May 24, 2017 / 3:21 PM / 2 years ago

OECD says 'basic income' reform would need more taxes

PARIS (Reuters) - Welfare reforms that would introduce public payment of an unconditional basic income to everyone of working age are worth exploring but would do little to combat poverty if not financed by extra tax, the OECD said.

It published a paper examining a long-discussed reform that is making headlines again amid labor market upheavals due in part to increasing use of robots, with Finland running a pilot project and Italy’s opposition 5-Star Movement promising a “citizen’s wage” should it win power.

The Organisation for Economic Co-operation and Development said that, if existing benefit systems were abolished and the funds used to pay an unconditional, flat-rate payment for all of working age, the payout would be lower than many welfare beneficiaries currently receive.

“A BI (basic income) at socially and politically meaningful levels would therefore likely require additional benefit expenditure and thus higher tax revenues,” it said.

In a note that outlined simulated national scenarios, the Paris-based OECD, a publicly funded think tank charged with reviewing economic and social policy ideas, concluded poverty rates would rise in Finland, France and the United Kingdom and remain unchanged in Italy.

In France, and to a lesser extent in Finland and Britain, middle-income households would gain as they do not currently qualify for means-tested benefits.

No country has so far introduced such a radical reform of social welfare provision but debate over a concept that has fans across the political spectrum has gained traction.

The Finnish project is designed to test whether basic payments with no strings attached might be a plausible new economic model.

Swiss voters rejected the idea in a referendum last year while the unsuccessful Socialist candidate in France’s presidential election, Nenoi Hamon, championed it, saying it would be funded by a tax on robots that replace people.

Reporting by Brian Love; editing by John Stonestreet

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