by Kate McFarland | Jun 11, 2017 | Opinion
For me, a job-unconditional basic income guarantee was simply a part of the life to which I grew accustomed as a young adult. In this piece, I describe how this experience has influenced my hopes and expectations concerning the effects of basic income as a policy.
The Author (circa early Graduate School)
Entering college as a scholarship student, I moved directly into a life in which I received a monthly living stipend that was not conditional on holding or looking for paid employment. There were, of course, some other conditions on the funding; I was, for instance, required to take classes at the university and make “sufficient academic progress” by some measure.
However, my “salary” was not contingent on anything that felt like being employed: I didn’t need to keep 9-to-5 hours, work in an office, report to a boss, or dress professionally — and, most importantly, I didn’t have to plan any aspect of my life around the question “What will people pay me to do?” I just took classes that interested me, which I invariably selected without consideration of the potential “market value” of the knowledge and training.
After about six years of such a lifestyle, I entered the “paid workforce” as a graduate teaching associate, an arrangement in which monthly pay continued to feel more-or-less disconnected from work, despite the addition of some new obligations. Now in my 30s, I’ve never worked a full-time job or signed an employment contract for more than a year — and I’ve continued, for the most part, to keep my deliberation about how to lead my life at a remove from questions of how to make money.
Certainly, there are significant differences between university scholarships and fellowships and a true basic income. Moreover, I am but one person, and individual cases are sure to vary considerably. Nonetheless, I believe that I came to adopt a lifestyle and internalize a mode of thought similar to what might be encouraged by a basic income.
This present piece is not an argument for basic income. On the contrary, it functions in part as a disclaimer on my own support for the idea. Of course I support a basic income, one might conclude; a basic income would help to sustain a lifestyle like the one to which I’ve grown accustomed, and it is difficult to give up what one has known and enjoyed. It is also an partial explanation of why I came to certain specific views and conjectures about the potential merit and effects of a basic income.
The following are nine conjectures about basic income that I developed due to my own experience:
- It would be easy to take a basic income for granted.
- A basic income might prevent the conflating of work (and worth) with paid labor.
- A basic income can promote lower consumption in the long-term.
- A basic income would facilitate living without long-range plans.
- A basic income could allow precarious jobs to be the most appealing jobs.
- A basic income could enable social isolation.
- A basic income would not “cure” anxiety.
- A basic income could enable individuals to make no useful social contributions.
- A mere “personal basic income” can make one feel alien.
1. It would be easy to take a basic income for granted (no pun intended).
This, I believe, is the crucial lesson, and it lays essential groundwork for all that follows.
When basic income proponents ask “What would you do if your income were taken care of?” they want the audience to fantasize about the myriad benefits a basic income could confer upon their lives (and, ideally, to imagine the ways in which they could use their good fortune proactively).
But when a guaranteed basic income is all one has ever known, it doesn’t feel liberating. It doesn’t feel special. It doesn’t spur one to better oneself. It is simply part of the ordinary state of existence, a silent component of the background conditions for everyday life.
When I headed off to college, I didn’t think, “Hey, cool! I have free tuition, a living stipend, and I’m relieved of working in a job; I think I’ll really make something of myself and contribute to the world!” No, not at all. Instead I thought, “Hey, cool; I have a living stipend! Now I’ll continue taking classes, as always, but I’ll get to live alone in my own apartment!” Arguably, the main effect of my job-unconditional income was to enable me to retain the mentality of a studious high-schooler: I ?took for granted that my basic needs would be met, that my main purpose was to study and learn, and that a job would just be a burden.
Of course, by contrasting this experience with that of those who lacked such financial good fortune, I can come to see that a basic income (or full-ride scholarship) entails freedom from much stress and overwork, and, in principle, opens the door for great accomplishments. However, I never truly felt freedom or relief, for I never knew a “before time” when I lacked my income guarantee.
2. A basic income might prevent the conflating of work (and worth) with paid labor.
I am ceaselessly baffled by the contention that people need jobs in order to feel a sense of purpose and self-worth, as well as the frequent assumption that when individuals are not at work in a job, they are idling away their time in passive leisure.
None of this is natural. Indeed, it is not what we learned as children. As children, we did not hold jobs, and yet our time was not one homogeneous block of undifferentiated recreation. We did not work for pay, and yet this did not entail that all of our activities were worthless.
Gulf Coast Regional Science Olympiad
When we were children, we had our schoolwork, which we were generally supposed to prioritize. We might also have had some organized extra-curricular activities like sports, band, debate, drama, or Science Olympiad, or various clubs in our schools, churches, and communities. These organized activities were also generally encouraged by our elders, as long as we did not pursue them to the detriment of schoolwork. Finally, we had “free-time”–and, even then, certain recreational pursuits (e.g. reading novels) were told to us to be more worthwhile than others (e.g. playing the Nintendo).
We were paid for none of this, of course, ?and yet we did not conclude that our activities were thereby equally valuable (or, perhaps better put, equally valueless).
Moreover, when we did grow old enough to take jobs, unpaid schoolwork (mark that: “school-work“) was usually still considered more important than paid job-work. We were subject to censure by teachers and parents if our paid work compromised our performance in our unpaid work.
At some point, apparently, many unlearn these truths that still seem obvious to me–that paid work and passive leisure are not exhaustive categories, that unpaid activities can be valuable, that unpaid activities can be work, and identify and self-worth can be found outside of the labor force–though, to be sure, I don’t know precisely when, why, and how this unlearning occurs. If the necessity of finding paid work is a contributing influence, however, then it might be said that a job-independent guaranteed income helped to prevent my unlearning of these truths.
As I said above, I was able to continue to live with (roughly) the mentality of a high-schooler, taking for granted that my basic needs would be met, that a job would just be a burden, and that my main purpose was to study. That said, there were occasions when I’d find myself with extra time, feel uninspired to make any productive use of it, and think to myself, “Well, I might as well take up a part-time job…” In these times, however, paid employment always felt like a path of last resort, a last-ditch effort to mask a transient but troublesome feeling of unproductivity or worthlessness. I could (and did) justify job-hunting by telling myself, for example, “I will earn money to save so that I can ‘buy more freedom’ for myself in the future, once my inspiration has returned.” Nonetheless, I would continue to feel somewhat ashamed of my failure to find my own intellectual or creative activities to which to devote my time; a job always seemed like something of a cop-out.
3. A basic income might promote lower consumption in the long-term.
My personal experience is the main reason that I have become interested in the supposition that a basic income could encourage degrowth. Because I entered adulthood with something like a basic income, I grew accustomed both to minimal consumer spending (since my stipends afforded only a basic “no frills” lifestyle) and to substantial freedom and flexibility in structuring my time.
Yes, the thought more money and greater purchasing power was (and is) often alluring; however, I never found it sufficiently attractive to tempt me to pursue a lucrative career. Instead, since I have always had the option of greater freedom, I have almost invariably chosen it–even though this has required me to content myself with significantly less consumption than a well-paying job (or even a modestly paying one) would have allowed. And this, importantly, has never felt like a sacrifice. I truly believe there is no salary high enough to motivate me to work a 40-hour job for the next 30 years–as long, that is, as it remains possible for me to afford my basic needs while spending little or no time in standard structures of employment. Having grown to know and cherish it, I feel my freedom has no price.
Tiny Home, CC BY-NC 2.0 Todd Lappin
It is significant here, though, that this “basic income lifestyle” is simply the life to which I adapted; it is, in essence, all I’ve known. I doubt that many individuals who earn, say, $40k per year in full-time jobs (an amount well beyond my highest annual earnings, yet slightly below the US median individual income) — let alone those with higher earnings — would want to leave their jobs to live on the much more modest amount of an unconditional basic income. For many, working a full-time job has become a natural part of life, and so has the lifestyle that their salary can afford.
It is difficult to give up the pleasant aspects of a lifestyle to which one has grown acquainted — whether this is freedom and flexibility, as in my case, or more lavish consumption, as in the case (presumably) of many individuals with full-time jobs in successful careers. Meanwhile, it is fairly easy to persist in something that has come to feel like second nature, even if mildly unpleasant, whether frugality in consumer spending (as in my case) or the confines of standard employment (as for many others).
A lifelong basic income has the potential to transform that to which individuals become habituated. It is on this basis that I conjecture that a basic income has the potential promote lower levels of consumption and economic growth.
