On Sunday, Switzerland will hold a referendum on a proposal to reform the country’s social welfare system by introducing a ‘basic income’.   All residents would be entitled to a guaranteed income from the state, unconditionally.  The proponents suggest 2500 SF (equivalent to $2500) per month.

The concept of basic income has been discussed for decades, perhaps centuries.  It has attractions for both the left and right of the political spectrum:  for the left, it offers a simple, radical, and comprehensive solution to concerns about poverty and inequality.  For those right – who often prefer the term negative income tax, a different label for a similar concept– the plan discharges social obligation with minimum intrusion into personal affairs.

The revived  popularity of this idea is part of the general revulsion against mainstream politics sweeping the world. Simple, radical solutions are preferred to messy compromises. Bernie Sanders has expressed sympathy for basic income , though stopping short of endorsement.  Yanis Varoufakis, the loud and ubiquitous former finance minister of Greece, is a proponent.  The scheme also gains credibility from loose association with Brazils’ widely praised, but wholly different,  bolsa familia.

Yet simple arithmetic shows why these schemes cannot work.  Decide what proportion of average income per head would be appropriate for  basic income.  30% of average seems mean:  perhaps 50% more reasonable.  The figure you write down is the share of national income which would be absorbed by public expenditure on basic income.  The Swiss government reckoned expenditure on social welfare would approximately double.  Add on the share of national income taken by other public sector activities – education, health, defence, transport etc. 20% is characteristic of advanced economies. That tells you the average tax rate.  Either the basic income is impossibly low, or the expenditure or it is impossible high.

Most advocates of basic income prefer to keep the argument at the level of general principle rather than engage in grubby practicalities of numbers. The Swiss proponents explain that basic income “arises from a general fundamental democratic right, the Right to Life. The basic income should be considered as one of the human rights”.

      But even they temper ideals with realism. Obviously children would receive less.  Sadly this does not help with the basic maths; even 50% of the average earnings of children is insufficient for their support, and the same is true for the elderly.

The Swiss supporters of the referendum solve this dilemma by saying that you are not entitled to basic income if you are already receiving 2500SF per month from an employer. Not only does this dramatically reduce costs; the proponents   wax lyrical about the social consequences.  “Wages in the private sector would be liberated from securing the livelihood of the employee….   An entrepreneur can be sure that people will come to her because they actually want to work for her.”

Perhaps the writers really do understand the radicalism of this proposal.  There could be no low paid or part time jobs. Few work as refuse collector or shelf stacker from love of the job. So such employment must pay more – a lot more – than the guaranteed basic income which has been declared a human right.  Both much higher unemployment and radical redistribution of income would follow.

Back in the real world, there are two ways to assess household needs for welfare.   Contingent benefits target causes of poverty – old age, unemployment, disability, large or broken families. But it is costly and inappropriate to subsidise Warren Buffett, Rupert Murdoch and the Queen just because they are elderly.  Income related benefits address poverty more directly, but diminish incentives to work. Social welfare systems everywhere make use of both types of information – contingent and income-related – to balance cost and effectiveness. That is why they are, inevitably, complex.