Finland launches trial program to pay unemployed citizens a basic monthly income
cbc.ca
cbc.ca
Specifically, this experiment eliminates (much of) the problem that earning a few hundred euros will cut your unemployment benefits by the same amount. It allows people to take part-time jobs without being penalized. It's not perfect for the reasons you give and more, but it might be significantly better than what is currently in place.
The premise that one can find some universal income amount X and do away with all other types of benefits is a pipe dream anyway. For some, X will be enough to scrape by. For others, X will not be enough for their medical care necessary to survive for two weeks. There will always be a need for some extra needs-based benefits.
That is why this a useful basic income experiment - regardless of whether the program itself is classified as basic income in its current form or not.
Not really, because (i) tax credits and other proposed "welfare trap" reduction methods have been around and studied for a while and (ii) it doesn't attempt to study any of the features of BI widely believed to have negative impacts such as the cost of extending welfare to millions of people not currently [interested in being] eligible for it, possible social effects of decoupling benefit entitlement from any indication of desire/need and net income reductions to some current welfare beneficiaries if other programmes such as housing entitlements are cut. As a general rule, experiments which don't test any of the perceived negative effects of a proposal generally mislead more than they inform in debates about whether it's an improvement on the status quo.
Finland (like much of Europe) has universal healthcare and a national health insurance plan; this is not an issue. There already is an 'X' that people can (adequately) survive on when on welfare. If basic income is something that a state wants to research in earnest, these kind of experiments provide valuable data and can be seen as a tentative first step towards a national basic income plan.
Benefits:
More equal distribution of income
Removes disincentive for beneficiaries to undertake part-time work
Poverty is reduced but only at the 60 and 70 percent relative levels (2, 2A)
May improve labour market outcomes in some areas: more employee flexibility; encourages unpaid work; additional employee bargaining power; encourages entrepreneurial activity; and reduces the opportunity cost of full time training or education.
Lowers administrative, management and operating costs
Costs:
Poverty is either increased across all relative levels as Superannuitants have their payment decreased by 44% on average (1), or is increased when measured at the 50 percent relative level (2, 2A).
Horizontal equity problems due to differential treatment of one and two parent families
Many current beneficiaries (e.g. sole parents, the disabled and carers) will be financially worse off under the scheme
Reduces the supply of labour: decreases hours worked; increases migration of skilled workers; discourages people from taking entry level jobs; discourages further education and training; and the EMTRs for families with children are very high discouraging further work, MFTC (1, 2).
High personal income taxes have negative implications for saving, investment and productivity
Lowers economic growth (estimated at 2.8 percentage points per year)
Non-alignment causes integrity and coherence issues for the tax system
I wonder if it would actually be the opposite, with people being able to work legitimately rather than under the table to supplement their income (and not have to fake ACC injuries).
Sure they have "discourages people from taking entry level jobs" under Costs (and they don't really elaborate much more in the main text), but they also have "Removes disincentive for beneficiaries to undertake part-time work" under Benefits.
At the moment when you're on the unemployment benefit there's a lot of pressure to look for and acquire a job. The lack of that pressure might be a factor in reducing the incentive to get an entry-level job. Or it might be the opposite - an incentive - because you won't lose your benefit when you get one!
It's complicated - the sort of thing that probably needs to be tested in a real-life trial. Too bad it'd be so hard to set up (and potentially revert) at a government level. If only we had a perfect computer simulation of a country.
There'd be so many knock-on effects. Like say you get your $300/wk, and you don't have a job with a company - is there going to be a big exodus from the cities since it's too expensive to live there on a UBI scheme? And you only NEED to be in the city if you have a job there.
People will still gravatate towards cities because that's what we do. However a little easing of the pressure on the three main cities would do wonders, as we know the cost of housing is out of control. With the fibre rollout we'll also see the requirement to live in a city is limited, if you can get 100Mb/s and work from home in the Waiarapa why would you bother living in Lower Hutt and face that commute to Wellington?
You are using a Private Use Area codepoint (U+F0B7) for your lists. These will show up as boxes-with-a-hex-code in it for some (I get this), the glyph you intended (no idea) for others, and a completely unrelated and inappropriate glyph for the rest.
Why not use one of these instead: » → ▶ ◆ ●
- the
- good
- ol'
- hyphen?
For giving $300/week to all 16+ years old citizens.
Poverty increases because higher taxes have to be levied on income earners (PDF says 44-48.6% range). Single person householders with >$50K; Two-earner households with children earning over >117K; Single income families earning >$183K are worse-off as it will reduce their disposable income. The main worry is people will work less for the time that fetches them $300/wk but the upside is that people will be more willing to take on part-time work; also people might shun entry-level jobs; increase in emigration due to increase in taxes; while immigration from unskilled labour will increase.
Brief 5 min look-through synopsis. Please correct if it seems insufficient.
This was a fairly limited study in that it only looked at a couple of simple ways of doing things, but I do think it's a good analysis to read. There's still a lot more actual number-crunching in it than you'll find in the average Internet discussion.
I've also come across a fairly thorough rebuttal to the whole thing in a blog post here, which might be interesting supplementary reading: http://www.oursystem.info/2011/11/gmi-response-to-treasurys-...
Labour and the Green party have both shown an interest in UBI so it will be interesting to see if it comes up as policy during the elections next year.
As far as I know the experiments that have been done (one in Canada and two in the US) concluded that only people in a few specific circumstances worked less (single mothers in particular I think).