This is also, incidentally, one reason for which I am skeptical about the ability of basic income pilots to reveal anything interesting regarding the long-term effects of an income guarantee on labor and consumption. If a person begins to receive a basic income after having already grown habituated to full-time employment and the lifestyle of earning-to-consume, then it might be highly unlikely that she would choose to leave the paid workforce and subsist on her comparatively meager basic income payments. But the situation could be much different in a society in which youth begin to receive a basic income before they have experience as either full-time laborers or high-volume consumers.
4. A basic income would facilitate living without long-range plans.
It is sometimes argued that a basic income would better enable individuals to plan for the long term, given its ability to mitigate the scarcity mindset and survivalist thinking engendered by poverty or economic insecurity (see, e.g., Louise Haagh’s article “Basic Income’s Radical Role” in Social Europe).
It has been my experience, however, that work-independent financial security can also produce the opposite effect: if one is guaranteed long-term economic security, then one is thereby relieved of the need to plan job and career goals oriented towards minimizing the chances of future economic hardship. Indeed, if one knows that one has long-term financial security, then one needn’t plan for the future at all, economically speaking, as long as one is able to live within one’s “basic” means. In other words, a stable and reliable work-unconditional income can permit individuals who might otherwise plan and act upon long-term career goals to think only in shorter terms, pursuing present interests with little or no concern for how these present tasks might promote employment or career advancement in the future. This is, at least, how I have always lived, continue to live, and desire to live.
The idea that basic income can enable risk-tasking is nothing new or unfamiliar. Notably, Facebook CEO Mark Zuckerberg recently recommended consideration of the policy for precisely this purpose. Most commonly, however, this idea is raises in arguing that basic income can promote entrepreneurial activities, in which the risk is assumed for the sake of pursuing a specific long-range project or goal. But deliberately and intentionally living without a plan — choosing to remain open and adaptable to unplanned opportunities and the ever-changing natural flow of life — is itself a type of “risky” lifestyle.
Those with conventional “careerist” values might read the above passage as admission that the feeling of financial security provided by a basic income can be mentally and morally degrading. It seems that many consider it a mark of good character to plan for the future and devote oneself to long-term career ambitions–and a character flaw not to do so.
I can only ask, then, that we critically reexamine the moral importance we place on career-oriented thinking. I have personally embraced my relative economic security as way to eschew careerism — to live and work in a way that is maximally flexible and adaptive to my evolving interests, abilities, social networks, external demands, and whatever unanticipated possibilities may arise. For me, this may be the single most liberating thing about my lifestyle — as well as the key source of my excitement and fascination with life — and I am hard-pressed to see it as wrong.
5. A basic income could allow precarious jobs to be the most appealing jobs.
As I mentioned near the outset of this piece, I have never worked a full-time job or signed an employment contract longer than a year. And this is no dismal fate but, rather, my ingrained preference and my incredible luck. It is one of my greatest hopes to maintain this lifestyle for as long as possible, primarily due to the flexibility that it allows, and its ability to sustain the “anti-careerism” described in the above section.
Having grown used to a stable but basic income, I have acquired a taste for jobs that can be picked up when in want of extra spending money and abandoned as quickly as possible after the desired sum of money has been obtained. I often found it desirable to earn a little more than my basic living stipend; at the same time, as discussed above, I could never imagine relinquishing freedom and flexibility for a full-time and permanent job, even a well-paying one.
“Gig Economy Graphic” CC BY 2.0 Mark Warner
Traditional full-time permanent positions seldom permit employees to work just enough to gain a desired sum of income — much to the frustration of those of us who identify with Max Weber’s classic description of the pre-industrial piece-rate worker: “A man does not ‘by nature’ wish to cam more and more money, but simply to live as he is accustomed to live and to earn as much as is necessary for that purpose.”
In contrast, “gig work” makes it easier to adjust the amount of one’s work to one’s desired income level, avoiding excessively confining commitments to jobs.
Proponents often speak of basic income as an “exit option” from employment, as if an independent source of financial security is enough to allow individuals to quit their jobs. But this strictly economic picture of employment obligations seems almost to fetishize money-making and downplay social norms in a manner reflective of the very status quo values that (in my view) a basic income should help us to overcome. The economic view of “exit” neglects the ethical importance of loyalty and trustworthiness: when I sign a contract, or otherwise give my word that I will follow through on certain tasks and duties, I consider myself bound to complete the work I have promised — irrespective of whether I am paid for that work, and irrespective of whether I can make a living for myself apart from that work. If one is under a long-term contract, the option of “exit” can pose ethical and psychological conflict even if one has the financial wherewithal to leave a job (and, we might add, even if one believes that one’s personal interest would be bettered by leaving the position).
That is, I have found that job flexibility is most easily attained not only by having access to a financial safety net but also by adopting more short-term and easily abandoned forms of employment. If a basic income enables individuals more easily to exit jobs, this is not merely due to its provision of a safety net but also due to the fact that this safety net allow individuals to avoid long-term contractual agreements in the first place (though I will admit that I myself am somewhat conflicted over the ethicality of this recommendation to avoid long-term commitment to employers).
6. A basic income could enable social isolation.
“The lonely woman” CC BY-NC-ND 2.0 Johan
In the spring of 2016, I managed the Facebook page of the US Basic Income Guarantee network. I recall sharing an article entitled “Will the Universal Basic Income make us lonely?“ (written by Oxford fellow Max Harris) and feeling rather disillusioned by the comments, which, I felt, often failed to engage sympathetically with Harris’s concerns.
Many commenters reacted as though the very suggestion that basic income could cause loneliness was utterly ridiculous. Some pointed out that (no doubt accurately) a basic income would permit many individuals to have a enjoy richer social life that they can currently manage. None replied that a basic income could indeed facilitate a potentially harmful reduction of social activity for some people. Although just a fledgling basic income writer at the time, I was inspired to write my own reply to Harris’s article, attempting a more charitable and nuanced treatment of the loneliness worry.
There was a reason that I took the loneliness worry as seriously as I did (and do): my own job-independent income helped to enable me to lead a life of fairly extreme social isolation. There’s little doubt that any sort of on-site job would have forced me to have more social interaction than I voluntarily chose during my college years. My nearly unconditional stipends permitted me to follow my natural tendency to seclude myself and work in solitude; a job, on the other hand, would have compelled me to act against it. To be sure, being very much an introvert by nature, I didn’t want additional social interaction. I didn’t feel lonely. Indeed, I would have objected vociferously if I had been required to relinquish my substantial alone-time, especially when busy with solitary work or other activities I found enjoyable. Its naturalness, however, doesn’t imply that my high degree of social isolation was healthy, and I later came to recognize that it was not.
We should admit that, in some cases, a basic income could facilitate unhealthy behaviors that a forced regime of paid employment could counter. Social isolation is one such behavior: some of us are disinclined to engage in social interaction when it’s not forced upon us; when it becomes voluntary, we naturally tend to abstain. With a basic income, then, we must force ourselves to do what, in other circumstances, the demand to earn a living might have forced upon us. We need to take it upon ourselves to ensure that we receive a healthy dose of social interaction — and sometimes, when it’s easier and seemingly “more natural” not to do so, we won’t.
Now, this is no more a reason to oppose basic income than “Some people won’t exercise if they aren’t forced to work in the fields” would have been a reason to oppose the mechanization of agricultural. But it is a possible outcome that does merit consideration.
7. A basic income would not “cure” anxiety.
In May 2017, basic income social media witnessed a viral spread of stories claiming that Finland’s basic income experiment was already showing a reduction in stress and anxiety. Although these particular stories apparently had their source in sensationalistic reporting of a single anecdote, the supposition that a basic income would reduce stress and anxiety is nothing new — and for good reason: economic hardship and income instability are major sources of stress and anxiety for many people (as is, on the side of the spectrum, overwork).
At the same time, however, many cases of stress and anxiety are not attributable to financial insecurity, poverty, or overwork. I know this firsthand: I have never experienced great economic difficulty, nor overwork (other than that brought on by my own perfectionism), and yet I have been affected by generalized anxiety disorder. Anxiety is an adaptable tormentor; it can find innumerable other potential sources of anxiety — as trivial as they might seem to others — to which to affix.
I often grimace, then, when I read particularly roseate predictions of the ability of basic income to alleviate anxiety — or, for that matter, any mental illness. Quite likely, a basic income would present significant advantages to sufferers of mental illness, especially those whose conditions prevent them from working (or from working steadily in full-time jobs), when compared to current systems of conditional welfare benefits. It would allow people security in their lives, and give them the time needed to help them grow more stable. But a basic income is no panacea.
