The Stockton Economic Empowerment Demonstration, or SEED, was founded in early 2019 by the then-mayor of Stockton, a city of about 292,000 in California. SEED is midway through an experimental project to demonstrate the advantages of a guaranteed basic income. The project includes a “treatment” group of 125 individuals who will receive a guaranteed monthly stipend of $500 for two years, as well as a control group that does not receive the stipend. Of the 125 in the treatment group, 100 comprise the core research sample and 25 serve as a “politically purposive, or storytelling cohort, or who publicly spoke about their experience with SEED.” (Preliminary Analysis: SEED's First Year, March 2021).
The results are in! Let the headlines tell the story:
“Universal basic income seems to improve employment and well-being” by Donna Lu/ New Scientist, May 6, 2020
“Results of Finland's basic income experiment: small employment effects, better perceived economic security and mental wellbeing”/ Kela May 6, 2020
“One of the world's largest basic-income trials, a 2-year program in Finland, was a major flop. But experts say the test was flawed” Aria Bendix/Business Insider, December 8, 2019
“Why Basic Income Failed in Finland” by Jimmy O'Donnell/Jacobin Magazine, December 1, 2019
Wait…what exactly is the story here? Was Finland’s UBI experiment a success or not? That question can’t be answered without defining success.
But what, exactly, is a Universal Basic Income? There is no consensus definition, but here’s a good one provided by a couple economists: UBI is a cash transfer program that 1) provides a sufficiently generous cash benefit to live on, without other earnings; 2) does not phase out or phases out only slowly as earnings rise; and, 3) is available to a large proportion of the population, rather than being targeted to a particular subset, e.g., to single mothers (Hoynes and Rothstein, 2019).
Who would be tempted to stop working, reduce their work hours, take longer breaks between jobs, plan gap years from work, or simply retire early if they could count on a UBI check of, say, $1000 a month? Some candidates….
The ASBI I’m proposing would cost around $567 billion a year. Unfortunately, “savings” from government programs downsized or eliminated as a result of the ASBI would not be enough to fund the entire $567 billion program. How to fund the balance? Here’s an idea…
May I propose a modest alternative: the Adult Student Basic Income (ASBI). The ASBI would provide a basic income (say, $1,000/month) up to six years total (minimum one month at a time) for adults enrolled at least part-time in postsecondary training and education programs, from ESL classes to apprenticeships to graduate school. Like the UBI, the ASBI benefit would not be means-tested, so recipients could work without jeopardizing their payments. The ASBI would also effectively combat poverty, income volatility, job instability, and lack of social mobility by subsidizing incomes while recipients increase their earning potential. Unlike the UBI, the ASBI is time-limited and would not subsidize a permanent way of life. And while the ASBI is conditional, the required adult education and training is not so onerous as to preclude working at the same time. Plus, it’s affordable.
The preliminary report doesn’t discuss why over two-thirds of those contacted did not complete interviews. Nor does it address potential differences between individuals who did complete interviews and those who did not.
…my TBI would provide $1000/month up to six years total (minimum one month at a time) for adults enrolled at least part-time in postsecondary training and education programs, from ESL classes to apprenticeships to graduate school. Among the benefits…5. A TBI would not be means-tested so recipients could work without reducing the benefit. Note that part-time work (20 hours or less a week) is associated with higher college GPA and completion rates. …
Ok! The total TBI budget would be $567 billion, including 5% administration costs and based on an assumption that in any given year about 45 million Americans would avail themselves of the benefit. Here's where the money would come from…
It's important to remember that labor market participation isn't just the result of collective choices about whether to work or not to work but also about how much to work, e.g., part-time/full-time, seasonal/temp/year-round. These collective decisions also impact labor productivity and the vitality of the economy as a whole (not to mention the tax base).
Some government programs have already been shown to reduce chronic and transient poverty. One multi-year study found that the following government benefits combined reduced the chronic US poverty rate from 10.8% to 2.1%...What more can be done? Lots! Just a few ideas...
At the debate, UBI advocates dismissed these predictions as overly speculative, maintaining that possible risks could be managed. Their main argument was that a generous UBI was called for because Americans are suffering and their situation will keep getting worse without a major overhaul of the social contract. More specifically: poverty, income volatility, job instability and stalled social mobility are a plague upon the country and the only cure is a universal basic income. ...So let's look at these Four Horsemen of the Apocalypse:
But wait! Won’t robots and AI free us from the need for labor? So can't we just ignore all the evidence re work disincentives and labor market participation?
Today's topic is: Why Many People don’t Return to Work after Not Working for a Period of Time
In Europe, high unemployment has been associated with the following: “generous unemployment benefits that are allowed to run on indefinitely, combined with little or no pressure on the unemployed to obtain work and low levels of active intervention to increase the ability and willingness of the unemployed to work" …What is it about work, and looking for work, that so many people would prefer not to?
UBI advocates often argue that government benefits only disincentivize work when they’re means-tested or stopped if the recipient gets a job. They argue that if you eliminated this “work-penalty”, there’d be no work disincentive. For proof, they point to Alaska...
With the proposed UBI, how many US citizens and residents would be tempted to stop working, reduce their work hours, take longer job breaks, or plan gap years from work? Consider, for instance, the results of a recent survey of older workers...
A whopping 57% of households in the bottom income quintile are single individuals. This is not so surprising, given that 44% of bottom quintile households are headed by individuals younger than 25 or older than 64. We're talking young people and seniors.
Per previous posts, this UBI scheme would cost about $4.1 trillion a year in new taxes. Let’s have the business community pay $500 billion of that. That leaves a $3.6 trillion tax tab for US households.
...to fund this UBI proposal with a stable source of tax revenue, we will need a broad-based tax base, like that of the Scandinavian Counties. For instance, like in Denmark, where “plumbers pay the same 50 percent income tax as hedge fund managers.”