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Against the UBI
In last week’s Ricochet Podcast, John Podhoretz brought up the Universal Basic Income. I’ve been a proponent of the idea for at least a decade, and I’ve been in good company with the likes of Charles Murray and Milton Friedman, but I was recently convinced it would be a terrible idea.
First the arguments in its favor. In its best construction, the UBI would eliminate all other welfare and tax breaks. Leaving aside whether any deal to eliminate all or most other welfare and tax breaks is politically feasible (it isn’t), it has an alluring elegance. Everyone gets the same tax break, and ideally, the tax rate is completely flat, meaning there’s no tax cliffs destroying incentives. Those who can’t work can still survive. And no one is making any decisions about what they can do with “their” money.
This seemed like a slam dunk to me for a long time, but then I had the moral hazard spelled out for me. As bad as the welfare state is, one currently has to be at least ostencibly in real need in order to take advantage of it. You have to be disabled, or have children and no income, or seemingly unable to afford healthcare.
The universal basic income means that people that are perfectly capable to do work are now able to choose to live off of the government dole. In the perfect situation I outlined with no other welfare, the income wouldn’t seem like enough to live comfortably, but this assumes someone lives as a single taking care of themselves. If everyone gets their checks from the government, suddenly half a dozen young men who would otherwise able to work could move into a beach house together and live comfortably off of other people’s money. This would have a noticeable and large negative effect on the economy. Able-bodied 18-64 year olds without minor children are one of the few (and large) swaths of the population who don’t have easy access to welfare. UBI would change that. Why work your butt off when you could make a sizable fraction of that doing nothing?
So, while the current welfare state is bad, the UBI would almost certainly be worse. It would give many people who currently have to work strong incentives to stop. It almost certainly wouldn’t replace the current welfare state. Even if it was passed with (some) welfare elimination, welfare could easily be expanded again. The better, if unsavory alternative, is coming to terms with the status quo and working to reduce it as much as possible. Austerity is the name of the game. Make it harder for people to prove disability, and make them prove it again on a regular basis. Other people are giving them money against their will after all! Many of the new Republican voters are likely to be receptive to this. Do they really want more people to have potential access to their hard earned money?
Brian Caplan recently had a series of blog posts spelling out his reasoning against the UBI. He also won a debate on the subject.
Published in Economics
Exactly.
One of my most successful friends — a pharmacist who at the age of 31 makes ~$150K/yr, has paid off all his student loans, has a stay-at-home wife with three kids and is currently buying a $450K house — will gladly admit that if he lived in a socialist system and made the same amount of money no matter what he did, he’d work as a ticket taker at a movie theater. Incentives matter.
Why would we want to export the social dysfunction of the urban underclass to every sector of society?
I’m not sure if it is really that simple that it would just make large swaths of the populace lazy. It certainly would create a completely different incentive structure. It would probably eliminate most menial jobs and would force crucial but undesirable jobs to pay more to attract workers. People having more time could mean an increase in domesticity, one positive outcome of this is that with time it become really simple to obtain a higher quality of food for cheaper price. One of the big drivers of cheap unhealthy processed frozen food is its labor saving aspects. Now domestic work will be compensated. One person in a house of six could help to feed and feed well everyone there. Good nutrition is paramount to health. Extra free time also means more time for exercise which will also improve health. Reduced stress will probably also be a big boon to people’s longevity. Extra free time might also create new incentives of fraternization between the sexes and a renewed interest in family formation. The number one reason for people delaying marriage and children is economic security. Why worry about having kids if you know you will be able to afford them? A need to be frugal and live within the means of allotment will probably encourage a lot of off the books artisan activity as people develop part time work to supplement their guaranteed income and improve the quality of their material possessions, so an instant entrepreneurial class.
Right, because this is exactly what we see in the inner city where practically everyone’s on welfare.