8. A basic income could enable individuals to make no useful social contributions.
I have spent most of my adult life as a professional student, receiving stipends to study, and choosing my courses of study with no regard for either employability or ability to contribute to society. And, to show for it, I have indeed made no great social contributions.
Certainly, I’ve never been the stereotype of the lazy person content to live on her basic income payments; I’ve never been one to spend my days smoking weed and playing video games. On the contrary, I have a natural desire to feel productive, including (perhaps especially) during weekends and holidays, and it must have taken years for me years to overcome workaholic tendencies that made it difficult to enjoy leisure activities from socializing with friends to simply gazing at a beautiful sunset.
But what it is to have the natural drive to “feel productive”? Well, for one, it can be a drive to further one’s own learning and development — irrespective of whether one uses one’s skills and knowledge in any way whatsoever for the betterment of others or society. By divorcing the means to a living from the demands of the marketplace, a basic income could better enable individuals to pursue art for the sake of art, science for the sake of science, and so on. For me, this has long been integral to the appeal of the idea — even before a “basic income” of sorts came to feel like an established part of my life. It must be admitted, however, that one consequence is that artists, scientists, and other self-motivated individuals would also be free not to publish or promote their work in any way, burying any potential social contributions. (And this is not to mention that a world of self-directed artists and scientists would still have a need for those who will tend to individuals’ medical needs, repair roads and bridges, clean sewers and collect garbage, and so forth. But that is another essay, for another time.)
I believe I’ve done well for myself: my life doesn’t lack for happiness, meaning, or identity, despite (or perhaps because of) my persistent low income and lack of anything resembling a stable career. Nonetheless, there is little doubt that I could have done better for the world. I was, for one, a pretty decent STEM student; it’s possible, I suppose, that I could already have contributed to great advances in technology to improve the lives of millions. Instead, having the means, I chose to spend years engaged in pursuits such as (for example) the study of a narrow sub-sub-field in contemporary analytic philosophy of language. Moreover, because I chose such activities merely for the personal intellectual challenge, I never bothered even to try to publish or distribute my work.
All that being said, I should mention that a basic income is not unique in permitting individuals to survive without contributing to society. Perhaps most obviously, we might imagine the “idle rich” living from inheritance, trust funds, and interest earnings. Moreover, and more importantly, the fact that an activity is profitable does not imply that the activity is socially beneficial (think of those who make a living in the “manufacture of demand” — getting people to buy things they otherwise wouldn’t even want — or, say, patent sharks). This does not imply, however, that tu quoque is an adequate response to the common concern that a basic income would permit free-riding on the societal contributions of others — for, simply put, a basic income would permit free-riding on the societal contributions of others.
9. A mere “personal basic income” can make one feel alien.
I have spent much of my adult life feeling like an outsider to much of my own culture — largely due to my rejection of career culture and other attitudes that I believe to have been engendered by the “BI-like” aspects of my early adult life.
I recall that, by the time I reached 20 years of age, I was already tired of living in a world in which success was equated with personal ambition or, more specifically, personal ambition as played out in a career in paid employment. There were those who wanted to advise me on how to achieve “success” and yet insisted upon projecting their own definition of that notion onto me. It felt, in those days, like there was no one with both the knowledge to offer good guidance and the open-mindedness to hear me out on my own interpretation of “success” and the good life. I embraced anti-careerism as part of my values and identity. I saw nothing inherently wrong with myself. I saw my situation as a case of organism-environment mismatch, and I was happy with the organism, just not the environment. Sometimes, when I felt particularly at odds with the job- and career-focused culture that surrounded me (but powerless to change it), the prospect of never contributing to society actually felt good — itself an act of rebellion.
Would my young adult years have been different ?if I had been born into a society with basic income already in place? Would I have been more eager to contribute my talents in a socially productive way if I had felt a less pronounced sense of “organism-environment mismatch”? I can’t say. Perhaps, even in utopia, all youth must go through their stage of rebellion and angst.
Still, I think, there’s an important point that transcends the rebellion and restlessness of youth: having a “personal basic income” in our present culture –? obsessed as it is with jobs, careers, consumption, and economic growth — ?is likely much different from having the same in a culture in which GDP is not the measure of societal success, income is not the measure of personal success, and education is encouraged for its own sake, not merely as a means to attain a good job. And, quite likely, it would take a universal basic income, or something like it, to pave the way for these latter large-scale cultural shifts.
What a financially self-sufficient individual would do in a society of financially self-sufficient individuals is different — potentially much different — than what the same financially self-sufficient individual would do in a society like ours, in which nearly all other people continue to rely on full-time employment as a means to earn a living.
In May 2016, campaigners for Switzerland’s basic income referendum presented the world with the “world’s biggest question“: “What would you do if your income were taken care of?” Having lived with a job-unconditional income guarantee, however, I realize that there is a much bigger question: “What would you do if everyone’s income were taken care of?”
Reviewed by Tyler Prochazka.
Cover Photo: CC BY 2.0 Generation Grundeinkommen
by Florie Barnhoorn | Jun 2, 2017 | News
The permission to start the social assistance experiments depends on the political will of politicians at the national level. Despite obstructions, several municipalities are determined to continue with the experiments for the sake of that part of the population that is suffering under the current social welfare regime.
It’s time for new forms of social security, says Sjir Hoeijmakers in a presentation held during the annual meeting of the Dutch branch of BIEN on May 7, 2017. He begins his lecture by stressing that he prefers to speak of ‘experiments in the context of the Participation Act’, instead of ‘basic income experiments’, because they don’t fulfill BIEN’s definition of an unconditional basic income. More on the subject can be found in this thoroughly composed article. However, to smooth the conversation, he cautions that he would probably fall back in the habit of talking about ‘basic income experiments’.
According to Hoeijmakers, an econometrist who crowdfunded his own income for two years in order to support municipalities who want to study alternative forms of social assistance in scientific research projects, we need a system that is based on trust, freedom and income security. A basic income can do that. However, nobody knows the short or long term consequences of the implementation of such an income, because it has never done before. Hence, we need to do experiments, investigate as many aspects as possible and launch a broad debate.
Background
The ideas for the experiments were mainly born out of discontent with the Participation Act. Under this law, introduced in 2015, the municipal executives are obliged to stimulate welfare recipients to look for a job and to accept paid work, as well as to provide social benefit payments to its inhabitants who need such arrangements.
The implementation of this law at the local level requires a complicated set of rules, obligations and restrictions. In order to ensure a welfare recipient’s integration into the workforce and to prevent fraud, the local bureaucracy has to develop many regulations regarding, e.g., the imposition of fines and payment reductions, the appropriate use of disciplinary punishment or the application of rebates for people who live together.
A newly introduced measure is the so-called ‘compensation’ (Dutch: ‘tegenprestatie’). A welfare recipient has the obligation to do something in return for the payments. This can be voluntary work, but one can also be forced to ‘gain work experience’ in a commercial enterprise. The obligation can go as far as requiring unpaid work for six months. Some organizations who have stood up against this policy have already called it ‘forced labor’. The kind of ‘compensation’ is to be decided by the civil servant of the municipality, who is in charge of the implementation of the Participation Act. This practice is highly susceptible to arbitrariness and is therefore very unpopular among recipients.
Because of the complexity and far-reaching consequences of the law, the local government has to allocate a lot of money and manpower for control and enforcement. In the meanwhile, the social welfare system has lost its function as social safety net by the dreadful accumulation of inspection, monitoring and sanctions. Additionally, as a result of the continuing exerted pressure, beneficiaries accept less instead of more paid or voluntary work leading to alarming levels of impoverishment among this group. At the same time Dutch trend watchers predict that in ten years less than thirty percent of the population will be engaged in full-time paid work. The rest will earn money with ‘loose jobs’.
A normative framework
For these reasons, municipalities have begun to design experiments within the existing social assistance scheme. In the Netherlands income distribution and taxes (except municipal taxes) are regulated at the national level. Municipalities are not allowed to implement income policy. However, it’s the local government that is responsible for the provision of social assistance.
After a long period of lobbying by the municipalities, the Ministry of Social Affairs and Employment has finally released its general administrative regulation (Dutch: Algemene Maatregel van Bestuur / AMvB). This sets out the exact standards for the implementation of a law. The social assistance projects must be tested to the AMvB. A city council can apply for an experiment based on this document by requesting an exception to the law, for example, to temporarily suspend reintegration requirements or to allow people to earn an extra income on top of the benefit payments. The municipality is required to carry out the experiment according to the terms of the document. The framework causes many problems, because the AMvB only allows for exceptions to the law in individual cases and not when it comes to groups.
