After Universal Basic Income, the Flood
medium.com
medium.com
If you give everyone just enough money to survive, it will encourage people to move back to the suburbs where rent is cheaper. They might have a hard time finding a job there initially but they may have the opportunity to start their own small businesses instead - This would be a boost to suburban economies.
Regarding the argument about some people wasting their UBI. I think that's fine. We're not looking for equality so much as we're looking for fairness. If someone gambles away their UBI every month, at least that money will be put into circulation and provide work to other people who are not wasteful.
UBI is about giving people breathing space to make decisions in their lives instead of being forced to follow the line of breadcrumbs that corporations have left behind.
Various sites (http://www.moneysense.ca/spend/real-estate/city-or-suburbs-w... , https://www.thepennyhoarder.com/life/cost-of-living-in-city-... , https://boomerandecho.com/living-in-the-city-vs-the-suburbs-... ) discuss how sometimes it's cheaper and sometimes it's more expensive to live in the suburbs.
The first two point out other alternatives; the first, "many Canadians are opting for walkable communities that offer nearby shopping, work, transit and amenities. Known in city-planner speak as “complete neighbourhoods,” these walkable neighbourhoods can be found in both urban and suburban settings."; the secondm "you may find a lower cost of living in a small town.".
Personally, I think UBI is more likely to support living in small towns than living in the suburbs. There are many small towns losing population because of people moving to the big cities to find work.
Every big city I've lived in (across many different countries) is similar in terms of transport costs so it's not just a UK thing.
The cost of living in suburbs is nothing. Peanuts. When I was working remotely living in a mid size town in Australia I was able to save up a lot of money very quickly. I just can't do this in a big city.
https://www.fool.com/investing/general/2016/02/13/the-hidden... - "The New York Times did some research and found that the typical suburban lifestyle in the New York City area costs about 18% more than living in the city itself. ...
The second link I gave does a breakdown. Some cites are more expensive than the suburbs, some are less expensive. In the US, the Dallas suburb is $14,128 cheaper than the center of town, while in Cleveland it's $9,034 cheaper to live in the city. What about that analysis do you disagree with?
The analysis in that link makes two assumptions: 1) you commute into the city for work, and 2) you have a child.
There are certainly other possibilities. I knew people who worked remotely from a small city (35K people) in Illinois for Wall St. firms, getting paid Wall St. wages. While it sounds like you are in a similar situation, you must certainly be aware that is relatively uncommon compared to the numbers of people who commute for work and have a child.
Also, your example of living in a mid-size town is not living in the suburbs. I earlier wrote, "I think UBI is more likely to support living in small towns than living in the suburbs."
UBI essentially assumes that everyone is a rational actor and that they will not succumb to spending the basic income on non-productive things (drugs, alcohol, gambling, excessively expensive consumables, etc). This is demonstrably false, especially if individuals don't have a day job. On an individual level it's easy to say that people should be responsible for their own wellbeing. But as a matter of public policy, it's just plain bad policy.
It's also hard to see how that money would /not/ be extracted in the form of higher prices across the board.
And the main point of the article is a very good one: what happens to all the now-unskilled labour?
Most people that collect social welfare payments in Australia and New Zealand don't do this - they are frugal with what they get and are careful to pay for their essentials first.
Those that aren't able to budget like this are often offered help in the form of budgeting advice and planning. Sometimes they will find themselves in a situation where they receive the payment they are entitled to, minus the cost of their rent - which is paid directly to their accommodation provider (often the government).
Beyond this, the number of people that don't benefit from their welfare payments because they fritter them away is vanishingly small.
BTW, here in NZ we do actually have a UBI, it's available to everyone regardless of income. The only condition is you have to be of retirement age. Unsurprisingly, it is very, very popular and nobody ever brings up the kind of objections to it that you have here with regard to UBI.
https://www.google.co.nz/publicdata/explore?ds=d5bncppjof8f9...
So retirement is just deferred wages. That's a different concept to getting paid for nothing all the time.
My point with the pension example above was to illustrate that a universal 'living allowance' doesn't necessarily get squandered.
