Thomas H. Davenport and Julia Kirby, the authors of Only Humans Need Apply, favor a job guarantee (JG) over a universal basic income (UBI). In a previous post, I critiqued their use of the claim that people who lack jobs tend to be less happy than those who have them (irrespective of income).
In this follow-up post, I take a different tack, and argue that we have reason to support UBI over a JG even if we grant that most people would be happier when employed than when not.
Two points will be key: a UBI does not prevent individuals from working; a UBI, but not a JG, would benefit the minority of individuals who do fare better outside of traditional employment.
1. A Basic Response
In their recently published book Only Humans Need Apply, Tom Davenport and Julia Kirby briefly dismiss a universal basic income (UBI) in favor of a job guarantee (JG).
I laid out their main argument in a previous post on Basic Income News. To recall: Davenport and Kirby’s primary claim is that a JG provides benefits to individuals that exceed those provided by a UBI–specifically, jobs. Central to their argument is the assumption that jobs “bring many benefits to people’s lives beyond the paycheck, among them the social community they provide through having coworkers, the satisfaction of setting and meeting challenging goals, even the predictable structure and rhythm they bring to the week” (p. 7).
In my previous post, I focused on their use of one particular type of data: studies that suggest that unemployed people tend to be less happy than employed people, even after controlling for monetary factors. I will now pursue a slightly different tack. Here I will argue that, even if it is true that jobs improve the happiness of most people, this does not necessarily favor a JG over UBI. (For the purpose of the argument, I will also assume–as do Davenport and Kirby–that sufficient jobs can continue to be created to support full employment, notwithstanding advances in automation.)
These are the crucial observations:
- A UBI does not compel individuals who already have jobs to leave them (obviously); thus, it would not hurt those people who already have jobs and value them. Similarly, a UBI does not prevent those without jobs from taking jobs (while also permitting them more time and flexibility to find, or retrain for, a job that is a good fit to their skills and interests).
- Even if most individuals are disposed to be happiest when employed in a stable, full-time job, there are some individuals who aren’t. Some individuals are disposed to be happiest–as well as most productive–when not traditionally employed. A UBI, but not JG, would allow those in this minority to flourish.
Combined, I believe that these two points provide strong reason to prefer UBI over JG. When we consider individuals who are happily employed, the choice appears to be a draw. Perhaps a JG could provide more security in a cherished job, but a UBI would not necessarily hamper it. Meanwhile, a UBI–but not JG–would immensely help those individuals who would better thrive outside of traditional jobs. (There is one important caveat here, which I will return in Part 3 of this article: a JG is likely to provide the greater benefit to some individuals who would prefer to be employed but are out-of-work.)
If the majority of individuals are happiest in jobs, as Davenport and Kirby assume, then a JG presumably would be for the good of the majority. A UBI, however, would be for the good of the majority and then some. A UBI would not cause anyone to be unemployed. However, a large enough UBI would enable individuals to abstain from employment temporarily or permanently–should they choose to do so. A UBI would support the majority and, unlike a JG, also the minority of individuals who are not happiest in jobs (as well as those who are happiest in jobs but need the flexibility to transition into a better job, as I’ll mention briefly in §3).
2. Liberation from Jobs
Most regular readers of Basic Income News have, no doubt, encountered the argument that basic income necessary to liberate individuals from overtaxing jobs, oppressive jobs, or meaningless “bullshit” jobs. Many, perhaps, were drawn to investigate basic income (as I was) precisely because it opens this possibility. Nonetheless, it’s worth rehearsing some points.
It is not hard to demonstrate that some individuals do not gain meaning, happiness, and self-worth from jobs. And, for the purposes of the above argument, this weak claim is all that is necessary (there’s certainly no need to argue that most individuals are so disposed). Some individuals would be much better able to gain meaning, happiness, and self-worth outside of a job–and, in the process, contribute more to society than they otherwise could.
In my last post, for example, I mentioned entrepreneur Robin Chase’s informal studies of individuals’ “passion jobs”. Recall, for example, the couch-surfing, open-source programmer–an individual who is presumably not interested in monetizing his work, who is motivated just to engage in challenging projects and disseminate his work as widely as possible. (For bigger examples on similar lines, we might look to the communities of creators of Linux and Wikipedia.) Even if he could monetize his work as a programmer, this would only take time away from–and perhaps constrict–the socially valuable work that he is currently performing for no financial reward. But, of course, one must have capital (possibly in the form of friends with couches) in order to devote significant amounts of time to open-source programming or other unpaid work. Many would-be creators and innovators lack such capital, and thus remain trapped in jobs that might well be less valuable–to both themselves and society–than the unpaid work they could (and would) otherwise perform.