Sjir Hoeijmakers
Unfortunately, the AMvB has become the subject of political controversy, as Hoeijmakers notices. That’s why additional stipulations have been added to the experiments and compromises have to be made. For instance, the projects must be now carried out in a relatively short time, and people who make too little effort to get work can be excluded from the experiments, which makes the whole project a bit weird. As Hoeijmakers explains, all these irritating requirements make it very difficult to set up a good scientific and ambitious project. At all political levels, there are often a few people who support or sabotage the idea. Yet, city councilors and researchers are determined to overcome the obstructions and are actively seeking smart, legal solutions to bypass the Participation Act.
In the previous cabinet consisting of VVD and PvdA, it was very difficult to reach agreement over the AMvB. A majority in the Second Chamber (or House of Representatives) was in favor of the proposed experiments, but the government was not. Especially the VVD (People’s Party for Freedom and Democracy; Dutch: Volkspartij voor Vrijheid en Democratie), a conservative-liberal political party in the Netherlands, had many objections to experiments that could emancipate welfare in the long run by introducing a basic income. Members of the PvdA (Labour Party (Dutch: Partij van de Arbeid, the social-democratic party) at the local level are usually in favor of experiments in contrast to members of the cabinet. In the last months, several municipalities have stopped the preparations because of all the difficulties. In an ideal world, Hoeijmakers comments, you would expect that the national government plays a stimulating role, ensures proper tuning of the experiments and good scientific coordination. This is not the case. Municipalities also lacked financial support from the government, despite of all the rhetoric about decentralization and being open to experiments.
Hoeijmakers explains that 45 municipalities are considering experiments with social assistance policy:
- Seven have submitted an application, among which the four forerunners Wageningen, Tilburg, Groningen who submitted their proposal in April. Utrecht wanted to start the experiment on May 1st, but the trial is postponed because the Ministry of Social Affairs and Employment (SZW) has still questions about the design. A few days after the presentation all seven municipalities received a response from the ministry with further questions and instructions about the experiments they had proposed. Tilburg’s responsible alderman (Christian Democratic Appeal / CDA) reacted furiously: “It is a bold from the blue! But we will continue with or without the blessing of the Secretary of State.”
- Eight municipal governments are considering an application.
- Thirty are considering alternatives. As exemplified by the experiment in Terneuzen, a small town that wanted to give a basic income of 933 euros with no strings attached to twenty benefit recipients to test how it works. However, after a news break on national television, the State Secretary for Social Affairs and Employment (PvdA) quickly torpedoed the plan. Here’s the clip (in Dutch) of the news item. There is also much hassle around an article in the AMvB indicating that the municipality is obliged to have a regulation regarding the ‘compensation’ and how it should be implemented. Multiple municipalities, for instance Amsterdam, don’t execute this directive perfectly, and that can be a reason for the Ministry to reject the application. A few days ago, the NRC, a daily paper mostly read by the establishment, came up with an article titled ‘Municipalities no longer listen to Klijnsma’ [the State Secretary of the Ministry of Social Affairs and Employment; PvdA], written in boldfaced headlines. In the article Amsterdam’s alderman for Work, Income and Participation, Arjan Vliegenthart (SP, Socialist Party) expresses his anger: “We are not going to wait for Klijnsma’s approval. We are going to start our own pilot projects.”
Hoeijmakers expects that the number of municipalities who actually will start an experiment will be around 10, although there is room for 25.
Political Outlook
Hopefully the new cabinet will become more positive about social assistance experiments. The Dutch general election of 2017 was held on Wednesday, 15 March 2017. Several small parties who were in favor of a basic income (a.o.Piratenpartij / Pirate Party, Basisinkomen Partij / Basic Income Party, Vrijzinnige Partij (VP, Liberal Party; leader: Norbert Klein) did not win a seat or lost its only seat (VP). On the other hand, GroenLinks (GreenLeft), D66 (Democrats 66), Partij voor de Dieren (PvdD / Party for the Animals) who are strongly supportive of pilot projects, all three won considerably: 10, 7 and 3 seats respectively. The PvdA lost substantially (29 seats). The new Members of the House of Representatives were installed on 23 March 2017. At least four parties are required to form a coalition with a majority (76 seats). At this moment VVD, CDA, D66 and GreenLeft have failed to build a new coalition.
According to Alexander de Roo, chairman of the Dutch branch of BIEN and co-founder of BIEN, the ratio between the left and the right in the Second Chamber is approximately 60 to 81 seats, assuming that a basic income is more popular among voters of left-wing parties than among parties at the right-wing. But this is not necessarily true. He proposes to cooperate with D66, GL and the PvdD in an effort to keep basic income on the political agenda.
Hoeijmakers emphasizes that it’s important to create a broad political support base. So, how can you introduce the basic income into the liberal tradition? Much depends on the framing of the message, stresses Hoeijmakers. He is convinced that a right-wing public is also susceptible to good arguments, at least for doing experiments, when you explain what is in it for them. For instance, what can a basic income mean for entrepreneurs, or for the complexity and bureaucracy of a government? It is very useful to show successful experiments done in other countries. The spin-off of these reports cannot be overestimated. They are very stimulating. Looking forward, it is inconceivable that we do not start experimenting with alternatives for the current social security system, we have to learn, tell stories. It will bring us to the day when people will say: Of course we want a basic income, of course we want to know the effects of its introduction! “I always advise the municipal authorities to continue with their basic income projects. Just do what you can do,” says Hoeijmakers. In conclusion, he points to Rutger Bregman, who stated in his Tedtalk (Vancouver, April 2017), “We already have the means, the research, and the need for basic income. All that’s left is the action.” According to Business Insider, “He [Bregman] got a standing ovation“ for the talk. Watch the video here.
“Rules are tools. But it is impossible to rule out the human experience.”
Credit: Benno Baksteen, retired pilot of KLM (Royal Dutch Airlines)
Credit Pictures CC Fidgit the Time Bandit and Hans Lindeijer
Thanks to Ad Planken and Kate McFarland for reviewing this article
by Karl Widerquist | Jun 1, 2017 | Opinion, The Indepentarian
In the process of cowriting a book about the upcoming Unconditional Basic Income Trials, I’ve been trying to come up with a list of the claims that tend appear in the debate. Below are two lists: first a list of supporters’ claims and then one of opponents’ claims. I gave each claim a name to make it easier to talk about them, but these names do not reflect any standard definition. I tried to order the claims in each list from the relatively more important or more common to the relatively less important or less common.
To say that a claim appears on the supporters’ or opponents’ lists is not to say that all supporters or all opponents agree on it. In fact, some of the claims contradict each other, which is to be expected, because different people support or oppose UBI for diverse reason. They might have little in common but their support or opposition to one policy proposal.
Supporters have claimed:
- The freedom claim: UBI gives people greater freedom by giving them more effective power over their own lives.
- The poverty claim: UBI (usually in combination with other policies) can eliminate poverty.
- The anti-exploitation claim: UBI reduces exploitation in employment by giving all workers the power to refuse exploitive working conditions.
- The welfare claim: UBI raises the welfare of net-recipients (by eliminating destitution, reducing poverty, increasing incomes of people near poverty, reducing inequality, and other effects) and many net-contributors (by removing the fear of destitution, improving their bargaining position in the market, and so on). To the welfare claim we could add many supporting claims, that UBI is good for physical and mental health, that it decreases homeless and malnutrition, that it decreases infant mortality, and so on.
- The increased-worker-income claim: UBI increases in the income of workers directly by acting as a wage subsidy for lower-income workers and indirectly by creating market conditions likely to increase wages.
- The better-working-conditions claim: UBI improves working conditions for many workers both by giving them the flexibility to move more attractive sectors and by creating market conditions likely to give employers incentive to improve working conditions.
- The affordability claim: UBI at the desired level is affordable. (Most UBI proposals call for one high enough to eliminate official poverty or to raise incomes to 150% of the officially poverty level. Some call for meeting basic needs or to enable social participation and to secure a life in dignity. Some simply call for the highest sustainable UBI regardless of what that might be.)
- The economic equality claim: UBI increases economic equality both by direct redistribution to lower income people and by creating market conditions where workers can command higher wages and better working conditions. (The taxes used to support it can also be formulated to increase equality.)
