The Next QE? Switzerland Prepares A "Living Wage" Of $2,600 For Every Citizen

With Japan planning a few trillion Yen stimulus plan of airdropping "gift cards" directly to the poor to spur spending (and the virtuous awesomeness of economic utopia), it appears Switzerland is about to go one step further. As Motherboard reports, Switzerland could soon be the world’s first national case study in basic income. Instead of providing a traditional social net - unemployment payments, food stamps, or housing credits - the government would pay every citizen a fixed stipend. The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 as of November 2014; meaning every Swiss family can expect an unconditional yearly income of $62,400 without having to work, with no strings attached. What could go wrong?

 

As Motherboard reports,

Switzerland could soon be the world’s first national case study in basic income. Instead of providing a traditional social net—unemployment payments, food stamps, or housing credits—the government would pay every citizen a fixed stipend.

 

The idea of a living wage has been brewing in the country for over a year and last month, supporters of the movement dumped a truckload of eight million coins outside the Parliament building in Bern. The publicity stunt, which included a five-cent coin for every citizen, came attached with 125,000 signatures. Only 100,000 are necessary for any constitutional amendment to be put to a national vote, since Switzerland is a direct democracy.

 

The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 as of November 2014. That means that every family (consisting of two adults) can expect an unconditional yearly income of $62,400 without having to work, with no strings attached. While Switzerland’s cost of living is significantly higher than the US - a Big Mac there costs $6.72 - it’s certainly not chump change. It’s reasonable income that could provide, at the minimum, a comfortable bare bones existence.

There are pros and cons (well really short term pros and longer-term ugly cons)...

The benefits are obvious (according to the supporters). Such policy would, in one fell swoop, wipe out poverty. By replacing existing government programs, it would reduce government bureaucracy. Lower skilled workers would also have more bargaining power against employers, eliminating the need for a minimum wage. Creative types would then have a platform to focus on the arts, without worrying about the bare necessities. And those fallen on hard times have a constant safety net to find their feet again.

 

Detractors of the divisive plan also have a point. The effects on potential productivity are nebulous at best. Will people still choose to work if they don’t have to? What if they spend their government checks on sneakers and drugs instead of food and education? Scrappy abusers of the system could take their spoils to spend in foreign countries where their money has more purchasing power, thus providing little to no benefit to Switzerland’s own economy. There’s also worries about the program’s cost and long term sustainability. It helps that Switzerland happens to be one of the richest countries in the world by per capita income.

But of course the muppets that are in power will be gone by then. Is it any wonder the government and central bank are opposed to the Save our Swiss Gold initiative if this is the fiscal plan for the future?

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Given that 60% of American households are already net takers from the government, codifying this in Switzerland is not such a huge surprise for the Keynesian cult.

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We are sure it is obvious what the problems are with this approach... but one quick (rhetorical) question - what do you think will happen to the prices of goods and services if everyone in the country is suddenly flush with $2600 more cash every month? And if $2,600 works - why not $100,000!

Q.E.D.