Why not solve both problems by simply eliminating income tax on lower income brackets instead? This is cheaper, easier to implement and less politically contentious (we already embrace the notion of progressive taxes, and who doesn't like a tax cut?). It also gives the money directly to those who need it most.
I suspect many people support basic income because they fundamentally believe in a world where you shouldn't have to work to make a living. They use arguments like helping the poor, or putting everyone on an even playing field, or the claim that tech will eventually destroy jobs anyway as Trojan horses for this agenda. I don't agree and I think most people would disapprove of basic income if you told them that it was intended to undermine the culture of working and earning to make your own living.
If you really want to help the poor and the working class, support the elimination of income tax on the lower income brackets instead of basic income. It is a simpler, better, cheaper, and less divisive solution.
I reject the idea that working any deadend awful job just to get by is somehow virtuous. I love what I do, and I would do it even if I didn't need to work -- but being able to say that is an extremely privileged position to be in.
We're automating away industry after industry. There already aren't enough jobs to go around, and that will only get worse from here on out. I have no idea what the future should look like, but we have to start by accepting that the value of working at a job to feed yourself is not irreducible or axiomatic.
Sure there is. Domestic labor (maid, cook, driver, servant) for more productive people. Mechanical turk. Selling loose cigarettes. Making tacos for people and selling them by the side of the road.
We know that these are jobs people could possibly do because in India people actually do them. Americans just have the opportunity not to work, so they take that opportunity. This makes us all poorer. BI only makes the problem worse.
Just because somebody in another country might be trying to scrape together a living that way, because there are no better options, doesn't make it _good_.
We're building better labour saving devices all the time, but that has a human cost. When the long haul trucking industry is inevitably automated, it's frankly callous and unfeeling to suggest that we'll all be richer by forcing those former drivers to become the domestic servants of "more productive people".
You seem to disagree with me about shared obligations; you think that some folks deserve to be able to live off the productive output of others and provide nothing in return. I think all people should contribute to society as best they are able - "from each according to his abilities" was an important part of Marxism.
That's fine - just recognize that "I don't want people to work" is a very different claim from "there already aren't enough jobs to go around".
The full quote is: "from each according to his ability, to each according to his need!"[2]-Marx
[0]https://medium.com/@MattBruenig/the-ubi-already-exists-for-the-1-d3a49fad0580#.ht5wz4ecy
[1]https://news.ycombinator.com/item?id=13303420
[2]https://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_needs#Origin_of_the_phraseBut I'm a bit confused what this has to do with the 1%, who typically gain capital income by managing companies that they own. How is that unproductive?
At this point, if they work, it's because they're choosing to - which is proof that passive income does not inherently slow productivity.
Is this really correct? Do you think that a trust fund baby would not become more productive if they lost their trust fund and needed to find a job? Do you really believe that exactly zero rich people choose not to work because they don't have to?
He was arguing under your premise that passive income equalled productivity. If you now suggest that they would be more productive without their money, why should "having money" be rewarded like it is? An automated machine doing a job gives money to the person owning the machine, who does exactly as much work as the unemployed person who lost their job to that machine.
On average, I think that's true. Economic returns are concentrated in the high-risk, high-return gambits that a trust fund baby can afford to pursue and a labourer can't.
The article says 25% of all passive income goes to the 1%, but says nothing of what goes to the rich.
> Do you think that a trust fund baby would not become more productive if they lost their trust fund and needed to find a job? Do you really believe that exactly zero rich people choose not to work because they don't have to?
You're making a straw man argument using stereotypes. I only spoke of 1% as a group on average. Any group will have people that are not currently productive, even those forced to go to work.
But that's unrelated to the argument I was making. I was simply disputing a claim that we don't have enough jobs. We do, people simply refuse to do them.
Wealth is matter, energy, information, and time arranged together in various ways. Leisure, the ability to spend time outside a "work or die" event-loop is a kind of wealth, one that most people have far too little of right now. You seem to be eliding leisure from your notion of wealth, and thus proposing that leisure be eliminated wherever possible.
A lot of people disagree with that.
buddy, all these things are heavily licensed and regulated. selling loose cigarettes or tacos on a side of the road... that is jail time you are talking about. it is a lot safer to sit at home and collect government checks than to sell tacos without FDA approval. /sarc
http://www.nytimes.com/2011/07/15/opinion/15zachbrooks.html
What safety do you believe that requiring 2250 hours of training to be a hair braider provides?
http://madamenoire.com/501738/texas-federal-judge-rules-hair...
And why is a pack of cigarettes sold by a bodega somehow safer than a single cigarette sold by Eric Garner?
I eat food that has not been blessed by American regulators all the time. Somehow, this didn't kill me: https://goo.gl/photos/ytKacsLvkxhqCnW18
edit: seriously, this is fantastic post, thank you. it perfectly captures modern european mindset. how dares someone to make <whatever> without any oversight of regulations! I enjoy protection provided by EU in a form of these regulations! я очень люблю Пеже!
you sound like communist shills during Brezhnev period, rhetoric and indignation аre perfect!
Are you seriously suggesting to implement (or go back) to the class system we (thankfully) got rid off in modern West? You can get a job as a maid, cook, driver and even servant if you want to now, but forcing people to take such jobs would be just another form of slavery that benefits only a small group of already well-off people.
I'm proposing one class: the working class. It's BI proponents proposing to add a leisure class.
That's also heard somewhere[0]. Didn't work out well either.
Don't we already have a leisure class in the >1%? It may not represent a large portion of our population, but it does represent a large amount of wealth and income.
Sure, there are still elements of the leisure class that spend time maximizing their income by working/investing, but its hard to call that a "job". If there's no risk of falling through and becoming insolvent, then I'd say it's more of a hobby focused on power/wealth accumulation.
