Labor policy researcher Anne Gray has written a new research article, “Behavioural Effects of a Citizen’s Income on wages, job security and labour supply,” for the Citizen’s Income Trust (BIEN’s UK affiliate).
Gray begins her article by noting two predictions about the labor supply effect of basic income that appear in tension with one another: the first is that a basic income would increase the labor supply by removing the poverty trap (unemployed individuals could take jobs without the elimination of their benefits); the second is that a basic income would decrease the labor supply by allowing individuals to quit jobs to (for example) perform unpaid labor, retrain, or take more time to find a suitable job. She examines both of these hypothesizes in some detail, stressing that a basic income could result in employers’ reducing wages if the labor supply increases.
Gray then proceeds to “guestimate” the effect of a basic income on workforce participation for various groups (differing according to employment status, socioeconomic status, and household status, for example). She concludes that labor supply would indeed increase among low-wage workers. Thus, a minimum wage would be necessary to enforce in addition to a basic income, in order to prevent the basic income from becoming an employer’s supplement to low wages.
Reviewed by Dave Clegg
Photo: CC BY 2.0 Stephen Bowler
