Tell me the good and the ills of a universal minimum basic income.
More specifically: The US federal poverty line is defined at a little under 12,000 per person. The MBI I'd like to consider ends poverty, so is a universal grant to every adult of $12,000 per year, in 12 chunks of a grand each.
Undefined and open for discussion: how to deliver the money, what social programs this replaces, how to pay for it, what to do about children.
Absolutely undefined and open for discussion: good and ills this will create. Unseen repercussions of putting more than 2 trillion dollars into the economy each year.
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Possible ill: Huge incentives for shady operators to figure out how to victimize the poor ... they've got more money to take now! Think "payday loans" on steroids.
ReplyDeleteTony Lower-Basch Yeah, absolutely. "Oh, you need 500 bucks now? Oh, no problem, we know you're getting a grand in a week. How about you get the 500 now and the grand comes straight to us?" ... and we've modified your bank information so we get it every month.
ReplyDeleteI'm also thinking that rents might include a step function ... with Dickensian warrens renting affordable to those on basic income, then a rent gap, then decent cheap housing at twice that. Not sure of the socio-economics there, though. A great deal depends on how much stigma attached to living on the dole.
ReplyDeleteI wonder how many people will choose to live solely on the dole. I imagine it'd actually be pretty low, as people will be free(r) to pursue goals and pursuits that they love that bring in small amounts of money.
ReplyDeleteBit of an interlocking system, with one of the other bits being "What does a little extra money buy you?"
ReplyDeleteIf the answer is "Not much of consequence" then the motivation for earning that extra money is reduced.
Value returned on the dollar is not linear, remember. It doesn't even have to be continuous. What I'm proposing is that if you create a population cluster near $12K, then that in turn creates price-clusters. It changes the landscape of what your 12-thousand-and-first dollar means, vs. your twenty-thousandth dollar.
ahhh.
ReplyDeleteIn which case, the labor market also gets all messed up. If you've got a significant segment opting out of labor altogether, then the price of labor goes up, wouldn't it?
Fairer wages. Some work needs to be done, but is really crappy work? Good luck finding someone cheap, since now their life won't depend on it.
ReplyDeleteChildren should get some fixed percentage, maybe 75%.
Regarding Tony Lower-Basch's first comment: Why should that be any worse than current receiver of any kind of income?
As a converse to William Nichols's point, there are a lot of things peopke might start doing for free if they don't need income from them in order to eat. I say this as a game developer in a community full of game developers.
ReplyDeleteIn turn that changes and possibly undermines the purchasers' understanding of what they should have to pay money to receive.
On the gripping hand, a lot more people have a little more disposable income - people previously living just over the poverty line are suddenly twelve grand over it.
One of the most basic goods would likely be a reduction in the level of homelessness. Which in turn should lead to a lowering of both health care and law enforcement costs that are directed at the homeless populations. Utah, for example, found that it spent an average of $20k a year on the chronically homeless, and saved approximately $8k a year on that cost by merely providing them homes.... which coincidentally works out to them spending right around your suggested $12k a year on them.
ReplyDeleteAt the end of the day it's essential to figure this one out because it's the only way to preserve a functioning society in a world where, within our life times, we are likely to see permanent 40% unemployment in the developed world.
ReplyDeleteThe alternative, as I like to point out to haters, is the world burns as those 40% decide they've had enough.
https://socialecologies.wordpress.com/2016/04/30/yuval-harari-what-to-do-with-billions-of-useless-humans/
William Nichols BTW if you haven't read Sapiens, highly recommended.
ReplyDeleteMichel Kangro What does fair mean?
ReplyDeleteNote: I've been reading a lot of economic fiction, and its been infecting me. Do you mean something like "x is fair(er) if it is entered into without the implied threat of starvation" ?
Brandes Stoddard The potential impact on gaming is really interesting! I write the occasional totally free pbta hack, right. With tiny audiences, and probably spending more time making it than it gets played. And that's OK, because I have fun with the writing.
ReplyDeleteAnd yet, there's a notion -- and i don't know if its right or ill -- that games we create a worth something. That by virtue of putting in labor (if it can be called that), that the product is valuable economically. I wonder if that would change?