- The social equality claim: UBI increases social equality by reducing social isolation of people with very low incomes, by reducing the stigmatization of people who benefit from redistributive programs, by reducing housing segregation, and by other means.
- The poverty-trap claim: UBI encourages people on benefits to reenter the labor force in greater numbers than a conditional system, by ensuring they are always better off earning more private income than earning less.
- The anti-ghettoization claim: UBI reduces (both personal and social) costs linked to high concentrations of poverty both by reducing housing segregation and by significantly raising average incomes in those communities.
- The cost-effectiveness claim: UBI is relatively more cost-effective than traditional, conditional welfare policies (in achieving goals such as increasing equality, raising welfare levels of recipients, and so on).
- The reduced-capture claim: UBI’s benefits are less likely to be captured by others (such as employers, landlords, and bureaucrats) than conditional welfare state policies.
- The bureaucracy claim: UBI reduces the overhead cost associated with income support.
- The labor-productivity claim: UBI increases labor productivity both by encouraging employers to substitute skilled for unskilled workers and by improving workers’ ability to enhance their skills and search for higher-productivity jobs.
- The productive non-labor claim: UBI allows people to do more unpaid work (such as care work and volunteering), some of which is more productive (or socially valuable) than many forms of paid labor.
- The politically-enabled-proletarian claim: UBI—by freeing low-wage workers from long hours and low pay—makes them a greater force for progressive social change on all other issues.
- The acceptable-labor-supply-effect claim(s): if UBI causes a reduction in labor supply, it will be within acceptable levels, and/or if UBI causes a greater-than-desirable labor-supply reduction, it can be at least partially counteracted by other policies to increase labor supply or the demand for higher-wage employees.
- The macro-stimulus claim: UBI, in combination with the taxes that support it, helps improve economic growth and reduce unemployment by helping to stimulate and stabilize aggregate demand.
- The “degrowth” claim: UBI helps economies move away from overconsumption and overexploitation of resources.
- Greater respect for people in need: UBI and other universal programs treat everyone with respect while many conditional programs treat virtually all recipients as suspected cheats, even if they fit almost anyone’s definition of the most truly needy.
- The increased-overall-redistribution claim: UBI results in greater overall redistribution to the poor, because universal policies foster greater feelings of solidarity and support once in place
Opponents have claimed:
- The reciprocity claim: UBI allows people to share in the benefits of social production without contributing their labor.
- The exploitation claim: a tax-financed UBI redistributes income from workers to people who do not work, thereby exploiting workers.
- The harm-to-workers claim: the taxes needed to support UBI financially harm workers, all things considered.
- The unacceptable-labor-supply-effect claim(s): UBI causes an unacceptably large reduction in labor supply that is not easily counteracted by other policies.
- The self-destruction claim: UBI increases self-destructive behavior in recipients.
- The meaninglessness claim: UBI makes it possible for people to live lives that they will eventually find meaningless because paid labor is a central source life meaning.
- The capture claim: many of the benefits of UBI will go to someone other than the recipients, perhaps because employers reduce wages, because landlords increase rents in low-income areas, because bureaucrats create overhead costs, etc.
- The inflation claim: UBI causes inflation that is not easily counteracted by other policies.
- The migration claim: UBI encourages immigration and/or migration into areas with UBI.
- The unaffordability claim: UBI at the proposed level is prohibitively expensive.
- The negative, relative cost-effectiveness claim: UBI is more expensive than other programs that can achieve similar goals.
- The gender-role reinforcement claim: UBI helps maintain traditional gender roles by making it easier for women to remain out of the paid labor force while performing unpaid care work and other traditional women’s roles.
- The macro-deterrent claim: UBI decreases economic growth by enabling reduced labor market participation and increasing costs.
- The shut-door claim: UBI creates political pressure to restrict immigration and migration.
- The bought-off-proletarian claim: UBI—by providing a minimal level of contentment for workers—reduces their effectiveness as a force to challenge the deeper inequalities and other social inequities in society.
- The consumerism claim: UBI leads to even more environmental destruction because of increased consumption.
- The decreased-overall-redistribution claim: UBI is (politically and/or economically) feasible only at such a low level and only accompanied by so many other social programs that it will leave low-income people worse off than traditional, conditional social policies.
- The strategy-to-cut-redistribution claim: factions in government will use UBI as an excuse to cut other programs, then cut in a strategy that will lead to much less overall redistribution.
I compiled this list from general knowledge accumulated over years of reading about the UBI debate. It is bound to be incomplete. Many more claims (of various levels of relevance, certainty, and testability) are undoubtedly circulating in the academic and nonacademic literature on UBI. But I hope it captures a significant range of what is being said. This list is enough to demonstrate the difficulty of designing a trial and communicating its results in a way that successfully raises the level of debate over these claims. Some are things that can’t be tested. Some are things that can only be tested indirectly, partially, or inconclusively. Few if any of these claims can be directed tested with any accuracy in a trial.
I’m interested to know how comprehensive people think it is. Did I include all the relevant claims you can think of? Did I overblow any claims that don’t deserve to be on the list?
A stock image used to evoke a mental connect with the word “experiment”
by Citizens' Income Trust | Apr 17, 2017 | Opinion
Written by: Anne Gray
Abstract.
What would be the effect of a citizen’s income (CI), aka basic income or BI, on wage levels – how would employers respond to its introduction? What would be its effect on the supply of labour, and on the total amount of paid work done in the economy? Would we still need a legally enforced minimum wage? This article explores the behavioural effects of a BI, on workers, jobseekers and employers. It first examines contrasting hypotheses as to the effects on wages and labour supply, then use official data to make a rough estimate of these effects for individuals in different socioeconomic and household circumstances. Analysis indicates that a Minimum Wage will remain essential after the introduction of a modest BI, to prevent the latter substituting for wages and job security, especially in the case of individuals in less advantaged circumstances.
Introduction
Frequently mentioned arguments for a BI include two different groups of incentive effects that can’t all take place at once for the same person or household. The first is the category of effects that increase labour supply to employers; that it would help people out of the ‘poverty trap’ and encourage them to get a job, or to move from part-time to full-time work. The second is the category of effects that would reduce labour supply to the market; that it would encourage shorter working hours and more leisure; that it would encourage some people to take time off work to study or to care for elderly loved ones or to do unpaid volunteer work. Which groups in the labour force would increase their ‘offer’ of work to the market and which would reduce it? Under what circumstances, and in response to what level of BI, would people work more, or work less ?
We are in the dark here for a number of reasons. Firstly, most previous experiences of anything like a BI have been in other countries, often in much poorer countries than the UK with much more self-employment – Brazil, India and Namibia to mention examples. The US and Canadian experiments of the 1970s were far from ‘universal’, all being a variant of income maintenance for previous welfare claimants only. All we have to go on to tell us what might be the labour market effects of BI are the responses of claimants and employers to previous benefit systems in the UK or in comparable European contexts, and informed guesses about what claimants and employers would do in response to a new type of benefit which has no very similar precedent in nature or scale.
The risk of BI reducing wage rates and job security
Benefit systems have in some instances been found in practice to lead to lower wage rates (Gray 2014). Among these examples, the oldest was the Speenhamland system of poor relief in the early nineteenth century (Polanyi 1957). More recently, lower wage rates, increased precarity and job splitting – leading to jobs with very short hours in place of the full time work that most jobseekers wanted – was an evidenced effect of the high ‘earnings disregard’ levels present in French, German and Belgian systems of unemployment benefit in the 1980s and early 1990s (Gray 2002, 2004). In the UK, Wilkinson (2001) found a ‘Speenhamland effect’ of Working Families Tax Credit. The same argument was made in relation to tax credits when they were first introduced (Bennett and Hirsch 2001). Since 2014, the UK government itself hinted that employers had taken advantage of tax credit, defending their 2015 plan to reduce tax credit allowances (later reversed, but only partly) by saying that ‘the tax credit system had, for too long, been used to subsidise low pay’ (BBC News, 15.9.15). This view was underlined by the statement that corporation tax was being cut to ‘introduce incentives for business to remove the need for tax credits with pay rises ‘ (George Osborne’s budget speech on 8.7.15).
