Sunday, 30 October 2016

Second thoughts about universal basic income

By Tyler Cowen, Published The Straits Times, 29 Oct 2016

I used to think that it might be a good idea for the federal government to guarantee everyone a universal basic income, to combat income inequality, slow wage growth, advancing automation and fragmented welfare programmes.

Now, I'm more sceptical.

"Let's send a cheque to everyone" is an appealing idea, but I've come around to the view that doing so would do more harm than good.

My first worry is that it eventually would choke off immigration to the United States. Voters don't like sending money to immigrants. A backlash could turn the net global humanitarian impact of a universal basic income plan negative. As I witness the evolution of US politics, I suspect it will prove easier to limit immigration than to limit the rights of immigrants to benefits, especially since the US offers a relatively rapid path to citizenship.

As it stands, most US welfare schemes are tied to the institution of work. That leaves gaps in the safety net, and frequently analysts decry this imperfect coverage.

I take this criticism seriously, but I see merit in tying welfare to work as a symbolic commitment to certain American ideals. It's as if we are putting up a big sign saying: "America is about coming here to work and get ahead!" Over time, that changes the mix of immigrants the US attracts and shapes the culture for the better.

I wonder whether this cultural and symbolic commitment to work might do greater humanitarian good than a transfer policy that is on the surface more generous. If you think of the US as the major source of innovation for the world, prioritising a work ethic over comprehensive welfare coverage might prove beneficial.

It is fair to ask whether a universal income guarantee would be affordable, but my doubts run deeper than that. If two able-bodied people live next door to each other, and one works and the other chooses to live off universal basic income cheques, albeit at a lower standard of living, I wonder if this disparity can last. One neighbour feels like she is paying for the other and, indeed, she is. It's different from disability payments, which enjoy public support because they require recipients to pass through a legal process certifying that they are not able to hold down a job.

Many people do know that standards for disability eligibility are somewhat dysfunctional. The disability rolls have been growing even though American life never has been safer or healthier. Still, the embedded cultural norm is that financial support is contingent rather than automatic. An overloaded and abused disability system may, in fact, be the form of a guaranteed income we end up with, without universality.

The cleanness and transparency of a universal basic income are sometimes touted as virtues, but in the context of American political culture, they might prove its undoing.

Finally, I wonder whether universal basic income addresses the real problem. Consider the millions of prime-age males who have dropped out of the labour force. Many are capable of working, yet these individuals typically are not taking the jobs that immigrants might end up filling. Either they shy away from hard work, don't want to move to where jobs are, or don't like the low social status of those jobs, among other possibilities.

I no longer see getting money to these men as the central social problem. Instead, the core issue is how to make the work that's available to them sufficiently rewarding, in cultural as well as economic terms.

That's hard to do. For instance, a lot of those men are not employable in the military because the military does not want them and, in an age of high-tech warfare, can't really use them. Jobs as healthcare aides are available, but they are low-paid and many men won't take them. Government make-work jobs are a possible option - think of a modern version of a Civilian Conservation Corps - yet it's not clear whether those jobs would be taken and whether they'd feel futile rather than like a career ladder to a brighter future.

If the kinds of jobs created by the modern service economy can be made more attractive, much (not all) of the work problem will take care of itself. Most people do wish to work in jobs they enjoy, as a source of pride, money and social connection.

Unfortunately, I don't have a good answer for how to get there, but I worry that permanent subsidies for those who don't work wouldn't lead towards solutions.

That means effective safety-net policies will continue to be messy and complex. Although the universal basic income idea sounds like a good direct fix, it probably leads in the wrong direction.

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