Basic incomes have always been an interesting idea, appealing to a lot of smart people from radically different economic-political camps. There are some potential massive wins on long term unemployment that come from eliminating incentive issues, some answers to the "living wages" and other positive rights problems. Less bureaucratic micromanaging of people's lives. There's a reason it hold attention on HN, it's a real interesting idea. But…..
Basic income is the type of idea that is very, very hard to implement within our current (possibly any) political systems. There is very little room for compromise, half measures and gradualism. It does not lend well to caveats exemptions, and design by committee.
One of the big selling points is that basic income is funded largely by replacing different welfare state institutions: unemployment benefits, child benefits, housing subsidies, state housing, pensions… This allows (A) A big enough basic income (B) big savings on welfare institutions running costs, (C) the simplicity needed for a clean re-write of incentives.
Where do the "efficiency savings" come from? Largely they come by cutting salaries associated with managing a welfare system. Can a government reduce public sector employment to that extent?
The danger for any country implementing this is that once they get into the political procee, they will chop and compromise and water down the idea until it is just another item on the big list of ingredient in the social welfare soup €212.13 per month that you qualify for while keeping everything else that exists.
Reforming the tax system and the welfare system as radically as required in a short time is a tall order. Maybe the Finnish can pull it off. They have a good track record. More broadly, I expect that this would have a high failure rate.
The best chance (IMO) is for very a small country to try it first.
> Where do the "efficiency savings" come from? Largely they come by cutting salaries associated with managing a welfare system
I think this is a misunderstanding. Those programs generally have low bureucratic overheads percentage-wise to begin with.
Some of the main benefits are 1) reducing welfare traps (accepting work doesn't cut your beneifits) and 2) encouraging independent behaviour by decreasing the stressful and dehumanizing busywork of continually reproving in various forms your entitlement to the benefits (and resulting economic uncertainty, mistakes derailing your finances)
Don't underestimate how inefficient benefits systems can be - an IFS paper in the UK from 2005 suggests that for every £1 a benefit recipient receives, £5.30 is required - that is, of every £10 that goes into the benefits system via national insurance or what not, £1.88 actually reaches someone who needs it.
The principal cost is staffing for the vast number of people needed to means-test, scrutinise, shuffle paper and rubber stamp things - were you to dispose of much of this apparatus by going for a straightforward "everybody gets £x/month", your efficiency would rocket.
That is, of course, if the actual main cost isn't money being siphoned off into politicos pockets.
6M or so people receive some kind of welfare benefit for a total of 77.8B dollars. Total expenditure on welfare in Australia: $154B (latest budget figures).
That's nowhere near a 5x overhead, but it is pretty damn inefficient.
You are linking to a 2009 study and comparing with this year's projected 154B budget. Aside from actual welfare spending changes there are all kinds of reasons why those might not be comparable.
You're right about the dates, but when I had a more convoluted set of figures for 2014 (which required doing quite a bit of arithmetic to get the raw inputs, and would have required linking several pages and so forth) the results were pretty much the same.
The fact is the Australian government spends in the ballpark of $2 for ever $1 of benefit handed out; whether it's $1.80 or $2.20 doesn't really matter -- it puts some actual figures behind the concept of simply giving out a basic income (versus trying to figure out who gets the benefit, means testing it, and so forth).
Australia's unemployment rate hasn't changed much over the period 2009-2014 (it was shielded from the great recession by commodity prices).
Another problem I just noticed - it seems your spending figures include more than just benefits paid in cash. Eg http://www.aihw.gov.au/expenditure-faq/ says
"In 2010-11, Australian Government and state and territory government welfare spending was estimated at $119.4 billion - $90 billion (75%) was in cash payments (including unemployment benefits) and $29.4 billion (25%) was for welfare services."
So to make your case you'd need to dig up figures about how much the administrative overhead related to the cash benefits is.
>> Those programs generally have low bureucratic overheads
What makes you say that? I have tried to look into this before and failed. But, from the way these things are structured I assume they have high overhead. The anti abuse/fraud work alone…
What makes you say that? I have tried to look into this before and failed. But, from the way these things are structured I assume they have high overhead. The anti abuse/fraud work alone…
I don't remember the source but I do recall findings that the costs of investigations into welfare fraud in Germany significantly outweigh the (potential) costs of the fraud itself.
