How Finland's Basic Income Experiment Will Work
fastcoexist.com
fastcoexist.com
Instead of treating this as a dupe like we normally would, let's try leaving it up with the request that people discuss the specifics of this experiment, and perhaps what other sorts of experiments could be run and how one might evaluate them—and leave the more generic for-and-against basic income stuff to the other thread.
With a 2 year length, people aren't going to adjust their long term plans regarding the expectation of how much they will have to work. The extra cash is just a windfall. Reaction to a long term political commitment will be different - once people trust that the basic income will "always be there."
Similarly, some local landlords and businesses may raise prices to soak up the extra disposable income, but they know that their actions will be scrutinized and publicized. Is 2 years of marginal extra profit worth the loss of good will? Again, I think the answer is different once there is a long term political commitment.
The answer to this last question is important, because it likely leads to the basic income being adjusted for price inflation, and then an inflationary spiral or price controls. To me, this is the central problem with basic income (I think the "motivation to work" issue is a red herring), and I don't see how basic income experiments can shed light on it.
Remember, if a store in NYC can't find anyone willing to work at X$/hour they must raise wages and prices. This sends really important signals up and down the economy.
And do what? Abide?
One thing that people want to test is whether this would disincentivize work. People choosing to move to where there may well be no jobs sounds as if it is disincentivizing work.
An income with no strings attached increases freedom. It's not easy to predict what people will do with it, but if you believe that people can generally make sensible choices, they're likely better off than before.
Why not? Not everyone is ambitious. Heck, I doubt more than about 25% of any generation would work if they didn't have to. It's one thing to be pulling down $100+/hr in a rewarding job building the digital future, but if you're working a fry vat you're gonna quit the first time the boss pisses you off.
So far, we seem to be positing that: with some sort of UBI, people can move to more remote or less costly locales and do things that aren't valuable enough to be paid for by evil capitalists, but are valuable enough for them to ... satisfy whatever psychological need they may have to tell themselves that they are useful or worthwhile human beings?
Gosh, IDK, that's a thin stretch. I think that if society needs a UBI as a better (more effective and/or efficient) form of social safety net, we will need to convince people that it's OK if 25% or more of the entire adult population is really doing nothing more with their lives than consuming air/food/water and watching Jerry Springer.
By which I mean - it might still be the best safety net scheme we can come up with to get us to/through an age of automation, but we'd best not try to sell it on the idea that it will lead to a flowering of the a new age of the human spirit or some such. Rather, it's just a social safety net that doesn't disincentivize any particular incremental unit of work at the margin. Policy-wise, that may be good enough to make it worthwhile.
The thing about both poor and rural locations is... they don't have the public funding or private companies for a lot of stuff we take for granted in rich urban cores. Stuff like:
* Medical clinics
* Firefighting
* Policing
* Maintenance on buildings
* Broadband internet infrastructure
* Plumbing and sewage infrastructure
* Electrical infrastructure
* Roads and bridges
It's not so much that UBI would end up paying the rural poor to satisfy their psychological need to feel useful, as it would send them money they can spend on pressing material needs that the rest of society have decided don't deserve to be filled if it doesn't benefit "evil capitalists".
I mean, come on, do you really want to object that rural electrification or sewage should starve for lack of funding? Because that's what's already happening with the lack of infrastructure funding in many places. Hell, there's a lot of rich urban areas which have let their basic infrastructure go to crap (looking at you, MBTA!) due to immature political slap-fights.
If UBI means that people have money to spend, which they can pump through their local economy, which generates a little bit more tax revenue to improve crumbling infrastructure and address basic needs, then it's a good idea.
(Sure, we could spend the same state money on direct infrastructure spending, but that would be industrial policy, and thus horrific, evil Communism.)
Instead, we subsidize housing in LA this creates a perverse downward wage pressure, distorts the housing market, etc.
Further, when people move to low cost of living there brining this BI income which creates jobs in that area, increases property values etc.
There are also hidden advantages. People get away with more crap in low population areas, because you have lower impact on other people.
Right now there are some huge basic unknowns about a basic income. For instance, one prediction is that everyone who receives a basic income will drop out of the working population (not a view I'm ascribing to you, to be clear, but not a straw man either--it's something I've seen explicitly stated here on HN and elsewhere). This experiment will give a rough estimate of the sign and magnitude of any disemployment effect: will it cause some people to drop out of the work force? Or everyone? Or will it cause people to join the workforce?
