A universal basic income (UBI) and unemployment insurance (UI) are two possible forms of social insurance for an economy in which job loss is a significant risk. Alice Fabre, Stéphane Pallage, and Christian Zimmermann (FPZ) address in a recent working paper from the Research Division of the St. Louis Fed. They argue, when compared head-to-head, UI is a better social safety net than a UBI. Skeptics are likely to seize on these findings, but in the Ed Dolan’s view, they do not support a blanket rejection of a UBI. Instead, as he explains, they highlight how important it is for UBI proponents to pay attention to details of financing and program design.
ABSTRACT: In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need.
An interesting discussion of automation’s implications for the economy. Among the questions explored is “What scope is there for a ‘Basic Income Guarantee’ to address the needs of everyone who will struggle to find work in the new age of smarter robots?”
Panelists included in the discussion: writers James Hughes, Martin Ford, Gary Marchant, and Marshall Brain.
Abstract: “This article explores the impact of both technological unemployment and a basic income on the provision of services of general interest. A basic income may promote the restructuring of production into postcapitalist forms and projects involving peer production. This change, as well as technological unemployment, will result in lower state and market capacities to provide services. Instead, people will create various forms of self-organization to meet their needs. The paper presents examples of such models. Some ideas about the new forms of inequalities in this system will be presented to inspire a further study of this scenario.”
