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The Swiss Voted Down a Universal Basic Income Plan. Now What for the Hot Policy Idea of 2016?
People cast their ballots during a vote on the basic income in Bern, Switzerland, June 5, 2016. (REUTERS/Ruben Sprich)
Who turns down free money? Well, the Swiss did on Sunday, voting down by a 3-1 margin an initiative that would have guaranteed all Swiss residents a minimum income, maybe $2,500 or so. Of course the Swiss probably didn’t view it as free money, which it really wouldn’t be. Es gibt keinen Baum Geld! There is no Money Tree! The basic income would have meant big tax hikes, even if some social spending were cut. This was not a “replace the welfare state with a government check” kind of basic income. It was additive.
So what next for the big policy idea of 2016? (Maybe next to Donald Trump’s MexicoMegaWall™, that is.) Finland and the Netherlands are planning limited experiments, as is the American startup accelerator Y Combinator. If you believe automation fears have driven renewed interest in the basic income, then the idea should have some staying power. It has proponents both on the left (“Yay, redistribution!”) and the right (“Yay, no more intrusive welfare state!”). In that way, the basic income has an edge over another policy also offering an appealing elegance and simplicity, at least in theory: the flat tax. Then again, the basic income also has opponents on the left and right.
But as I recently wrote in The Week, the basic income is a disruptive and risky policy choice lacking a truly compelling rationale. A big answer needs a big question. And widespread technological unemployment might be just that.
Yet, if the past is a good guide to the future, such fears are overblown. Then again, given what’s happening in artificial intelligence and robotics, maybe the past isn’t such a good guide this time. Perhaps my AEI colleague Charles Murray is right when he argues, “We are approaching a labor market in which entire trades and professions will be mere shadows of what they once were.” I wouldn’t bet against it, at least not much.
For now, though, more incremental reform — at least compared to the basic income — seems the better choice. From The Economist:
Make no mistake: modern welfare states leave plenty to be desired. Disability benefits are for many people an unsatisfactory version of a basic income, providing those who will no longer work with enough to get by. But rather than upend society with radical welfare reforms premised on a job-killing technological revolution that has not yet happened, governments should make better use of the tools they already have.
Labour-market reforms—to crack down on occupational licensing, say—would boost employment growth. More generous wage subsidies, such as an earned-income tax credit, would help people stay out of poverty. Long-overdue public investment in infrastructure would foster demand. Relaxing planning restrictions would create jobs in construction, and homes for workers in places with robust economies.
And let the experimentation continue.
Published in Economics
Paul Krugman lamented the latest jobs report, then argued that it was indeed a problem, and suggested how to fix it:
Yep. A stimulus for infrastructure. He then said it would never happen unless the Democrats took back the House.
I’m sorry – I saw the headline “hot new policy idea” and I was startled by the contrast with Krugman’s retreat into the failed past.
What are Switzerland’s welfare systems like?
If their welfare systems are designed in such a way that they avoid fraud and don’t bust the public budget, then there’s really no need for a UBI or Negative Income Tax.
The UBI/NIT concept is best considered when a jurisdiction’s welfare systems have grown out of control, costing more in administration and fraud than the actual benefits they provide.
“Out-of-Control Welfare State,” is generally not how one usually describes Switzerland.
Murray’s WSJ article makes a convincing case for a guaranteed basic income, even from a somewhat conservative perspective. Not that it’s ideally conservative, but that it’s an improvement over what we have now. I was surprised when I read it that I found his reasoning so convincing.
I was as well. His caveats are very important; if it’s just an add-on on top of the current system, it would be a rolling disaster.
Surprised this was turned down. Who does not want free money?
We’ve been so successful with our welfare and central planning, of course we should continue to explore how we can do more. Especially since we can see the future so clearly and how technological change will make us all unemployed, just like population growth led to global starvation even before global warming caused it. The only thing we can say with some confidence, is, no matter how the evidence piles up about our inability to predict the future, control technology and plan our economy, we won’t learn because it is not in the interest of powerful people to learn.
Freakonomics has a good episode about a guaranteed living wage. I’m glad Switzerland voted no.
I hope it never comes up for a vote in America. I doubt that we would be so wise.
But why would it be unwise? Depends on the specific proposal I suppose, but you should be able to replace all social welfare spending (including SS and Medicare with appropriate buyouts) with a UBI with a considerable reduction in friction. Milton Friedman used to cite $3 spent for $1 delivered for the status quo. And for a country saddled with a large, incompetent, and overbearing bureaucracy–as mentioned above–it makes perfect sense to confine it to something it can actually do fairly well: write checks.
I think historically the problem in the US (and a negative income tax came close in 1974 IIRC) is that when you tell a lawmaker you can replace 102 inefficient, ineffective programs with one low-friction one, they hear: oh boy, 103 programs. Pretty sure that’s what had Friedman lobbying for and against his own proposal in olden times.
The biggest hurdle for UBI/NIT is, of course, that the devil’s very much in the details. The Swiss scheme was a very non-standard version of the concept:
Source: http://news.nationalpost.com/full-comment/andew-coyne-how-a-guaranteed-minimum-income-could-work-in-canada