Matt Johnson Agreed. What Utah has done is a pretty great model. I'd rather avoid giving houses away, as I think that leads to things like the projects in our large cities -- on a large enough timeline, anyway. But, it is fantastic that it was cheaper to end homelessness than to police it!
ReplyDeleteRalph Mazza Thanks for the reading material! I don't think I'm smart enough to know what a near singularity will do to the need for human labor, but its is often enjoyable to read about.
ReplyDeleteWilliam Nichols Spontaneously defining 'fair' is hard. :)
ReplyDeleteWhat I meant to say was: if workers are able to disagree with price for their labour without being endangered of starving, homelessness and so on, then they could start to ask for higher wages, unless there are enough people willing to do said work for low wages. I believe that could lead to a situation in which work was more valued financially if it is, for whatever reason, not very rewarding in itself. Of course, that goes the other way as well: rewarding work, arts, maybe, might be done far cheaper then nowadays.
I would be okay with creating gaming material for free - as my blog's nearly six years of history demonstrate - if I didn't need money to pay bills or buy other gaming material. Yes, there's free stuff out there; there's also not-free stuff, and I would not like to be unable to purchase it.
ReplyDeleteI don't believe that gaming material should be free as a universal default assumption, because at absolute minimum materials were consumed to create the work. As long as it takes money to do things, I think it's fine for money to change hands as part of game development. Show me a Roddenberry-esque Federation in the real world, and I'm great with no money changing hands for anything at all. But if it takes money to live and you still believe in paying artists for their labor, then writers should get paid too.
Michel Kangro It is, sorry! But, yes, being able to negotiate without fear of starvtion / homelessness sounds like a valuable thing!
ReplyDeleteInterestingly that book is so much more than that. It's subtitle is a brief history of humans...and it is. It touches on evolution, the development of early society, religion as a manifestation of our ability to build artificial realities... the same ability that enables us to pretend that nations and money are things than actually exist. he discusses what the agricultural revolution really meant for mankind...I expect you'll quite enjoy his observations that human progress generally means human "progress". It then moves on to capitalism, imperialism and science and demonstrates how those three things are all tied together and feed each other.
ReplyDeleteIt's a very high level survey written for a lay audience, but the assertions he makes on topics I'm familiar with from more academic works (like recent efforts to trace technological development through the spread of vocabulary) lines up with what I've been reading elsewhere.
Truly an amazing synthesis.
You could prevent a lot of the loan-based scams by forbidden bankruptcy courts from taking the UBI into account. This is, when they consider whether you can pay your loans, they can't count it, and they can't garnish it.
ReplyDeleteDeliver the money by direct deposit (and I see no reason not to do it weekly). One payment per SSN/SIN. We already have an enormous bureaucracy devoted to detecting and eliminating welfare fraud. Determining whether people exist and are unique is much easier.
For how we pay for it, considering the USA, population 324 million, life expectancy of 80 years, that's about 290m people to pay (counting under 18 as half). About 3.5 trillion dollars a year. Which is roughly the US Federal budget. Ouch.
Paying continued: The US spends nearly a trillion dollars on various social security programs already, so that's one down. Somewhere around half the population don't need the help, so their taxes will go up enough to counteract the UBI payouts, which saves about 1.5 trillion. That leaves about a trillion in the middle. I expect that at least half that will be recovered by taxes on those below the break-even line. So, it's at least close. I believe that professionals can massage the numbers to make it work out.
As for what social programs it replaces: welfare, food stamps, unemployment insurance, social security, pensions, etc. You could probably also eliminate subsidized housing. It doesn't replace free schooling, healthcare, libraries, etc. It does eliminate the lowest tax bracket, so if you work, you start getting taxed from the first dollar, with a break-even point around $60k/a.
Children should "clearly" be given a reduced value, curved by actuarial science. We already do that to a certain extent, via baby bonuses and child benefits.
William Nichols I agree, giving away homes is easier to manage on a small scale and can lead to it's own problems which is honestly why I'd like the BI method better anyways. Paying out BI will still require people to take care of finances, and to be part of the economy in a way that just saying "Live here" wouldn't.
ReplyDeleteBrandes Stoddard Sorry, let me back up a tick. Game designers should always and forever be free to charge whatever they wish for what they make.