Brian Eno CC BY 2.0 Garry Knight
Musician Brian Eno supports basic income for quite similar reasons–that it would enable individuals to avoid jobs in order to engage in more creative work–as evident, for example, in remarks made at meet-up in London last December:
I often get asked to come and talk at art schools, and I rarely get asked back, because the first thing I always say is, ‘I’m here to persuade you not to have a job.’ … My first message to people is: try not to get to a job. That doesn’t mean try not to do anything. It means try to leave yourself in a position where you do the things you want to do with your time, and where you take maximal advantage of whatever your possibilities are. The obstacle is that most people aren’t in a position to do that. I want to do anything to work to a future where everybody’s in a position to do that. … [T]he concept [of basic income] is the closest thing I’ve heard to achieving the kind of future that I would like to live in.
Similarly, anthropologist David Graeber, known in part for his trenchant look at the proliferation of “bullshit jobs”, supports basic income as a means to unleash the innovative potential of people who might otherwise wasting their talents in unfulfilling jobs.
David Graeber (left) CC BY 2.0 Guido van Nispen
This has all seemed perfectly obvious to me: I’m among those who find traditional jobs confining and stifling, and who has no particular interest in monetizing and advertising the work that I do outside of traditional employment–including, of course, my writing and other work for BIEN and Basic Income News. If only could afford it, I would indeed prefer not to have to seek personal monetary gain from my work. And this preference is not limited to my work for the basic income movement. For instance, one of alternative plans has been to do more work as a “curriculum development consultant” for graduate teaching associates and adjunct faculty in my discipline. This would be interesting, challenging, and rewarding for me–as well as a valuable service for others. But, being familiar with the financial plight of most graduate TAs and adjuncts, I am rather appalled by the thought of charging money for any such services.
Chakay Artisan Roasts: one product of an unpaid passion job
Prior to my recent personal experiences, my late mother stood out for me as someone who quite clearly found her meaning and purpose outside of paid employment. After spending years feeling stuck low-paying, dead-end service job, she only discovered her “passion job” after she was fired: developing and manufacturing a vegan meat-substitute. Indeed, although the product has begun to be sold in restaurants in the year prior to her death, my mother and her partner didn’t view their invention as a (meatless) cash cow: their vision was that it would eventually provide a low-cost and sustainable way to end worldwide protein malnutrition.
Meanwhile, some people find traditional jobs constricting simply due to the norms and expectations of job culture. A recent blog post on Medium, which focused on neurodiversity, makes this point well:
Most people are unhappy with their jobs, and workplace stress is the biggest cause of workdays lost to ill health. There are many reasons for this, and some of them are directly linked to the reasons so many autistic people struggle to find or hold onto jobs. Noisy environments, interruptions, long work hours and lack of autonomy are stressful for everyone, but often downright intolerable for autistic people. Expectations of conformity hit neurodivergent people especially hard, but they can be stifling or even ruinous for people from other cultures, too, not to mention anyone who doesn’t fit neatly into the gender roles assigned them by society. [Embedded links in original]
Neurodivergent individuals, and others who do not fit neatly in the mold of society, can be stifled and inhibited by traditional work environments. Such individuals are better able to flourish personally–and, in turn, become more valuable contributors to society–if they are able to working outside of traditional jobs, or perhaps take the time to a job that is a better match.
Examples like the above easily could be multiplied, but these will suffice to make the point.
Now, then, what do Davenport and Kirby have to say about such individuals? The answer is not much. They do mention explicitly that proponents of UBI often claim that “the impulse to create value is innate in humans, and if anything is channeled into less socially valuable activities when the point must be to gain payment for one’s work” (p. 242). However, their only reply is quite hastily and uncritically dismissive:
Unfortunately, the data don’t bear that out. As Derek Thompson notes in his provocative Atlantic article “A World Without Work,” time studies suggest that people who don’t work tend to sleep more, watch more TV, and browse the Internet. So much for taking up painting.
