Thursday, May 21, 2015

Universal Basic Income

Universal Basic Income is an idea that regularly raises its head but sometimes from unexpected corners.

The extreme left, especially feminists (eg Sue Bradford, Prue Kelly) have pushed it for a long time.

More recently though the right/libertarian author Charles Murray wrote a book recommending it. Not long after, Gareth Morgan popped up suggesting it in his book "The Big Kahuna" (I asked Morgan if he was a aware of Murray's book and he said he wasn't. I was skeptical).

I am against the concept because its acquiesces to the state's coercive power to redistribute wealth. In fact it increases the amount of redistribution in order to purportedly achieve better results. I'd go the other way. Reduce state-controlled wealth redistribution to increase voluntary wealth redistribution through investment, jobs and trade.

Michael Tanner, who has written two substantial books about the welfare dependence problem in America deals with the idea, summarised here by NCPA:



·                     We Should Pursue Incremental Steps to Welfare Reform
May 20, 2015
Over the past 50 years, the United States has created an enormous, complex and costly welfare state. Federal, state and local governments have spent more than $20 trillion on such programs since the start of the War on Poverty in 1965. Yet, the current welfare system has failed to make the poor independent or to increase economic mobility among the poor and their children.
There are three approaches to a guaranteed national income - a universal basic income, a negative income tax, or a wage supplement - that offer potential advantages over our current welfare system.
  • First, a guaranteed national income would be simpler and far more transparent than the current welfare bureaucracy.
  • Second, a guaranteed income program would reduce paternalism and government in­volvement in the lives of poor people. It would also do more to bring participants into main­stream economic life.
  • Third, directly providing cash assistance, as opposed to in-kind aid, would more effectively alleviate poverty. It would also allow recipients to develop life skills they will need when they get to the point where they are more indepen­dent.
  • Fourth, a well-designed guaranteed nation­al income could provide better incentives for work and marriage than the current welfare system.
  • Finally, depending on the level at which it is set, a guaranteed national income could, in theory, significantly reduce poverty.
But what sounds good in theory tends to break down when one looks at questions of implementation. There are serious trade-offs among cost, simplicity and incentive struc­ture.
  • A universal basic income would be simple to implement but would cost far more than the current welfare system.
  • A negative income tax might be affordable but would likely be complex and it would potentially discourage work.
  • A wage supplement like the Earned Income Tax Credit could encourage work, but it would not be universal, and therefore it could not fully replace the cur­rent welfare system.
Source: Michael Tanner, "The Pros and Cons of a Guaranteed National Income," Cato Institute, May 12, 2015.




We Should Pursue Incremental Steps to Welfare Reform

May 20, 2015
Over the past 50 years, the United States has created an enormous, complex and costly welfare state. Federal, state and local governments have spent more than $20 trillion on such programs since the start of the War on Poverty in 1965. Yet, the current welfare system has failed to make the poor independent or to increase economic mobility among the poor and their children.
There are three approaches to a guaranteed national income - a universal basic income, a negative income tax, or a wage supplement - that offer potential advantages over our current welfare system.
  • First, a guaranteed national income would be simpler and far more transparent than the current welfare bureaucracy.
  • Second, a guaranteed income program would reduce paternalism and government in­volvement in the lives of poor people. It would also do more to bring participants into main­stream economic life.
  • Third, directly providing cash assistance, as opposed to in-kind aid, would more effectively alleviate poverty. It would also allow recipients to develop life skills they will need when they get to the point where they are more indepen­dent.
  • Fourth, a well-designed guaranteed nation­al income could provide better incentives for work and marriage than the current welfare system.
  • Finally, depending on the level at which it is set, a guaranteed national income could, in theory, significantly reduce poverty.
But what sounds good in theory tends to break down when one looks at questions of implementation. There are serious trade-offs among cost, simplicity and incentive struc­ture.
  • A universal basic income would be simple to implement but would cost far more than the current welfare system.
  • A negative income tax might be affordable but would likely be complex and it would potentially discourage work.
  • A wage supplement like the Earned Income Tax Credit could encourage work, but it would not be universal, and therefore it could not fully replace the cur­rent welfare system.
Source: Michael Tanner, "The Pros and Cons of a Guaranteed National Income," Cato Institute, May 12, 2015.
- See more at: http://www.ncpa.org/sub/dpd/index.php?Article_ID=25675&utm_source=newsletter&utm_medium=email&utm_campaign=DPD#sthash.CW15VFnS.dpuf