Thus benefit systems that allow unemployed people to move into temporary employment like that offered by this denver staffing agency, without total loss of benefit, as in the examples above, can lead to reduced wages. With WFTC (and the later Working Tax Credit), when unemployed people got a job they re-applied for in-work benefits to partially replace their out-of-work benefits, whilst with Speenhamland and the continental disregards (Polanyi, op.cit; Gray 2002) they just kept some of the benefit they had whilst they were unemployed. Such systems, to a greater or lesser degree, alleviate the ‘poverty trap’ where almost 100% of benefits are lost on taking a job, as with JSA, discouraging employment. But unfortunately downward pressure on wage rates is an inevitable effect of allowing unemployed people to keep getting state money when they get a job, if that is all we do. If ending the ‘poverty trap’ persuades some unemployed people to take jobs they previously wouldn’t have accepted because the wage was too low, employers will then find it easier than before to recruit the numbers they want at a lower wage – unless a minimum wage law prevents this . In fact right wing writers (e.g. Friedman 1962, Parker 1989) have argued for BI precisely because it helps and encourages people to take low paid jobs. And if pay falls, it falls not just for those who may be desperate for any job, but for all those changing jobs – and possibly even for those in jobs and staying in the same workplace. Many recent press reports show how easy it is for employers to issue new, worse contracts in the current under-regulated, under-unionised environment. Some defenders of BI argue that if the BI was high enough, a minimum wage law would not be needed – and even that some element of ‘wage subsidy’ is beneficial because it would protect small businesses like rural shops. (Or, one might add, this would help socially important sectors currently placed in serious difficulty by the recent rise in the legal minimum wage, in particular social care). But pay would fall not just for small businesses (including small shops and care homes, which some people might want to have lower costs to prevent them from closing). It would fall for supermarket chains and other corporate giants as well. In any case there are alternative, more targeted, ways of helping small businesses or particular sectors – especially those where, as with social care, the public sector is the main customer.
Can we avoid the Speenhamland effect and the poverty trap with a single measure? Probably not , for two reasons, as follows. First of all there is the question of whether a BI would be affordable at a level high enough to enable people to refuse all jobs below whatever we consider to be a reasonable wage level. Secondly any measure which increases labour supply is likely to induce easier recruitment at low wages. BI removes the poverty trap for the unwaged, and many of their job applications are directed at low paid sectors. So BI on its own, even at a high level, is liable to induce wage freezing, or recruitment at lower than previous hourly rates, just as did tax credit and the continental high-disregard systems. This can be avoided by ensuring that employers are obliged by law to pay a minimum wage – as I argued in 2014, such a regulation is an important safeguard against the BI being use to benefit employers rather than employees.
However, also at stake are other aspects of labour standards, and these are at issue even with a very high level of BI. Guy Standing (1999) amongst others has argued that a BI is a good defence against precarity – in these days of widespread temporary jobs, zero hours contracts and part-time unemployment, it makes such conditions more tolerable and less exposed to poverty. But if such jobs become more tolerable, employers will find it easier to recruit to them. In effect, such employers would be using state funds as a subsidy to support their practice of laying off workers for the weeks or days they are not needed, rather than meeting the costs of continuous maintenance of their labour force as they do in long-term employment contracts with specified hours. Again repeating the argument of my 2014 paper, limiting the use of temporary labour, and in particular zero hours contracts, is an important form of regulation to prevent this. What is important here is the similarity between a BI and the high disregards in these French, Belgian and German benefit schemes, which did encourage the offer of temporary and ‘mini-jobs’. They were like a partial BI for the unemployed. To combat these effects of encouraging more precarity, alongside a BI we need regulation of zero hours and limitation of temporary work. This is essential if the BI is not to end up subsidising employers who show no long-term responsibility for training or supporting their workforce and want to turn labour supply on and off like a tap.
Moreover, the problems of precarity are not solved by a BI without other measures. A prospective landlord or mortgage company will be unimpressed by someone who doesn’t know whether next week’s income will be her wage for 40 hours (say £400) plus her £80 BI, or just her £80 BI. It is creditworthiness and a secure long-term income that gets people a home – which is a good reason for minimising insecurity in the jobs market. A stable and secure income is important for individuals’ credit rating and thus their financial wellbeing, according to journalists’ advice on how to obtain a good credit rating.
An ‘on your bike’ economy where individuals have unpredictable changes in jobs and housing may also be inimical to family relationships and children’s education ‘
BI and the freedom to with-hold one’s labour
So far this paper has focussed on one potential effect of BI –the increase in the supply of labour. That is, the unemployed would move more easily into employment because they would face no poverty trap, and precarious jobs would become more acceptable. But it is often said that BI would enable people not to work, that is not to work for so long or all the time because they chose study, caring, or volunteering; or not to work because they wanted to refuse exploitative conditions. At first sight these two expectations seem in contradiction to each other; would BI induce more paid work or less? Firstly, it depends on the level of BI compared to average wages. Secondly, the effects would differ between various population groups.
Let us consider first the effect of BI on the unemployed. Unemployed people fall mainly into two groups – those receiving JSA and those who are ineligible – plus some eligible non-claimants who feel they cannot meet the very strict conditions, or have no fixed address. The ineligible group are mainly people whose 6 months’ entitlement to insurance-based JSA has expired and they cannot claim income-tested JSA because they have an employed partner . Ineligible unemployed also include those aged under 18. The argument that people are deterred from working by the benefits poverty trap applies mainly to this non-claimant group, because for those on JSA, the benefit conditions are the main factor. People on JSA are currently under such strict rules as to what jobs they can refuse that they are often obliged through fear of sanctions to apply for rock bottom pay and conditions regardless of the ‘poverty trap’ (Gray 2004). The financial incentive effect of a BI (that is, removing the poverty trap) would make little difference to them. What would make a big difference is that BI is unconditional : all the job centre rules about applying for so many jobs each week, with sanctions for even minor rule infringements, would not apply.
Current JSA rules have been getting gradually tighter, with sanctions and the imposition of compulsory work-for-benefit placements becoming more common, even since 1996. These aspects of the job centre system, described by labour economists as ‘conditionality’ and by critics also as ‘workfarist (Gray, 2004; Peck and Theodore, 2000) were designed to chase people into bad jobs. According to OECD-reported research, greater conditionality of benefits systems do increase the outflow from unemployment into jobs (OECD, 1994, 2000). That is, greater conditionality leads to an increase in labour supply. Conversely, relaxing the punitive sanctions and workfare regime would enable people to spend longer looking for a good job, or re-training in new skills, with nobody forcing them to take the first offer even if this does not meet their income and job security needs or fully use their skills. That is, less conditionality could be expected to lead to a fall in labour supply; this option to turn down bad jobs would work against the Speenhamland effect explained earlier. If a BI was introduced, it is hard to say which effect would win out – easier recruitment by employers to low paid or casual work because of the cushion of BI, or more difficult recruitment on low wages/temporary contracts because of the end to benefit ‘conditionality’.
It is because of the threat of sanctions and workfare that some voices in the trade union movement have recently taken up the historically popular claimants’ movement demand for a BI, a demand first flagged up by Bill Jordan (1989). BI was enthusiastically discussed at a conference on welfare held by UNITE and the PCS in autumn 2014, leading to the publication by UNITE of the ‘National Welfare Charter’ linking BI to the demands to end sanctions and workfare, which was endorsed by a fringe meeting of the TUC in 2015 (see
There was also a UNITE/USDAW motion supporting the principle of BI passed at the TUC itself in 2016.
Over and above the virtue of abolishing benefit sanctions, a BI that was high enough to enable people to refuse low pay or very insecure work would probably reduce the total of hours worked and the number of jobs offered. Some of the worst jobs would not be offered because they would attract few applicants. But if the BI was not high enough to enable people to refuse ‘bad’ jobs, it would have the opposite effect – low pay would be more acceptable and employers would recruit more easily at low wages than if there was no BI. It is impossible to say, a priori, how much would be ‘high enough’ to mark the tipping point or boundary between these two effects, above which labour supply falls. Moreover, the tipping point could vary according to socioeconomic group and region.
Turning to people who are not on out-of-work benefits – that is, people in paid work, mothers and other carers, students and would-be students, the level of the BI would be the key factor in their decisions about whether and how much to work. Just as people clearly find it hard to manage on JSA of £73.10 per week, they would probably not stay completely out of work for long on a BI of £70 or £80 per week unless they had some parental support. However for many students that might be riches, given that the maximum maintenance grant of £65 per week in England has just been abolished for new starters. Some parents might work more if they found £70 or £80 a handy childcare grant, but others might want to spend more time with their children. Some older people might find it was enough to make up any deficit in their pension entitlement and therefore retire sooner than they would otherwise. Some full-time workers might do less overtime, and some people (in particular students or those in poor health) might give up part-time jobs. Some people might feel more confident about starting their own business with even a small BI as a cushion in the early stages, rather as they were once encouraged by the Enterprise Allowance Scheme of the 1980s – but they could be people moving out of unemployment or out of jobs they found boring or ill-paid, so the net effect on labour supply is again unpredictable.