How many people with substantial inherited wealth just slack off?
There's a whole range of possibilities between low pay, maximum freedom (nothing but UBI), and high pay, low freedom (continuing to work as before). That's one big advantage of UBI over other benefits schemes: there are no breakpoints where working makes you worse off.
Actually, they can, there is no problem. Somebody still has to produce these things, and they have to pay them. So naturally, cost of these things is bounded from below by their supply.
As someone noted, you can look at rich people who don't have to work, they mostly don't do that.
Also, from ecological perspective it would better for people to spend most of the money on alcohol rather than say travel, because the ecological impact of drinking is much smaller. It's in fact interesting, because we tend to see unproductive things as bad, but they often have smaller ecological impact.
> It's also hard to see how that money would /not/ be extracted in the form of higher prices across the board.
Yes, the price of the labor would be higher, but that is the whole point. Although the best I think would be to tie the UBI to %HDP or income taxation, so that even if more is given to the productive people, the same portion is again returned to everybody at some point.
People get this intuitively wrong, because they don't understand that in basic money equation, there is also velocity of money. The UBI in fact artificially increases the velocity, by redistribution of money at many points in economy to everybody, forcing another redistribution from everybody to production.
> what happens to all the now-unskilled labour?
Why don't you ask this today in the context of disabled people, or retired people? It's really nothing to freak about.
Increasing the velocity of money without increasing production just leads to devaluation:
MV = PY
So P = MV/Y. Increasing M or V increases P.
You don't get more stuff just by moving money around faster. And production will decrease with higher welfare spending, so you'll have less per capita GDP/consumption/quality-of-life.
Producers receive less per hour worked because now a portion of their production has to be given to other parties who are not contributing production in exchange. Imagine if all the non producers got zero dollars. Now the money the producers earn could be traded for goods other producers are producing, letting the producers consume more goods.
Production is not an unlimited resource that can just be increased by increasing some party's consumption level. Increasing one group's consumption through income redistribution comes at the expense of lower consumption for another group.
My point is though, if you naively ignore V in the equation (and yes, usually it's considered to be a constant), then you might think that increasing price of labor can lead to decrease of production, because the term PY must be constant. But it's not constant if you increase V correspondingly, and so the decrease in production won't happen in UBI, even with inflation.
In practice, the production is often not at a peak, and there are savings too (not everything gets invested or consumed). Redistribution in UBI has then potential to reduce savings (because savings really make rational sense only if you're powerful enough) and through that increase the economic production in the slump.
The P represents the nominal price of goods/services, which is not the same thing as the 'real' price. When V is increased, P is increased correspondingly, which means the price of everything goes up, and the faster circulating money buys the same amount as before. So Y doesn't increase if you increase P. The PY side of the equation can increase without any logical inconsistency, since it represents the nominal price of all economic output, and not the 'real value' of that output.
When PY increases without an increase Y, you're simply getting inflation, where everyone earns $2 increase of 1, but everything costs 2X as much.
Anyway, the point is that increasing V has no effect on total consumption, so there's no benefit from deliberately boosting V. If that weren't the case, you could grow the economy simply by mandating that everyone spend more, which obviously would be magical economics.
>>Redistribution in UBI has then potential to reduce savings (because savings really make rational sense only if you're powerful enough) and through that increase the economic production in the slump.
Most savings are in the form of investment. Reducing the savings rate and savings not only will make the economy more fragile to shocks, but will also reduce the investment needed for economic expansion. The ultimate source of all economic growth is investment. A policy that reduces investment is harmful to efforts to grow the economy.
Also, regarding savings, according to standard theory, savings are indeed equal to investment. But I think it is wrong, because in the real world, there is a difference in reversible and irreversible actions. So I consider investment/consumption to be only irreversible actions on the world (for example, building a factory), while savings are reversible actions (buying a gold brick from someone). In the real world, it makes sense to postpone irreversible actions if possible (you can always react to others), and so investments and savings are not the same thing!