I don't think that inventing bullshit jobs (say an extra few layers in your local bureaucracy) is really a solution.
I'd much rather everyone got a universal basic income and could focus their lives on something more useful like their families, or creativity and art or whatever the post-job-world will be about.
Working women don't need child care, and should in fact be encouraged to stay home to reduce the demand for jobs? Infrastructure is not crumbling and in need of repair? That's what "no useful work" means.
There will always be useful work to be done, but will there be enough for 7 billion people? What about 10 billion people? Especially as more routine work gets automated "away".
Instead of UBI, I would much prefer creation of state sponsored jobs, even if the jobs were mundane like painting roads. It's effectively the same as giving everyone money, but with all the benefits of "work".
It could work if the jobless are "socially placed" into existing workplaces. Creating gangs of unemployed people to paint roads, however, would only enforce the low status of the jobs and the people doing them. There is no motivation and strength to be found there.
If basic income is low enough, then people could choose themselves to either scrape by (which is nigh impossible in Finland for 560 euros) or find additional sources of income for themselves. It's always better if your job is by choice rather than forced on you.
The question is, what's inspirational work? I think it's easy to come up with examples of inspiring work.
I often hear some variation of "the government needs to incentivize people to strive for more so they aren't so lazy", but somehow it only applies to the poor.
I'm all for donation-driven-universal-basic-income. Please do that instead.
It is, because being alive is somehow virtuous.
Japan is one of the most "automated" countries. And they have 3% unemployment. I think we are far, far away from the moment there won't be enough jobs to go around.
The taxation is quite progressive, so low earners pay less tax than in most European countries, and high earners pay more than almost anywhere else in OECD (depending a little on family status etc).
The main problem for Finland's tax collection is too few high earners to get enough tax revenue (not entirely unsurprisingly, because the other policy goal is a flat income distribution.)
I don't think the basic income experiment changes anything, though. It's impossible to move to BI because some people would lose money so any change would be extremely unpopular. And a change where "everybody wins" would be prohibitively expensive.
On another note I don't understand why the word Universal is being used. The point is that it's unconditional compared to the conditional version of something like Negative Income Tax.
The point of basic income is that it is universal. It is fundamentally a social welfare program, but it is designed to be a more effective one. By far one of the biggest problems of being poor and especially unemployed is lack of cash flow. This doesn't just get in the way of living a "luxurious" lifestyle, but it causes fundamental problems which can drastically reduce quality of life and often increases the cost of living. This is a well known problem, people with very little money end up forced buying things of low quality, and they end up getting less value for their money, they also find themselves in emergencies because they are unable to pay for essentials.
Moreover, there are huge problems related to improperly aligned incentives when it comes to traditional social welfare programs. With UBI the incentives are, however, very properly aligned. If you want to make more money, if you want to improve the quality of your life, then you can seek progressively higher paying work to do so. UBI merely sets a floor on the minimum level of quality of life that is possible. It does not destroy an incentive to work it merely destroys the coercion to work any job whatsoever in order to avoid starvation. Personally I think that's a good thing, not a bad thing.
Additionally, your point about elimination of the income tax on lower income brackets is tone deaf. This already exists today. The bottom 40% of incomes in the US pay essentially no federal income tax, with many people in those income ranges receiving money back from the federal government in the form of the Earned Income Tax Credit.
That's a fallacy of composition. Not everybody can, because there aren't enough jobs to go around. So about 5% are always permanently in poverty.
Fundamentally you need to change the labour market from a buyers to a sellers market. Until you do that, nothing changes.
To give an example. In Denmark the book that determines the laws when it comes to unemployment benefits is 26.000 pages.
That's a lot of bureaucracy which can be killed right there.
The income receiving individual gets paid twice in real terms - consumption of goods and services provided by others and consumption of their own labour hours.
Those producing the goods and services end up with more money, but less in the pool to buy with it. More money chasing less output is inflation.
We need a system that allows the exchange of labour hours for goods and services, not compulsory handouts.
Giving tax breaks to people who make no money isn't helping the poor.
My country already does that (no income tax below something like $14,000). That doesn't replace basic income - you still need to do something about people who aren't in work, so there are still a variety of benefits (disability, housing, unemployment), and that variety of benefits is still cut if you start working, so there is still the problem that someone working 5 hours a week is worse off than someone working 0.
That doesn't work. It is already essentially done in the US and hasn't solved the significant poverty problems in the US. Quite the contrary it has likely made the situation worse. Studies show that when the poor don't pay taxes they end up being vilified by the middle class and viewed as leeches. "Why do we pay for free stuff for them", would be the rebuttal. This excepting the poor of taxes erodes the support for welfare programs, and tax cuts on a low salary can't make up for cuts to programs such as public education, subsidized health care etc.
Studies show the best way to reduce poverty is through broad non-means tested programs everybody gets whether they are rich or poor, because that allows the whole population to keep its support behind these programs as everybody benefits from them. It also allows resourceful people to demand quality and improvements. Examples of this is e.g. public education. Whenever education is segregated into public education for the poor and private for the well off, then public education is almost always shitty quality. When the middle class and rich also send their kids to public school, it tends to be of high quality as the powerful will pressure government to keep quality high.
There are some great examples of this from when black and white schools got desegregated. As soon as white kids got sent to black schools, those schools saw dramatic quality improvement as there became much stronger political pressure from resourceful people to improve those schools.