ReplyDeleteI wonder, in a post UBI world, to what extend we'd pay for pdf's and things. Not that game designers wouldn't be able to charge, but to what extent gamers would be willing to buy. That's what I wonder.
That too is an interesting question! I have a lot of thoughts around this topic that are sufficiently divergent from the core of this conversation that I will save them for another day. =)
ReplyDeleteRalph Mazza Put on hold at the library.
ReplyDeleteJonathan Beverley You seem to have the answers, thanks.
ReplyDeleteRegarding: Fairness in labor markets.
ReplyDeleteI don't know how this relates to "fair", but the UBI increases the elasticity of labor supply with regards to salary offered. Elastic markets tend to seek equilibria very differently than do inelastic markets (e.g. why healthcare costs do not auto-adjust to shifting market conditions in the same way that bed linen costs do).
Brandes Stoddard Drop a verse, give us some knowledge.
ReplyDeleteTony Lower-Basch I'm never sure what fair means either. I think there's an intuition -- which I can't disagree with -- that labor that is compelled is inherently not fair. That seems like how the word is often used.
ReplyDeleteAs for the elastic versus elastic markets, I don't know enough to speculate. Macro economics is a thing I have never understood. I have no intuition and no real understanding.
Elastic and inelastic are micro econ terms that relate to how readily demand adjusts to changes in price. It's the same concept as discretionary vs. non discretionary.
ReplyDeleteIf you can easily do without, easily wait, or easily find a substitute then demand tends to be elastic. Raise the price a little, demand plummets, it's a "buyers market".
If you can't do without, there's a high degree of urgency, lack of competition and no ready substitutes, demand tends to be inelastic. Raise the price all you want, they have no choice but to buy anyway. It's a "sellers market".
When jobs are scarce, savings are low, bills are high and options are limited labor is very inelastic..."if you don't like it quit and work somewhere else" is easier said than done.
To the extent that GMI gives enough of a saftey net to allow workers to more readily walk away from bullshit conditions, labor becomes more elastic.
The laws of supply and demand are more responsive, and thus provide more effective (or at least more immediate) checks and balances, the more elastic a market is. Inelastic markets encourage alot of cream skimming.
William Nichols I don't pretend those are "the answers", but just the ones I've come up with so far. I haven't been able to get a lot of capable discussion on the topic.
ReplyDeleteJonathan Beverley
ReplyDeleteI'm curious as to why you say loan-scams could be legislated out of existence with bankrupcy courts. The suggestion was something like: a vile loan company says "Hey, yeah, sure, of course I'll give you $500. And we'll set up an auto transfer next month to pay it off .... and for every month until its paid off."
The stop that, you'd maybe need to stop auto transfers. That sounds like a big ole problem.
and sure, its by direct deposit. Of course. But, where? Is everyone going to have a bank account? Is there going to be a national bank with a checking account for every citizen?
I was going with 2 trillion, as I said above. That's ~160 million people, so not counting children. I was intentionally leaving them out, as children are a thorny issue. I'm curious as to why it is obvious to everyone else to include children.
You suggest that half the population doesn't need help. I think this is a weird way of coming at it -- the UBI goes to everyone. You, me, bill gates, the dreams. Every adult citizen. Right? Right.
How we pay for it, then, is different from what the money is. Do we need additional taxes, or would we find a lot of the money by having a lower number of contractors checking for fraud & abuse of our dozens of programs?
I'm not entirely convinced that I want it to be revenue neutral for those who're middle class, either.
The tax brackets in the Us already start with taxing at the first dollar. I think you mean to eliminate all deductions? Maybe, but that seems even harder than a MBI -- ask the middle class about their mortgage interest deduction sometime.
I /think what he is trying to say, is that if you could exclude BI from bankruptcy courts, i.e.e it can not be effected by it then a loan company could never in effect collect from someone who was only on BI because thy could declare bankruptcy, get their debt's dealt with but the BI could not be reduced. I /think/ that's the basis of what he is saying at least. There are some details that would need quibbled there, but there is a core to it that would basically make predatory loan companies unable to function by removing their ability to force people into perpetual debt.
ReplyDeleteRather than posting my whole spiel here, I've created a separate post. https://plus.google.com/u/0/+BrandesStoddard/posts/apAjkWdkF6j
ReplyDeleteBrandes Stoddard Reading now. This may take a bit.