There’s no need to say much more in reply to this hasty assertion. Certainly, it is not difficult to compile anecdotes of specific individuals who would (or do) thrive outside of paid work. And, for the purpose of the present argument, there is no need to demonstrate that all or even most individuals would engage in socially valuable activities outside of paid work. Plausibly, even with a UBI, most individuals would choose to remain in paid employment. To make the case for the advantage of a UBI to a JG, we need only to show that some individuals (and, in turn, society) would benefit tremendously if liberated from the need for work for money–as we’ve done.
It is worth pointing out, though, that the Thompson’s Atlantic article goes much farther than Davenport and Kirby’s comments would suggest–and it goes much farther, specifically, in exploring and describing a multitude of creative recreational activities performed by individuals outside of paid work. Indeed, Thompson states that one of his objectives in the article is to envision “how millions of people might find meaningful work without formal wages”. He accepts that it’s possible for people to “meaningful work without wages”. Moreover, he investigates what such meaningful work might be–visiting locations such as the Columbus Idea Foundry, a large “makerspace” (right next door to my own neighborhood, as it happens).
CC BY-NC 2.0 Stephen Wolfe
It’s worth reading more of Thompson’s own words:
The Internet and the cheap availability of artistic tools have already empowered millions of people to produce culture from their living rooms. People upload more than 400,000 hours of YouTube videos and 350 million new Facebook photos every day. The demise of the formal economy could free many would-be artists, writers, and craftspeople to dedicate their time to creative interests—to live as cultural producers. Such activities offer virtues that many organizational psychologists consider central to satisfaction at work: independence, the chance to develop mastery, and a sense of purpose.
After touring the [Columbus Idea Foundry], I sat at a long table with several members. … I asked them what they thought of their organization as a model for a future where automation reached further into the formal economy. A mixed-media artist named Kate Morgan said that most people she knew at the foundry would quit their jobs and use the foundry to start their own business if they could. Others spoke about the fundamental need to witness the outcome of one’s work, which was satisfied more deeply by craftsmanship than by other jobs they’d held.
Late in the conversation, we were joined by Terry Griner, an engineer who had built miniature steam engines in his garage before Bandar invited him to join the foundry. … “I’ve been working since I was 16. I’ve done food service, restaurant work, hospital work, and computer programming. I’ve done a lot of different jobs,” said Griner. … “But if we had a society that said, ‘We’ll cover your essentials, you can work in the shop,’ I think that would be utopia. That, to me, would be the best of all possible worlds.”
To echo Davenport and Kirby: So much for just sleeping, watching TV, and surfing the web.
3. UBI for Workers
I believe that the proponent of UBI can hardly underemphasize the need to liberate individuals from stifling, unengaging, and unnecessary jobs. At the same time, however, it’s important not to lose sight of the fact that the choice between JG and UBI is not a choice between “jobs and fewer jobs”. A UBI per se does not entail that individuals will stop working: it merely enables this possibility. A UBI does not harm those who are already happy in their jobs. Indeed, far from discouraging paid employment, UBI carries the advantage of avoiding the “welfare trap”: individuals do not lose the benefit when they assume a job or wage increase. (Indeed, this is a major reason that countries like Finland are seriously exploring the implementation of UBI.)
And we could add that there might be advantages of a UBI over a JG even when limiting our attention to those who do prefer to work in traditional jobs. A UBI would benefit anyone who feels trapped in a job that is a poor match for their personality, interests, and capabilities–even those would prefer to remain in full-time employment (but simply not in their current ill-fit jobs). With a guaranteed unconditional income, one could take away from full-time employment in order to retrain, further their education, start a private business, or pursue other such opportunities. A basic income provides a financial floor to enable individuals to switch jobs and careers–and even to execute the retraining that Davenport and Kirby recommend to cope with the age of automation!
A job guarantee provides jobs. A basic income, however, provides individuals with the financial security necessary to temporarily abstain from employment while retraining or searching for a job that is a good match to their interests and capabilities.
4. A Critical Caveat
There is, though, one caveat–which I’ll take up in my third and final installment. We must concede that there is something that UBI doesn’t guarantee that JG does: jobs.
Under a UBI, without a JG, there is no guarantee that sufficient jobs will even exist for all individuals–and even if there are sufficient jobs, a UBI alone does not enable individuals to access those jobs. A UBI does not provide social networks, cultural or linguistic capital, resumé-writing or interviewing skills, or self-marketing abilities. A UBI does not overturn implicit biases in hiring. A UBI does not guarantee that jobs are located where job-seekers live, or that job-seekers have the training and credentials needed to obtain a job. And so on.