Right, I usually agree with Valiuth, but this reads as what people who are naturally driven to work (especially if their work is fun) would do if they didn’t have to worry about income. I’m pretty sure a large majority of the population doesn’t meet this standard.
And quite frankly, based on my weekend/staycation productivity, I’m probably one of them.
I suspect most of us with a propensity to work would end up like the horse Boxer in Animal Farm.
Seawriter
My non-philosophical reason against UBI is that it assumes it is replacing all other forms of welfare.
That means all existing forms of welfare have to be removed and disallowed from starting up again.
That’s a pipe dream.
In reality, the implementation would probably be UBI + welfare/social services.
We had a fun, long conversation about this awhile ago. I wanted a UBI that came in the form of a yearly lump sum, because then it could be used as capital—to rent a U-Haul and move to where the cost of living is lower and there are more jobs; to buy a food truck or —what the heck—a minivan to travel the country in. Welfare pins people in place, and is hedged about with rules about what you can do with the money. And if everyone 18 and over in the country got it (I know, the math doesn’t work) it could be something they talk about in math class: what are you going to do with your 10 grand (or whatever) a year?
Also, I would hope people would team up, and pool their resources. Indeed, a lump sum, no-strings payment to a young, inner-city man makes him reasonable husband material rather than a dangerous nuisance whose presence in the home makes the busybodies down at the Welfare Office dock your dole.
In my fantasy, of course, there is strict discipline: no welfare for the able-bodied other than the lump sum! If you run out and can’t get a job…there’s always the Salvation Army. Which, one hopes, will expect something in the way of improved morals or at least improved personal accounting skills in exchange for its help.
I’ve gone back and forth on this, too.
For:
some states spend an awful lot administering their welfare programs. If I remember right, the two most extreme states are West Virginia and California when it comes to food stamp overhead. IIRC: it takes WV like 0.08$ to give out a dollar in EBTs and CA like $1.30. So there are some real costs to be eliminated there by a truly thin, automatic program.
We are going to have a harder and harder time finding jobs for people , especially the low-skilled. We may need to hand out money just to keep people from freezing and starving to death .
against
poverty is more than just money, and without the life skills to make use of it, an income wont necessarily improve anyone’s life
Unless the administrative costs are used to prevent handouts that are undeserved. It might be similar to the “problem” of healthcare administrative costs, all those costs might be there to prevent even more costs in unnecessary payments or inefficiencies.
I’m still not convinced this is true. We’re going to have a hard time finding jobs for the low skilled that they are willing to take and at a standard of living we find acceptable (like below minimum wage). If a large part of the US population is about to be literally unemployable, the rest of the world is doomed. It’s not like not graduating from highschool means you can never learn skills ever. They would be more motivated to learn skills if they couldn’t easily receive handouts.
Well I was going for a devils advocate position in my first comment. On a personal level I am up in the air about how I would come down on such a scheme. Still it is no fun if we all agree so lets see where we can take this discussion.
The issue of comparing the current welfare scheme and the incentives it creates and this universal income scheme is that earning money officially while on current welfare puts you at risk for losing your benefits. Yet, I have met people who while on welfare were working, under the table for cash. This now is technically illegal and a form of fraud I am not condoning law breaking, but while the welfare they received along with their living arrangements could provide a minimal and suitable level of comfort, having extra money to buy extra things is still nice, and people will work to get what they want if nothing more. So I don’t think even welfare today stops people from working it forces them to work illegally. Material security might also give people confidence to be more risky and adventurous in their job prospecting. If you need a job you might just take the first job you can get that you can keep. Which may not be the most efficient use of your skills. If you have the security to keep looking you might be able to find more productive and fulfilling work.
Which explains why it’s so nice to have a sugar mama like I do ;)
In thinking about this topic the question I have is why do people today work as hard as we do? Think about this for a second. People lived good, long, productive and meaningful lives back 200 years ago. The material comforts needed for such lives are very cheap to acquire today. So why do we work so hard why don’t we just lower our material consumption and pocket the extra time? Ultimately what drives people are social expectations and cultural norms as much as necessity. In fact it might be arguable that not much of modernity has been driven by our need to fulfill basic necessity. Once we had a stable food crop and easy means of manufacturing shelter and clothing what have we really been working for as a species?
