Gareth Morgan's TOP proposes universal income for 18-23 year-olds of $200 per week; Will scrap student allowances and living costs, and first $10,000 of annual benefits for the age group

Gareth Morgan's The Opportunities Party (TOP) has proposed a universal basic income of $200 a week for 18-23 year-olds in New Zealand.

The policy would remove the need for the government to pay student allowances and living costs and the first $10,000 a year of any benefit people in the age group receive.

The $10,000 per person, per year, would cost $3.4 billion annually, although TOP argues that the final cost would be closer to $2.4 billion once student and benefit costs were removed, and the GST take from spending by 18-23 year-olds was netted out.

Read the full policy release from TOP below. You can read all published policies in our Election 2017 section here.

We acknowledge the fact that it’s not only people with families that matter but also people starting out in adult life who need support to help them reach their potential.

The Opportunities Party is proud to release an unconditional basic income for those aged between 18-23 years old.

For the first five years of adulthood, as people are striking out on their own, they have the security of $10,000 per year, no questions asked.

If you are between 18-23

You get $200 per week ($10,000 per year) no questions asked, no hoops to jump through, no bureaucrats telling you what to do.

You get to decide the best way to use the money, to pursue your own goals.

You will be financially better off under our policies. This includes your mates who are unemployed, students, parents, apprentices, artists, entrepreneurs, etc. Like we said all your mates.

This will take stress off you at a pivotal time in your life. NZ has an appalling rate of youth suicide and financial stress plays a key role in this.

This is the third stage of our UBI (Unconditional Basic Income) implementation, after young families and the elderly.

Background

The UBI is a fundamental reform of our social security system that recognises that the economy is changing and work is becoming more uncertain. Unlike the current antiquated system of targeted welfare, the UBI doesn’t penalise people as they move in and out of work, start a business, or retrain. It doesn’t discriminate between different forms of retraining, such as official government courses or more informal approaches like shadowing someone on their job. It acknowledges the people who undertake unpaid work, without whose endeavour our society would collapse. And most importantly it represents a civilisation dividend wherein an affluent society defines a person’s right to access resources, irrespective of their situation. A backgrounder on a UBI is provided here. 

The concept of a UBI is gaining traction here and around the world. It was featured in the TVNZ series What Next as a way to deal with an increasingly disrupted job market. It is also being piloted in many countries around the world including the Netherlands, Finland and Canada. These pilots are exciting, but they overlook the fact that trials have already been done in the 1970s, and we have had a successful UBI for many years in New Zealand; NZ Super. TOP intends to give young people the same opportunities that we’ve been giving those over 65 for the past forty years.

The Opportunities Party (TOP)’s ultimate goal is to roll out a UBI for everyone. The reason for targeting 18-23 year olds next is because they have the highest levels of unemployment and face the greatest challenge getting into the labour market. This is also the age where New Zealand has some of the highest suicide rates in the world, brought about by the transition from nest to independence. We want to help young people with this difficult transition from school to training or work, and support them while they figure out what they are doing with their lives; whether they are setting out to establish their own businesses or extending their training.

Turning 18, the age at which many finish high school, is often seen as the point where our children begin to progress into adulthood. We know that there is still plenty of development to come, however the decisions made at this age can have a massive impact on the rest of their lives. Trade training, volunteering in the community, starting a business, university, work experience, artistic endeavour, starting a family, moving out of home, or simply taking time out to figure out the next step all come with a financial burden. The Opportunities Party (TOP) acknowledges this and wants to give all our young adults the opportunity and security to make good decisions about their futures.

Labour plans to give everyone 3 years free tertiary education and NZ First wants to write off student loans. We don’t presume to know what is best for our young people and there are many traps with tertiary education nowadays. For starters, funding tertiary education is middle class welfare, as most of the people that go straight into university are the children of the well-off. Not funding those who choose another path is arbitrary and discriminatory. Several of the most successful tech entrepreneurs globally and in New Zealand for instance were university dropouts. University education is no longer a precursor for success in the modern economy.

And of course the courses offered up by Universities have not moved on much from the era when University education was pretty much a “free good” for those who qualified. Now that the price has risen one would expect the demand for it to fall – meaning there is a higher proportion of young ones for which University is quite an inappropriate option. Our “Youth to Young Adult” UBI recognises this, whereas as University fee subsidies do not. For some people formal training works, but that isn’t the case for everyone. Some people will want to set up their own business, others will want to learn from a mentor or on the job. Everyone should get the same support. 

So how much will this policy cost?

There are around 337,780 people in this age group. Giving each a UBI of $10,000 would cost around $3.39 Billion per year.

-        Number of New Zealanders 18-23 – 337,780

-        UBI Level - $10,000 per year after tax

-        Total cost of $3,388,800,000

However we have to take into account what this age group already receives. Around $284m is currently received by this group in benefits. The UBI would replace the first $10,000 (after tax) of benefits received by 18-23 year olds. The benefit of the UBI to this group as opposed to targeted benefits is that people would not lose it if they moved into paid employment.

Currently the government also spends $500m on student allowances and another $150m on student loan living costs (i.e. the cost of borrowing on the loans) each year. Around 41% of people at university are aged 18-23, so we can expect to save around $267m there.

No one aged 18-23 would be worse off, and in fact those on student allowances and jobseeker support will be better off than they are currently. Of course all those not currently receiving any benefit will also be better off. It is particularly worth noting that there are 20,000 people aged 18-23 who are not in education, employment or training and are not receiving a benefit.

Therefore the additional investment to implement this policy comes to around $2.8 billion. This does not factor in the increase in GST take that we would expect to see from this money being spent; around $424m is likely, which drops the cost to $2.4b.

The funding for this will come from National’s $2b Family Incomes Package ($2.5b if we are comparing apples with apples, as they have factored in the increased GST income into that total), with the remainder ($0.4b) coming from the projected budget surplus of $1.6b in 2017/18 and rising from there.

Labour’s proposed 3 years free University would cost around $1.2 billion per year when fully implemented (2025), just for course fees for students. It will not affect the existing living allowances and course-related costs meaning students will still have to borrow to live, which as detailed above costs around $650 million per year. Many students also report struggling to support themselves and Labour’s policy will not prevent that. New Zealand First’s proposal is to wipe student loans and offer a universal student allowance, and would cost $4.6b per year. 

Conclusion

The UBI is a revolution in the way a modern society operates. In time it will allow for a major reduction in targeted welfare and associated administration and compliance costs. More importantly, however, it is about enabling people to make more choices, to find their own paths and to cope with the rapid flux of a workplace that must be responsive to technological disruption. There is just no way bureaucrats can design complex systems (big data or not) that can cope with all situations in a cost-effective manner. Targeted witch-hunt welfare is dead, long live the UBI revolution.