A UBI program is likely to treat individuals as self-reliant–left to their own devices to find a job (or not)–in contrast to a JG program, which would bring along services to ensure that individuals are provided with jobs. Quite likely, one fear of Davenport and Kirby is that a UBI, but not JG, would result in many individuals who desire jobs but have difficulty in finding or obtaining them. While UBI might not prohibit individuals from taking up employment, it also does nothing to guarantee jobs to those who want them.
CC BY-NC-ND 2.0 New York City Department of Transportation
Perhaps, then, there is one category of individuals who stands to benefit more from a JG than from a UBI: those who are not employed, and who are looking for entry into a traditional job.
My hope, as broached in my last feature, is that UBI would usher in the attenuation of the job-culture. But it would not be immediate. At present, many (perhaps most) people have internalized the job-ethic. At present, unemployment does bear a stigma. And many people lack the training, motivation, or desire to start a small business or become independent artists, craftspersons, researchers, or software developers. Plausibly, there are many unemployed individuals who just want a job to provide their lives with purpose, dignity, structure, and a sense of social contribution. And we must not simply assume, without evidence, that such individuals would not be satisfied with the sort of “make-work” position created by a JG (which, after all, could be a truly important one, such as repairing our failing infrastructure).
It’s important that UBI advocates do not overlook this category of individuals: those who would prefer guaranteed employment (even in a government-created job) to guaranteed income.
But how many such individuals actually exist? And how would they fare under under a UBI? Is the solution a UBI plus a JG or other policy? Are other compromise positions available?
These are important concerns, which I plan to address in future work.
Davenport and Kirby: Full Bibliographical Entries
Thomas H. Davenport and Julia Kirby (2016) Only Humans Need Apply: Winners & Losers in the Age of Smart Machines, HarperCollins Publishers.
Tom Davenport and Julia Kirby (May 26, 2016) “What Governments Can Do When Robots Take Our Jobs“, Fortune Magazine (and reprinted in Yahoo Finance).
Reviewed by Tyler Prochazka
Featured Image CC BY-NC-ND 2.0 San Francisco Public Library
Thanks to Kate’s supporters on Patreon
By Jennifer Lawson
Per capita payments, or ‘per caps’, as they are known in Indian Country, function as a kind of basic income for tribal nations that have them. In this piece, I want to examine the distinct difference between the thinking about such a basic income in Indian Country and the United States in general.
The other day, I was talking to a small group of non-native Americans about basic income. One of them said to me, “Basic income seems like something like that would take a long time to gain ground.”
In the United States in general, the thinking about basic income is not as far along as it is in Indian Country, where per caps have been a staple for many tribes for several years.
One of the first questions, for tribes that gained discretionary income in the last decade, has been, “What do we do with this money?”
Many tribal nations have tribally owned businesses and, unlike the general thinking in the United States, no one worries that this may be a form of communism or socialism. It is simply, for many tribal nations, in keeping with their tribal values to have a collectively owned business.
The revenue from such businesses, as well as the revenue from natural resources and other ways tribes gain money, provide the discretionary income that tribal nations work with.
The answer to the question, “What do we do with this money?” is answered differently by different tribal nations. Some provide services to their citizens, such as childcare, early childhood education, hospitals, and so forth. Others provide per caps to their members.
I do not want anyone to come away thinking that tribal nations are flushed with cash or that Native people are, in general, rich from per caps. Rather, I want to look at the differences between the tribal way of thinking and the United States’ way of thinking
From the tribal point of view, when you have a collectively owned business, it makes sense that one option would be to divide the revenue up and disperse it among citizens of the tribe. In general, what to do with the money is voted upon and the decision about what to do with the money is decided that way.
For non-native people, we do not have collectively owned businesses to decide how to divide the revenue. A large portion of people in the United States would rebuke such a business as socialism or communism.
However, we do have other ways of gaining access to a basic income without having collectively owned businesses. Some have suggested taxing pollution, for example.
For tribal nations, some of the arguments that are familiar to people in basic income have been espoused, both for and against. One worry, for example, is that people will not attend college because the thinking What’s the use? is in effect. That is, if you don’t need to attend college for future employment, why go? This thinking saddens many tribal people, who have a pre-colonial history of being interested in education, contrary to stereotypes.