Of course the inefficiency is difficult to prove because it's impossible to correctly measure the amount of fraud that would exist if there were no investigations (the existence of the investigations might discourage fraud in the first place).
Still, it seems pretty intuitive that welfare fraud isn't actually as big a problem as people tend to think. Welfare fraud is one of these problems that are easy to exploit for public outrage. It's relatable ("they steal my (tax) money"), the people doing it are already stigmatised (if you're on welfare you either did something wrong or are simply not trying hard enough), the falsely accused are unlikely to retaliate, it's easily actionable (just add more inspections or simply reduce the benefits) and it's difficult to measure and nearly impossible to solve.
Sure, it may be a non-issue but it so wonderfully exploitable if you're a politician (or a "newspaper" that needs some inciteful headlines).
There is no concept of benefit fraud in a BI system. Everyone by default qualifies for the same level of BI. Your government paycheck starts at the max value and can only go down from there, which happens when you are paying back that money in the form of tax. The only type of fraud detection needed would be the tax fraud system that already exists.
I'm not saying everything about BI would work (although I hope it does), but the fact that you could cut benefit overhead is self evident I think.
Well, that is already tax fraud correct? Someone already has to check for that. The savings come from all the additional checks you would no longer need to do to see if people are really disabled, what their marital situation is, where they live, etc.
In most of European countries, people has an ID card and SS number, and there is a centralized database controlled by the state. A single person cannot have 2 different IDs. At least, it is not something trivial to do.
I'm don't really know much about the US case, but that article reads as a somewhat disingenuous response to a very disingenuous statement by and electioneering politician. They define "Benefits & Services" as opposed to "administrative costs" and report the first makes u 90% or more.
I assume that "Benefits & Services" includes various services that might be termed "administrative costs" in everyday talk.
But point taken, maybe this is not such a huge savings.
I believe he's referring to fraud in the current system: inspectors working full-time to catch people claiming welfare while working odd jobs, processes to verify that people are entitled to various benefits that they're claiming, etc.
Cutting the jobs is very doable, the UK shed hundreds of thousands of public sector employees over the past 5 years.
The concerns I have are:
a) a ratchet effect along the lines of state pensions where the basic income keeps being put up in populist moves but is never reduced
b) that specific entitlements (with their administrative burden) either continue to exist or again get created by politicians in "something must be done" mode. Specifically things like disability benefits, state pensions, child benefits are all likely to still stick around
Finally many of the lessons we've seen in the where welfare reform has been attempted over the past 5 years is that it is the detail which gets you. Young healthy people are not the majority recipients, it is questions over how to support the partially disabled, children of separated parents with joint custody etc. Giving a new entitlement is easy as it is something that wasn't there before. Taking it away is incredibly hard politically.
I don't see how child benefits and state pensions need to exist if you have lifelong BI.
Sure, you could convert state pensions in the public sector into a voluntary retirement fund but the basic idea behind pensions is that the government gives you money in old age so you can afford not to continue to work -- this is entirely solved by BI.
Likewise, child benefits are intended to be spent to accommodate the child, exactly like the child's BI.
Of course good luck convincing prospective pensioners that their pensions are not going to be.
Disclaimer: I have only a vague idea of what the welfare and pension systems are like in the US.
State pensions provide a much higher level of income than a universal basic income could possibly provide.
Basically, government workers agreed to work for a lower current salary for many years, with the coincident agreement that they'd get X% of that (via some complex formula) for life after Y years of service. That X% provides a modest but certainly comfortable lifestyle.
There's no way you can set basic income levels high enough to provide everyone with that same level of lifestyle before they've lifted a finger of productive work. Basic income must be more basic and spartan than that in order to work mathematically/economically/practically.
(My parents both retired as school teachers with 25-ish years of service and a full pension. I'm not privy to the details, but it's enough for them to live reasonably well, but that didn't fall out of the sky; it came from them raising kids and living 25 years on school teachers' modest salaries.)
