Thursday, August 22, 2019

Making the Case for Universal Basic Income


The notion of a universal basic income (UBI)—provided to every eligible person whether in need or not—has come a long way in recent years.  Several books have been published supporting the idea, there is a Democratic candidate for president, Andrew Yang, who makes such a scheme the centerpiece of his candidacy, and recently we had a credible observer of the political and economic scenes, John Lanchester, publish a compelling article in support.  Let us consider Lanchester’s reasoning which appeared as Good New Idea in the London Review of Books.

Lanchester begins by pointing out that the left has not been doing well in the policy arena.  And it is recognized as having been complicit in all the damage that unrestrained capitalism has done to society in terms of economic inequality within our societies.  He also points out that current trends indicate that problems are only going to get worse.  The left needs a big new game-changing idea to make amends for past failures and to prepare society for the future to come.

“You don’t have to believe in an imminent artificial intelligence job apocalypse to see that work will continue to change in the direction of machines doing more and humans doing less, and often less interesting, work.”

“The question is what to do about it. In response to the right’s bad old ideas – more nationalism, more borders, blame the immigrants, culture wars, trade wars and war wars – the left needs some good new ideas. And that is where Universal Basic Income comes in, because UBI has the potential to be the frame-changing, game-changing solution to a whole set of economic and political problems.”

The UBI is simple in concept.

“A guaranteed regular cash payment for every citizen, unconditionally and for life. The money would be enough to provide psychological and practical security, and enough to prevent destitution, but not enough to be a disincentive to work; if you wanted to live on it, you would be safe but not comfortable. (I’m paraphrasing, and there is, as we will see, no consensus about the exact amount of money we’re talking about.)”

Let’s begin by discussing the problems that Lanchester believes would be addressed by the existence of UBI.  Perhaps the most egregious example of economic unfairness is the manner in which society’s most critical tasks end up receiving low or no pay.  The economic engine requires children to be raised, educated, and delivered into its maw in order for progress to continue.  For this difficult and time-consuming labor mothers receive no compensation at all.  Teachers, who are an important part of this process, are compensated at a rate totally inconsistent with their importance.  Care giving for the disabled and invalids is often performed for free by relatives and friends, saving society a large expense.  When care giving is provided by the state it is usually compensated only at a minimum wage rate.  All of these services are primarily provided by women who bear the brunt of economic unfairness.  A UBI would provide some recognition that these efforts are of value.

“The amount of unpaid work done by women was dramatically highlighted in Iceland by the Women’s Day Off on 24 October 1975, an experience which seems to have raised the consciousness of the whole country. President Vigdís Finnbogadóttir, the first single mother to have become a head of state, credits the radicalising effect of the Day Off, which inspired her to go into politics: ‘It completely paralysed the country and opened the eyes of many men’.

A worker in our current economic system has essentially no power but to accept whatever wage is offered.  This means that only a mandated minimum wage can put a floor on what workers are paid.  New trends in employment are aimed at making workers contingent, and left bidding against others to perform tasks most cheaply.  Work is being redefined so that many people are needed to perform ever simpler tasks for even less pay.  A UBI would restore some dignity to workers by allowing them to resist this trend and decline to perform tasks that humans shouldn’t have to do.

 “Recent decades have seen a catastrophic loss of worker power…a systematic attack on organised labour, and a corresponding reduction in pay, security and working conditions. UBI would, quite simply, make it easier for workers to say no.”

The notion that people who are not performing paid labor are of no value to society and of no value to themselves pervades our society.  This becomes a rather insidious concept as the forms of work available become more and more demeaning.  UBI would provide options for workers who wish to have more control over their existence.

“…UBI would have the effect…of ‘desacralising paid work’: of making it clear that there are other forms of work than paid work, and that work is not the only basis of worth, and that it is not true that any job is always better than no job. It would allow people to refuse work that they felt was demeaning, and to take creative chances with their lives; it would make possible deliberate career breaks and ease the strain of externally imposed periods in between jobs. Both of these, along with mid-career retraining, are widely seen as an inevitable feature of the future world of work, and UBI would be a big step towards making them much more endurable.”

As meaningful work becomes rarer, we must recognize that no paid work at all can become a useful form of participation in society.

 “It is possible that some people would take the ‘desacralising’ even further, and choose not to work at all. To some thinkers of a utopian or anarchic bent, such as Graeber in Bullshit Jobs or Srnicek and Williams in Inventing the Future, that is one of the most positive features of UBI, which represents a profound break with our culture’s deeply imbued ideas about the innate and redemptive virtue of paid work. It’s not as if most people find their jobs satisfying. A survey from Gallup showed that only a third of workers in the US are ‘engaged’ with their work, which isn’t great, but is a lot better than the findings in the UK: only 11 per cent of British workers feel ‘engaged’.”

Finally, a UBI contributes to our liberty.  In the United States, the term liberty generally refers to license to do something.  The liberty referred to here is the freedom to be, or attempt to be, whoever one might want to be.  A UBI would support a person who wished to try a career as an artist, or as an author, or even as an entrepreneur.  It might also encourage some to participate in otherwise low-paying public service fields.