But the biggest issue for tribes, which has become a real problem, is that of disenrollment. Disenrollment is, in effect, making people ineligible to be tribal citizens. While many tribal nations are growing as of late, some tribal nations with per caps have closed and/or tightened up their citizenship requirements to make per caps go further, and to allow each individual to have as much money from per caps as possible. If a tribal nation is doing pretty well economically, it does even better when the tribe is small.
With the large population of the United States, as well as our open citizenship requirements, where people may become citizens after completing various acts and learning about our government and founding documents, what we can afford to give our citizens depends on how we collect that money.
Because the issue of having collectively owned businesses seems to be less compatible with the values of the United States than of tribal nations, we of the United States have to be creative in how we decide to fund a basic income.
No matter the problems that tribal nations have experienced due to per caps, what is clear is that tribes that have the ability, and vote accordingly, can provide a basic income for their citizens. This should make us wonder why the United States, which has more wealth, opportunity, and so forth, cannot.
Looking over the state of per caps in Indian Country has made me, at least, realize that it can be done, and that we should do it. After all, if we had a basic income, I might be able to be in Standing Rock right now, standing with my Native brothers and sisters against the Dakota Access Pipeline—or engaging in other activist or cultural activities.
There is much that Indian Country can teach us. The issue of basic income is one we should look into further.
There was an uncanny similarity between two referenda held in June: the UK’s referendum on whether to remain in the European Union, and the Swiss referendum on a Citizen’s Income. In each case, the ballot paper asked a simple question: whether to remain or leave, and whether to establish a Citizen’s or Basic Income – an unconditional income for every Swiss citizen. In the latter case, the wording was explicit that the Swiss federal government was to decide on the level of the Basic Income and on the means of funding it.
And then in both cases the campaigns leading up to the referenda were less about the referenda questions than about very different issues.
In the Swiss case this was largely the fault of the proposers of the referendum question. The wording having carefully left the decision as to the level of the Citizen’s Income to the Swiss government, the campaigners then suggested a level of 2,500 Swiss francs per month – about £400 per week. It was largely this that led to so many members of the Swiss parliament asking people to vote against the proposal; it was the proposed figure that dominated the campaign; and it was the fear of the massive tax increase that would have been needed to fund such a large Citizen’s Income that led to so many people voting against the proposal. All of this could have been avoided quite easily. If the campaigners had wanted to inform the debate about potential levels of Citizen’s Income and possible funding methods then they could have undertaken the kind of careful costing work that we and others have undertaken in the UK. If that had happened, then the government could have made clear the level of Citizen’s Income that they would be likely to agree on if the referendum were to pass, and the debate and the decision might have been rather more rational.
Having said that, the referendum was in many ways a success. The referendum was held; it contributed significantly to media and public interest in Citizen’s Income, both in Switzerland and around the world; and 23% of the Swiss population approved of the idea. The referendum will be seen as an important stage in the Swiss and global Citizen’s Income debates.
In the British case there was always going to be a problem. Public understanding of the European Union is almost non-existent, so the only information that most people had available to them were the halftruths that campaigners on both sides and the press chose to feed to them. Members of the public were told that we could avoid EU workers having the right to live and work in the UK and trade within the single market, even though the European Commission had made it clear that remaining within the single market was conditional upon allowing EU workers to live and work in the UK. Throughout the campaign, leaving the EU was touted as a way of preventing immigration, whereas most immigration is from outside the EU and was therefore nothing to do with the question on the ballot paper.
There are two lessons to draw from these two referenda. One is that referenda are a bad idea in the context of an ill-informed public and a biassed media. The question on the ballot paper might be a simple one, but if it is about a complex reality then even generally well-informed members of the public might have little understanding of the possible consequences of a referendum result – whatever that result might be. In relation to complex issues about which members of the public understand little, representative democracy is the least bad system of government, and it is safer than referenda. It enables proposals informed by a civil service to be debated in a parliament and in committee, to be amended, to be tested in another parliament, and then amended again. Such a method has to be preferable to a one-shot referendum ill-informed by emotive campaigns. This is not to suggest that referenda are never appropriate. If the public is well informed about the issue on the ballot paper, if campaigns are based on evidence, if experts are heard, and if the print and other media see it as their role to educate rather than to persuade, then a referendum has some chance of assessing an informed population’s view on the question on the ballot paper. The 2014 referendum on Scottish independence came closer to this ideal referendum than either the Swiss Basic Income referendum or the recent British referendum on EU membership; and the Swiss Basic Income referendum came closer to it than the British referendum on EU membership. It would take a massive educational effort to enable the UK’s population to gain a sufficient understanding of the desirability and feasibility of a Citizen’s Income to enable it to compare a benefits system based on a Citizen’s Income with the current system. Whether such an educational effort is possible, or such an outcome feasible, must be in doubt: in which case the safer method will be for the institutions of representative democracy – Parliament and the Government – to evaluate the arguments for a Citizen’s Income and to decide in accordance with their findings.
