Credit picture: CC(Andrew Newton)
Nobel Laureate economist Joseph Stiglitz speaks about inequality, automation, and Universal Basic Income (UBI) in a conversation at the New York Stock Exchange.
The economist says that, as many people fear, it is entirely plausible that the problem of inequality will get worse if countermeasures are not undertaken. Although he recognizes that a single program such as UBI may offer some advantages, he is not a big fan of the idea. Instead, he thinks that the main responsibility a society has is to provide everybody with a job (a Job Guarantee).
Stiglitz states that if jobs with decent salaries were available, the need for UBI wouldn’t exist, even though some social programs to protect the needy would be needed. But in his opinion many people find dignity in their job, and so the focus of the attention should be to make the labour market work properly.
A goal that could become more and more difficult to attain as technology advances, with machines threatening an ever-increasing number of professions. As automation proceeds, the risk is that inequalities will increase, as a result of growing unemployment and AI undermining the very basis of the market.
Artificial Intelligence (AI), Stiglitz states, makes it possible to alter the functioning of the market economy, making everybody pay a different price, appropriating consumer surplus and adding it to the profit of the wealthiest, thus further polarizing the distribution of wealth.
The solution should be, in the economist view, twofold: on the one hand, the economy has lost its balance because workers lost their bargaining power, and thus it should be reestablished. On the other hand, the core of innovation is government funded research and government funded education, but too little of the proceeds go to the public, and a better system of sharing the benefits need to be designed.
While Stiglitz states he is not a big supporter of UBI, what he proposes in order to reduce inequality is what UBI itself is designed to do: provide workers with bargaining power and redistribute the wealth of society in a more equal manner.
More information at:
Andrew Davis, “Joseph Stiglitz weighs in on Universal Basic Income and the future of work“, CNBC, May 5th 2019
Written by: Felix FitzRoy & Jim Jin
School of Economics and Finance
University of St. Andrews
As interest in UBI has exploded in recent years for many positive reasons, including the United Kingdom’s disastrous new “universal credit” policy, three major issues remain that are almost universally neglected. First, a modest ‘affordable’ UBI could not raise non-working individuals or households above poverty, even in addition to existing, means-tested benefits. Second, UBI alone would effectively subsidise low-wage and low-quality jobs, reducing pressure for improvement. Third, meaningful work is essential to well-being for most people, but unattainable for two million discouraged workers who want to work but have given up looking for work, as well as the officially unemployed (and those with inadequate jobs) – a major cause of unhappiness.
As we argue in Prospect, a public sector job offer (JO) at minimum wage, combined with a UBI of £3,000 to £4,000 per year could raise all households above poverty when combined with improved disability and housing benefits. Urgent and growing needs for care of an aging population and improvement of deteriorating infrastructure would ensure meaningful employment for all who took up JOs, with appropriate training when needed.
Such a modest UBI as proposed by Stewart Lansley and Howard Reed for Compass, and many others in the UK, could be partially funded by abolishing the regressive personal tax allowance. It would replace some means-tested welfare measures, though disability and housing benefits should remain and need augmenting. The additional cost of JOs is modest, only about £28 billion, which is around 11 percent of total welfare spending for 2 million full-time JO workers, less than total cuts in welfare spending under austerity measures since 2012. As a result of these cuts, child poverty has risen to 30 percent, and the UK holds the worst record in Western Europe. Child poverty has severe negative consequences for the entire life course of those affected.
By providing good working conditions and career advancement, our JO would set standards for minimum wage employment which could not be undermined by common current practices such as demanding unpaid overtime, since those affected could always credibly threaten to quit. Such a general improvement of working conditions would not greatly disrupt existing labour markets, in contrast to the high–wage job guarantee discussed in the US by prominent Democrats, promising to double the minimum wage. This would likely generate excessive uptake in public employment, causing substantial inflation, followed by restrictive government policies. Such a policy would not compensate for the unpaid work done mainly by women in the home as caretakers for children and the elderly.
JOs for all who want to work would be part of the framework of a Green New Deal (GND), now proposed by figures in America’s Democratic party, such as Alexandra Octavio-Cortez. This would involve greatly increased investment in the urgently needed transition to a carbon-free economy by 2050, which is essential to avoid catastrophic climate change. Such a GND could generate full employment similar to the mobilization in World War II but would require higher taxes on the rich for long-run funding. Though such tax increases would face strong political opposition, this would in turn help to reduce extreme inequality and all its negative effects.
About the authors:
FF – Emeritus Professor of Economics, and Research Fellow, IZA – Institute of Labor Economics, Bonn;
JJ – Reader in Economics, both in the School of Economics and Finance, University of St. Andrews
Universal Basic Income (UBI) is gaining more traction in mainstream discourse, but the academic debate has been heating up for years. One scholar with a sympathetic but critical eye towards basic income still believes it is not the best priority for activists.
Philip Harvey, a professor of law at Rutgers, wrote that a job guarantee could eliminate poverty for a fraction of the cost of UBI — $1.5 trillion less.
Harvey argued in 2006 that the focus on UBI may be crowding out more realistic policies that could achieve the same ends.
“[Basic Income Guarantee] advocates who argue that a society should provide its members the largest sustainable BIG it can afford – whether or not that guarantee would be large enough to eliminate poverty – are on shaky moral ground if the opportunity cost of providing such a BIG would be the exhaustion of society’s redistributive capacity without eliminating poverty when other foregone social welfare strategies could have been funded at far less cost that would have succeeded in achieving that goal.”
When I interviewed Harvey this month, he said his views have largely stayed the same and he still sees a fundamental difference between the advocates of UBI and job guarantee.