"I suspect many people support basic income because they fundamentally believe in a world where you shouldn't have to work to make a living"
I suspect that is what people against basic income usually suspect about advocates. You engage in a rather human logical fallacy. Assuming people supporting something primarily do it for their own benefit. I support legalized prostitution and drugs. Yet I am not a prostitute, john or drug addict. Wow how can I hold that position then? Hint I care about practical solutions to real problems in society.
I don't really believe in universal basic income but not for the reasons you state. I don't think the problem is that people wouldn't work, but rather that it could never be high enough to replace all the things a welfare system now takes care of.
Edit: Looking at some stats here [1] and it looks like 565 euros is enough to rent an apartment outside of city center. It also looks like one could potentially find something for 450 which leaves pretty decent money for food and perhaps a bicycle for transportation? Definitely not enough if you consider utilities though. That's some rough living.
[1] https://www.numbeo.com/cost-of-living/country_result.jsp?cou...
Also If you manage to buy a (small) condo, the interest is basically below zero right now, so 560e could easily cover basic expenses.
In Helsinki Metropolitan area is is
315e student aid + 200e housing aid ( + possibility for student priced housing and other student priced amenities)
Note that this doesn't really "cost" anything as the people in the program are already receiving generous unemployment benefits, " The amount will be deducted from any benefits they already receive."
So the difference mainly is that you don't have to ask for this money or report it if you start to earn money. I wonder how your other benefits are affected though (child support, living expenses like rent and utilities etc.) if you indeed get a job.
The bureaucracy is a nightmare here with unemployment benefits, so hopefully something good will come out of this project.
Personally, the lowest I was able to achieve in practice was about 650€. Gotchas:
1. It was over 10 years ago
2. I had student discounts on housing, lunches, public transport etc.
I suppose I could still have squeezed that down if I really had to, fortunately I didn't.
So you have 16% of the average wage.
Rents lower end 600€ at a smaller backwoods town, up to +2000€ in capital area.
It's pocket money and according to the article it decreases the other benefits you get, so I'm not really sure how much people actually gain in terms of their available assets. I guess it's mostly about getting that money without having to fight bureacracy that normally occurs with some gig based jobs etc.
Nothing new to see here at all other than the elimination of the ridiculous requirement to look for jobs that don't exist - because there aren't enough jobs.
Not enough jobs is still the issue, and nothing has been done to redress that. Nothing changes until the buyers market in labour is turned into a sellers market.
To my knowledge this has worked well in Norway, and so I suspect a similar change can work well for the unemployed.
I think we are going down the wrong path with endless reports, and threats to get unemployed people back into the workplace. I think it would be better with stronger focus on positive encouragement.
I won't claim to fully understand the theory of guaranteed basic income, but as it has been explained to me it seems inherently flawed in its purest form. The whole point of a welfare system is that members of society will occasionally experience dramatic situations which can get very costly, whether from unemployment, serious illness or accidents. That means sudden spikes in money requirements. A socialized system can handle that as those spikes are evened out over a large portion of people. But a universal pay is constant to my understanding and thus won't fluctuate with need.
This all it can really solve is hindering people from lacking basic necessities like food, shelter and clothes. You can make a system which pays enough to handle every possible case unless you make the payment really high. A young healthy individual will require less basic income than a disabled person in a wheel chair with expensive medications and customized house and car.
No scheme on earth could automate 40% of jobs in a decade.
> what actually is the alternative
As a proportion of total U.S. jobs, farming declined steadily 5% per decade from 1800 to 1970.
Imagine telling a youth in 1900 that in his lifetime, 35% of the nation's jobs would disappear. People will have nothing to do!!
You may think it improbable, but surely you think it still possible?
I don't think most people understand how fast this is going mostly because we work in the part that still benefit from this.
When automated cars and truck become a reality then 12 million jobs in the us are in danger. Transportation being the one job that can't be outsourced to other countries (contrary to Europe) is the most common job in the US. Once that's gone so are their jobs.
And can we please stop comparing to farming and the luddite fallacy they are completely missing the point of whats going on right now. Did the horses get new jobs when cars started taking over?
Technology replaces jobs that require higher and higher levels of abstraction and while technology keeps improving humans only improve to the extent that technology allows them to.
Also here is another good example of a huge manufactorer who is going to get rid of all their people.
It's here faster than you think.
http://www.theverge.com/2016/12/30/14128870/foxconn-robots-a...
Secretary used to be the biggest job in America and now it's virtually gone because of technological progress.
Do you know how many clerks were automated away when the database was created?
Maybe this time is different, but you can't assume it will be.
So the trend is actually showing us exactly that.
If your claim is that new jobs will be created you need to show those new jobs cause they are needed right now and I don't see what area you are referring to which should be able to take over.
Saying we don't know is not an argument when the trends show the opposite.
Predicting what the new jobs will is very hard. Someone in 1870 couldn't predict that a large percent of Americans would stop farming and instead manufacture cars, radios, and refrigerators. Those things hadn't been invented yet.
Also, sometimes automation brings cost down and unlocks demand that increases the number of jobs in total. More people worked in auto manufacturing after the factory line was invented than before, despite it drastically reducing the man hours per car.
There may be a period of high unemployment, but the cheap labor will find uses. Well, it always has in the past. Against this time might be different if automation is easy enough to replace nearly all low skill human labor.
Unless you are somehow expecting technology to stop improving and humans to somehow improve exponentially the trend is pretty clear. Machines will be able to do most of the things we do at levels we haven't seen before.
It's not hard to predict new jobs if they are there, they should already be there and you should be able to point to them.