The second lesson to draw is that careful research is essential if any future debate about Citizen’s Income is to be sufficiently well informed. It has been a pleasure to see recent well researched reports from the Royal Society of Arts, the Adam Smith Institute, and Compass, and up to date costings and other statistics relating to a particular illustrative Citizen’s Income scheme have recently been published by the Institute of Social and Economic Research at the University of Essex. We hope soon to be able to publish costings and other information relating to a couple more illustrative schemes, and we also hope to have available soon some information on how a range of typical households’ net incomes would be affected by some illustrative schemes. We would like to see even more research organisations involved in the rigorous testing of the financial feasibilities and consequences of illustrative schemes.
There is a connection between the Swiss and British referenda: EUROMOD, the microsimulation programme that we use to evaluate illustrative Citizen’s Income schemes. The programme’s development is funded by the European Union. We are very much hoping that the UK will continue to be involved in the European collaboration that makes such a useful piece of research infrastructure possible.
Another connection is the one between Citizen’s Income and important factors in the British European Union referendum. Widening inequality and deep social divisions appear to have been important motivations for voting to leave the EU, even though leaving the EU is unlikely to remedy the situation and might even make it worse. A Citizen’s Income would help to reduce inequality and to heal social division. It is therefore essential that widespread informed debate on Citizen’s Income should take place, and that the institutions of representative democracy should decide to implement a Citizen’s Income: perhaps informed by an advisory referendum.
During the 20th century, the increase in purchasing power of the workers in Western Europe was negotiated by the labour unions and paid for by the spectacular increase in productivity of agriculture and industry: we made more and better products with less workers. This yielded generous increases of net salaries and on top of that it allowed governments to pay for schools and health care. This resulted in the general belief that the wealth of a nation is the result of labour, because it paid not only for salaries, but also for social security and other government spending. Since then, the world elite believes that labour participation is the basis of our social security system and our wealth.
There are a few problems with this belief, however.
The first problem is that with the collapse of communism in 1989, the size of the economy grew from 1 billion participants (Europe, the US, Japan and a few small countries) to 6 billion. Cheap labour supply became abundant while the world wide bargaining power of labour unions became irrelevant. Many manufacturing companies moved their production to low cost countries. The “low cost” of these countries was mainly due to the insignificant tax on labour there, compared to Western Europe, where the labour tax was between 100 and 200% of the (higher) net salaries. The saving of the high labour tax was a major cost reduction driver for companies which moved their production, much more than the net salaries of the highly qualified, well trained, loyal, productive local workers which lost their jobs. Political Europe was sleeping apparently, not realising that the corresponding financing of the social security was moving away with the factories.
The second problem is that increasingly machines, robots and computers used in production of goods and services decrease the need for human workers.
The third problem is that social security contributions from the rapidly increasing public and subsidised employment are not real, because the wallet which collects them is the same wallet which pays them: the state.
The fourth problem is that life expectancy is growing, affecting the cost for the state paid pensions. Since health care cost is much higher in old age, the cost of state paid health care increases as well.
The fifth problem is that income from savings is trending toward zero. Citizens owning property are mostly excluded from social aid provided by the state, since they are supposed to derive an income from their property. This induces a new type of poverty. Moreover, the decrease in income from capital affects overall consumer spending, also within the working class.
As a consequence, the purchasing power of the working class has stalled in Western Europe and the US since 2000. This is hidden in the national accounts because in those figures the “income” which households derive from labour is the “gross” income including social security contributions and income taxes. The latter have risen.
Some political parties start to plead the reduction of social security benefits, which would be the start of a negative spiral.
