Mincome: Canada’s 1970s universal basic income experiment
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To me it seems it would be similar to the government intervention into housing - the gov't wanted more people to be able to own homes. So they create 30-year mortgages (for example). This was great because you could spread the payments out over more time, lowering your monthly payment.
Oh wait, the 30-year mortgage is open to everyone. So now everyone has more buying power. Prices rise and you end up in the same spot as before - a big chunk of the population can't afford a house.
Why wouldn't this happen with UBI? If you have everyone in the US $10,000, no strings attached, I would guess prices would generally rise until $10,000 wasn't enough to survive on.
Homes might get more expensive. Will they get $10,000 more expensive? Not everywhere.
Potatoes might get more expensive. Will they get $10,000 more expensive? Probably not.
As long as there's a class of products that don't increase in price by as much as the UBI, those products will become more affordable to the people that UBI is intended to help.
The US already has a fairly solid way to transfer money for those in need of food. I'm sure it inflates food prices some but clearly without food stamps more people would be hungry.
Secondly, if your net income is currently $0, then it's hard to imagine that price inflation alone could be enough to keep your purchasing power from significantly increasing with UBI.
Thirdly, labor supply might not necessarily be removed; there would be less need for a minimum wage, and fewer cases where eg. disability payments or unemployment payments are an active disincentive against working (get a job and get paid less than you earn on unemployment handouts), so there's a reasonable chance the labor supply would increase for many tasks.
...that's not what they're saying. The 10k/year wouldn't all go to one cost, it would get split across all costs, distributed by peoples' choices. Certain foods may go up only a couple dollars, while rent could increase a few hundred, until in aggregate across all costs that extra 10k is used up with no net gain to quality of life.
In competitive markets, goods generally fall in price to the baseline level needed to get a competitive return on assets employed. While anti-market people often claim this doesn't happen, it actually does happen for most goods. Food, consumer goods, most computers, household staples, vehicles, etc., are dominated by fairly thin margin goods that are sold at just a bit above the total cost of production. (See grocery financials to see this in action.)
There are exceptions. Some products have constraints on supply. Some are natural constraints, some are government-created supply constraints.
Housing in big cities is mostly government-created supply constraints through zoning regulation implemented on the behalf of wealthy NIMBY landowners. In this case, yes, you could see some housing price increases, because municipalities restrict the ability of builders to respond to price signals. The price of land is a minor factor as well, but usually density can overcome that, and density is what the city NIMBY monopolists oppose.
However, this would be far less true outside of America's biggest cities. Much of the housing stock in the US is not nearly as exposed to tight restrictions in supply. And so an increase in income would result in increased housing supply, without an increase in price, because housing supply in most areas is restricted only by cost of construction.
The cost of production of all those other items - the household staples that is most of what we buy on a day to day basis - does not change if people receive a check from the government. Their price will still stay near the cost of production. Sellers of oranges still compete with each other on price to sell you fruit. Ford still competes on price with Toyota. If prices were to rise, then Ford would run their production line at a higher output to capture the excess profits, supply would increase, and then price would fall back until Ford no longer wants to run that extra shift.
And so the "prices will increase" argument against UBI is largely illusory. It could occur in certain monopolized areas of the economy, mainly expensive real estate in a few big cities. But most of America is not like that, and people who would benefit most from UBI (i.e., people with low income) mostly do not live in the highest priced real estate areas, so their real estate costs would not increase with the introduction of UBI. That inflation effect would be strongest with the wealthiest.
Perhaps that's why we hear the argument so often.
However, if, as per your scenario, we only see housing prices go up in big cities, then we end up in the same place as before - people would need to leave in order to afford a place to live (where previously they would have received gov't housing).
Ideally, SF/Seattle/NYC would reform zoning, which would help reduce inflationary pressure in those specific areas, but that reform wouldn't be necessary for UBI to still have a big helpful impact on housing affordability for most people.
That probably wont change.
What you are missing is that UBI is supposed to replace all existing entitlement programs, such as unemployment, disability, food stamps, social security, etc.
We already hand out tons of money, UBI is just a different way of handing it out money that is more efficient because there is less bureaucracy involved.