The numbers speak for themselves. As I said the number of new jobs created have actually gone down decade over decade in the US.
The real danger is saying things like "jobs will come" thats not an argument when you can't point to it, then it just become a religious belief in something there is absolutely no evidence for.
Can horses perform many of the other jobs the average Uber/truck driver is capable of?
If we're worrying about the 30% of Foxconn workers who will have lost their jobs if the company hits their automation targets and doesn't grow at all, we ought to consider that this would still leave them employing 900,000 more people than they did a couple of decades ago in the manufacture of devices whose sales were comparatively tiny two decades ago. I don't think our desire for new types of possession is fully satiated yet either.
Machines can perform a greater and greater amount of jobs which normally only were for humans because they achieve higher and higher levels of abstraction.
Most jobs doesn't require you to be a human they require you to perform a small part of what humans can do.
So whats left are things that require an entire human which makes it a commodity.
And whilst "smile, pass a Turing test and do something I haven't asked you to do before" might be a very small part of what humans can do, it's something which machines in general available aren't doing a great job of catching up on. There's even a non-trivial proportion of jobs where "be a human" is the main requirement of the job. And even in the subset of tasks where computers have gone far beyond humans' capabilities they're usually better still at those tasks with a person or thousand interfacing with them, usually in jobs that didn't exist in a less technically-enabled age.
The number of new jobs created each decade in the US has gone down since 2nd world war. This is the point that many don't seem to get. Outsourcing is mostly the last step before automation.
Here is the reality of what I am talking about.
http://www.wsj.com/articles/routine-jobs-are-disappearing-14...
https://upload.wikimedia.org/wikipedia/en/5/55/Total_private... Trend growth looks pretty steady to me, including when typists and telephone switchboard operators were being replaced at a much faster rate than machine welders. The 2000s was obviously a terrible decade, but I'm pretty sure that has more to do with the global financial crisis than any ~2007 breakthrough in robotics
https://plot.ly/~BethS/8/job-growth-by-decade-in-the-united-...
Also the way jobs are defined is problematic here is how it's defined.
"People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:
On vacation
Ill
Experiencing child care problems
On maternity or paternity leave
Taking care of some other family or personal obligation
Involved in a labor dispute
Prevented from working by bad weather
These people are counted among the employed and tabulated separately as with a job but not at work, because they have a specific job to which they will return."
https://www.bls.gov/cps/cps_htgm.htm
95% of the jobs created since 2008 are temp jobs.
So no it doesn't look steady once you actually start looking into the details.
The first two came to pass in more or less obvious ways, but the third (automation) is only really happening now - there isn't much alternative if work is automated away unless you think having a hugely wealthy elite controlling everything while everyone else starves is a good idea.
We already have comprehensive and complex welfare system that creates pockets where effective marginal tax rate is above 100% (going to work part time reduces welfare, net effect is negative). In the lowest income service industry almost half of workers would earn the same if they were unemployed. Fears of people not working if they get the same money without working seems to be false.
There is already two groups of Finns that get kind of basic income. Underage children and old people. Underage children get unconditional sum of money (goes to parents of course). Old people have guaranteed small pension.
This test has many faults, (its only for unemployed, basic income would be for everyone) but it's unconditional like basic income should be. People get the same amount of basic income even if they find work, or work only part time.
The problem with welfare system's pockets of >100% marginal tax are not only related to money in the long term. It's also that the payment of benefits is interrupted very quickly upon the employment office learning of someone getting any job (even temporary and part time) and resuming payments is slow. So although the money is evened out in the longer run, people who take a job tend to have short-term cash flow problems. They really suffer for taking a job, and that is wrong.
BI would help in that, but as a long-term solution on population level the equation looks unsolvable.
---
1: Yes. Pensions in Finland are welfare. Pension fund savings cover only tiny percentage of pension. Young working people are paying sums much bigger than basic income to old people.
Ultimately, if BI had the incredibly desirable (and unlikely) effect of encouraging every one of Finland's 250k unemployed people to start part time work and pay tax on those earnings, the state would still be much worse off than before from paying all these economically inactive people a subsidy they probably don't need.
And remember friends, TANSTAAFL.
For a maxim held by so many who flirt with economics, it's strange that so much of the field is explicitly about determining where the free lunches are.
Throwing in TANSTAAFL doesn't add anything to the discussion.
The point is that every lunch is non-free to some people, even if it is free to others.
You might thing it trite or a truism, but very many people forget that the billions/trillions for UBI is going to be very expensive for a lot of people.
If you think there is no value to living inside, well, that's just delusional.
True, renting isn't merely usage of the house; renting involves more than that. A landlord is required to maintain upkeep on the housing and ensure the property remains functioning. If you buy a house you need to pay for that yourself and the costs can be situationally high. (Disclaimer: I don't know if this is true in US, but its true in NL at least.)
Where did you get this idea?
Redistribution covers both sides of the transaction rather succinctly.
What has worked:
- Stronger (ie sans "right-to-work")/more-effective/less-corrupt unions
- Much higher, graduated corporate tax rates
- Simplified, progressive personal & corporate income taxes (ie Norway's personal tax system by SMS is often quite user-friendly)
See also:
- Robert Reich's "Inequality for All"
- Michael Moore's "Where to Invade Next?"
- Basically every day on Thom Hartmann
I place a high value on living in a city where there aren't hoards of sick people dying from malnutrition because a simple injury has made them unemployable. And it is nice to know that the person making my latte isn't likely to be a carrier of tuberculosis or cholera.
Hi, I'm affluent and highly taxed, and redistribution is awesome.