The labour tax based system is structurally unstable. When sales decrease due to economic slowdown and workers are laid off, their income decreases so they buy less leading to further sales decreases and job losses in other businesses. The “Labour Church” will tell you that the central bank then should decrease the interest rate to stimulate investment and spending. This is speculative and slow to start effect. In any case, the interest rate is now zero and hence cannot be reduced anymore. The “Labour Church” system is in deep trouble. They seem to hope for a miracle: I see no “Plan”.
There is however one stabilising factor, our social security, which makes people continue to spend money when they have no work. This hints to the fact that “Purchasing Power” could be the solution to our stalled economic system. When the economy weakens, we should inject additional purchasing power into the economy. When the economy gets overheated, we could reduce the purchasing power injection.
Purchasing Power injection, Basic Income, should replace “labour” as the motor and regulator of our economic system. The distributed purchasing power generates spending, entrepreneurship and work for those who want to earn more money. Tax on labour can only be an auxiliary source of funding if we want such a system to be stable.
Basic Income supporters are a minority still. But we have a Plan.
Evidence indicates that Universal Basic Income (UBI) policies would benefit our society’s least fortunate, decreasing poverty and improving the prospects for long-term income mobility. However, one UBI critic has asserted that a basic income replacing current forms of welfare would make it harder for immigrants to become naturalized citizens of the United States because of political pressures. An excerpt from an interview journalist Megan McArdle gave to PBS News Hour:
A lot of immigrants are low-wage workers. They’re not skilled, a lot of them. They don’t have as much education as most Americans and so they never do get up to the point where they would ever pay enough in taxes to make back that check. Even if you just limited it to their children, the political support for importing people whose children will then be entitled to the same $15,000 a year as your children — I don’t think that would ever be politically viable.
So if you want to have a guaranteed minimum income, you need to shut down, pretty much effectively, shut down immigration, or at least immigration from lower skilled countries…
There are three reasons why McArdle’s conclusion, that UBI would complicate the immigration debate and necessitate an end to immigration, is very incorrect. First, naturalized immigrants are already the recipients of welfare transfers in the status quo; distributing this aid through a UBI will lower administrative costs, be less controlling, and help those in poverty more than existing welfare policies do. Second, the UBI’s political effects on immigration are largely unpredictable, but the reform could be sold to the public in a bipartisan fashion. It is not hard to imagine that UBI would have broad appeal if constituents knew it offered a simplified benefit structure, created clear incentives for legal immigration, and eliminated some of the perverse incentives embedded in current welfare policies.
Welfare policies already exist – and naturalized immigrants already participate in these programs at relatively high rates because immigrants are more likely to be low-income than the average American citizen. This is worth repeating for emphasis: naturalized are already eligible to receive social security benefits, Supplemental Security Income, food stamps, TANF benefits, and benefits from other transfer programs. This fact alone means that UBI, as a phased-in alternative to current welfare policies, would not increase the amount of money transferred to naturalized immigrants.
While it is feasible that welfare transfers to new citizens could be viewed as unpopular, the balanced approach of a UBI could help mitigate these concerns while leaving everyone better off. Policymakers who answer to constituents with negative views on immigration could effectively communicate that a UBI would reduce the total cost of welfare by reducing administrative costs. Policymakers who answer to constituents with positive views on immigration could argue aid would be given to those in need in a better way, a way that empowers new immigrants to make their own choices rather than choices dictated by the government.
Depending on implementation, a UBI policy may slightly increase or decrease aid to the families of illegal immigrants. Although immigrants illegally residing in the U.S. are generally ineligible to receive welfare, illegal immigrants are permitted to apply to receive food stamps on their children’s behalf. A UBI equal to the value of the food stamps the family would have otherwise received should be the preferred policy. Various states already have their own forms of supplementary assistance for illegal immigrants in addition to food stamps: these states could bridge any perceived gaps by offering the same assistance they do now.
Lawful, non-citizen residents, such as students, exchange visitors and foreign workers, are eligible for certain welfare transfers depending on their circumstances. Current laws also require waiting periods and point systems for noncitizens to become eligible for Supplemental Security Income (SSI) transfers. These rules could be maintained to alleviate concerns that noncitizens would take advantage of the UBI: as it stands now, non-citizens receive substantially less welfare transfers than their citizen counterparts. Essentially, a UBI would end up looking very similar to the SSI – the general idea would be to have fewer onerous requirements on how welfare dollars are spent.