We Should Pursue Incremental Steps to Welfare Reform

May 20, 2015
Over the past 50 years, the United States has created an enormous, complex and costly welfare state. Federal, state and local governments have spent more than $20 trillion on such programs since the start of the War on Poverty in 1965. Yet, the current welfare system has failed to make the poor independent or to increase economic mobility among the poor and their children.
There are three approaches to a guaranteed national income - a universal basic income, a negative income tax, or a wage supplement - that offer potential advantages over our current welfare system.
  • First, a guaranteed national income would be simpler and far more transparent than the current welfare bureaucracy.
  • Second, a guaranteed income program would reduce paternalism and government in­volvement in the lives of poor people. It would also do more to bring participants into main­stream economic life.
  • Third, directly providing cash assistance, as opposed to in-kind aid, would more effectively alleviate poverty. It would also allow recipients to develop life skills they will need when they get to the point where they are more indepen­dent.
  • Fourth, a well-designed guaranteed nation­al income could provide better incentives for work and marriage than the current welfare system.
  • Finally, depending on the level at which it is set, a guaranteed national income could, in theory, significantly reduce poverty.
But what sounds good in theory tends to break down when one looks at questions of implementation. There are serious trade-offs among cost, simplicity and incentive struc­ture.
  • A universal basic income would be simple to implement but would cost far more than the current welfare system.
  • A negative income tax might be affordable but would likely be complex and it would potentially discourage work.
  • A wage supplement like the Earned Income Tax Credit could encourage work, but it would not be universal, and therefore it could not fully replace the cur­rent welfare system.
Source: Michael Tanner, "The Pros and Cons of a Guaranteed National Income," Cato Institute, May 12, 2015.
- See more at: http://www.ncpa.org/sub/dpd/index.php?Article_ID=25675&utm_source=newsletter&utm_medium=email&utm_campaign=DPD#sthash.CW15VFnS.dpuf

4 comments:

Anonymous said...

The only effective welfare reform in NZ was Ruth Richardson --- cutting benefit levels across the board, eliminating the old child benefit, etc.

The only effective welfare reform in the UK has been George Osbourne in the previous UK government --- cutting benefits, the "bedroom tax", child benefit, overall caps on benefits paid to family irrespective of size, etc.

http://www.politics.co.uk/comment-analysis/2013/04/02/george-osborne-welfare-speech-in-full

"Incremental" steps are all very well, but they are slow and ineffective. Real reform is legislatively (or administratively) easy, effective immediately, and unpopular only amongst the dependent classes and the extreme left.

Ruth's government was re-elected with an increased majority after its benefit cuts. Cameron's government was similarly just elected it is own right with no coalition partner. UK style benefit cuts (not "renaming") would deliver Collins or Tolley a majority at the next election, and a mandate for much more wide-ranging reform to welfare, schools, health, and super.

Anonymous said...

Very surprised to see Charles Murray advocating a larger welfare state.
His 1985 "Losing Ground : American social policy 1950-80", cogently argued that government help usually increases poverty; does more harm than good
"A hand, not a hand-out, only produced more hands out" was his summation 30 years ago.
(I'm stunned I could remember, so long ago)
Peter

Anonymous said...

I often whether society will be forced into a position where this concept will become inevitable.

A minimum wage, increasing automation, and in a few decades soft AI is likely to result in a decreasing employment rate across the population.

Increasing investment in education is usually considered to be "the answer" but I wonder whether for those people on the wrong side of the bell curve whether it will be viable.

As the nexus of these factors increases in magnitude, employment will move downwards over time and result in an increasing level of inequality of income.

To prevent the second coming of socialism the owners of capital will be forced into introducing a guaranteed minimum income.



david said...

I have toyed with the idea of a universal basic income. I was interested in reading Morgan's book. However when I read on the cover that the purpose of government was to redistribute income I decided it wasn't for me. I didn't come at the idea from a redistributive viewpoint at all. My basic starting point was simple economics. If a good costs more for the buyer to buy than the supplier receives, the result will be a gap between supply and demand. Where that good is labour, the gap is unemployment. In the absence of welfare, you would expect unemployment - means tested welfare benefits exacerbate the problem. People on benefits have very high effective marginal tax rates and that is one reason (as you keep saying) that we get bad choices. A universal basic income might be a sinecure for some, but for most, actually restores the incentive to work. It would have to replace minimum wages. It would replace a number of means or age tested benefits and save the cost of administering and policing those. On introduction, its value would be deducted from all state and municipal wages, and the legislation could allow it to be deducted from private wages. By allowing firms to pay much lower wages it should generate employment demand - or if not, would generate profits to be taxed. I once went through the budget and identified all the savings to government that could be off-set against the cost and at that time concluded it would close to break even. Just a thought.