James Meade's Proposals for a Social Dividend

Discussion

Cui Zhiyuan:

The second feature of Meade’s program of “liberal socialism” is “social dividend:

”every citizen is paid a tax-free Social Dividend according to the citizen’s age and family status but without any other conditions. Two basic reasons for instituting social dividend are:

(1) promotion of equality by providing everyone with the same basic unconditional income;

(2) the reduction of risks by providing some part of income that is unaffected by variations required by flexibility in the labor market.

The intuitive core of the idea of social dividend lies in the attempt to replace the demand for job tenure by an enhancement of the resources and capabilities of the individual citizen.

One of the advantages of social dividend over the conventional socialdemocratic policy of “conditional benefit” is that the former improves the incentives of recipients of low-earning jobs. This may appear counter-intuitive at first sight, because “unconditional social dividend” seems to reduce the incentive to accept low-paid jobs more than conditional benefit (based on unemployment or illness). However, intuition is wrong in this case.

Meade argues against intuition with the following simple example:

- a recipient of a Social Dividend of 80 supplemented by a Conditional Benefit of 20 will have an incentive to take outside earnings so long as those earnings after deduction of Income Tax are greater than 20; but if he or she had relied for the whole 100 on a Conditional Benefit, there would be no incentive to accept any outside earnings less than 100."

• Essay/Chapter: Liberal socialism and the future of China. A petty bourgeoisie manifesto. Cui Zhiyuan. Chapter 9 of: The Chinese Model of Modern Development. Edited by Tian Yu Cao. [1]