In fact, this happens in deflationary crisis, people hold money (that is, postpone irreversible decisions, and by above definition, save) in expectation that the money will gain more value. And they are effectively deadlocked, waiting for each other to make move and make irreversible decision. This is bad for economy, because economic production requires people to make irreversible decisions (to invest and consume), and so giving everybody some amount of money (especially to people who have no option than to spend, in the form of UBI) can break these deadlocks.
Which then leads to the idea that the idle rich can cause inflation because they have a reduced sense of value to the poor.
If we are to share the same currency we have to have a similar sense of what it is worth in exchange. Spending eight hours doing something in exchange for 80 dollars gives you a very good idea what those dollars need to be worth.
Work is actually what we do with our day to get a sense of value. If you expect somebody else to give up their day to produce stuff for you then you have to respond in kind or they'll stop doing it.
The reason we resent the idle rich is that they expect something but add nothing of actual value back in return. So it would be with anybody receiving free money. It would be seen as the theft it is.
If we truly are moving to a society where labor as we have it today becomes unnecessary, leisure has to replace a portion of that. Note that 18-19 century landowning classes produced a lot of what we today would call negative behaviors (drugs, drinking, gambling, parties, etc), but the same classes also produced a lot of scientific and philosophical advances we take for granted today. A lot of these advances are possible because people could sit for hours musing on various topics without the need to produce something marketable immediately.
If we can finance one more Newton or Einstein at the cost of hundreds of thousands spending their time watching TV, I'd say that's a worthy trade.
Another issue here is that UBI can bring about a lot more investment of human capital into causes that do not produce marketable outputs, such as care for environment or fellow human being on a voluntary basis. This needs a culture/norm shift, but it is possible.
To combat such gaming, the UBI may need to phase out payments beyond replacement rate until they reach 18 or something like that.
My view is that people don't want to simply maximize income, otherwise everyone would have two or three jobs and no free time. And taking care of children sometimes feels like having an extra job. I think the Daily Mail, etc. view comes from the idea that the poor are poor simply because they are a bad type of person, and not because of, say, structural inequalities or class oppression.
Bear also in mind that those countries with a level high amount of social services (long paternity leave, free day care, subsidies for children, etc.) tend also to have low rates of childbirth. Quoting https://en.wikipedia.org/wiki/Birth_rate#Coercive_population... :
> In many countries, the steady decline in birth rates over the past decades can be greatly attributed to the significant gains in women's freedoms, such as tackling the phenomenon of forced marriage and child marriage, education for women and increased socioeconomic opportunities. Women of all economic, social, religious and educational persuasions are choosing to have less children as they are gaining more control over their own reproductive rights. Apart from more children living into their adult years, women are often more ambitious to take up work, education and living their own lives rather than just a life of reproduction.[45] Birth rates in third world countries have fallen due to the introduction of family planning clinics.
My comment was not meant to vilify a family that would choose to have more kids as the result of UBI, but more to indicate that it could be a rational choice for some.
With full time work, it's often hard to raise one child, but if all you are obligated to do is care for the children and everything else is flexible, it is rational to consider that many families will choose 2 instead of 1, 3 instead of 2 and so on.
This choice is irrespective of the income braket, btw. End result could still be a disaster for our ecology.
Do you have references that support your statement?
Especially as the reference I gave concerned people on the dole in England, most of whom are members of the "incumbent majority population".
"This choice is irrespective of the income braket"
Yet if you look at rich people, with more than enough income to hire nannies, au pairs, and the like, and who don't need to work at all, you still don't see them as a group having more children.
Here's one example of a paper on the subject: http://onlinelibrary.wiley.com/doi/10.1111/padr.12037/full#p... "Immigrants from Pakistan and Bangladesh in the UK and immigrants from Turkey in France, Belgium, and Germany have significantly higher first birth rates than most other population subgroups, which is expected given that they arrived in Europe from high-fertility societies."
Note that there is a decaying towards the national average with each successive generation.
Please show statistics that demonstrate that the ultra wealthy do not have more children than the national average.
The direct inverse correlation is with income per capita (PPP and adjusted for social services) and nothing else. Not education levels, GINI, freedom of women. Even in countries where contraceptives are rarely used and women have limited rights, such as Saudi Arabia.