I concur that child benefits need not exist (unless/except to the extent that children receive basic income of their own).
Its not actually inconceivable. The world is changing. We have to suppose a new sort of industrial infrastructure. One that doesn't need (so many) people to run it. The level of lifestyle (or standard of living) can certainly stay high, even increase, without so many people working. Its already happening!
Rising unemployment is partly due to a rise in automation and industrial efficiency. The ultimate limit is, (almost) nobody needs to work, yet goods are still available and continue to increase.
Even if you could provide that same level of basic income, there's an inherent unfairness between someone who worked in the private sector and saved $1MM for their defined contribution (401K-type) retirement and people who worked for less salary all that time and now rely on their defined benefit (pension) plan. Let's say both are living off $50K per year (4% plus a slight drawdown for the 401K person and $50K in straight pension for the other).
If you use basic income to replace the pension money, but don't confiscate the 401K savings, you've massively disadvantaged the pension holders. If BI is $25K/yr, now one person is living on $75K per year (or $65K/yr and passing along a $1MM inheritance) and the other is living on $50K and will die without a nest egg to pass along.
Trust me, those pensioners are one pretty well-organized voting bloc... ;)
Yupp, pensioners (especially in the US) are a big problem to plans like this.
Ideally (state) pensions would become obsolete and retirement funds would become an entirely personal issue (as they've largely become in Germany btw -- the tax-funded pensions will at best barely keep you above the poverty line even if you've worked every day since from 18 to 65).
So as far as pensions go you will have to go with an unfair transitional period. You could freeze the pensions and pay them out in proportion to the (now discontinued) contirbutions (which at least in Germany is how it works already) on top of the BI. But for pensioners you pretty much end up allowing them to "double dip" or drawing some arbitrary cut-off line for who will receive BI or only grant BI in proportion to the pensions.
But as you may have noticed I'm not well-versed when it comes to US pension systems. I'm assuming it's similar to ours but considering even healthcare was purely defined by the employment contracts until fairly recently I wouldn't be surprised if it's drastically different.
The difference is that a basic income is supposed to persuade non retirement age people to continue to work, hence "basic". A state pension is supposed to be enough to enable every retired citizen to be able to live without working with a sufficient sense of dignity even without any other form of pension. It is almost always higher than the equivalent unemployment benefit.
Now it could be combined (as Finland currently does) with a mandatory pension scheme system in order to provide retired people with an additional income source, but then you're getting beyond a basic income only. See - it's hard!
There might be a more utopian concept of paying everyone enough that they don't need to work at all, but that isn't what is meant by this Finish scheme and what is meant by "basic income" normally.
my dignity is OK only if I can spend at least 6 months travelling around the world, and remaining 6 spoiling myself. good luck satisfying that! (joking on my side, but this whole discussion is pointless, since everybody wants something else from system (and all want as much as they can, and slightly more) and it would produce massive resentment from those that would lose even a single cent
For most of the people, dignity is being able to sleep under a roof, being able to eat at least once a day, being able to be seen by a doctor when they are ill and being able to give an education to their children.
We should be deeply ashamed by the fact that there is people in our rich developed countries who do not have access to that simple things.
Yeah, good luck living a worry-free live on pensions these days.
In Germany outside the public sector pensions put you so far below the poverty line welfare has to jump in and bridge the gap. For anyone entering the workforce today that is.
> I don't see how child benefits and state pensions need to exist if you have lifelong BI.
State pensions need to exist as long as you expect state workers to work for (pension excluded) below-market compensation for the jobs they do. BI has no effect on this one way or the other.
> Sure, you could convert state pensions in the public sector into a voluntary retirement fund but the basic idea behind pensions is that the government gives you money in old age so you can afford not to continue to work
No, the idea behind pensions is that, as part of the exchange for work now, you accept a deal which provides payment later (including specified contribution of the funds from your nominal current income, as well as the rest being contributed by your employer.)
