IZA Tower Talk - Report

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Unconditional Basic Income - "From the Cradle to the Grave"?
At the 19th IZA Tower Talk on December 10, 2007, the founder and CEO of the German drugstore chain “dm”, Götz Werner, presented his idea of an “unconditional basic income.” The record attendance proved that social visions are still capable of attracting a broader public. According to Werner’s concept, which has recently been discussed by policy-makers and researchers, every citizen should be entitled to a legally guaranteed monthly income as a living wage that does not involve any service by the citizen in return. This would provide people with a feeling of security “that no one can take away” and that will foster a social climate in which “labor and capital can interact as creative forces.” Increased individual freedom through technological change could thus help to serve society’s goals by enabling people to perform new, self-elected and more stimulating tasks.

Today, these preconditions for the stimulation of creativity and economic dynamics are virtually non-existent due to a deeply unjust system of direct taxes on income. Heavy taxation of labor “nips creative processes in the bud,” complained Werner. As an alternative to the current fiscal system and a way to finance the basic income, Werner proposes to abolish all forms of direct taxation and replace them with a heavily increased value-added tax on consumption.
The proposed shift toward more indirect taxation was actually endorsed by Hilmar Schneider, IZA Director of Labor Policy. Schneider, however, regarded the idea of an unconditional basic income as a utopia because it would be impossible to finance: According to IZA calculations, even with increased consumption taxes and a restructured labor market, the concept would generate a budget deficit of 110 billion euros annually. Werner saw less difficulty in financing the basic income through the abolition of tax breaks and social benefits. But more importantly, he argued, the basic income would spare people the “agony and indignity” of dealing with the entire welfare bureaucracy. Asked about an adequate level of basic income, Werner suggested 800 euros but pointed out that this would be up to public debate on what can be considered a humane standard of living. He admitted that his model was to a large extent visionary and could only be implemented in the long run on the basis of “revolutionary thinking and evolutionary action.”