by Tyler Prochazka | Dec 12, 2016 | Opinion
This week, I had the opportunity to be a guest on New York University’s Students for Criminal Justice Reform podcast. I spoke with Thurston Powers about the positive effects a basic income may have on American society.
One overlooked potential benefit is the effect of basic income on crime rates. I noted that a basic income could create more stable households and increase the likelihood of parents spending time with their children. Unstable and low-income households are linked with creating long-term issues for children that grow up in these situations. The fact that crime could be higher due to these circumstances speaks volumes about how important it is for families to have access to an income that can help them provide for their children without them having to consistently work to keep a roof over their heads. Crime happens all the time, and the use of firms such as Salwin Law Group, as well as similar other legal representation, may be used to show evidence on how financial issues have provided this base for criminal activity, not as an excuse but as a show of how the system needs to change to help people in these situations.
Those that critically point out single mothers work slightly less under a basic income do not understand this is probably a good thing. Considering it is single mothers in the data that show reduced work hours, it is likely they are spending their extra time raising their child. In the long-run, raising a well-adjusted adult will produce social and economic dividends.
In fact, research shows that basic income experiments have resulted in increased social cohesion. Studies have shown increased school attendance after the introduction of a basic income-type grant. In Namibia, there was about a 40 percent drop in crime in areas where the basic income was introduced.
While it is highly probable the basic income would improve some of the factors that lead to crime, I said in the podcast there is virtually no chance a basic income could increase crime. Frankly, the conservative narrative surrounding welfare is just not true.
The problem is not that welfare recipients become lazy, it is that the structure of welfare can discourage work. This is because welfare benefits diminish sharply as low-income individuals improve their wages — which is precisely why a basic income is more effective.
I also noted that most research demonstrates that overall people will not work less, and in some cases may work more if it benefits them, under a basic income. For libertarians that are interested in creating an effective solution to deal with the upcoming wave of automation, a basic income is the most efficient answer.
Listen to the full podcast below:
https://www.youtube.com/watch?v=iW6KgITEdT0&feature=share
by Tyler Prochazka | Nov 29, 2016 | Opinion
Europe has received a lot of attention for its recent moves toward experimenting with a basic income policy. What has been lost in this focus are the developments that are taking place in the rest of the globe, including the world’s second biggest economy: China.
Cheng Furui is one of the organizers of the China Social Dividend/Basic Income Network, and has done extensive research on China’s social safety net. In the interview below, she said a basic income would resolve many of the problems facing China’s current welfare program.
As the international economy faces increasing automization, Cheng said basic income is a potent answer to this issue in China.
“I believe that basic income and China’s status quo are aligned because it is in accordance with the essence of both socialism and the market economy,” she said.
The full length interview is below:
What is different between Universal Basic Income and China’s Minimum Livelihood Guarantee (Dibao)？
Dibao is China’s Minimum Livelihood Guarantee program. Anyone with an income below the minimum can receive a supplementary income up to the standard. In this way, Dibao is unconditional: no one can take away someone’s right to the Dibao income. The Dibao only provides a grant to those that are below the Dibao income standard. Thus, the government must conduct strict evaluations of recipients’ economic situations, which creates a lot of implementation problems and issues of abuse. By contrast, Universal Basic Income provides the grant to every person, regardless of income. Moreover, China’s Dibao benefit has a large discrepancy across different regions, consistent with the regional economic inequality that China already faces. Here is more information for reference: China’s MCA.
How do the Chinese view basic income? Do the Chinese generally understand about this policy?
Most Chinese don’t know about the basic income concept. Nonetheless, there are some places that are currently carrying out this policy, although they do not call it basic income. The areas that are implementing basic income all have different situations. The differences are not just regional, even neighboring areas have large differences depending on the community members’ organizational depth and shape.
Why should China implement basic income? What type of impact would it have?
The foundation for China’s implementation of basic income comes from China’s public ownership system itself. State owned enterprises, urban land, and mineral resources already exist, much like Alaska in the United States. Every person should have a share of public resources. This relies on the profit from the public resources being utilized as a basic income revenue, not only does everyone receive equal payment. This means the government does not have to collect more taxes from the rich only to give back to every person.
Chinese history applies the profit from publicly owned resources to supplement the country’s public finances, therefore lowering the private sector’s tax rate. In turn, conducting large scale investment in service sector and infrastructure development, including constructing railroads, and the systems that support the economy such as education and healthcare. These systems provide benefits to the vast majority of people. During China’s period of urbanization and gradual improvement of infrastructure and even completion of these projects, the profit of public resources perhaps can be used as a benefit to each person. Certainly, this will lower society’s overall wage rate or working hours. Simultaneously, some places have collective ownership of resources, and most of Chinese social dividends come from these resources.