I think an important economic impact people forget for Basic Income is how it will liberate people to pursue vocations, invention and education. How I expect this to show in practise is an explosion of culture and learning and new tech (hardware and software) - ripe for secondary commerce.
You're thinking of how it will shuffle money around, you aren't considering how it will shuffle opportunity around.
I think you may have a skewed view of what the average person does with their free time (probably because you and your peer group are not typical). Here's a breakdown of what the average unemployed person does with their day (lots of television, almost no education): http://www.bls.gov/news.release/atus.t08C.htm. There's also a big chunk of unspecified leisure/sports, but those activities don't seem to be the type you're hoping for either: http://www.bls.gov/TUS/CHARTS/LEISURE.HTM.
You may very well be right that the relatively small group of people who like to do creative things in their free time would make a big impact, though.
- Low access to anything not in walking distance, or which costs money to get in
- Easy access to distracting pop culture and particularly TV
It's basically unsurprising that a person here and now who's unemployed DOESN'T behave like a person in a society that distributes Basic Income without stigma.
If you want to look at a group which might make a better comparison, look at retirees, or lottery winners.
Fair point, but compare full-time workers to people aged 75+ (who are mostly retired): the latter have 4.5 hours more leisure time per weekday, and 60% of that is spent watching TV. The category most likely to contain creative hobbies ("Other leisure and sports activities, including travel") gets an extra 4 minutes per day. Education time rounds to zero. They do read more, though: about an hour more per day.
Dropping back to ages 65-74 is mostly similar, except they only read half as much.
This is skewed towards people who are unemployed in the current system. It's a bit far-fetched to conclude that this is also what the average person would do. It's more plausible (to me) to assume those people are doing this regardless of the system, and those who would quit paid work because of basic income might do something different.
Also, many types of work are just not possible outside of a company context because you need infrastructure and, well, company. Some people may be willing to do a bit of today's work for free, just for socializing, if they have basic income and if it's socially acceptable to work without pay. Or maybe not. But it's hard to know, from just looking at this data.
You do realize you need money to do what the OP said, an unemployed person with no BI income is not the same person with BI income.
If I have a basic income, I would love to go out and do something productive, take classes to benefit myself to get a better job. I have a few family members who doesn't have a job for a few years and they cannot take any free classes, they all cost money, especially the intensive technical courses.
I would love to go to the arts and stuff but the moment I step out as an unemployed person with no income, it will only incur expenses I can't afford. Rent, Bus fares, food, clothing and so on are vital expenses that I need to save for, I can't do that with no income. I've met people who can barely make any profit after paying their expenses.
This. I've seen people effectively emulate this lifestyle by living on student loans (that they then didn't actually use to pay tuition). Except in the end they'd have accrued a considerable amount of debt, of course.
The benefits of BI can be summarized in that it eliminates the foundation of the hierarchy of needs from everyday considerations. Even minimum wage can't aspire to solve this (simply because at some point minimum wage becomes so high the jobs become unprofitable if they can be avoided -- also because minimum wage does nothing for those who don't collect a wage).
This is just a glass-half-full way of admitting that a lot of people will quit their jobs and stop working. Unfortunately, we're not mining asteroids yet, so we need enough people to continue working regular jobs that there couldn't be a significant gain in short-term-unproductive pursuits.
According to a study (don't have a link unfortunately), 56% of Danes say they would continue working their current jobs if then won millions on the lottery. In a society like that, basic income may very well work.
Would love to see how that statistic breaks by class of occupation though.
Whilst there are plenty of people who wonder how they'd fill their day if they didn't have computers to program or interesting research to complete, there are an awful lot of people who work long, tedious and unsocial hours simply to make ends meet. Any feasible value of BI is going to be set at much closer to the current incomes of the latter group of people than the former. Even if the first group is vastly larger than the second group, they're still going to have to pay significantly more for the drudgery to be done.
Unfortunately, there are still a few problems. One, we don't know how many would actually continue working. Two, 44% quitting is still far too many. Even 10% of currently working people would cause huge problems.
On the other hand, any feasible BI program couldn't pay anything close to the annuity possible by winning a lottery, so a lot of Danes should still be 'stuck' trying to make their desired income level.