If a BI were high enough (how high we don’t know) it would encourage more people to work part-time, even those used to quite high hourly rates. For there to be any substantial effect of a BI in terms of people withdrawing, at least by working shorter hours, from jobs they already had, a BI would have to offer enough for them to feel that the loss of income was worth the gain in non-work time. For example if a BI of £150 per week was introduced, this would enable someone to give up 10 hours work per week without loss of income if s/he earned £15 per hour after tax, but to give up 15 hours work per week and have the same weekly income as before if s/he only earned £10 net per hour. But if the BI were only £60, the person on £15 per hour would only feel motivated to work 4 hours per week less whilst the person on £10 per hour might work 6 hours less. The higher the BI in relation to the individual’s hourly wage, the greater would be the likely reduction in labour supply from people already in paid work. The ‘value of leisure’ (whether used as leisure, or for some form of unpaid work or study) clearly varies considerably with the individual, depending on their tastes, commitments and current hourly wage rate. As a rule of thumb, one might expect that if – and only if – people have a ‘target weekly income’ they want, irrespective of the amount of effort it takes to obtain it, the ratio of the BI to the hourly wage rate gives us the maximum number of hours by which they would seek to reduce their work time. So for example, if the hourly wage was £10, a BI of £100 would induce people working 45 hours to seek only 35 hours, and a BI of £140 would induce people to seek 31 hours rather than 45. But things might not be as simple as that, firstly because the value of the first extra hour of leisure may be greater than further hours, secondly because employers are not that flexible, and thirdly because the ‘target weekly income’ may vary with the extent of income security, the effort involved in earning, the costs of commuting, work clothes and lunches, and the influence of other family members in response to the introduction of a BI.
Conversely, if we consider new graduates or school leavers, or mothers returning to work, the question might be, ‘what is the minimum extra income I need?’ The higher the BI, the more likely they would be to meet that target with a small number of hours’ work per week. The higher the ratio of the BI to the hourly wage, the more likely are new entrants or re-entrants to the labour market to be satisfied with a small number of hours of work. But independently of the level of the BI, the higher their hourly wage rate the more likely people are to achieve their ‘target’ income with a short working week. So if we want to encourage part-time work to reduce any pressure placed by automation on the ‘supply’ of jobs, a high legal minimum wage would help, whatever the level of BI offered.
Clearly not everyone would react to the introduction of BI in the same way. How it would affect their ‘propensity to work’ would vary with the level of wages individuals can obtain, depending on occupation, skills, experience; their entitlements (or lack of them) under the previous benefit system; caring commitments; the desire to study; their partner’s work, their health/disability; and heir closeness to pensionable age.
Who would work less and who would work more ?
This section attempts to investigate what the effect of a BI might be on the employment behaviour of different groups in the population. Who would respond to a BI by offering more labour to the market – taking a job when they hadn’t before, or seeking longer hours? And who would respond to a BI by reducing their personal labour supply, dropping out of paid work or seeking shorter hours?
The method used here is first to consider which categories of people would gain from a BI introduced in the range of £70 to £90 per week for a working age adult, and which categories would lose through paying higher taxes to finance the BI. Both gainers and losers are categorised by their current employment status. They include full time workers, who can vary their hours only by doing overtime in some instances: and part-time workers or self-employed people, both of whom can in theory at least vary their working hours quite a lot, in the case of the part-timers possibly by changing jobs or taking two jobs. Then there are unemployed jobseekers (divided into those claiming JSA and those who are not claiming); people who are medically unfit for employment or whose job choices are heavily constrained by their health; people whose main activity is caring for relatives; students; and those who are still under pension age but wholly or partly retired. Most of these groups can be identified from the Labour Force Survey; however, the published data for 2016 do not identify all the categories in the table separately, and have been supplemented by published LFS data for earlier dates, and from other sources as detailed in the notes. There may be an unintended overlap, thus some double counting, for some categories. Thus the estimates of numbers are very rough, and may be regarded as guesstimates of the rough order of magnitude of numbers pending the possibility of access to the raw data which one could interrogate to provide better estimates of the numbers in these various categories. Further information about sources, and some caveats, is given in the note to the two tables below.
Table 1 shows roughly how many people are in each sub-group, and hazards a guess at what the effects might be for different sections of the labour force of a BI in the region of current JSA entitlement or not much higher. For clarity, those whom we can expect would be likely to raise their hours of work in response to a BI are highlighted in yellow and those whom we expect to reduce their hours in grey. This table suggests what might be the direction of change in offer of paid work to the market from each group, considering both the likely effects of the BI itself and the likely effects of higher taxes to pay for it, compared to the current system. The higher tax burden would of course impact on income groups above the ‘breakeven’ level where BI and income tax bill would be equal. Table 2 shows guesstimates for what might be the total effect on labour supply in terms of hours per week. It should be emphasised that this is highly speculative and needs to be informed by more research on labour supply elasticities and the gains/losses produced by a BI system compared to the current benefits system, as well as by interrogation of the Labour Force Survey and other large data sets to obtain better estimates of the numbers in each labour market category. The guesstimates of what proportion of people in each of the categories would respond by working more or less are mere hypotheses and not based on evidence. However, the table may serve to show the very rough orders of magnitude of the changes expected.
In Table 1 there are four quadrants; on the left side are those who are currently not in paid work and on the right side those who are employed or self-employed. In the upper half of the table are the ‘gainers’ from BI (‘G’ groups) and in the lower half the ‘losers’ who would pay more tax than their BI – that is, their income is above the breakeven point. These two variables – in paid work or not, gainers or losers, divide the table into four.
In the upper left quadrant (gainers from BI, not employed) we have those with non-economic reasons for staying out of the labour market, plus those most affected by the ‘poverty trap’ in the current benefits system. Unemployed people, if claiming benefit, would be more likely to enter work quickly because their BI would remove the poverty trap, although as noted earlier the effect of removing benefit conditionality would work in the opposite direction and modify this incentive effect. Unemployed people not claiming benefit would especially gain from a BI taking them out of the poverty trap if any money they earn currently results in a loss of JSA or tax credit for their partner. But the published LFS data do not tell us how many of them are in this kind of household situation. So the table makes a very arbitrary guess that half of the non-claimant unemployed are in this situation.
In the bottom left quadrant (non-employed ‘losers’ from BI) we have the ‘early retired’ and a few others who are not working by choice – taking a gap year, ‘housewives’ (or ‘househusbands’) without young children, etc. It is assumed that most of these, in particular ‘early retired’ people (those aged 50 to 64, not in paid work, nor disabled nor engaged in care ) are in the ‘loser’ category since they have decided they do not need earnings, so they are probably people of above average means due to wealth, partner’s income or early pension entitlement. Also in the bottom left quadrant, a few early retired people (defined as aged 50-64 and not working or claiming unwaged benefits) might respond to higher tax by thinking their money is no longer enough and they should take a part time job – or keep up some activity in their former profession. In the bottom right quadrant (employed or self-employed, ‘losers’) other workers aged 50 plus, if already partly retired and working part-time, might decide that the extra tax makes it no longer worth working and would retire completely. Also in this quadrant are some other part-time workers who are not carers, nor over 50, nor disabled nor students – it is assumed that they have non-economic reasons for their choice of paid hours and that a BI would probably not affect this choice.