Lanchester realizes that there are plenty of reasons why such a scheme might not work; but concludes that there is sufficient existing evidence to indicate that a UBI is worth a try.

“By about this point, most people hearing about UBI for the first time are saying ‘but but but …’ The questions and objections have two main strands, the first of which concerns whether it would work, or be destroyed by unintended consequences. Here are some of them: that people would take the opportunity to drop out of work, and society would end up with a permanently entrenched underclass; that people would spend the money irresponsibly, squander it, so none of the benefits of increased security would be realised; that people would piss the money away on ‘private bads’ (wonderful term, the opposite of public goods, and meaning essentially drugs and drink); that it is inherently invidious to treat the non-working and working poor alike; that too much money would go to people who don’t need it. (Note that plenty of money already goes to people who don’t need it: during quantitative easing, the UK spent £435 billion on buying assets, all of it going to rich institutions and people, to uncertain effect. That would have been equivalent to £50 a week paid to everybody in the UK for two years. I think you would have trouble finding a sane economist who doesn’t think the stimulus effect of that would have been much greater.)”

“Fortunately, there is a large body of empirical evidence about the effects of UBI, thanks to a range of pilots and experimental schemes, from an extraordinary range of places: Manitoba, Iran, Finland, Stockton, Kenya, the Cherokee nation, Alaska, Brazil, Mexico, Liberia, Honduras, Indonesia, even the City of London.”

There will obviously be people who will abuse the benefit, but if on average, the lives of the recipients are significantly improved, then the trial UBI can be considered a success.

 “As always seems to happen with these unconditional cash transfers, people spend it mainly on things they really need…the most common thing people say, when asked what they do with the money, is: ‘It helps me make ends meet’.”  

Lanchester reports on several of these UBI trials.  We will consider a few.  The first examples come from Brazil and Mexico, the last has been ongoing in Alaska for many years.

“The largest sort of UBI programme in the world is Brazil’s bolsa familia. (I say ‘sort of’ because it is paid only to families and is conditional on the children being vaccinated and attending school. That makes it technically not a UBI but a CCT or Conditional Cash Transfer. Acronyms are fun!) It cut extreme poverty by 50 per cent, reduced inequality by 20 per cent, increased school attendance and cut the suicide rate, inter alia. A similar programme in Mexico increased women’s earnings by 65 per cent, increased the amount of time children spent in the school system by a year and three months, cut childhood rates of illness by 23 per cent, and reduced stunted growth in girls by 39 per cent.”

“Alaska has had a version of UBI since 1976, thanks to a policy brought in by the Republican governor Jay Hammond. It is called the Alaska Permanent Fund and takes a quarter of the annual royalties from fossil fuel extraction and puts them into a government-run fund…The fund hands out 2.5 per cent of itself in cash annually in the form of a cheque given to every resident of Alaska except prisoners and convicted felons. The amount usually comes to between $1000 and $2000; the typical payout has been about $1400, which for a family of four is more than $6000 a year, not a lavish sum but not a trivial one either…Alaska has one of the lowest rates of inequality of all fifty states. Studies have concluded that the fund dividend has no negative effect on Alaskan employment rates – a big part of the argument against UBI schemes is that they reduce the incentive to work.”

Lanchester also concludes that the various forms of a UBI are more affordable than one might think.  The money must come from somewhere and there are many ways in which it can be accomplished.  Choosing the best approach could be difficult, but clearly tax increases and spending cuts will be part of the package.  This illustrates one generous form of UBI.

“Andy Stern suggests a form of UBI giving every American adult $1000 a month, at a cost of $2.7 trillion, to be paid for by getting rid of existing programmes, cutting tax breaks (which cost $1.2 trillion), reducing defence spending and instituting a sales tax.”

For perspective, the current size of the economy is about $21 trillion, and annual federal expenditures are currently about $4 trillion. 

There is a bit of a warning that comes with these considerations.  The small-scale experiments that seem reasonable in terms of results might have unintended consequences when applied to an entire economy.

“Pilot schemes can give you all sorts of evidence about the effect of UBI on individuals, but to run an economy-wide UBI you would be running an economy-wide experiment, and by definition, we don’t know how that would work out. This is a good reason for starting UBI low and seeing what happens.”

Lanchester provides a final word of advice to ambitious progressives.  And he turns to none other than the conservative economist Milton Friedman.

“The left will need a new toolkit. It will need to have done its intellectual prep. That, more than anything, is what this new wave of work on UBI represents. Milton Friedman wasn’t right about everything, but he knew more than anyone in modern political economics what it takes to change an intellectual climate. He worked out how to make a new idea take shape first as something thinkable, and then as a specific policy. He said that the crucial step was to be ready…”

Then this quote attributed to Friedman:

“Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

Lanchester’s final word:

“The list of progressive alternatives which currently fit that description is one item long: universal basic income.”


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