But to your point, I've heard a proposed UBI that gives money to everyone, but effectively claws it back in taxes for higher incomes. Actually it would claw 100% back and more in order to fund UBI.
In that case, I could see the inflationary pressure not being an issue since net-net, you're just giving cash to a set group of people.
Goods with not enough supply: massive inflation in case of printed money or UBI. Examples are "good investments" with the only safe ones and available for common folks being real estate.
That's in case cities don't get destroyed by rioters and looters and people don't escape to safety out of the cities.
Prices for resources with high plant costs and low unit costs do not, to anything like the same degree - medicine, consumer electronics, food.
If we don't tax land and amenities and jobs remain concentrated in large urban areas, imho there is a risk ubi will be absorbed into land prices, meaning idle rentiers win yet again.
Couldn't it be said that those jobs are therefore not valuable enough to exist? Many jobs certainly are, and automation will obsolete many others. I guess we should be providing the basics for most people if we only need a fraction of the population for work though.
UBI won’t work unless we deregulate zoning, reduce the cost of higher education, and reduce the cost of healthcare.
But its such a psychological issue, it’s hard to know how it’ll play out long term.
If there are 11 widgets, 10 people who want widgets and one person has 3 widgets then UBI might help. It will definitely help if the biggest problem is an uneven distribution of widgets.
"Inflation" is a largely irrelevant metric that provides an accounting measure of how those situations play out. What matters is the production & distribution of goods.
The problem with 30 years mortgages isn't necessarily that they are given to everyone. It is that they create a situation where to own a home people have to agree to give years of their labour to a bank for essentially no reason.
But if I can spend my money on a variety of things, then there is a lot more competition for me to figure out the value per dollar of a purchase.
In the specific instance of housing, the increased ability to move helps. What can also help is the ability for banks to be sure that people can pay. In areas with less pricey housing, a $100,000 house can lead to a 30-year mortgage at about $600 a month leaving $400 for other living expenses. This is a guarantee to the lender that the person can pay regardless of employment. And so suddenly a bunch of houses for poor people that are not economically viable because there is no lending for it suddenly become so. Not everyone will support it, but some will and that will ease up on pressures for apartments lowering that rent cost. It also could end the housing blight in many, many places without the truly inflationary process of gentrification.
The UBI is a floor and I would bet that prices would adjust to reflect that. If the floor is set too high, inflation will happen (imagine giving everyone a million dollars a month, it would certainly torpedo the current economy, but, assuming society somehow survived, new prices would probably change so that a minimal lifestyle require a million dollars a month). By setting the UBI at the current poverty threshold, it allows the poor to finally feel secure, it allows for the middle to save a little and feel less anxious/dependent on the good will of their boss, and for the rich, it keeps society stable enough that they won't have a revolution challenging them. All of this without doing too much damage.
Some things could end up with a higher price if the current wages are too low to worth being done by people who can now choose to walk away. This could be the case in industries where there is little profit being made and the workers are being paid very little. If there is a lot of profit, then I would presume the competition pressures would lead to the profits being diverted into wages rather than prices being inflated. Being money that can be used for anything would help keep some competition even in sectors that are monopolized.
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As an alternative approach, think of UBI as a dividend on our prosperity. Imagine that every American had enough ownership of stock to get a dividend pay out per year of $10,000. Would you ban the dividend pay out due to fears of inflation? The argument for the dividend approach is that prosperity comes from all of us contributing and so all of us should get a share of the profits of our society (private ownership is a creation of society and protected by society). And just like investors getting a dividend, the idea is that giving out that money is not only a useful reward for the lending of capital, but it also supports new investments and growth. The Citizen's Dividend does the same allowing each of us to invest in ourselves, and others, in ways to improve all of our lives.
A good narrative is that we are a species willing to be friends with one another and to be helpful to each other if we feel safe, secure, and supported. A CD (UBI) does just that.
1) Recognize that we have sufficient "small" scale studies (note the quotes) that are short term, and providing similar results, which necessitate longer term studies. i.e. studies that are ~30 years, so that children can grow up completely under this environment and live through their dependent years (<25 years old) under these conditions.
2) The experiments provide enough evidence and this warrants attempting this on a much larger scale for the presumed future. i.e. institute a UBI (obviously we need to determine WHICH kind of UBI we would institute).