What is the status of China’s basic income movement?
The basic income concept is currently only being discussed among Chinese academics and there are currently few researchers of the policy. However, the general public is already exploring implementation of basic income, also it is genuinely that every person in those areas can enjoy the local basic income. For example, much of the revenue for basic income programs is contributed by the collective organizations’ dividend bonus.
Since the founding of the People’s Republic of China, rural China has implemented collectivization of land, the household farm quota system allows the individual to use the land for production, but they cannot sell the land to others. During the movement toward urbanization, one part of the land was acquired by the government. Some of these collective resources that were taken were compensated with urban-based resources, in turn producing new benefits. From there, it produced social dividends within these communities. Looking at the entire country, this was not a rare case.
In BIEN News, I recently introduced these types of cases. China is putting into effect the policy of ‘separation of three land rights’ (ownership, contracting right, and operating right), which will promote the land right equity investment Recently, our main work has focused on excavating the essence of these cases, evaluating the likelihood of wide-spread promotion of this policy. Under the recent pessimistic economic environment, we want to offer a feasible path forward.
Does basic income suit China currently? Does it fit with Chinese culture?
I believe that basic income and China’s status quo are aligned because it is in accordance with the essence of both socialism and the market economy. However, Chinese culture encourages labor and looks down upon laziness. With the development of automatization, machines will continue to replace human labor. As a result, Chinese people will start to rethink this issue. If a basic income is put in place, after it is implemented it is feasible that the entire country will uniformly cut down on the weekly work schedule. Previously China had a six-day work week, and now it has been cut down to five days. In the future, it is possible it can be reduced to a four-day work week.
Additionally, China’s various regions have had drastically different levels of development, and the cost of living differences are also quite large. The social security system has not yet achieved nationally uniform administration. Public resources and financial data also need to be gradually made more transparent. This lack of transparency has impeded the ability to evaluate the potential impact of basic income.
About the interviewee:
Cheng Furui is doing her Post-doctoral program in Chinese Academy of Social
Science. She got her PhD in Tsinghua University. Her research interest is social
policy. “Social Assistance and Poverty Alleviation Divergence: A Capability
Approach” is her $rst published book based on her doctoral dissertation,
which explores Chinese social safety net in details. She is a voluntary news
editor of BIEN now. She is also one of organizers of China Social
Dividend/Basic Income Network: bienchina.com
by Tyler Prochazka | Nov 7, 2016 | Opinion
I recently led a roundtable discussion on basic income at National Chengchi University (NCCU), which was attended by students from various countries. The participants vigorously debated whether a basic income would result in inflation, with some parties worrying that the greater spending power will push up the demand for goods and, in turn, prices. The increased prices could possibly erode much of the spending power from a basic income.
To confirm whether these worries were justified, I reached out to three experts on basic income (BI), co-editors of the Ethics and Economics of a Basic Income Guarantee, to see what the research says about basic income and inflation.
It turns out: it depends.
Overall, the scholars agreed that there could be some areas where prices are pushed up, but that it would depend on how the BI is implemented.
Knowledge about the topic is limited since none of the BI research has looked at inflation, nor have the experiments been long enough to get a true idea of the BI’s effect on prices.
Dr. Steven Pressmen, former professor of Economics and Finance at Monmouth University, said this means economists “therefore must fall back on theory to answer the question about the inflationary consequences of a BIG (basic income guarantee).”
Dr. Michael Lewis, associate professor at Silberman School of Social Work at Hunter College, added that “multiple variables affect inflation”: if government spending is reduced in some area after a basic income is introduced, there would be a simultaneous push-and-pull effect on inflation.
Pressman also said that the outcome of a basic income on inflation will be based on “the overall condition of the economy and how a BIG is financed.”
According to Pressman, there are several potential scenarios that could play out.
If the economy is near full employment, then a BI would likely “push up prices rather than employment.” Also, since much of the gains in income from a BI would go to people in poverty and “people with low income tend to spend any extra income that they get,” then total spending will increase along with inflation.
On the supply side, Pressman said there are two important factors: taxation and labor.
If a basic income is financed by sales tax or value added tax (VAT), then this will increase prices and inflation. Second, if BI gives employees more leverage to increase wages, firms may “try to pass along these costs to consumers in the form of higher prices,” Pressman said.
On the other hand, Pressman said that financing a BI is paid for by reducing other government spending means “there should be little or no inflationary impact of a BIG.”