Has our consumerist dynamic made us better nobler people? We certainly innovate plenty, but do our inventions make us happier, do they enhance our chances of salvation? If they do not why work so hard in vain?
Yay the only real argument for is that it reduces the goverment headcount and cost of administrating welfare, and reduces the skill set needed to work the system (this includes fraud). Yes there is a skill set of learning how to work the system and get as many free things from as many places as possible. You make it easier to do more people will due it.
Where are you getting this?
Most of my money goes to retirement, taxes, food & shelter.
After that comes material consumption.
via googling percentage of us income going to food and housing …
I think this is a key part of this issue; we’d need to be much more willing to dismiss genuine need than we are. We have a lot of the payments that traditionally get bundled in with those that are dismissed being medical costs. If you don’t include them, the payments become trivial. If you’re just shifting cash payments from being redistributionary to being equal, you’re talking about dramatically cutting social security for those who are already living in much more challenging circumstances than they did through the rest of their lives and denying them the support that they genuinely depend on, forcing them to move away from their families when their families live in more expensive regions, and so on.
You’re talking about cutting back spending on disabled Americans in poverty in order to give the money instead to you and I. Taking those currently in poverty and halving their incomes isn’t the same sort of thing as failing to increase incomes that would otherwise have doubled; halving your spending (or worse if you’re one of the disabled people who lives in government housing as well as having SSDI income) is substantially harder than maintaining a low income. Permanently lowered income causes mental illness and social breakdown.
It’s not just cruel, it’s bad policy; Bismarck introduced welfare to create social cohesion and it’s been reasonably successful in Western countries. Even France no longer revolts. The overly sudden and surprising break in the social contract would create a substantially less docile population and the creation of a law abiding population is one of the greatest advances of the twentieth century. This phenomenon gets still worse if we treat people in prison better than we treat people on disability; it is not healthy for society to have the commission of crime with the intent of getting imprisoned a rational choice for too large a portion of its people.
Edward Banfield would probably agree with you. He wrote “The Unheavenly Cities” (it can be found in pdf for free online) back in the 70’s and defined the classes not by monetary measures, but by how far out they planned. The underclass generally spends and it comes in, and the upper class looks forward to having their names on public buildings.
My husband used to manage a buy here/pay here car lot years ago. I know they have bad reputations, but they also deal with people that are high credit risk. He said something that has stuck with me: People who don’t take care of their credit generally don’t take care of other areas of their lives. They don’t take care of their property and their families. This is a general observation. He no longer feels a lot of sympathy for the poor, because very few are really trying hard to make their lives better. A lot can’t, they are not equipped to be employable, even at the lowest levels.
Presumably by noting that housing has dramatically increased in size in the last 100 years. The working class house I owned was built in 1920 with 900 sq ft; I grew up in a 1500 sq. ft. ranch (average for when it was built in 1970); and the current average house size is almost 2700 sq ft. Source
As I’ve noted on Ricochet several times: you can live on a single working class salary like they did in the 50s if you’re willing to live a working class lifestyle of the 50s, and among other things, that means a house that is cramped by today’s standards.
I just moved to Hilton Head, but for the past 20 years I lived in eastern Tennessee – up in the mountains. The 4th poorest county in the 5 poorest state, or something like that.
What you describe is not rare. That was the nature of our entire economy in east TN. You have to pay people cash, because no one can have a paper trail. In many occupations, it is somewhat rare to have workers who are not on disability. Businesses and employers are accustomed to dealing in cash, even large companies working on large deals.