In the top right quadrant of the table (in paid work, whether full or part time, gainers from BI) we have people who are employed (or self-employed) part-time because of caring or for health reasons, plus students. Many students can be expected to drop their part-time jobs if they had a BI, at least in term time, and this is important because there are over 2.3 million students employed part-time – they are a larger category than the unemployed. Then there are mothers who are in paid work part-time; they might be affected by the poverty trap associated with tax credits, and welcome the lower withdrawal rate of a BI, so they might seek longer hours. However research on American and Canadian experiments in offering something like a BI suggests that women with children tend to reduce their hours (or delay return to work) when offered a BI (Prescott et al. 1986, Hum and Simpson 1993). But if they are lone parents on benefit or their partner is not working (and therefore claiming income based JSA in the current system), they might work longer hours because they would no longer penalised by a loss of benefits from the household as their earnings rise. Blundell, Dias, Meghir and Shaw (2012,2015), when modelling the effects of the 1999 introduction of WFTC, found that more generous in-work benefits overall reduce mothers’ work offer to the market. The change from Family Income Supplement to WFTC in 1999 made the in-work benefits regime more generous with a lower ‘taper’ rate and by starting the taper at a higher level of income. This change was rather like what a BI would do since it offered, in effect, a higher ‘disregard’ of earnings and partial alleviation of the poverty trap. Modelling the introduction of WFTC showed a positive effect on lone mothers’ employment rates – but only very small unless they were home owners. For the much larger number of partnered mothers, there was a negative effect on employment rates of 2-3%, and also a negative effect on their hours. On balance it seems likely that the effect of a BI on the employment seeking behaviour of part-time-employed mothers would be a small reduction in the hours they offer to the labour market.
Table 2 attempts to gauge the rough orders of magnitude of these effects, to determine whether it is more likely that a BI would lead to a rise in aggregate labour supply or a fall. This second table takes each of the groups identified in Table 1 and hazards a guess at how large the effect per person in each group would be. Thus, having established hypotheses about the direction of labour supply effect in Table 1, Table 2 offers a guesstimate of how large these effects would be. It suggests that a BI for working age adults in the range of £70 to £90 per week, if all benefits for children and disabled people remain as now, would produce a substantial increase in labour supply, of 3.92 million hours or the equivalent of 98,000 full time workers. Compared to the overall 31.56 million people in paid employment or self-employment, this seems small – but in certain sectors and places where jobs are scarce, it could have a substantial effect on wage levels. As shown at the end of Table 2, there is a particularly large increase in labour supply for unskilled or entry level jobs – altogether possibly almost 12.3 million hours. This is a very powerful argument for keeping a minimum wage law in place.
The overall result is highly sensitive to the size of the effect on the unemployed, which is likely to be the largest of all the effects on separate labour force groups. Alongside the effect on the unemployed, there would be substantial effects on students and mothers. The potential increase in labour supply from the unemployed, if the BI reduced their number by one third, would be perhaps 21 million hours per week. But the contrary fall in labour supply from students might be over 11 million hours per week. This is useful to the job prospects of the unemployed, since they often compete with students for unskilled part-time jobs.
For mothers, the effects are particularly unpredictable and would depend a great deal on what regime is in place to help with childcare costs, as well as on the income tax rate. In the table, if a 5% increase is assumed in the number of working mothers and their average hours were 19 per week (as estimated by Alakeson, 2012), this would lead to an increase in labour supply of 2.09 million hours.
Full time workers who do not currently get WTC but who would gain from BI might reduce their overtime, which in aggregate amounts to a large effect even though paid overtime per person across the labour force is very small anyway in the current state of the economy. The full time workers who don’t gain from BI, but find themselves with a higher tax rate than before or in a higher tax band, might also do less overtime because of the disincentive effect. A guesstimate is a fall of 7.7 million hours per week, if say average overtime per worker was reduced from one hour to half an hour across all these full time workers.
At this level of BI few full timers would feel able to switch to part-time jobs, unless perhaps nearing retirement. But assuming a BI would mean a higher income tax bill for some groups, some early-retired workers might re-enter the labour force for ‘mini-jobs’ (‘unretirement’) and some might postpone their retirement. Others might reduce their hours, whether because they felt the BI enabled them to do so, or because if they were well paid and therefore in a higher tax band to pay for the BI, they felt deterred from continuing full time. These effects are small and comprise increases in hours from some older workers set against reductions from others – the net effect might be less than one million hours per week. (Effects on people over 64 are not considered here; however depending on the level of BI for people currently receiving state pension, there obviously would be some labour market effects in so far as some pensioners do also have jobs)
Conclusion
The interesting points shown by this series of guesstimates are that firstly whilst the effect of a BI on unemployed people’s job seeking and job acceptance is the largest effect, the effects on mothers, students and choice of retirement age are also important. Whereas much discussion of the labour market effects of BI has focussed on the unemployed or ‘prime age’ full time workers, the responses of other groups in the labour force may be of considerable impact on the likely change in overall labour supply. Despite the likely fall in students’ working hours, one would expect a large rise in labour supply will be at the lower end of the pay ladder, making the retention of a minimum wage very important. It must be emphasised that the guesstimates of both size and direction of the labour supply effects mentioned here are highly speculative, and no more than an initial sketch of the several different effects that need to be subjected to proper econometric modelling in order to assess what would really be the effects of introducing a BI.
If we now consider a considerably higher BI – say £150 per week – it is likely that some full time workers with no caring commitments and of ‘prime’ working age would reduce their hours to part-time, if their job conditions permitted that. There would probably be a demand for three or four-day a week jobs. Here the previous analysis about the trade-off between the hourly value of leisure and the wage rate comes into play.
If people did reduce their income from work it would erode the income tax base, which must be taken into account in assessing how large a BI would be affordable. Ensuring that a BI does not induce a fall in the tax revenue used to pay for it is one of several reasons why it would be desirable to fund it partly from non-income tax sources – such as taxes on personal wealth, land value tax, capital gains tax and corporation tax.
References
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Bennett, Fran and Hirsch, Donald, 2001. Balancing Support and Opportunity, in Bennett and Hirsch, eds., The Employment Tax Credit and issues for the future of in-work support, Joseph Rowntree Foundation, downloaded from https://www.jrf.org.uk/report/employment-tax-credit-and-issues-future-work-support on 4.12.16.
Blundell, Richard _ Dias, Monica Costa, Meghir, Costas and Shaw, Jonathan, 2012. Education,labour supply and welfare. Institute of Fiscal Studies/University of Sheffield, downloaded from https://www.sheffield.ac.uk/polopoly_fs/1.247215!/file/E2_dias.pdf on 4.12.16
Blundell, Richard _ Dias, Monica Costa, Meghir, Costas and Shaw, Jonathan, 2015. Female Labor Supply, Human Capital and Welfare Reform , downloaded from https://www.ifs.org.uk/uploads/publications/mimeos/Dias_NBERwps_2015.pdf on 22.12.16
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by Guest Contributor | Jan 29, 2017 | Opinion
Written by: Craig Rhodes
We are fast entering an era in which there’s going to be a chronic shortage of jobs for millions looking for employment. That trend is only going to accelerate. Everyone’s job is on the line now. If we don’t begin to address this problem, then we will suffer long-term consequences: mass unemployment and political alienation of millions because jobs are fast disappearing mainly due to automation.
My suggestion is strategic not tactical. The details can be worked out in committee negotiations.
Corporations are mining nearly every piece of online data that we as individuals produce and then selling it to the highest bidders including the NSA for hundreds of billions per year. To find out how to protect yourself from this visit websafetyadvice.com.
It’s an unregulated modern day gold rush happening under our very noses without notice. We as individuals should be compensated for our data in the same way that corporations are compensated for their data. Copyright law should protect us in the same way it protects corporations. Terms of Service Agreements should be outlawed. Copyright laws should be amended or rewritten.
There’s a reason Google and Facebook do not bill us. We’re not their consumers — we’re their product. The lion’s share of profits made by Google, Facebook, AT&T, Verizon, and scores of other corporations are from the data we produce. Facebook’s billion plus users are the largest unpaid workforce in history.
If a corporation profits from our data, whether it be browsing history, emails, buying habits, contact lists etc. then they should have to pay us for it just as we must pay for their movies, music, software and more. Such compensation might go a long way toward alleviating our chronic employment problems as well as help the working class who are losing jobs faster than any other demographic. It would not be welfare nor would it involve raising taxes. It would be payment for services rendered in the form of a subsistent guaranteed income similar to the Alaskan model.
Manufacturing jobs are not going to come back. And in time automation will begin to affect the professional class as well. Those who depended on such jobs should be dealt with or our nation is going to suffer catastrophic consequences.
This and many more initiatives should be included in a robust strategy. We must be bold.
About the author: Craig Rhodes is a retired art teacher after 34 yrs. Active in politics since an early age. Rhodes held elective office. Lifelong gardener, musician, environmentalist, avid reader of all subjects both non fiction and fiction, potter, portrait artist, and more. Rhodes is active on any number of social media including Facebook and have been surfing the internet since it first appeared on the scene as the Arpnet under DARPA.