ReplyDeleteMatt Johnson AHH. Maybe so!
ReplyDeleteSo, if a predatory loan company goes after you, then you can declare bankruptcy and still eat. That's pretty nifty, actually!
Tony Lower-Basch a lot there also depends on if landlords can get housing regs that prevent said warrens repealed. There is an argument that talks about project housing already being this, but project housing is exploitable because it is taking a housing credit direct from the state; it just has to set its price to the max for the credit.
ReplyDeleteMatt Johnson William Nichols exactly.
ReplyDeleteMy point about those "who don't need it", is that their taxes will go up by at least the BI. They're still getting it, and if they lose their job/etc then it'll be there for them, but revenue-wise, they're paying for their own BI.
I don't really know how the US tax system works. In Canada, there's about $10k in deductions you get just for existing, so effectively, you're not taxed until you hit the poverty line.
Jonathan Beverley Ours is, maybe unsurprisingly, complicated. There is a deduction every gets for existing -- a couple different ways actually -- but technically the first dollar is taxed. Its just the first non-deducted dollar, and is confusing.
ReplyDeleteEffectively, then, there are these three broad catgories maybe, with admitted edges between them.
1. proletariat -- get an MBI, don't have an income, don't pay taxes.
2. bourgeois - get an MBI, have an income, pay taxes suffieint to cover your MBI.
3. capitalist - get an MBI, have an income, pay taxes sufficient for your MBI and that of the proletariat.
Is that true (ish) in your view of how to pay for an MBI?
The main consequence (as Brandes Stoddard touches on in his thread), is that hitherto uncompensated labor-- namely childcare for your own children-- suddenly is compensated. The ability of at least one parent to be able to delay returning to an external job, or choose not to if so desired, is really huge. Possibly, it would bring a leveling to the cost of daycares, demand reduction keeping it from being such a catch 22 (those who most need the daycare working jobs where it's crazy hard to afford it).
ReplyDeleteI also expect there are a number of small farms where UBI would essentially take the place of a subsidy, and keep them from completely going under in lean production years. I'd have to do some asking there though.
Rabbit Stoddard Looks like we the US does about $20 billion a year in direct to farmer subsidies. Making that a part of the UBI would help, and is illustrative of how much a trillion dollars is -- its 50 times the subsidies!
ReplyDeleteWilliam Nichols I agree with your categories, acknowledging that they're not hard, and, in particular, there's a significant number of people in 1.5 -- get an MBI, have income, pay taxes on that income, but not sufficient to cover your own MBI.
ReplyDeleteJonathan Beverley Abs, that's an important part. I think almost everyone in (1) is actually in (1.5), where you have some income and pay taxes, but those taxes are less than enough to support your MBI.All you need to be in that category is work a gig every so often.
ReplyDeleteI have to argue fro Germany, as I do not know either the US or Canada well enough.
ReplyDeleteIn the end, in my opinion, the financing should not be an issue, at least not in countries which do have some general social security system in place, as we do have in Germany. In theory, no one needs to be homeless or starving here, since everyone can get social security.
What we are basically doing is looking at everyones income, checking on an individual level wether or not each individual has enough to get by. If someone hasn't, he/she has the right to some money, carefully balanced against his motivation to go seek work.
UBI would do the same, but put the system back on its feet. Instead of checking and calculating for each and every individuel wether their income, deductables and so on are enough to get by, everyone gets the UBI. No checks, you exist, you get enough money to survive.
Well, some get some money that they wouldn't have gotten else, but we are also saving on all those buerocracy, and in the end, we achieve the same basic goal: No one needs to starve or freeze or be homeless.
Through taxes, those getting an UBI and not needing it will effectivly not get it, but pay for those getting an UBI and needing it.
Since we are restructuring money in amounts that basically double government spending (on paper), why not couple this with abolishing all and every single tax and then carefully reintroducing just one or maybe two taxes to pay for everything (and those we aren't doing for money, but for other reasons, like fuel, tobacco or alcohol taxes).
Michel Kangro Thank you for the perspective from across the ocean. We have similar services in the US, but limited and complicated.
ReplyDeleteI think this is really the core of the positive: No one needs to starve or freeze or be homeless.
