The celebrated economist says a progressive property and income tax, greater say for workers in companies and an education system that is less biased against the poor will do more to reduce inequality than the fashionable proposal of a ‘basic income’ for all.
The debate on basic income has at least one virtue, namely that of reminding us that there is a degree of consensus in France on the fact that everyone should have a minimum income. Disagreements exist over the amount. At the moment, the Revenu de Solidarité Active or RSA (the French unemployment benefit scheme) currently grants to single unemployed individuals with no dependent children 530 Euros per month, a sum which some people find sufficient, and others would like to increase to 800 Euros. But on both the Right and the Left, everyone seems to agree on the existence of a minimum income around this level in France, as is the case in other European countries. In the United States, the childless poor have to make do with ‘food stamps’ and the social state often assumes the guise of guardian or even prison. Thus, the French consensus is to be commended but at the same time we cannot consider it satisfactory.
The problem with the discussion about basic income is that in most instances it leaves the real issues unexplored and in reality expresses a concept of social justice on the cheap. The question of justice is not simply a matter of 530 Euros or 800 Euros a month. If we wish to live in a fair and just society, we have to formulate more ambitious objectives which cover the distribution of income and wealth in its entirety and, consequently, the distribution of access to power and opportunities. Our ambition must be that of a society based on a fair return to labour, in other words, a fair wage and not simply a basic income.
To move in the direction of a fair wage, we have to re-think a whole set of institutions and policies which interact with each other: these include public services, and in particular, education, labour law and organisations and the tax system.
In the first instance, we have to challenge the hypocrisies in our educational system, which too frequently reproduce or even exacerbate inequalities. This is the case in higher education. The university courses which are the most popular with the disadvantaged students are massively under-funded compared with the elitist courses. The situation has only got worse with the result that today whole generations cram into over-crowded lecture theatres.
The same is true for schools and technical colleges. In practice, the underprivileged establishments have many more inexperienced teachers on short-term contracts than the others, with the result that effective public expenditure per pupil is in reality less than elsewhere. In the absence of a transparent and verifiable policy of allocation of means, the focus has been on stigmatising establishments by categorising them as being in an educational priority area or ZEP (zone d’éducation prioritaire), without increasing their resources, whereas the authorities should have done the exact opposite.
Also by Thomas Piketty on The Wire
If in addition we bear in mind the fact that nothing has been done to promote a mix of social classes and that the private sector has been allowed to recruit whoever might be thought fit, while benefitting from public financing, we are very far from the equality of opportunity vaunted in the advertising slogans in electoral campaigns.
To move towards fair pay, we must stop denigrating the role of trade unions, the minimum wage and salary scales. We should reconsider the role assigned to the employees’ representatives. In countries where they play an active role on the executive boards – between one third and half of the votes in Sweden and Germany – we find a narrower range of salary scales, greater investment of the employees in the firms’ strategy and, as a consequence, higher productivity. In addition, there is nothing to prevent us from imagining original forms of power-sharing, with the board members being elected by a combination of employees and shareholders (to go beyond the interaction between paid administrators and shareholders with the latter automatically holding the majority).
To restrict the power of capital and its perpetuation, the tax system must also play its role fully – in particular by means of the progressive tax on property which enables the transformation of the right of ownership into a temporary right, at least for the largest property owners. This is, in effect, what inheritance taxes do for intergenerational transmissions (i.e. family property is no longer permanent). Annual progressive taxes on property would do the same within a lifetime. Instead, the Right-wing wishes to suppress France’s meagre wealth tax (the ISF – impôt sur la fortune); this should instead be brought closer to the property tax (taxe foncière), to reduce this for smaller property owners.
Finally, a progressive income tax rate should contribute to the fair wage by reducing the income gap to the strict minimum. Historical experience shows that high marginal tax rates on very high incomes – 82% on average between 1930 and 1980 in the United States –enabled an end to giant salaries to the considerable benefit of lower salaries and economic efficiency.
The last point is that with deduction of income tax at source, a progressive income tax enables the basic income due to low-wage earners to be paid directly on the pay cheque or remuneration statement. At the moment, a full-time employee paid at the minimum wage rate (the SMIC) earns 1150 Euros net, after deduction from his gross wage of 1460 Euros of 310 Euros for the CSG (generalised social contribution) and other contributions. On application, several months later, the employee is eligible for an activity allowance, equivalent to 130 Euros per month. It would be infinitely preferable to reduce the deduction at source and raise the net salary by an equivalent amount.
For the same reason, I have difficulty in understanding those who insist on wishing to pay a basic income of 500 Euros per month to those earning a salary of 2000 Euros, and then deducting the same sum by raising their taxes deducted at source.
It is now time for the debate on justice to ask the right questions.
(This is an English translation of a op-ed published in Le Monde December 13, 2016 under the title “Revenu de base ou salaire juste?”)
Copyright: T. Piketty, Le Monde, 2016
Thomas Piketty teaches at the Paris School of Economics and is author of the bestselling book, Capital.