I agree we may be able to count on the Scandinavian mindset to make social programs work that couldn't in a place like the United States, but even in Denmark, I don't think this particular program can deliver the desired benefits without giving out enough money to cause problems.
1. The study does not say that 44% would stop working - they just wouldn't continue working in their current company/occupation, with a portion of them probably moving on to more fulfilling work (as opposed to living a life of pure leisure).
2. The stats refer to winning a lottery, which solves one's all financial problems and desires. Basic income does neither for a majority of people.
> The danger for any country implementing this is that once they get into the political procee, they will chop and compromise and water down the idea until it is just another item on the big list of ingredient in the social welfare soup €212.13 per month that you qualify for while keeping everything else that exists.
Exactly this. You can already see in the article this process is happening in Finland. At first it talks about basic income, then about how the income should be below a living wage (which at least waters down many of the benefits). It then ends with a suggestion that maybe it won't actually be a basic income, but a stipend for poor people.
Stipends for the poor are hardly a revolutionary new idea being tested for the first time, and calling it a "basic income" is just wrong.
I also am not sure that testing such a thing in only a part of an existing economic area is a valid indicator of how it would function over the whole. If only some people get the benefits it may create some perverse economic incentives.
It should really be unconditional basic income (as it's called sometimes). The main risk I see is that conditions creep in, e.g. if it gets tested only on people who are currently on welfare. I think a low UBI can still have a small effect, and there is no need to go from zero to 1000€ per month in a single day. The amount can be adjusted by the usual political processes, and if it gets adjusted towards zero, well - then maybe the people who vote didn't actually want to grant this small amount of freedom to each other.
The problem with a basic income is that for it to be close to enough to live off, it'd be very very expensive — way too expensive. Giving everyone in the US enough to be above the poverty line, say $12,000 (which is hardly enough to live off in many areas), would cost $3.8 trillion, which is what the entire US federal budget is now.
So, people with disabilities and people who are unemployed would be left worse off, with an amount they can barely live off. Not exactly the situation we want after enacting our utopian basic income program.
The only way around that would be to give people with disabilities and the unemployed more money. But then that means you can't eliminate the welfare institutions needed to identify them and cut them checks.
You can correspondingly increase taxes on people earning substantially more than the basic income. Unconditionally increasing everybody's final (post-tax) yearly income by $12k isn't an outcome anybody expects (or should expect).
One way of modelling basic income is as a negative income tax.
However one of the advantages of making it "unconditional" (but not necessarily actually beneficial to high income people) is that it buys political acceptance from the middle classes especially.
That doesn't mean the cost goes away. You'll still have to increase marginal rates by at least 20% across the board, or if you have lower marginal rates for the poor, then even higher for the rich. ($12K is about 20% of the per-capita income in the US).
A 20% increase in marginal rates is definitely going to affect the incentive to work. Middle class wage earners will be paying 50% to 60% of their income.
If you want to save on the cost by scrapping existing benefits, the $12,000 a year would probably not fully replace the social security pension, disability benefits, or EITC/food stamp/TANF benefits people get, or at best be approximately the same. So you haven't changed things much for people at the bottom, in exchange for a massive tax hike.
> So you haven't changed things much for people at the bottom, in exchange for a massive tax hike.
A massive tax hike combined with a simplification in government should result in larger revenues. If things don't change for people at the bottom, who did they change for - all that extra money has to go somewhere, holding all other government spending constant. Presumably the lower middle classes ended up the recipients of this massive tax hike, in your perspective. But this is just a function of the progressive tax curve; it and the fixed payment can both be adjusted to achieve a particular redistribution.
The more interesting thing, to me, about an unconditional fixed income, is that it changes the nature of work at the margin. Benefits don't turn into poverty traps if they're unconditional. Incremental part-time work doesn't come hand in hand with the risk of losing your benefits. I think employment overall, and productivity, would increase.
Either you need to make a massive, basically unaffordable tax hike on middle-class and upper-middle class people, or make a decent size tax hike on everybody.
Pensioners/disabled/people receiving unemployment benefits would be worse off.