3) There are major flaws in the studies that need to be addressed and we need to refine them. (Personally with the many variations of these I've seen I do not think this is an accurate conclusion, but I am open to being wrong as I am not an expert studying this topic)
4) While the benefits are real, the cost is too much. This is one I'd particularly like to see addressed. Pretty much every time we see UBI experiments come up we see: 1) little to no earning wage increase (which is difficult to say if it is because the short time periods or not) 2) lower hospitalizations 3) higher sense of self worth 4) more children are finishing education 5) more children are reaching their dietary needs. The issue I see is that these have (unclear) economic values tied to them but are not discussed. I ALWAYS see the economic cost discussed, though understandably this is a much easier thing to calculate. But aren't economists supposed to be estimating these difficult concepts? As a voter I would like to know what the economic benefit is to these programs as well as the cost. This will allow me to make better judgments (e.g. even if UBI costs more economically maybe my personal moral utility value makes up the difference between the numbers). It is a shame that this is not discussed.
The issue of UBI and all its variations is complex but I believe that the conversation is frequently being framed in ways that is difficult to make real judgments on. We see the economic costs, but not the economic benefits. But we do see moral benefits, but this isn't enough. Legitimate excuses are given (for and against), but no one is making new experiments that address these concerns. We need a serious conversation with less surjection.
Since we are in the middle of various economic transitions where we need to introduce taxes to control over consumption the simpler experiment (instead of finding a region and allocating a budget) would be to introduce those taxes together with a public dividend.
2016 https://news.ycombinator.com/item?id=11497021
If one goes into the experiment knowing that the basic income will end after N years, I suspect that may significantly affect one's behavior. For example, this study found that people typically did not quit their jobs (for 4 years of basic income). Would that result replicate with indefinite basic income? I'd like to see a follow-up study to test that.
This is what drives me crazy about these experiments. Obviously, using straight donations to keep people above a certain poverty line will improve the lives of those particular people. What's always missing is the other half of the equation: the analysis of whether UBI is the most efficient way to spend that money. Every study seems laser-focused on the outcomes of people who received the benefit while ignoring the projected effect on the society as a whole. It's entirely possible UBI is a great choice but its proponents seem bound and determined not to prove it.
It's true that in the grand scheme of things, averaged over many years, I would get the same amount from a UBI and a negative income tax. But at critical points in life, where my employment status changes significantly, the delay from the negative income tax would not provide the security that a UBI does.
Providing care for others is a great use of labor. Working towards human capital acquisition sounds great, but then you realize you still need people working the bottom jobs.
Bottom jobs suck. If people have legit UBI, they won't do them. They'd be stupid to do them unless they truly believed they could not do better with self investment. But we need those jobs to be done.
So maybe you raise wages. So prices rise a bit, cheap foreign labor becomes even more enticing where available, and the UBI is not Universal-not-quite-Basic-Income. What do you do when your UBI isn't quite livable?
BTW, an UBI can be less than "livable" and still be quite useful. Even a baseline subsidy can bring a very welcome increase in flexibility in the seemingly "bottom" sector, which is also often the entry point into the labor market.
However, when you raised the wages, you inevitably caused some of those jobs to be outsourced. So now there's a class of people who bottom tier job doesn't exist anymore and whose UBI isn't enough to live on. Now they're screwed. They could offer to work for cheaper and lower the wages, and let's be fair and acknowledge that even if they do, overall real wages per capita will probably rise net positively. But it's much more difficult to compete with neighbor nations.
If you automate the jobs, then these people have nothing. If you increase they pay, then they get globalized away.
It's a difficult problem. Solutions that sound nice are full of holes.
If they outsource or automate jobs and thus become more profitable we would always have the option to raise the UBI, because after all they can afford it then.
Agreed. You could also just raise the minimum wage to achieve the same for far less.
> If they outsource or automate jobs and thus become more profitable we would always have the option to raise the UBI, because after all they can afford it then.
That just shifts incentives higher up the chain so we have more labor done by other countries and more dependent people in domestically producing nothing. That's the worst possible outcome. Outsourcing jobs is a bad thing.