Try stats from, say, gapminder.
The biological theories suggest birth rate selection based on living conditions.
You asked: "Please show statistics that demonstrate that the ultra wealthy do not have more children than the national average."
First, my argument is that people will decide to not have children even if there are no financial costs limiting them from having more children. This suggests that the cultural costs to have children may be quite high, and therefore it is not always rational to have more children, even for people who might receive money for having children.
To use the same source as before, the Daily Mail, http://www.dailymail.co.uk/news/article-2759353/Are-YOU-just... :
> The average billionaire is male, 63 years old and married with two kids
https://www.statista.com/statistics/299077/billionaires-chil... breaks it down further with the table "Average number of children of billionaires around the world in 2013": 16% of billionaires have no children, 22% have 1 child, 27% have 2 children, 20% have 3, 9% have 4, and 6% have 5 or more. Assuming the last category is only 5 children, this places a lower bound of 1.8 children per billionaire, so two kids is reasonable.
"The national average" requires picking a nation. I'll choose the US, because billionaires prefer New York over other cities. This analysis is faulty as Abdullah of Saudi Arabia is a billionaire with over 35 children, and Sulaiman Abdul Aziz Al Rajhi has at least 25 children. Neither are from one of the women's rights culture that I mentioned earlier, so the relevant fertility rate is slightly lower.
"The national average" also requires a time, as the fertility rate has changed over time. Those 63+ year olds did not all have children now, so it's invalid to compare the "2 children" to the current rate. https://en.wikipedia.org/wiki/Total_fertility_rate says that in 1999 the fertility rate in the US was 2 children per woman.
A more complete analysis would need also to look at when the children were born.
Still, I believe this is enough to show that hyperrich Westerners - those whose wealth places effectively no limit on the number of children they have - are not appreciably more fertile than other Westerners.
I've seen it personally - when you get money no matter if you do anything - A LOT of people just won't. They will happily consume what little they have and focus on other things. You could go to jail for not working in these times, so people pretended to work, but they weren't really working.
Efficiency was awful. One example - my country is one of the top food exporters in EU. 27 years ago we had food shortages and rationing system for many goods. Exports grew over 20 times. GDP grew around 10 times.
That's the difference in output I'm talking about. And countries where they had full collectivization were even worse. We had "communism lite".
Admittedly there are differences between communism and UBI - the system was forced by USSR and they also did some very unpopular things (like persecuting people for religion, murdering WW2-era heroes, beating students and falsifying elections). Also - the chances to make any proper career were very small without at least some participation in the regime - for example signing "I will spy on my colleagues", giving bribes (not money, money were worthless, but favours), etc.
So compared to capitalism the positive reinforcement to working was much weaker, and negative reinforcement wasn't there.
With UBI negative reinforcement also disappears but positive reinforcement stays there. Maybe it will suffice. I don't think so.
I believe the exact same thing would happen with UBI - a lot of people would just stop working because....well, why would they not?
And yes, I do like the argument that maybe some people just shouldn't work, there is no need to do stupid manual labour just to survive, but at the same time - I suspect Poland will feel the economic hit of this decision for decades to come, especially since we're not a rich country and can't offset both the financial and economical results of a) paying for it b) losing so many workers.
So it's a decision between 3500 per month or 2000 per month and free time.
So 500+ (3500 or 2000 and free time) is something between communism (2000 or 2000 and free time) and UBI (4000 or 2000 and free time).
Also like 90%+ of society has 2 kids or less, so it's tuned for 2 kids, not 4, and that's where the decision is more interesting (2500 or 1000 and free time). And there's black market for jobs, especially in poor areas, so there you can have both (and only the state loses, because it pushes people not to pay taxes).
Yeah in conclusion I think 500+ is even worse than UBI, but thankfully it's only 500 PLN per child, so around 25% of average salary.
Even 500+ as currently implemented is too expensive. It is essentially financed by debt right now. And currently Poland is somewhere around 60% debt.
I suspect even USA cannot afford it long term given the state of debt. They had trouble even with public healthcare.