Seeing how people react to basic incomes offered over different time spans is going to be important, but before the shape of that curve can be characterized (in what's ultimately an empirical question) we've got to get at least some basic information. Before Newton could come up with a solid theory about gravitation, he had access to plenty of information; but as far as a basic income goes, right now it's like we don't know whether gravity pushes or pulls.
And your point about inflation is my biggest area of concern about the basic income as well, but focusing on second order price level effects when people are still in dispute about the basic first order effects is putting the cart before the horse.
I think the parent's comment is mainly asserting that, because of its experimental nature, the experiment will not be able to actually answer that question. If participants do not drastically alter their work behavior like in previous basic income experiments such as MINCOME[1], that would not necessarily predict how people would act if given a promise of indefinite basic income.
The answer to "what are the effects of a basic income" isn't a single scalar value, but more of a function on the size, population, and duration of the income. What you seem to be asserting is that there's a discontinuity or inflection point in that response function, and this experiment probes the wrong side of it. Which is fair enough. But the results with t=2 gives us some information about t=3, just as the results with t=30 give us at least some idea of the results of the minimum income taken for an infinite duration. It's irresponsible and politically impossible to jump in at t=30, though, so we take baby steps, as they say, and gradually build our base of knowledge.
I suppose your argument might be "well, we need to do a test of t=5 to provide any additional information over previous limited rollouts of a basic income," but I'd argue that previous experiments have been pretty different and existed in a different social context. Other interested economics and policymakers certainly agree, hence Finland running this experiment.
Inflationary spirals are no joke. Some degree of caution is in order before deliberately engineering one.
I'm assuming inelastic goods aren't price controlled (creates intolerable shortages) and that basic income does increase disposable income. There are revenue neutral versions of basic income sometimes proposed by conservatives - dismantle social security and distribute the proceeds - but I don't think those versions are what most advocates have in mind when they call for basic income.
That might take a generation or two. I don't think I'd ever allow myself to be in a position of depending on an income stream that itself depended on the whims of legislators and their ability to budget. But I can see someone who grew up never knowing life without a basic income scheme might make the assumption he didn't have to worry about developing and maintaining a career.
1. The preliminary study was launched at the end of October 2015.
2. A review of existing information and experiences [...] will be presented [...] in spring 2016.
3. Following on from this, an analysis [...] will be produced in the second half of 2016.
4. The universal basic income experiment is planned to be launched in 2017.
[0] http://www.kela.fi/web/en/news-archive/-/asset_publisher/lN0...
Finland is a really small place.
I understand that people here WANT it to happen and therefore discuss it as if it WILL happen. Unfortunately reality is going to get in the way.
The US could afford to give the poorest 50 million adults a $2,000 per month basic income. Federal + State + Local welfare spending total, is a bit over $1 trillion annually (including Medicaid). You could parse that $2k down to $1k across 100 million adults, but at that level it won't be enough to replace all the benefits people are deriving from welfare today (the health coverage alone would severely drain that $1k level).
The downside is, giving the bottom 50 million adults a $2,000 check every month, would enrage the middle class. One of the benefits of current welfare programs, is you don't see it the way you do cash being spent, and I believe most people think of cash payments entirely differently than they do eg free healthcare.
Want to give all adults enough money? You can't do it. There is no math that will ever get you there, unless you plan to abolish the US military, part of Social Security and Medicare, and raise taxes simultaneously. 230 million adults * $1,000 per month = $2.76 trillion per year (almost the whole federal budget), it's obviously laughable.
Basic Income is only a simple solution if it's universal.
Additionally, part of the benefit of a universal basic income is that it covers the ground of programs like Social Security, so at least in theory you can get rid of it. (though I sure wouldn't want to be responsible for orchestrating the transition)
The basic income concept also collapses when you consider Social Security - that system is designed specifically to only give people at a certain age those benefits. As has been pointed out in the case of Finland, plenty of people will find they are worse off. In the US case, if you spread that Social Security money out across 230 million adults, it would become tiny per person (~$300x per month), which is exactly what you don't want to do (unless the plan is to shift back to a system in which people are expected more so to take care of their own retirement needs, but I don't see how that is going to work out with the median paying vastly higher taxes).
Clearly that isn't the idea though. The idea would be more like multiplying SS such that all of those 230 million adults get the same payout as what the current recipients get now.