Dr. Karl Widerquist, co-chair of BIEN and associate professor at Georgetown University SFS-Qatar, said that Denmark’s economy demonstrates that spending on welfare such as basic income should not lead to inflation “taking away all those workers’ gains.”
“There is nothing special about Basic Income spending. It is not any more likely to cause inflation than any other spending,” Widerquist said. “It is not any more difficult to use taxes and borrowing to counteract inflationary pressure caused by Basic Income spending than it is to counteract inflationary pressure caused by military spending or any other kind of spending.”
Regardless, some inflation may not be such a bad thing for the economy, according to Pressman. He pointed to the Japanese deflationary spiral in the 1990s as to why some inflation may help an economy.
For policymakers considering a basic income, it may be useful to think about adjusting the BI benefit depending on economic conditions.
“It also may (make) sense to think about a variable BIG — one that increases as unemployment rises and falls as the economy gets closer and closer to full employment. This too will reduce the inflationary impact of any BIG program,” Pressman said.
Although more research needs to be done, it appears a basic income is unlikely to contribute to inflation in a substantial way because there are so many factors that influence prices.
“Policy matters, and sensible fiscal and monetary policies can ensure that more egalitarian social policies are consistent with low inflation,” Widerquist said.
by Tyler Prochazka | Oct 12, 2016 | News, Research
After many years writing scholarship on the citizen’s income (or basic income), Malcolm Torry was constantly asked about the feasibility of the policy. A new book by Torry, The Feasibility of Citizen’s Income, seeks to answer this question.
Below is an interview with Torry on he came to write the new book and some of the conclusions he made in his research.
What prompted you to write this book?
It was about two years ago that the Citizen’s Income debate started to become seriously mainstream. I had already published Money for Everyone: Why we need a Citizen’s Income (Policy Press, 2013), a general introduction to the subject. Although the book was designed to be accessible to the general reader, a number of people had said to me that something shorter and cheaper would be useful so I wrote 101 Reasons for a Citizen’s Income (Policy Press, 2015). Both of these books were designed to show that Citizen’s Income is a good idea. They might or might not have contributed to the increase in interest in Citizen’s Income among think tanks, political parties, and the press. (Both international developments and increasing concern about the future of the employment market were probably more significant causes.) I had frequently been asked questions about the feasibility of Citizen’s Income. At both BIEN and Social Policy Association conferences I had presented papers about feasibility that built on articles about political feasibility by Jurgen De Wispelaere and his colleagues; and then, following a presentation for Cambridge economists on different kinds of feasibility, Karl Widerquist, who was the other presenter at the seminar, asked me if I would turn my presentation into a book for the Palgrave Macmillan series that he edits. Some of us had already noticed that the Citizen’s Income debate was becoming at least as much about feasibility as it was about desirability, so I agreed to Karl’s proposal.
What was the most surprising and/or interesting element you discovered while researching for this book?
A combination of related elements: that the policy process (the process by which an idea finds its way to implementation through a variety of interconnected institutions) is extremely diverse; that understandings of it are equally diverse; and that ideas can sometimes achieve implementation without passing through what we might call a normal policy process: that is, that policy accidents can occur. The book therefore contains chapters on political feasibility and on policy process feasibility, as well as a final chapter, ‘From feasibility to implementation’, in which policy accidents are discussed.
Which aspect will be most challenging to overcome in achieving a citizen’s income: political or psychological barriers? Why?
It became clearer to me as I researched and wrote the book that political feasibility relies heavily on psychological feasibility. Only if a significant proportion of a population are convinced of the case for a policy change, and significant proportions of particular groups within populations (journalists, academics, policy-makers, etc.) are convinced of the case, is there any chance of political feasibility. Psychological feasibility therefore precedes political feasibility – except when political accidents occur, and even then potential psychological feasibility is required. Psychological feasibility will not be easy to achieve because in the UK we have been means-testing benefits for four hundred years, and it takes a significant paradigm shift to recognise that in the presence of a progressive income tax an unconditional payment can do the same job as means-tested benefits and can do it a lot more efficiently and without all of the side-effects of means-testing. Given the further popular ‘deserving/undeserving’ mindset, building psychological feasibility for a Citizen’s Income for everyone is going to be difficult. However, building psychological feasibility for such ‘deserving’ groups as elderly people, the pre-retired, children, and young people, would not be so hard: so a feasible implementation method might be to implement Citizen’s Income one age group at a time, beginning with those thought most deserving. This would eventually build the psychological feasibility required for a Citizen’s Income for working age adults.
Is a citizen’s income feasible just using current revenue? If so, would this be the most desirable way to implement basic income?