And if we can do that in a way that doesn't mess with human dignity? All the better!
12k is still homeless in some (many?) parts of the country, and the homeless population isn't very mobile. (It's also cruel if you're forcing people to choose between living near their support network and housing; "just move somewhere cheaper" isn't a great solution.)
ReplyDeleteI worry about housing costs in general, because what I've seen demonstrated in non-controlled markets is that housing usually stays in low enough supply that it remains priced out of the low end.*
*Note that I grew up in what is now a very expensive housing market, so I admit that this is skewed, but I'm still not going to be surprised if landlords try to charge "all of UBI and more" in any market they can do that in, because Murika and free markets.
Controlled markets have landlords never fixing or building new buildings, and tenants afraid to move, so they also end up with under supply.
Without some way to get adequate housing supply, and to prevent it from becoming segregated (segregating low income housing has bad consequences for the segregated) I don't see how UBI alone helps homelessness a ton.
Mind you, I love the idea of UBI, but it's only part of a fix for poverty.
ReplyDeleteGretchen S. You are right. UBI doesn't fix everything and if the market for housing is a seller's market, UBI alone won't fix it.
ReplyDeleteAlthough it might create an environment in which providing affordable housing is more worthwhile, since it is known that, say, 300$/month should be ok for a rent. Nowadays, building especially for lower income might lead to situations in which their income changes drastically and the rent is not as reliable, thus investors may be deterred from investing in that market or add a risk surcharge to the rent.
But as said, making housing more of a flexible market in which buyers and sellers are eye-to-eye would be something looked into without much regard for UBI.
Michel Kangro I'd like to see it as a baseline to set housing around, so it certainly doesn't hurt. My city has a program where multi-unit buildings have to have some of them be only rented/sold to low income households, and while that's overloaded (because we're not growing much, so it's not adding enough supply) it does help, especially because it doesn't segregate people so they live in buildings that get maintained.
ReplyDeleteIf that baseline was affordable on UBI then there's some help.
We also have a voucher subsidy program. They've been finding that about six months of subsidized housing and targeted support (access to medical care, mostly) gets a significant amount of people into a self-sufficient state. Imagine how much easier that state is to maintain with a guaranteed income. Though cost of living here is well over that proposed UBI, it's still a cushion. I don't think you could replace this program with UBI without vastly restructuring the housing market, though. So it's not safe to assume that all social services can be replaced. (Not that this is a federal program.)
Gretchen S. The ill, as I understand it, is that UBI does not end homelessness in expensive cities. Did I catch that right?
ReplyDeleteAnd, really, that this isn't a panacea, as much as I would like for it to be. (I would!). Right?
William: I would project a further ill: Selling UBI as "This will let us dismantle our other social security networks" builds political will behind the notion of dismantling other social security networks. If you then provide a solution that leaves people starving and homeless in urban areas, you have significantly worsened the world.
ReplyDeleteThat's the key right there. Either way it doesn't work. If UBi isn't high enough it fails. If it doesn't replace all other subsidies it fails.
ReplyDeleteIt has to be the right number. Which it actually isn't hard to implement the right number...it's just the utter lack of political will to do so.
Frex:
1) index the UBI to core inflation aka CPI (a given in any system)
2) create a separate inflation metric (Basic Price Index) that focuses just on the goods and services people living on UBI need.
3) index the UBI to BPI and in any year where BPI is greater than CPU levy a surcharge against the top tax brackets however large is needed to cover the difference.
That would create an environment where UBI doesn't wind up with declining purchasing power as the demand for basic goods and services drives the price for those up faster than the broader index.
Solutions like that are easily doable. But I expect it will pretty much take a coup resulting in a benevolent dictatorship to make it happen.
Ah. So, because MBI is (often) seen as a panacea that will solve poverty, it may create an underclass with piss poor housing and no access to other government assistance programs that go beyond simple cash.
ReplyDeleteThat sounds like a downright reasonable concern!
William Nichols Well, it's not just the richest cities. I doubt that I could live in the entire state of my birth on that income, which means no access to family and friends. (Heck, we're already leaving in a year because we can't afford this state on our actual income, but we can at least afford my husband's home state and have family and friends there... But we very much couldn't at the poverty line.) And the people who can't do that tend to have the shallowest support networks, so moving somewhere affordable makes their lives meaningfully worse, as does the act of moving itself, which if forced by low income tends to involve sacrificing possessions.