The political implications of UBI implementation are nearly impossible to predict, especially in the context of immigration. For example, even though illegal immigration has been falling over the last decade, voter concern is relatively high. Additional demographic changes will likely change the political realities surrounding immigration reform and welfare policies.
It is also unlikely that a UBI would drastically change the rate of naturalization or where non-citizens choose to call home. After all, research shows that welfare spending does not have large effect on immigrants’ decisions on where to live (the biggest factor appears to be economic opportunity). It also appears that citizenship fees are a bigger factor in determining whether immigrants will pursue naturalization than welfare is.
It is clear that UBI would not lead to the cataclysmic outcomes McArdle expects: we would have already seen those consequences with current welfare policies. A UBI would just improve the existing system.
About the author:
James Davis is an undergraduate at Columbia University studying Economics and History.
Social security emerged in Western Europe with voluntary solidarity contributions within labour unions in the late 19th century developing into a mandatory insurance contribution organised by the state in 1950. A mandatory insurance payable to the state is a tax, in this case a tax on labour. Because the employer pays all if it, it does not matter if legislation categorises it as employee’s contribution or employer’s contribution.
In addition, the 20th century saw the birth of a new type of tax: the income tax, designed to capture the total income of wealthy people. However, after 1950 the income tax started to hit the rising incomes of the working class. It became the second component of the tax on labour. Zero in 1930, insignificant in 1950, the total tax on labour is now by far the most important tax income for Western European states. It varies between 50 to 200 percent of the net labour income of the workers, making the cost of labour on average twice as high compared to what the worker gets.
The history of its creation explains why social security is linked to labour participation. The political class assimilates “job creation” to welfare: the more people work, and the longer they do, the more taxes are paid and the better for the state budget. This thinking induced many countries to increase the age of retirement. Obliging older people to work longer when there is a five-fold increase of unemployed young people waiting for a job, is absurd. It is an example of wrong collective thinking by people indoctrinated by the “Labour Church”, because they assume “full employment” is still possible.
In the cultural sector, the high tax on labour is a problem. We can watch fantastic artists for free on television. High taxes on labour increase the wage cost of artists. Most local performances cannot compete unless they get subsidies, which is now current practice in most Western European countries. Would it not be more straightforward to have no taxes and no subsidies in the cultural sector?
Education and healthcare are heavily subsidised in many countries to cover the cost of their employees including the tax on their labour and other expenses. Their net finances would be the same if taxes on labour would be set to zero and subsidies lowered with the same amount.
Same for services completely paid by our tax money like police, justice, the military, federal and local administration: the labour tax cost included into the payroll expenditure of the state is paid and collected by the state, the same wallet. Setting their labour tax to zero would not affect their net finances.
In Western Europe, 40 to 50 percent of employment is publicly funded which means the corresponding labour tax has no effect on net state receipts.
For a state, the real proceeds of labour tax come from the non-subsidised private sector. Hence, the proceeds are much lower than what policymakers are tempted to believe while looking at public accounts which provide gross rather than netted labour tax income figures.
Meanwhile, the high tax on labour effectively increases the cost of services for those who want their shoes, a washing machine or a bike to be repaired. Mind that the “Labour Church” does not allow citizens to trade services. Services should be acquired from service companies because allowing citizen’s to work for each other by exchanging services would be unfair competition to the firms selling such services.
These firms charge a labour cost at least twice as high as what their workers get, because of the tax on labour. This higher price obviously reduces the demand for repair services and many people try to paint their house themselves, maintain their garden themselves and their kids drive bikes without proper lights or brakes. The tax on labour reduces exchange of services, hence it reduces the creation of wealth in the proximity economy.
In Western Europe, the labour Church created this barrier to social inclusion by segregating contractual labour from voluntary and informal work. Helping each other in an informal way, like our grandparents did, is not permitted anymore: the labour tax collectors are chasing offenders. However, poor people can get help from subsidised workers if they successfully find and convince the right state personnel that they are really poor. Clearly, the economic religion put in place by the “Labour Church” does not empower the population to help each other.
Would it not be more effective to convert the directive, complex, fraud-prone and costly social security allowance system into its basic income equivalent and allow the social economy to thrive again by allowing people to work for each other in an informal way, like our ancestors did until 50 years ago?