A Citizen’s Income certainly is feasible just using current revenue if income tax allowances (‘standard deduction’ in the USA; ‘Personal Allowance’ in the UK) are adjusted appropriately, and Income Tax rates and other aspects of a tax and benefits system are adjusted appropriately. We have shown that in the UK a Citizen’s Income of £60 per week for working age adults (less for children and young adults; more for elderly people) would require no additional public expenditure if Income Tax Personal Allowances were reduced to zero, Income Tax rates were raised by just 3%, and National Insurance Contributions (social insurance contributions) and means-tested benefits were adjusted appropriately.
Whether this would be the most desirable way to implement a Citizen’s Income scheme is of course debatable: but it would probably be the most feasible way to begin implementation.
What would the most significant effect of the citizen’s income be on households?
What would be the most significant effect must be a matter of personal opinion, because different households have different priorities: but among significant effects would be greater freedom to choose an employment pattern that worked for all of the members of the household; lower marginal deduction rates for all or many households, meaning that an increase in earned income would translate into a higher additional net income than under current means-tested benefits systems; and freedom from bureaucratic intrusion into the household’s relationships and circumstances.
What is the empirical evidence that universal programs are superior to means tested ones?
To decide whether one system is superior to another requires a list of criteria for a good benefits system, and then different systems need to be evaluated against those criteria. The book Money for Everyone contains a full discussion of the criteria for a good benefits system, discusses the ways in which the criteria are met or not met by different systems, and concludes that a universalist system meets the criteria more thoroughly than a means-tested one. The Feasibility of Citizen’s Income does not ask directly about the desirability of Citizen’s Income, but rather seeks evidence for Citizen’s Income’s ability to pass a variety of feasibility tests (although of course feasibility is required for desirability, and desirability for feasibility). Evidence is drawn from natural and constructed experiments, microsimulation results, and other empirical research.
What is the most desirable aspect of a citizen’s income? What is the main reason you support basic income?
Again, what is the most desirable aspect of Citizen’s Income will be a matter of opinion. Since we all have different preferences, the question then comes down to the second question asked: What is the main reason that I support Citizen’s Income? There is no main reason; there are lots of reasons: unconditionality; universality; lower marginal deduction rates; greater individual freedom; greater equality; decreased poverty; enhanced social cohesion; administrative simplicity; the absence of stigma, error, fraud, and bureaucratic interference in the lives of individuals and households.
What brought you to the citizen’s income movement?
From 1976 to 1978 I worked in the Department of Health and Social Security’s Supplementary Benefit office in Brixton in South London, administering means-tested benefits. We all knew how bad the system was, both for claimants and for the staff. The benefit that we and the claimants loved was universal Child Benefit, for its simplicity, its reliability, and the way that it reduced poverty, increased equality, and created social cohesion. Why shouldn’t the same principles and the same results be transferred to benefits for working age adults?
I was ordained, and served my first post in the Church of England’s ministry at the Elephant and Castle: the parish in South London in which the headquarters of the DHSS was located. I got to know people in the offices, and was invited to the department’s summer school. There I found the idea of a Basic or Citizen’s Income being seriously discussed. I was invited to join a group of individuals from a variety of backgrounds interested in the idea – the Basic Income Research Group, now the Citizen’s Income Trust – and have participated in its work ever since.
The motive has always been the same: to research the desirability and feasibility of an unconditional income for every individual as a right of citizenship. My new book concludes that Citizen’s Income’s implementation is feasible.
by Tyler Prochazka | Oct 6, 2016 | News
Iceland is poised to elect the Pirate Party as one of the two largest parties in the new parliament. The Cato Institute recently reported that this could be great news for Basic Income advocates.
The Pirate Party introduced a proposal last year to research the feasibility of a basic income as a replacement to the existing welfare system. This proposal falls in line with the Pirate Party’s overall focus on direct democracy and technology.
However, Halldóra Mogensen, Deputy MP of the Pirate Party of Iceland, said in an email exchange with Basic Income News that the Cato Institute “seems to be taking quite a leap.”
“We (the Pirates) have a proposal in the welfare committee proposing that UBI be looked into as a possible substitute to the current welfare programs but that’s the extent of it. Who knows what will happen in the future, but as of now, there are no concrete plans,” Mogenson said.
The Pirate Party is known for pushing for accountability in government and using technology to engage civic society. Iceland’s move toward the Pirate Party coincides with their growing distrust of institutional parties. A basic income could be a mechanism for Iceland to achieve both of the Pirate Party’s goals by reducing bureaucracy and allowing individuals to more freely participate in civic society.
As the Cato Institute notes, the current welfare system in Iceland deters work and a basic income may “reduce these work disincentives” depending on how it is constructed.