The main problem of malnutrition is nowadays not that people wouldn't get food; it's that they get too much of it (particularly of the instantly gratifying type that has high energy content).
My point is a broader one made by example, that a society of people with a safety net is more desirable than one where the have-nots can only live off trash and sympathy.
(Though personally, I think the biggest reason to give a guaranteed income is because the money poor people receive is almost entirely spent in local shops and on rent and utilities. And it's spent on stuff that people want, whether we think it's a good decision or not. That makes it an efficient way for government to disperse money into the economy.)
And it is paid for by suppressing the income of those who work for a living.
Unsurprisingly they get upset at that and political agitate to stop the theft of their output. Which is why all income guarantee schemes fail.
It's known there are tens of thousands (hundreds? millions?) of people who just don't want to work and sit around on it for their entire lives. A few friends did it for a decade after highschool, just surfed all day every day.
Despite all the naysayers and doomsayers about this kind of thing, Australia's economy and workforce is perfectly healthy, and has been this way for decades....
And remember: there are 4 weeks and some change in the average month, so more like $1083/mo. Not that that's much more :)
Evidence proves otherwise. I know people who are doing it right now.
Nobody needs a cell phone when they're just surfing every day anyway....
By contrast can I point out that Australia has a high basic cost of living, colossal levels of private debt, an epidemic of obesity, an ongoing productivity crisis that was only temporarily masked by a resources boom, and a demographic inversion just around the corner that is likely to a) overwhelm the healthcare system and b) elect ever more conservative governments that will stifle immigration at exactly the time it is most needed.
http://www.abs.gov.au/ausstats/abs@.nsf/0/1CD2B1952AFC5E7ACA...
If this is the first you've heard of the West and many Asian nation's pending Demographic Inversion, I suggest you do some research. China, Japan, most of the EU have serious issues ahead as a result of now going on three generations of birthrates below replacement level.
Figure 4 on page 10 of this pdf shows that the lowest income decile has seen real income growth of over 40% in just 20 years:
http://www.pc.gov.au/research/supporting/income-distribution...
Have you ever actually dealt with Centrelink?
I was also on center link payments for study.
20 Years ago maybe, now there are so many strings no one knows what to expect from centerlink.
My mum has to get a doctors certificate every year to prove that my sister is still down syndrome. I doubt she's going to grow out of that extra chromosome.
It is a classic resource economy, helicopters of money everywhere during the boom years, take on debt during the bust years, cycle repeats.
Sorry but that's just flat out incorrect.
The maximum payment possible is $528 a fortnight through Newstart (not available to everyone, and only available for 6 months). See https://www.humanservices.gov.au/customer/services/centrelin... for more information.
$528 a fortnight equates to $13,728 annually (so you're going to get less than this, because you can only get it for 6 months) in a nation where the _median_ income is over $80,000 AUD. What little you get is going to be spent on rent, food, and going to and from interviews (which are a requirement of you getting NewStart).
> It's known there are tens of thousands (hundreds? millions?) of people who just don't want to work and sit around on it for their entire lives.
Dole bludgers are _few_ and far between. What you're seeing is people doing nothing because they literally cannot afford to do anything, even if they're getting the maximum payment (and it's likely they're not).
Welfare in Australia could be a lot better, and I'd be interested to find out how a UBI could affect the process as Centrelink (the welfare department) is incredibly inefficient.
Have you been on the dole?
I was on it between jobs, and my brother was just on it for a year while he rode a bike around Tasmania, then volunteered at the circus in Perth.
It's very do-able. Obviously you're not owning an iPhone and driving a new Commodore, but if you're willing to have a few roommates and eat 2 minute noodles from time to time, it's an easy life.
I'm not implying it's not do-able, but it's definitely not the same as having a job that pays even 30k AUD a year.
How comfortable you're going to be also depends on where you live naturally, as renting a room in Brisbane is about ~$120 a week minimum. Melbourne is more expensive and Sydney same again.
The way means-tested welfare works is that there is e.g. a 20% tax and then people are given some benefits but the benefits are taken away very quickly, e.g. you lose 70 cents in benefits for every dollar of income. It means that low income people are effectively paying a 70% marginal tax rate while the rich pay 20%, which means there is a much lower incentive for the poor to make some more money. Especially when making more money can also cost more in expenses like transportation and child care, which can eat more than the part the government didn't take.
The way a universal basic income works is that there is a somewhat higher nominal tax rate, e.g. 30%, but everyone gets the benefits unconditionally (and in cash, so less bureaucracy), so everyone has the same marginal tax rate. Which reduces the disincentive to work of means-tested welfare.
You can still have any effective tax rate you like at a given income level, by choosing the amount of the basic income and the nominal tax rate.
But true, it would be a better experimental setup to include all kinds of initial circumstances in the study population.
On the other hand, people realize that UBI may go away any day.
What will be when canceling UBI has as much chance as canceling Minimum wage?
It looks like they're doing it in a way that doesn't cost anything - its just a reshuffling of the current benefits.
Note that any "complete" welfare state more or less guarantees, that you will get X income (or at worst, incur a cost of X). Even if you refuse to work, society will make sure you aren't hungry. There is universal healthcare etc. So the money is already spent - a basic income only changes the dynamics by also offering it to those who work.
Offering it to people who work might reduce the number of worked hours, which would be a positive effect (might create more jobs, improve health etc). It comes at an increased cost of course - but that can be offset by increasing income taxes.