I'm not saying this is directly analogous to what might happen with a UBI program but it certainly demonstrates that there is a price point where some people will choose not to work.
I feel like this is one of the major weaknesses of the UBI concept. When people believe the safety net is designed to help people who find themselves in unfortunate circumstances beyond their control, then they can support the idea of taxes to fund the safety net. If on the other hand there are significant number of people who choose not to work, then it is very difficult for those who are working to accept that they should be funding that choice.
Unemployment is means-tested. If you are paid more to not work than to work, it's economically rational to not work.
It's also against the rules of unemployment to keep collecting it when you've been offered a job, but this is difficult to enforce.
With UBI, this isn't a problem: a temporary bump in UBI in response to some future pandemic crisis would be in addition to any work someone could or couldn't get.
Andrew Yang's proposal of $1000 a month should be enough to survive on... maybe. But if someone could make another $500 on top of it, that's going to be a much higher quality of life. I'm confident most people would take that job if they could get it.
So if we're saying that an experiment has to run for at least 30 years: 1) why aren't we getting on that? 2) are short term studies enough to warrant bypassing the long term small scale study and precede to a large scale study?
A better question is: why do we actively discourage single parents from marrying and working full time? In many places, full time employment with low skills is a ticket to disaster.
Most people do seem to need to decompress by doing nothing useful for a time; I find a month per year of work turns out to be about right. So let's say you do whatever you need to do to recover (games, videos, books, ...). What can you imagine doing after all that escapism becomes boring? It may not be employed by a boss, but would it be a useful contribution to society?
Having a child is hard work. It's just not valued by modern liberal society, which doesn't value people, only their value they can sell.
There is a possibility that addressing financial insecurity will give people the freedom to address other social ills on their own accord. Yet we will never find out if people keep coming up with excuses to prevent wider scale trials.
In order to form the Canada federation, Ontario had to agree to pay residents of Quebec and the Maritime provinces for not working.
"Transfer payments" is the only reason Quebec hasn't become an independent country yet.
How it's handled in Newfoundland is that fishermen agree to fish for a few months, then they get "income support" for the remaining months of the year.
This is a more relevant link[0].
Technically, the money comes from the federal government. It is given to the poorer provinces as general revenue and it is used to balance their budgets.
It is not specifically used to pay Maritime fishermen not to work. The wealthier provinces essentially subsidize the poorer ones. It is just like society; wealthier people pay more tax and poorer people use more social services.
I'm not saying it is a perfect solution. But it does ensure a certain baseline level of services across the country.
Quebec is, by far, the largest recipient of equalization payments.
[0] - https://en.m.wikipedia.org/wiki/Equalization_payments_in_Can...
I sometimes think really that a good alternative would be Universal Protected Net Worth. Maybe things would be better if there was some floor of money and assets below which no court or legal proceeding could take from you, including taxes, fines, bail, judgements, seizures, forfeitures, etc. I don't know how that would work in practice.
One of the best things about UBI is that it is unabusable (except with faking existence of people, which can be used to abuse literally any system).
If we are just talking about giving cash as charitable donations, smaller-scale experiments about giving people cash tell us what we need to know about the effects. But at large scale, yes, we will have to also consider the effect of whatever taxes are used to counter the increase in the money supply. This isn't an immediate concern considering very low inflation, zero interest rates, and a depressed economy, but might eventually become an issue, someday.
The thing is, you could combine UBI with any tax, so that means there are a huge number of possible policies. My favorites are a carbon tax along with making income tax more progressive, but there are others.
If much of the benefit of UBI is earlier in life and the taxes are paid somewhat later (at higher income), then this has similar effects to a loan. If the benefits happen after peak income (in retirement) then it's more like forced savings.
It's also similar to an insurance scheme. On net, some people may never benefit due to always having a good income and paying more in taxes than they get back, but it still reduces your risk if you somehow lose your income.
Someone still has to work to produce the food that UBI wastrels consume. Please, explain to me why we should feed everyone for free? What gives them the right to commandeer someone else's labour while they languish?
All of these schemes to shift taxes here and burdens there ultimately just have the effect of making it so that the people who do work and do produce value are shouldering the burden for everyone else. You can print money, but you cannot print calories.