6 times that (so - 300 PLN) isn't that big a stretch (especially that you get like half of that back in taxes from increased consumption).
It's doable for a few years. Especially, if you cut some other social costs (but then it has to be more than 300 PLN per month).
"You could go to jail for not working in these times, so people pretended to work, but they weren't really working."
That is not the ideal way to implement UBI imho.
However the industries stagnated and once competition went on they died. Not to mention scandalous sales of critical companies just to make them private.
A world where you have UBI, but can still work for Google and make truckloads of money is very different from communism.
If you get money no matter what - money are worth less and less compared to what you can buy for them, and to stop that they might introduce rationing, and that's just asking for corruption.
The UBI society does not have that problem as no one is capping production because they view a particular good as a capitalist symbol or something.
The reasons for that are many, and irrelevant here - I do think UBI will have similar problem, because you give away money not covered by additional production.
In Poland pre-1990, you didn't just get money "no matter what". You got a salary for working , just like in the west.
The difference, and cause for demotivation, was that you had only very limited say in what and where you'd work. So you're really good with numbers and have asthma? Road construction it is!
UBI is nothing like that. It doesn't change the system free enterprise. In fact it's designed to do the opposite: remove the remaining threat of starvation, and see if it doesn't, once again, lead to an explosion of creativity and productivity.
UBI is fundamentally about ratcheting up redistribution, not ensuring that people's necessities are met. Programs for the latter will continue to be necessary.
A supposition. Fine. Opinion is ok although supporting evidence would be nice.
> UBI is fundamentally about ratcheting up redistribution, not ensuring that people's necessities are met
Declaration of fact without supporting evidence. An argument based on an unsupported opinion.
Any final proposal to improve SS budgets would be a combination of all three, but I don't see reducing retirement age on the table. So how would your proposal work in this political climate?
One particular issue I have is the fiat nature of money: it’s meant to be printed to promote economic growth but it will usually reduce purchasing power. This is similar to the effect of dilution on stock.
The article talked about price inflation bit the real issue with UBI is we finally remove any economic value that may be equated to money - it just becomes a piece of paper and it will likely lose value until it has none left.
As for people not "being productive" with their UBI...I hate to break to everyone but the vast majority of people involved in corporate America are not productive at all. There is more make work and duplication and accountability avoidance built-in to corporate life to protect people's income than people involved in valley startups could possibly understand.
Because the stakes are so high around unemployment, accountability becomes a very dangerous proposition. Projects are designed to put potentially career ending actions on consultants or outside parties that assume that responsibility as part of implementation contracts. It's crazy.
If there was a UBI and social safety net that allowed people to pursue interests and not force them to take jobs that they dislike and cling to for dear life...everyone will be better, and I promise the people motivated to perform will still be performing, they just won't have people in the way that don't want to be there.
It will also stop hiding the cost of getting high performance employees. People won't have to take employment to survive.
- mostly because people on the bottom can be powerless and get stuck in low paying jobs, no means to move, to re-educate, etc.
- today most countries already redistribute money, in form of minimum wage, tax cuts, food stamps, disability benefits, heath insurance, etc.
- UBI is a dial, you can turn it up, or turn it down, redistribute 15% of all value created is not unreasonable, some European countries are already at 10-15%
- make sure every dollar earned, helps you move forward, benefits, UBI, taxation, should never have jumps in scales, but always be linear (this is horribly off in my country today)
- drug misuse, poor that cannot handle money, is a problem today, and UBI won't solve it, it's not on the agenda to dump all social workers ...
- lazy hipsters, that is intuitive but likely wrong, ... UBI is not exactly luxurious living, you'd want a job or no car, no nice clothes, no travelling, etc ...
We're not there yet, but the odds of ending up there sooner or later is very high.
(Negative income tax could still be good if the activities themselves have a positive social value.)
Reactors going critical is a good thing.
From wikipedia: When a reactor's neutron population remains steady from one generation to the next (creating as many new neutrons as are lost), the fission chain reaction is self-sustaining and the reactor's condition is referred to as "critical".