ReplyDeleteDisability is another factor. People who need health aides would quite often die if that assistance was removed, so their situation would very much not be improved by UBI replacing their current social assistance. It is commonly more expensive to live with a disability, and low income housing in particular is less likely to be accessible, limiting available housing even further, yet it's the population most likely to be living in poverty.
Folding home health aides and more than the most rudimentary accessibility modification into the health care system might help there, but in a market with a disabled person who needs a ramp added, and an able-bodied person on the same UBI the disabled person is generally not getting the housing if there is at all limited housing, because the landlord is generally not putting in that ramp unless they have to. Right now they get some directed benefits that reflect their needs, though it's already not a very good system. (And even worse, it's two tiered, with Medicare being a decent model to base single payer on if it added dental and optometry, but Medicaid varying widely per state and covering much less; anyone disabled before they could work for the minimum income and number of years is on Medicaid.)
Now I'm curious, Gretchen S. . What's your home state where $1,000 a month means homelessness?
ReplyDeleteWell, that's "nowhere within a hundred or so miles of family." I'm from Northern CA, though we moved out of the Bay Area for cost reasons over a decade ago.
ReplyDeleteI've lived in various economic states here, everything from housing secure but food/clothing insecure, a transitory state of homelessness that we politely called "couch surfing", in shared housing at around the poverty line, and as a DINK Silicon Valley tech worker, as a homeowner and as a renter. Economic whiplash. We're currently in transition to move to Sweetie's home state, which is much more affordable and fitting for our current capacity. (Complicated by not wanting to leave my aging family here.)
We just apartment hunted in our non-Silicon Valley and better priced town a year or so ago, and while I don't think we'd be food insecure on double 12k (assuming that both of us got it), rent would be easily 75% of our costs for the most affordable housing in our county, which puts us a major car trouble or medical emergency away from real trouble. In our case we have emergency funds (both of us have been financially insecure enough in the past that we save tons whenever we have income, so and we planned to stay here a year or so before leaving, so saved for that as well) so we could absorb some of that, but someone who's never had cash flow is less likely to have savings for emergencies.
I mean, there's a medication my doctor wishes to put me on that with the best prescription plan I could find costs a copay of about a thousand a month all on its own, and I'm not even ill in one of the really expensive ways. Right now I'm spending about 25% of that 12k/year on medical. So yeah, actually there's no room left for food, transportation, or clothing.
Which is a roundabout way of saying that you shouldn't have to win a skill aptitude/upbringing/family lottery (as we did) to be able to live near your family.
ReplyDeleteOne issue, of which Gretchen S. reminded me: costs of living are different in different places. How can that be handled? At what level? Suburb? City? State? Nation?
ReplyDeleteIf the UBI is not enough in a certain state/city/suburb, people might be forced to move away from that state/city/suburb.
Having different amounts per suburb/city/state would complicate things. Having the same amount would lead to said consequences. difficult.
Yeah.... I'd love there to be a solution that can't be gamed. Setting UBI high enough to cover the basics in all markets is the only simple (but highly expensive) solution I can think of. That would still get people to self-sort to cheaper places, but more because "I have expensive hobbies, so somewhere cheap lets me enjoy more of them" positive motive than over "eating is important to me" negative incentives. But egads the cost.... And it still needs a way to have housing supply or the cost keeps rising.
ReplyDeleteHaving better housing supply might be a solution though, if the costs could be made more equivalent. (But I can see single payer health care happening in the US long before I see guaranteed safe and adequate housing. The US culturally just does not see shelter or even food as a human right.)
Possibly things like the measure in my city (which mandates that part of any multi-residential housing must be for low income people, set to a percentage of median income so it will adjust to change) would help there; it helps modestly here, and unlike the Bay Area we're reducing homelessness, between that and the voucher system.
ReplyDeleteWe've had some pretty bitter debates about rent control here. I'm not sure if it works as well as vouchers, because of the perverse incentives against maintaining or improving rent controlled property. But spiraling rents are hardest on the most vulnerable people.