Maybe you should ask instead, if there are a lot of people living only on UBI, how will we generate enough demand to keep the whole economy going? If it's a $1000 a month, someone living on that isn't going to be eating out or going on vacation. As we're learning this year, people settling for the essentials (housing and groceries) is not enough. Agriculture and related industry only requires 11% of the workforce in the US.
But anyone with ambition is going to want more in life than just the basics, and so they will keep working, earn more money, and spend more. That doesn't change.
Also, I think you may have missed this: any UBI can be entirely undone by taxing people exactly the same amount. That would be silly, but it shows that a UBI scheme could be an ambitious redistribution, or just a formality, depending on how taxes are set.
Thank you for the thought experiment.
So if we are to have such institutions as private property and similar rights to exclusivity, those excluded should be justly compensated for being excluded.
Edit: To clarify. Take John Locke, he argues that when you mix your labor with nature you should have right to the result of that labor, but that you can only take from nature what is not needed by anyone else.
One could also extend from that argument that one should not have the right to destroy that which is needed either (think pollution). So be it land value taxes or carbon taxes, you can argue that some compensations is just.
Right now, tens of millions of people in the US alone are unemployed through no fault of their own. To characterise them as "languishing" is ridiculous (and most unemployment rates only take into account people who are actively looking for work, as a measure to make a government's numbers look better). It is simply a fact that capitalism as a system cannot function with 0% unemployment because there would be no job market. Thus, there will always be people who are willing to work but don't have a job.
To me, it is fundamentally unethical to have an underclass of people who cannot afford food or shelter while their "fellow citizens" have an excess of resources. We are not an island, we live in a society and rising unemployment and homelessness hurts us all. But even if it had no impact on you or me, we should still help people who need it.
Not to mention that the actual producers of foods and products are still being paid with money, so I don't get why you think any aspect of this is related to the "right to commandeer someone else's labour" (in most countries the government actually does have that power, but that's a different topic).
> All of these schemes to shift taxes here and burdens there ultimately just have the effect of making it so that the people who do work and do produce value are shouldering the burden for everyone else. You can print money, but you cannot print calories.
Any economic system has at least some people who generally do not produce things -- babies and the elderly. In capitalism, you also have the unemployed. One of the goals of economic systems is to determine how value created by those who work is distributed to those who don't. Placing a value judgement on the need for this redistribution makes no sense. It's like saying a boulder is lazy because it only chooses to go downhill.
There is a big difference between people who are incapable of producing things (perhaps because of circumstances beyond their control) and people who choose to not produce things. This is one weakness of the UBI concept that I haven't seen addressed in a forthright way.
However, there are two points to be made:
* Most UBI progrms are designed to fulfill the base requirements to live in society (food and shelter), so if you want to have a better quality of life than the bare minimum you'll need to get a job as you do today. Most people want to improve their life in some way, but being in poverty robs you of opportunities to do so. So the same incentives to work would exist under UBI, it's just that the bottom of the income ladder isn't marked "$0".
* Not fearing unemployment may enable more people in lower-end jobs to leave their jobs to become better-educated and perhaps find better work in the future (perhaps even starting their own businesses). Again, being poor robs you of the freedom to pursue activities which require an up-front time (and thus money) commitment like higher education or other forms of skill development.
These apply to people who would "choose" to not work, there are other arguments for those who cannot work (but I guess we're in agreement on why that would be a good idea).
I want to point out that I'm not really a proponent of UBI. There are many possible ways to solve existing problems of wealth inequality, and UBI is possibly the most "obvious" one, but I personally think job guarantee programs are a better solution. They solve the same issues of unemployment and wealth, but they also (if implemented correctly) can act as trade schools and as national infrastructure programs (they are also a better application of MMT, because you are actually purchasing resources -- physical labour and materials). But you'd still need a strong safety net for people who cannot work.
From my reading, economists consider a 100% employment rate bad as it means there's no elasticity in the labour supply. If there's no elasticity in the labour supply, wages go up and the rich can't effectively extract surplus value. We will always have the unemployed, as it's a feature of the economic system we participate in.
If you want to fix the "problem" you need to abandon capitalism. I'm not sure anyone here wants to do that, myself included.