The big winners would be people who are not working and not receiving benefits today, and presumably the people who live in the same household as them.
1. It's not going to be an amount barely above the poverty line. If it's implemented "correctly" it needs to be enough to do away with all the other welfare programs. Think way, way higher than $12K per person per year.
2. With less revenue coming in, guess who's going to be hit with higher taxes? All those suckers working to make a marginally higher income.
3. If the BI is sufficiently high (think in the $45K range), there will be a lot of people leaving their jobs to live a life of leisure and avoid having their income taxed at a >50% rate. I know I would.
This utopian idea is like every other: sounds great on the surface, may even work reasonably well at a small level, but doesn't scale. Human nature is what it is.
BI alone is by definition the poorest you can be. That's never going to be nice. It's almost certainly never going to be $45k. So long as money motivates people, people should still be motivated to have more than the poorest.
OTOH, BI does not disincentivize recipients from working, like current schemes do.
The specifics vary by place but almost everywhere unemployment benefits recede rapidly when you are.. employed. If you are disabled but manage to work part time, that can be used to invalidate your disability claim.
The whole point is to get more people working, and make it worth their while. If BI results in fewer people working, it has failed.
The benefit will be universal, but then you have to pay for it with increased taxes. So the increased marginal rate will disincentivize people from working.
$45k is way too high. A basic income is per person, not per household. Median personal income in the US is only about $24k (https://en.wikipedia.org/wiki/Personal_income_in_the_United_...). About 20% of adults with income currently make less than $12.5k. And if children also receive a basic income payment (which seems to be the case in the parent post's calculation), then no one will be starving at $12k/person.
Right, but like I said, if this is to be implemented correctly your BI has to be high enough to replace existing welfare programs. One of the benefits is that you eliminate the overhead of maintaining said programs and just cut everyone a check.
You need to look at this in the "end game" scenario, which is, we need BI because there will be so much automation that hardly anyone needs to work anymore. You're not going to sell this to the poor by telling them that they're now unemployable and their BI is going to be less than their previous income + food stamps + housing subsidy + etc. So right off the bat, yeah, the BI floor needs to be the cash value of a person with full welfare benefits. And that's a lot more than $12K.
You're also discounting the inevitability that politicians will promise bumps to the BI for votes, people protesting that they can't afford to live in Manhattan on their BI, etc. It will quickly reach a point that even skilled workers will say "F this" and join the ranks of the unemployed.
If per person, it would need to top out at some level.
Assuming your household consists of 5 kids, your spouse and you. 7 people x $12K/person = $84K. That would be 2x the average family income in the US today!
Generally, I think a strong version of BI is a payment of similar value to an unemployment/disability pension.
I don't think this is impossible, but it's pushing the limits of what's possible.
To take one example, "social welfare" in Ireland is widely quoted as costing 20bn, about €370 per person. Maybe close to 500 per adult. If you could scoop 75% of that amount into a BI fund, you would be about half way to funding a BI scheme.
The other half would come from increased income tax, a low band increase. Realistically, there will be a break even point that probably should sit around median income. IE, for a median income person, their increased tax equals their BI income, more or less. So, a lot of that tax come from people who are still net beneficiaries. Most people are close to break even.
There is an extra tax burden but it's not an impossible one.
So, if I'm following your math right, you're proposing a basic income of €1000 per person annually?
That would indeed be basic and probably too low to achieve what proponents want, which is to allow the elimination of other welfare programs for the truly disabled, etc.
That doesn't make sense. You're not going to give everyone that 12000. Just those that make less than that per year, right?
If that's the case, then the amount is a whole lot less than $3.8 trillion. The calculation is then 12000 * (Amount_of_people_that_get_less_than_12k).
Latest poverty numbers (2013) that I could find indicate only 45million are living in poverty. Assuming that poverty maps to less than 12k (and assuming they get all of it, and not simply the difference), then the calculation is:
12000 * 45,000,000 = $540 billion.
Which is a lot less than what you mentioned, and would probably be even less. That is definitely do-able, if the political and social will is there.