And obviously it isn't as simple as that, not least because that's about 4 times as many people as SS covers currently, and it's already about 1/4 of the total US budget. In addition, the idea is that we shouldn't be required to work, and thus there should be basic income such that you can live comfortably, and arguably SS is already not enough for that. (the total SS budget/# of recipients = ~14k)
If BI is treated as income, this (through taxes) limits the net cost of benefits to the rich (or even middle class), while avoiding the perverse incentives that come with a hard cutoff, or even a dollar-for-dollar phase-out of benefits at some point.
If you don't have a cut-off, basic income can never work in America. There is no math that can ever get you there. It takes a few minutes to run the numbers, they do not work - unless you raise taxes a lot and reduce the other major federal programs a lot.
If it has a cut off, its not basic income, its a means-tested welfare program. We've got those already.
And there's absolutely no validity to the "in America" here. There's nothing inherent about America that makes it different here. A low level BI that doesn't replace all means-tested programs (particularly not Medicaid) or retirement and disability programs, but maybe displaces GA and SNAP is more plausible in the near term.
However anathema to our national ethic, this is what works, and form must follow functionality.
Mincome was an experimental Canadian basic income project that was held in Dauphin, Manitoba, during the 1970s. It was only half "unconditional", the rest income-dependant, but it did seem to have good effects.
Income is anything that...well...comes in.
The way I see it if someone really does not want to work, they'll go to great lengths to cheat the system and the government will spend a great deal combating these people. Just giving the bum money will be cheaper for everyone.
More importantly a basic income will free up people who will take jobs just because they have to. This will actually open up jobs for people who want to work hard to rise above the basic level. It will give people freedom to explore things that would not be feasible otherwise. This will generate more art, more music, new science and philosophies.
Perhaps my thoughts are too idealistic but I think its more reasonable than trying to police welfare or telling everyone to just be more bootstrappy.
I'm genuinely unable to fathom why when it comes to solving the diverse, expensive and very real problems a social safety net is designed to capture, that "give everyone a fixed large chunk of cash each year" is so widely perceived as the "most efficient" solution on here.
The separate ideal world argument that BI would ensure that people don't "have to" work (unless they're foreign, obviously) obviously flies a little in the face of the efficiency argument too.
I don't know if it's the absolute most efficient, but I suspect it's a lot more efficient than the current collection of social safety nets - especially assuming the tax agency is already decent at doing it's job, giving everyone a few hundred dollars a week is pretty easy to administer, and can be taxed back from higher earners easily. If instead you have multiple decision trees about who gets particular benefits and who doesn't, you suddenly need a bureaucracy, and those are always expensive.
Fundamentally I want my society to feed, clothe, and house people who can't manage to do it themselves for whatever reason. At that level it's not that diverse; does it matter if someone is disabled, drug addicted, chronically unemployable, a single mother with no support, a refugee, whatever? They can't come up with rent and food money, let's give it to them.
And yes, it matters hugely whether someone is disabled, a single mother or a whatever, because their rent and food money needs are likely to be quite different.
Also, my idea of a basic income would be for everyone in the country (every citizen and permanent resident at least) to receive it, non-optionally. No applying, no means test, nothing. You get $X direct deposited every week or two. For high income people it get taxed back (and more), of course. So it's not just to those who are economically inactive, it's to everyone.
And sure, we should help people find useful work and all that. But it can be separate than giving them money for basic living expenses.
http://www.theatlantic.com/business/archive/2014/06/a-danger...
Though frankly, $xxxxx from the government for signing up to pervasive monitoring would still be a better deal than anything I've ever been offered as a result of interacting with an ad tracker or promised by the brave new world of the IoT.
The situation is worse in my home country (Spain): I know too many people that doesn't want to work because they would lose benefits.
It's not about giving away more, but giving it equally. Income taxes can "take back" money from people that don't need it.
Welfare cliffs can be eliminated quite effectively by tapering welfare payments, and can remain (and potentially be made worse) after a BI is introduced if there are still some [household] income-linked subsidies or tax breaks available.
Economists widely agree that cash transfers are more efficient at improving welfare for the poor than transfers-in-kind. It's one of the less controversial statements in the field. "Give everyone a chunk of cash once a year" is probably not the most efficient manifestation of the concept just because peoples' behaviors tend to be different if they receive regular reliable income vs irregular income (see the permanent income hypothesis), but when it comes to the choice of giving the poor cash or services, just giving them cash is widely preferred.
I find that baffling based on San Francisco's experience. When the city replaced its "in kind" services with cash, for the most part the homeless people went out and spent the cash on booze and drugs.
The cash system was such an obvious failure Gavin Newsom was able to build his political career on converting the system back to the "in kind" type.
[1] rank 36/65: http://www.telegraph.co.uk/education/leaguetables/10488555/O...
