Wednesday, December 28, 2016

Universal Basic Income (A Response to Josh Barro)

It was interesting to see Josh Barro let the election of Donald Trump help him make up his mind against universal basic income. In my case, even the prospect of a Trump presidency was making it clear to me how important the UBI is as a policy. So I thought I'd quickly jot down some reactions to Barro's piece.

First, like Barro, I think the strength of the UBI is the way it unites Left and Right. It

has become subject of fascination for policy wonks across the ideological spectrum because of the goals it intends to serve: decoupling subsistence from wage labor (a goal of the left), replacing complex safety-net programs that often create disincentives to work (a goal of the right), and preparing for a future in which automation reduces the demand for labor.

So far, we agree entirely. A UBI would help America heal by transcending its ideological divisions.

But where I think Barro goes wrong is when he begins to think about the importance of work and the associated resentment of those who don't have it. "Work is one of the core institutions that holds our society together," he reminds us. "It serves two purposes: It provides people with the income they need to support themselves and their families, and it provides a sense of purpose in life and society." That is indeed how things are today, more or less. Our culture links employment and dignity very closely, so that to be jobless is a source of shame.

Barro thinks that a UBI would exacerbate the problem. I think it would solve it. Here's how:

First, it would no longer be the case that you needed either a job or a humiliating relationship with a welfare office to survive. Like everyone else, you would simply have enough money in the bank every month to survive if you lived frugally enough. You and your spouse could, working together, probably even raise a family without having to do any paid work at all.

Second, and this is very important, the minimum wage could be abolished. Wages would fall (with no effect on the real income of working people, since the UBI would cover their decline in wage income). It would become possible for employers to offer jobs at whatever rate people would be willing to take them. Keep in mind that their willingness to work would never be outright desperate. So employers would still need to offer a combination of reasonable compensation and reasonable working conditions. The point is just that they'd probably be able to find someone willing to work quite cheaply for at least a few hours every day. And they wouldn't have to offer anyone a full-time job to get ordinary labor done. They could just hire more people.

And that's where UBI would also solve "the immigration problem" as construed by Trump and his voters. It would effectively build a "wall" ... actually, let's call it a "platform". There would be plenty of low paying, part-time jobs in America, and plenty of Americans willing to work at them. (After all, they would now have reasonable comfort, plenty of time, but still not enough cash for that better stereo or road trip to LA.) But, since the UBI would increase purchasing power across the board, the cost of living relative to wages would be quite high. This means that "undocumented" residents, who would not be able to collect the UBI, would no longer find the US a very attractive place to live. The UBI would create a paradise only for legal residents.

I realize that there are people on the Left who would question the humanity of this arrangement for existing non-documented residents. But that political problem already exists and would be solved simply by issuing the necessary papers under whatever agreed upon criteria. The point is that the incentive to take up undocumented residency in the US in the first place would disappear almost overnight. Once you got here, no one would be offering you a job you could survive on.

Let's return to Barro's notion that "Work is one of the core institutions that holds our society together." The point of course is that it has outlived it's usefulness in this regard. The Cult of Work needs to go the way of the Cult of Virginity. We need to stop connecting any shame to loafing. Labor should be exchanged as freely for money as anything else. Let's make love, not work!

That would make America great again, I think.


Presskorn said...

"Among other things, these writers dislike the fact that a UBI would deliver individuals income in a way that is divorced from working. Such an income arrangement would, it is argued, lead to meaninglessness, social dysfunction, and resentment.

One obvious problem with this analysis is that passive income  —  income divorced from work  —  already exists. It is called capital income. It flows out to various individuals in society in the form of interest, rents, and dividends."

Thomas said...

Thanks for the link. It's an interesting counter to the specific argument Bruenig targets. As a thought experiment, it works. But I don't like the way Bruenig ends up taking it literally at the end to suggest that the "government [should] employ various strategies (mandatory share issuances, wealth taxes, counter-cyclical asset purchases, etc.) to build up a big wealth fund that owns capital assets."

I guess that's the way socialists think about UBI. The State ends up owning (at least a share) of the means of production. I'm much more comfortable with the State extracting "rent" from the land owners in the form of the Georgist land tax. Giving government "various strategies" to meddle in the way business operates is the system we already have. In an important sense, I guess, Bruenig is simply defending welfare payments, which, like capital income, are given to people who don't work guided by "various strategies" (means testing).