In the first article, he says we'd need to increase taxes 35% if we don't cut any programs. If we cut them, he says we'd "only" have to increase taxes 18%. Neither seems particularly affordable to me — remember, this is on top of our existing rates.
If we cut existing beenfits, it still seems to me many disabled/unemployed people would be worse off with BI, or about the same, as the current system. So we're left with massively higher taxes, and people who can't work will be left poorer.
The second article mentions all the secondary social benefits, and all the costs we'll avoid associated with people living in poverty. I buy that, but a 18%-35% tax rate itself is also going to have a massive deadweight losses as well which he's not accounting for. Current marginal rates are 30-40%, so we'll now have 48%-75% marginal rates (or assuming a 35% increase, 65% to 75%). Think that won't make society poorer and decrease the incentive to work?
I want a stronger social safety net. But BI seems to me like a extremely costly way to do it. There are many things we can do that would have higher bang for the buck.
Looks like each year of age under 18 makes up about 1.33% of that, for a total of 77M residents under the age of 18.
Suppose you don't give a cent to anyone under 18 (which is not consistent with the UBI arguments I've seen, but whatever). 244.5M residents, times $12k, gives $2.9T.
Sure, that's "residents", not "citizens". Otoh, non-resident citizens might be entitled as well. Either way, how can you argue with "over 300M times over $10k gives over 3 trillion"?
Edit1: screwed up reading the graph, fixed above numbers.
Edit2: oh, just saw your comment suggesting "18 to 65" Fine, integrating by eyeball the graph from my link, I see 47 years at more than 1.2% of the pop per year, gives roughly 60% of the population in your age bracket. Now it's 200M recipients, or $2.4T.
Bi has two main savings, direct welfare and indirect welfare from a flat tax rate. The vast majority of workers make over to 9,225$ per year which is taxed at 10%. If they had a 39.6% tax that's 2730.6 new taxes to offset a BI of 12000$ for a net cost of -9269.4.
Next $9,226-$37,450 is at 15%, bump that to 39.6% and someone making 37,450 costs -9269.4 + 6943.104 = -2,326.30$.
Now if you continue this you find a medean income gets a bigger tax break than 12,000$ per year from the graduated tax rates. Also, with BI you don't need a standard deduction...
Net impact BI's are not simply whatever the BI is * the population.
Whether you call the way of paying a "claw-back", "flat-tax", or just straight up higher marginal rates, you need to pay for it somehow. In the end someone is getting less of each additional dollar they earn. All these need to add up to BI * the population.
BI makes a lot of implicit subsides explicit. If someone gets a tax break that adds up to 1k/month and you replace that with a check for 1k/month and do away with their tax break it's no net change in there cash flow. All that you’re doing is acknowledging a tax break is equivalent to a cash handout.
If we decide that 12,000$ is enough to live on then it calls into question why people get a larger payout from SS on top of a large tax break from low incomes.
Add it all up and a 12k BI costs less than SS + all other tax breaks and subsides. But, people rarely think of tax breaks as a subsidy so there is a lot of cognitive dissonance on this topic.
PS: Another way of looking at it is to consider the Canadian government spends less per person on healthcare than the US government while covering their entire population. Presumably the US government could do the exact same thing which makes it a worthwhile thing to consider.
I am agreeing with you that there's really no difference between a tax break and a subsidy.
However, I don't understand your next point. If you're saying a $12K BI wouldn't cost anything extra after getting rid of social security and all tax breaks in our tax system, well then maybe. But then you've made SS pensioners much poorer. And increased taxes on all the rest of the population. Also keep in mind the standard deduction is sort of like a BI for people who earn above a small threshold so if you get rid of it the net benefit of implementing a BI for low income people is even less than $12K.
BI sounds attractive in theory, but the math around it seems hand wavey. When you try to add up the numbers, there's no way around increasing taxes massively, or leaving large groups like the retired/disabled/unemployed worse off.
It might be impossible to make significant change without making some group worse off. My point is the net cost of BI is simply the added benifits to very low income people as long as your also removing other subsidies. And we are already handing out a lot of subsidies.