“The most important driver of that difference is the inherent attractiveness of the UBI idea. It really is an idea that captures the imagination and admiration of all kinds of interested parties with different kinds of agendas. The job guarantee idea, on the other hand, attracts people who are more into the weeds of policy analysis.”.
There is a big debate about which type of cost calculation is most relevant for UBI, since wealthy individuals would have most or all of the basic income taxed back.
Basic income scholars such as Karl Widerquist argue it is more accurate to calculate UBI’s “net cost” which subtracts the portion of the basic income that is taxed back, as individuals are essentially paying back the benefit.
Harvey argues that, from a political standpoint, people will not view UBI in such a way: “The problem with Karl’s argument is that he that he thinks that people will think the way he does, when there’s no evidence to support that given the way they think about other analogous government benefits.”
Harvey notes that, since the gross cost of UBI proposals is typically a high percentage of a country’s overall GDP, there are tradeoffs that must be considered when pushing for basic income.
“On a practical level, that’s the biggest problem that UBI advocates face is that they don’t have a good answer to why it’s worth spending that much money on this kind of benefit as opposed to spending that much money or a far lesser amount of money on other benefits that would serve the same purpose.”
Many basic income proponents have argued that the job guarantee would have much higher administrative costs than the basic income, and thus say it is a less attractive proposal.
Interestingly, Harvey argues the high administrative costs actually serve the purpose of the guarantee because the administration of the program also creates new jobs: “The goal of the job guarantee is to provide jobs and as long as the jobs you provide are helping to achieve your goal, it doesn’t matter whether if they’re administrative jobs or non-administrative jobs, they still count.”
The plan he proposes is for the government to offer grants to nonprofits and government agencies to create jobs that fulfill their mission to help the community. For example, installing rooftop solar panels and advocacy work.
“Why not give not-for-profit organizations the opportunity to compete head-on with government agencies to see who can do the most good with the resources made available to them through the program?”
Allowing for this competition would avoid the criticism that the government cannot create productive work.
“You can design a job guarantee program to avoid the relative incapacity or possible incapacity of governments to create meaningful jobs.”
Harvey has designed the ‘Jobs for All’ congressional bill with former Congressman John Conyers, who recently resigned amid sexual harassment allegations.
When pushing for basic income, Harvey believes the opportunity cost, both in the time spent advocating UBI and then financing it, may be too great.
“Unless you can argue that you are prepared to provide a UBI that is really adequate to eliminate poverty, you’ve no business advocating a program that would leave people in poverty because it was inadequate.”
Author’s editorial note: I plan to write a follow-up article to discuss and analyze some of the points made by Dr. Harvey.
A basic income and job guarantee are commonly presented as competing solutions to poverty and economic insecurity. In a new paper for the Institute of Labor Economics, however, Felix FitzRoy and Jim Jin of the School of Economics and Finance University of St. Andrews make a case for combining the approaches.
According to the authors, proponents of a basic income often fail to give due attention to the importance of work and employment to subjective well-being and life satisfaction; unlike a basic income, a job guarantee can provide a good job for all those who want to work, and can also offer training and experience to allow individuals to advance to better jobs. At the same time, the authors argue that a job guarantee overlooks the importance of non-standard employment (they note, for example, that self-employed workers often report high levels of satisfaction, and value their autonomy) and unpaid labor, such as child and elder care.
FitzRoy and Jin develop a proposal for a modest basic income (or partial basic income) in conjunction with a guaranteed job offer for those able and willing to work, striving to combine the advantages of each approach in a policy package that is also both affordable and politically feasible.
Read the full paper here:
Felix FitzRoy and Jim Jin, “Basic Income and a Public Job Offer: Complementary Policies to Reduce Poverty and Unemployment,” Institute of Labor Economics (IZA) Policy Paper No. 133.
Reviewed by Russell Ingram
Photo: Employment Office (1916), CC BY 2.0 Seattle Municipal Archives
The Polish political philosophy journal Praktyka Teoretyczna (“Theoretical Practice”) has published a special issue on the relative merits of a basic income and job guarantee.
The contents of the issue are freely available online, although only in Polish.
Contributors contain a mix of supporters and critics of each of the two policies.
Mariusz Baranowski and Bartosz Mika compare basic income and job guarantee programs with respect to a variety of metrics, including funding and cost, impact on existing social security systems, impact on income inequality, and emancipatory effects, ultimately favoring a job guarantee. Pavlina Tcherneva investigates the relative macroeconomic impacts expected from the two types of policies, arguing that a job guarantee possesses an economic stabilizing effect not possessed by basic income. Further, Tcherneva argues that a job guarantee has a greater potential to contribute to sustainable development and ecological goals.
Angelina Kussy and Félix Talego Vázquez, on the other hand, argue for a basic income as a component in a new understanding of work. The authors use ethnographic research of the communitarian Spanish village of Marinaleda to critique contemporary notions of “work”. Zofia Łapniewska also questions the assumptions that form the foundations of current economic institutions–developing a proposal for an alternative economy based on the ethics of care. She uses this as a basis for further consideration of policies including basic income and employment guarantees.
In addition to original articles, the issue also includes a review of BIEN cofounder Guy Standing’s 2017 book Basic Income: And How Can We Make It Happen, as well as a review of the work of economist Mariana Mazzucato.
The edition was edited by Maciej Szlinder, who is Praktyka Teoretyczna’s political philosophy editor as well as an active participant in Poland’s basic income movement.
Praktyka Teoretyczna is an open-access peer-reviewed journal, with new issues published quarterly. Its content focuses on “continuously question[ing] the relation between theory and practice”, and is especially aimed at fostering the development of young researchers.
Reviewed by Caroline Pearce
Photo: Worker in Poland, CC BY 2.0 Chris