This is complicated by the fact that a significant portion of our population is on narcotics. A local restaurant needed waitresses – put an ad in the paper – got over 80 resumes. Only four of them passed the drug screen. And these are mainly young and middle aged women – not young men. With them, it’s worse. And remember that the success rate in drug rehab is something close to zero.
I’m not sure how all this ends…
One of the biggest consumers of unhealthy, processed foods are the people currently on welfare, who have plenty of free time to cook.
The UBI is something I go back and forth on.
I’m just going to ramble a little here:
There’s no reason to think those guys in the beach house would just smoke pot and play video games. They might be developing apps.
Not having to worry about being at work every day frees people to travel or be artists or students or parent their children. It would be people could do what suits them better then working at some job they hate.
That being said, I, and a lot of other ppl, would still work. Maybe not at the same jobs, but we would do stuff other than smoke pot and play video games. (My wife would probably read books all day.)
Amy, you can’t judge based on your staycation or weekend productivity levels. Those are brief breaks between periods of furious activity.
All that being said, while it sounds seductive, the math isn’t there yet to make it work.
My thought is that when the robot revolution comes, the wealth increases will be so enormous (assuming government doesn’t muck it up somehow) that not only will the math work, but the UBI will be non contraversial.
Additionally, my preference would not be for a government UBI funded through coercion, but some kind of voluntary civil society benevolence fund, paid for through the wealth increases of the robot revolution, that cuts everyone checks.
Someone is going to say that is a pipe dream. Considering the massive productivity and wealth gains robots and AI stand to create, it may not be.
Or one great week in Vegas. Then back to the welfare office with a sob story.
The average lifespan was 35. The average person worked like a dog to survive to age 35.
The *mean* lifespan was 35 because 80% of people died before they hit five years old.
If you were a man who survived to 20, you were likely to survive to 60. (Women still had the gauntlet of childbearing death to run.)
That is a pipe dream.
Well, there might be no reason to think that all of them would smoke pot and play videogames (and likely sleep around), but there’s plenty of evidence that a very sizable proportion of them would.
Why aren’t there more artists, students, and good parents on (much more generous) welfare now?
Sure, if the singularity happens and makes human work obsolete, I would still find productive, self-fulfilling, things to do as well.
I’m not convinced this will happen (I use to think it would). At best, it might double the economic growth rate. Robots will make a lot of things easier, but after we can do those things the next things we want to do will be yet harder to obtain. It’s a low hanging fruit thing. It’s hard to automate something you never could imagine before it was possible, and automating it is unlikely going to be as easy as telling a simulated brain to figure it out in a couple hours.
Sure, they say when we didn’t have welfare, there was more charitable donations than the charities could use. Hopefully there will always be incentives for humans to discover new things and use labor because otherwise the people that can buy the robots are the only ones who could generate any income.
Again, maybe. I’m skeptical. Both of my favorite thinkers (a philosopher and economist) believe that robot consciousness and ultrafast continuous doubling of the economy are simply not possible.
What’s the evidence? (I’m not doubting you, I’m just curious.)
Also, that wouldn’t be very fulfilling for very long.
That’s fine. But those simple tasks will create massive improvements in the standard of living. Look at what current level of mechanization, combined with longevity, disease control, free instant communications, and cheap shipping have given us in the last century. Hell, in just our lifetimes.
Every man, woman, and child in America, save for the lowliest Bowery bum, has better food, communications, healthcare, dental care, and a warmer home than any Russia czar ever had. And it’s only going to get better.
Each robot dramatically increases the productivity of each human. Combine that with, maybe not full AI, by AI tools, and humans will accomplish still more.
@midge should weigh in on that. She’s our resident expert on pre-state private welfar. (I’m on my phone, so if that tag didn’t take, will someone please tag her. )
Look, there will always be people who want to discover new things. No matter how many robots there are, or how much AI there is, it won’t extinguish the spark of human creativity, nor will it damper men’s egos.
Yes, but even Heinlein noted that they’re a tiny minority despised by all right-thinking people.