If money is distributed and taxes are not increased, then it is a form of stimulus. In that context, a Basic Income should be compared to central bank stimulus (artificially low interest rates etc). If you want to make absolutely sure that stimulus money ends up spent in the economy, as opposed to saved or transferred abroad etc - then a BI seems like a better idea.
i read this all time around here. money "saved" is usually invested, and that too stimulates an economy -- and probably more meaningfully long-term.
https://en.wikipedia.org/wiki/Keynesian_economics#Excessive_...
It logically leads to the existence of an optimum rate of saving/spending and the requirement of some powerful actor to keep that rate near optimum. Notice that the math is flawless, but there are some issues with its meaning, so again, reality is more complex than that too.
Money gets very tricky at scale. If "money" means "paper bills" and "saved" means "sitting in a warehouse", then no, saving enormous amounts of money will not make you richer or improve your future. You can't eat bills—or bitcoins. And indeed, if enough people decide to hold onto large amounts of cash, it makes it harder to trade.
Can this really happen? Sure. When the market looked like it was about to crash in 2008, I moved my investments out of index funds and into cash equivalents. Now, this might have been a dumb move—but I'm not the only one who panicked and invested very conservatively. As a result of this, it became much harder for even solvent businesses to get short-term loans to pay for inventory, etc.
Or we could use a really simple model to visualize this: Imagine that the entire economy consists of (vertically integrated) restaurants. When the economy goes to hell in a hand-basket, people will do two things: (1) eat out less, and (2) try to get more hours at work. Obviously if nobody eats out, the restaurant will not be offering anybody very many hours!
What's happening here is that a sudden change in risk tolerance drops the total demand for goods and services below what the economy is capable of producing, while increasing the number of people who want jobs. When demand is lower than production capacity, we'll produce less than we can, and fewer jobs will be available. Apparently, you need a reasonable balance between the number of people who want to work, and the quantity of goods we want to consume.
Now, is any of this true? Who knows. The Keynesians certainly think so, and their model does explain some things. (Krugman, who's a Keynesian when he's not a political commentator, gives his own personal favorite introduction here: http://www.pkarchive.org/theory/baby.html) Other economists disagree. And of course, it's also possible that the Keynesians were correct about the exceptional events of 1929 and 2008, but that their theory is irrelevant in ordinary economic times. But the key takeaway is that money is weird at scale—because it's basically an illusion, among other things—and that you shouldn't expect personal intuitions from your day-to-day life to always apply in obvious ways.
That's good for the economy when there is a lack of supply: plenty of people willing to buy stuff while nobody wants to make those stuff. When there's a lack of demand, it doesn't help. When there's a lack of demand, you need to make people consume more, possibly by delaying / alleviating the expectation that they produce something valuable first. This consumption is expected to allow creation of supply. That's the principle of a Keynesian stimulus.
The problem typically associated with massive unemployment is a lack of demand: there are plenty of unemployed people who would like to produce and consume, but they can't find anyone willing to buy whatever they might produce.
Put another way, UBI is a way to raise the velocity of money, the amount of commercial exchanges per amount of time occurring in the economy; saving lowers money velocity.
Also, most income earned by the top 1% of income earners is employment income; many professionals (doctors / dentists / engineers / lawyers / accountants) fall into that top 1% of incomes. The working-age individuals whose income is primarily from capital are generally in the top 0.1%.
I am not American and I don't know if doctors and lawyers are usually considered 1 percenters, but Wikipedia says "Data on the minimum yearly income to be considered among the 1% vary per source, ranging from about $500,000 to $1.3 million."[1] It is my understanding that half a million dollar is not a common engineer or doctor income, I am not sure most income earned by 1 percenters is employment income.
> In 2015, according to PSZ, the richest 1% of people in America received 20.2% of all the income in the nation. Ten points of that 20.2% came from equity income, net interest, housing rents, and the capital component of mixed income. Which is to say, 10% of all national income is paid out to the 1% as capital income.
> Even if you exclude the capital component of mixed income (since it is connected to work even if the income is not from labor) and housing rents (since these are imputed to homeowners rather than paid to them as cash), that still means that, from equity income and interest alone, the top 1% receives 7.5% of the national income without having to work for it. Put another way: the average person in the top 1% receives a UBI equal to 7.5 times the average income in the country.
That last line is key. Even if most of the income of the 1% is not passive, they still receive a massive amount of passive income.
Source: https://medium.com/@MattBruenig/the-ubi-already-exists-for-t...
Sorry. My mistake
IMHO, Finland hope that with basic income they will spend less on prisons or social workers in long term.
IMHO, main risk for basic income is exponential growth of money eaters in long run (>50 years).
I like this is not even proposed by a leftist government. The Scandinavian left-right scale maps outside the political spectrum of many countries.
If we automated everything, where does money/value come from.
I still don't completely understand how money works "it's a ledger, faith, gateway of energy" a doctor is worth more than a janitor (not arguing that)
Just when there are no skills involved, everyone's the same, would money still have a purpose.
Though I like the idea of basic income. I wouldn't mind that myself and I could remove the fear of being homeless from my mind and focus more on web development.
Scarcity seems to be the reason why anything has value.... No forget that I kind of forgot what I was going with that.
What I did want to bring up is this argument of land vs. population and energy/raw materials.
If energy is neither created or destroyed, it's just moved around, and assuming we still have the sun, if we're just using the energy from the sun through food, then as long as the sun exists, aren't we fine? Same with water. Water might be transformed but it returns. Where it would it go? There is also salt water sure you have to take energy/time to desalinate and purify it.
I just don't get that argument of resources if you have an ineexhaustable supply of energy as the sun for 5 billion years.
