a progressive employerImage: DPA

"The work that we are compelled to do can also be done by machines and methods," he said. "Where we have a great potential is work that focuses on people: social work, cultural work."

Ridding people of the burden of work would allow them to devote time to things they actually want to do, whether volunteering at an old folks' home, pursuing dreams of an artistic career or spending more time with their families. And it would relieve millions of people from the stigma of not having a job.

Shift of paradigms

In Werner's scenario, every man, woman and child would receive a monthly allowance that would cover the costs of living, plus a little bit more. The state would finance the new system through a high consumption tax that would replace all current taxes and could be gradually introduced over 20 to 30 years. The non-wage labor costs, such as social welfare and pension contributions, that add to the high cost of German jobs, would be a thing of the past as would the bureaucracies that administer them.

Werner is one of Germany's most vocal proponents of an unconditional basic income, but he's not alone. Thomas Straubhaar, head of the Hamburg's HWWA economic think tank, also backs the idea -- from a different angle. He thinks it's important to move away from a system financed by labor costs in favor of one financed by taxes.

Arbeiterin komplettiert einen Computer in einer Siemens Nixdorf Fabrik
People shouldn't have to do jobs they don't want to doImage: AP

"In the long term, it will be unavoidable to get away from today's system, because it's not financially feasible in some areas," Straubhaar said. But people should receive only the existential minimum so that "the majority will continue to want to, to have to work."

Straubhaar added that Werner's reliance on consumption tax was untenable. Instead, the system could be financed by a combination of high consumption tax -- 25 percent, for example -- and direct taxes of the same level on income from work, rentals, investments, dividends and speculation.

"Don't feed the horses to feed the birds," Straubhaar said, stressing the advantage of shifting from indirect to direct aid for those who need it.

If it's not broken, don't fix it

But others are skeptical.

"I find the suggestions either illusory or brutal," said Gustav Horn, director of the IMK economic think tank in Düsseldorf. "The one side of the suggestion is illusory because it would provide an income up to 1,500 euros ($1,800) for each person. There are no suggestions on the table that deal with financing it adequately. The second version is brutal because the amount that people would receive would be much lower than the current social welfare amount. That would make people already receiving welfare even poorer."

Kreis Demmin hat zweihöchste Arbeitslosigkeit in Deutschland
A basic income would allow people to do what they wanted -- even if it meant doing nothingImage: dpa

Horn said tackling social benefits isn't the way to deal with high unemployment, but that the "problem of the social security system is a result of high unemployment. The real problem is economic policy."

As far as Werner's concerned though, his pet project's time has come.

"More people than ever recognize that the problems that have developed can't be solved with the current solutions," he said. "Unconditional basic income would mean everyone has the freedom to do what he wants. Our democratic aim should be that people have freedom, that means being independent to do what they want to do."