Switzerland Takes the Minimum Wage a Step Further
Should everyone have a guaranteed minimum income even if they don’t have a job? It’s a radical idea on the Swiss ballot that also has some support in the United States.
This story is part of Governing's annual International issue.
There’s been a great deal of talk this spring about the American minimum wage, with President Obama and some local leaders pushing to raise the national base pay, while other lawmakers contend it’s sufficient at the current level or should be done away with altogether.
So what about a minimum income? That’s what’s being debated right now in Switzerland. At some point in the near future, Swiss citizens will vote on a ballot initiative that would guarantee a base pay -- with no work requirement -- equal to about $2,800 a month, more than double what the current federal minimum wage pays in the United States.
More than 100,000 people signed a petition last year to place the minimum-income measure on the ballot. If a majority of voters and cantons -- the Swiss version of states -- support the proposal, it would become part of the country’s constitution. (A November 2013 survey commissioned by two Swiss trade unions found that 74 percent of respondents supported instituting a national minimum wage of roughly $25 per hour, a related proposal that is scheduled for a vote in May.)
The cost to implement a universal income would be astoundingly expensive, about $220 billion a year, or one-third of Switzerland’s gross domestic product. Advocates of the initiative say that $75 billion will come from replacing existing safety net programs, such as unemployment insurance, disability payments and welfare. The remaining two-thirds of funding would likely come from some kind of tax or fee increase.
Even the more modest proposal to guarantee a minimum wage for workers has attracted its share of detractors among the highest echelons of Swiss government. “It would be wrong for the state to impose a nationwide wage,” the country’s Economy Minister Johann Schneider-Ammann said at a press conference in February. He argued that a national minimum wage would lead to job cuts and the closure of small businesses.
So far, the notion of a guaranteed income hasn’t exactly won widespread support in the U.S. One unlikely exception is Charles Murray, a policy researcher at the conservative Washington-based think tank the American Enterprise Institute. Murray, a libertarian, advocates for a similar idea in his 2006 book, In Our Hands: A Plan to Replace the Welfare State. The country’s current batch of safety net programs are confusing, complicated and inefficient to administer, Murray argues. Both the taxpayers and the poor would be better served, he says, if the government simply gave away money.
“It’s a very interesting policy idea,” says Iowa state Sen. Joe Bolkcom, who last year successfully pushed through a law increasing the refundable value of the Earned Income Tax Credit in his state. American safety net programs often come with compliance criteria to verify that people are using public assistance in appropriate ways, tantamount to assuming the recipients are dumb, he says. By contrast, the Swiss proposal “recognizes that the people running that household are probably better at more efficiently managing that money.”
But a guaranteed income would face stiff political resistance in Iowa and other American states from those who prefer that public assistance be tied to work requirements. Also, each of the existing safety net programs, from food stamps to Head Start, would have its own constituencies ready to resist a complete system overhaul. The political barriers to implementing a guaranteed income would be so great, Bolkcom says, “you would have difficulty getting people to take it seriously.”
This story has been corrected to distinguish between two separate ballot initiatives in Switzerland, one for a guaranteed minimum income and one for a national minimum wage. The latter is up for a vote in May 2014.