Also humans compared to the size of the Earth, we don't even begin to cover it as far as human size compared to land size eg. continents.
Please correct me as I'd like to learn.
That's how they're selecting the participants for the trial; but continuing to be unemployed is not a requirement for receiving the $587. (Indeed, this is the whole point: They want to see if the existing system of unemployment benefits is creating a disincentive to finding work.)
Suggested title: "Finland launches basic income experiment with 2000-person pilot project"
(Submitted title was 'Free money for all: Finland launches basic income experiment with Jan. 1 cheques').
is this a form of basic income
But "net wealth" is a really weird statistic. The top 20% of the world has somewhere around 125% of the world's net wealth, because many people are in debt.
What's the incentive to start looking for work if there are no strings attached on how you can spend money? Is Finland the only country in the world that has 0 junkies, 0 prescription addicts, 0 dads paying child support?
I agree with @aswanson, this is headed for inflation, or an even worse financial disaster.
Side Note: Is it easy to immigrate to and naturalize as a Citizen? I'm buying my ticket.
More money?
> I agree with @aswanson, this is headed for inflation, or an even worse financial disaster.
Why would distributing money per se cause inflation? Does inflation go up any time money goes from one entity to several?
That only makes sense when supply is inelastic, which is not a valid assumption, imo. I can imagine certain things, though, like housing, might be more successful as extracting additional rent from across the board income bumps.
No, it makes sense whenever supply is not perfectly elastic. And time scales matter -- most supplies are inelastic over the short term but elastic over the long term, so "helicopter money" will tend to produce a short-term spike in prices due to more money chasing a limited supply, which then levels off at different rates depending on the goods as the supply catches up.
So-called "helicopter money" is very good at inducing inflation, because it shifts the equilibrium between "holding money" and "buying stuff". This is the principle behind quantitative easing. But basic income isn't simply a matter of distributing money; the money also has to come from somewhere, and raising taxes (or cutting spending elsewhere) in order to fund BI has a disinflationary effect.
That said, the inflationary and disinflationary effects are likely to not apply equally across all goods; if you raise income taxes in order to fund a basic income system, you'll likely see increased inflation on low-end goods (since the people who purchase them have more money to spend) and decreased inflation on high-end goods (since the people who purchase those have less money to spend).
This is true, but it's worth pointing out that it applies equally to anything that transfers wealth from the rich to the poor. You get the same effect from a significant increase in charitable giving from the rich, or a reduction in apartment rents, or an economic boom that reduces the unemployment rate.
And it's assuming that a basic income would actually do that. You could have one that simply replaces the existing tax code and welfare system without inherently being any more or less progressive on net. You could have one that does the opposite -- you could lower the effective tax rate on the rich and have a very small UBI.
How progressive you want the government to be in terms of income redistribution is completely independent of whether a UBI is preferable to means-tested welfare.
So if you get a job, you'll still be receiving the 560 euros. That actually will make recipients go get a job.
Our modern society has the contradiction that many people are expected to work for money, with poverty or death as the punishment if they don't, but there are not enough jobs for these people to do, so poverty or death results.
First-world societies already have people who don't work for money: children, the elderly, new parents, homemakers, the disabled, and the filthy rich. It appears that there is room for more non-working people.
It's hard to know what would happen under universal basic income in a capitalist society, though localized experiments have been promising. But some questions you posed seem to have straightforward answers:
- You make it sound like drug addicts get unlimited money. They get the same basic income as anyone else. Good luck sustaining a drug habit without a job.
- Child support is derived from the premise that fathers are obligated to work and mothers will suffer if they don't. It would be nice to change this state of things.
- Is it easy to immigrate to and naturalize in a country with UBI? Obviously not. It should be incredibly expensive.
No it's not. The premise is that a child should be receiving a lot of time and/or money from both parents if it's at all possible. More time means less money, and less time means more money. There's no inherent gender bias.
We're also greedy and want comfort. There's bound to be some people that will use a basic income scheme to not work, just like there's already people in European welfare states that take advantage of the system and avoids work.
Politicians keep trying to tighten the law that regulates unemployment benefits, pensions and other welfare benefits. It only hurt those that who are in actual need, those that try to scam the system are still doing fine. The Danish politicians change the rules for some benefits last year, claiming that it would force people to take jobs. The new law affected more than 30.000 people and managed to get only 400 people to take a job. Most of the people simply aren't able to find jobs or aren't physically able to.
My point is that most people will work, even if it's not fulltime employment. People want nice things, and they aren't going to get that on basic income. That amount of people who will not work don't change, at least not much, and there aren't enough of them that it's worth the effort and cost to try to force them to work.
How can it be failed when it's never been implemented?
Even in St. Louis (https://www.rentjungle.com/average-rent-in-st-louis-rent-tre... ), average monthly rent for a one bedroom apartment is $1000 a month. In LA, it's over 2000 a month, in NY it's 2700, in Detroit it's at 1000.
SNAP (Food stamps) give about $255 a month. That means that out of UBI, about $300 is left over for rent.
2. If everyone in the US gets $587 a month, that's 1.5 trillion a year.
The current US federal budget is 3.8 trillion.
That's about a quarter of current US federal budget, and we still have to give an actual livable stipend to the truly poor (SNAP, section 8, medicare), some kind of defense, leave some for state/city tax, federal infrastructure programs (freeways/trains).
Only some will be given free money, and almost all of them will be spent since receivers are poor and cannot save it, would be quite a boost to the economy. It's a very direct way of implementing Keynesian policies.
I thought the idea is that everyone from Bill Gates to the beggar will be given it?