* developed world, obviously.
How do you think that this would translate to less "classes"? I know some number of humans, and based on this limited experience, I'd be surprised if there wasn't some sort of "makers" and "takers" class dynamics emerge.
Usually things had a tendancy to increase differences, if you were in need, someone who had a headstart could use you and make profit. You earned a little while he gained too. Increasing it's position in the same way, more capital, more opportunities to hire, create business.
The problem is it simply is not possible or feasible.
https://aspe.hhs.gov/2015-poverty-guidelines
Poverty line is $11,770.
I'm pretty sure any reasonable person doesn't want to live on that amount of money because it would suck!
So how much does it cost to, say, give everyone $10k/year and thereby guaranteeing everyone who can work would want to?
http://quickfacts.census.gov/qfd/states/00000.html
23.1% of the population is under 18.
So .769 is 18+.
318,857,056 is the total population of the US.
(318,857,056.769$11700) = ~2.9 trillion US$
https://www.nationalpriorities.org/budget-basics/federal-bud...
We have about $3.8 trillion in federal revenue.
$985.74 is the cost of Medicare.
$985.74 billion + $2.9 trillion = ~$3.9 trillion
This leaves a $0 budget for literally anything else. To be reasonable, we'd probably need to raise another ~$1 trillion in taxes to sustain something vaguely resembling current government functions [remember, the existing expenditure is already over $3.8 trillion]. Even then, it'd be really iffy.
http://fortune.com/2014/10/31/inequality-wealth-income-us/
> There is no dispute that income inequality has been on the rise in the United States for the past four decades. The share of total income earned by the top 1 percent of families was less than 10 percent in the late 1970s but now exceeds 20 percent as of the end of 2012.
https://bber.unm.edu/econ/us-tpi.htm
Total household income is only ~13 trillion.
So even if you took 100% of their income, the numbers wouldn't work.
Pretty much the only way to make that work is to tax people down to the $75,000 or so level.
You've basically gotta take half of the household income in the country to make your plan work. That isn't happening.
1) Even if you spent the entire $2T annual federal budget on a basic income, it would come to about $500 per person per month. The cost is simply gargantuan.
2) It would not replace welfare, it would come on top of it. This is because welfare isn't about helping the poor, it's about giving political power to the lawmakers. This power comes in the form of large administrative bodies, where political allies can be given cushy jobs, and in the form of an electoral clientele. Basic income doesn't have these two features, so from a public choice theory, it will not replace the welfare state. Case in point, when the Reagan administration tried to apply Milton Friedman's negative income tax, he distanced himself from it as they wanted to do it on top of other welfare programs. This is exactly what public choice theory dictates.
~1000€ is what ultra leftwing party's youth group proposes. ~600€ is what the Green leftist party proposes
The right wing parties talks about creating motivation for people to get to work with the basic income. A newspaper supporting prime minister party's talk about either partial basic income of 550€ with it replacing most benefits or full basic income of 800€ with absolute cutting of other benefits.
What I'd like to see most is basic income combined with true flat tax. No tax deductions, minimal bureaucracy. If we are going to pay certain minimal support to everyone to keep them from going too desperate, we could as well pay it to everyone and then start taxing from first euro earned with the flat percentage.
Instead of current system in which people send lots of separate applications for different benefits and then people paid by government has to work. And when you get raise you probably need to get new tax form from tax office to give your employer.
What well made basic income should give is instead of having long plateau after the minimum everyone is guaranteed to get one way or other, is a way for everyone to get that minimal guaranteed all the time and any marginal employment would increase income over that. And most of the cost would be got from reducing number of government employees required to handle it. Everyone doing the math should consider that only real cost of basic income is when someone earns less than (1/taxrate)*basic income and more than what government currently gives to poor. And it eliminates cost of MANY government jobs handling papers for benefits, and makes easier to take a job for a day or two or week or two because you cannot loose benefits for it. Or loose benefits for starting your own business.
We don't know how many people are going to rely on basic income as main mode of income and why.
If a real problem does arise with a non-working majority perpetually voting to increase their BI, a more flexible answer would be to make the vote conditional on having paid a certain amount of tax, either in that year or over their lifetime to date or some combination of the two. But let's not roll back the clock a few decades on universal suffrage until we're absolutely sure we need to.
EDIT TO ADD: a core principle behind BI is that paid employment is not the only socially valuable form of activity. I believe that. Taking away the vote from people who aren't making a contribution in $$$ form would fly in the face of it.