Which subsides to remove becomes an open question. EX: With BI do we still pay post doc's a small amount for living expences?
PS: If nothing else BI is an interesting comparison point for the current system. EX: You get more from SS as a married couple than an unmarried couple.
> Now if you continue this you find a medean income gets a bigger tax break than 12,000$ per year from the graduated tax rates.
You're going to struggle to sell BI on the basis that the person with a median income should make higher net tax contributions to subsidise those that won't work as well as those the present system determines "can't" work at the moment...
You're assuming the goal is to increase the post-tax income of all citizens by $12k, and all current benefits schemes are kept running.
In the UK, there's a tax free allowance of ~10k then an income tax rate of 20%. If we gave everyone in the country £2k/year and dropped the threshold to 0, nobody earning more than £10k would get any extra money. This is just an example that seemed nice because the figures were pretty clean.
Even this toy example would still require a 3% rise in taxes on all workers, decreasing the incentive to work. Also, in this case you literally wouldn't help any poor wage earners at all, since a minimum wage job in the UK is already making more than £10k. (and maybe hurting them, if you increase taxes across the board — if not, then high earners will be seeing a rate increase of closer to 4% -- so top rate will go from 45% to 49%).
If you start getting to more life-changing money, like £6k a year, you're starting to talk about >10% increase in taxes on the whole working age population. The top rate will go from 45% to over 55%. And again, it won't add a penny to anyone who's earning more £10k.
On top of that, some people would presumably drop out of the work force, and the higher tax rates would reduce the incentive to work, so your tax base will be even smaller. That'll push up the tax rates a few more percentage points at least.
My math:
Going along with the example, around 65% of the UK is working-age, and about 62% of working age people work. So 15 million people in the UK don't work at all, let's assume they don't earn anything. Assuming you restrict the BI benefit to just to working age population (no pensioners or children), there are suddenly 15 million people who didn't get anything before who now get BI, costing £30 billion pounds. The UK collects/spends about a £1 trillion, so that would be a 3% rise in spending.
My point was simply that the cost of any form of unconditional income is not "population * amount given out", as with that maths the cost of £2k/year to everyone of working age would be over 80 rather than 30 billion. I'm not arguing that even small forms of unconditional income would be free, but the system is not as expensive as made out.
> 3% rise in taxes on all workers
A 3% rise in tax revenue, how that affects people will depend on how it's applied (changes to tax on businesses, for example).
We must consider at least
* Knockon effects of changing the tax thresholds / amounts
* Benefits that are being paid out that no longer need to be
* Changes in employment when people have a more reliable safety net
For example, with the £6k case, we can now remove JSA, ESA, Incapacity Benefit and Income Support I think at the least. That's about £20B we can knock off, while increasing the amount those people receive and removing the problems that come with things like benefits sanctions. The UK spends about £85B on welfare other than the state pension, and any of that spending that gets people's income up to £6k is completely covered already.
I would like to see more involved analysis for specific figures to know what the true cost might be.
> (no pensioners or children)
Children, yes, but any pensioners claiming more than this sum in state pension don't cost more.
> Also, in this case you literally wouldn't help any poor wage earners at all, since a minimum wage job in the UK is already making more than £10k.
Full time workers, true, but several forms of benefits now are restricted to those working fewer than 16 hours. A 20yo could be earning less than £4300 (£5.13 * 16 * 52).
Not a great source, but precise figures here aren't too important:
It can be unconditional and not apply to children and people collecting pensions. It would not create a huge mess by limiting it to people over 18 and under 65.
Wouldn't the simpler solution be to simply reduce the pensions by the amount of UBI?
For example, a pensioner gettin $40k/year would get $25k under a $15k UBI. You would have to get them to agree to the renegotiation, so I suppose it's not a realistic solution.
Yes it would, although getting people to give up something is hard. Personally I would structure a UBI as a large negative income tax to try and avoid these problems.
Why should people with pensions not get UBI? They saved their money into a pension vs into a bank account.
Unless you are talking about replacing Social Security, but even there the math isn't as straightforward.
As for 18 and under, I think it's a bit tough. A 6 person household with 4 kids needs much more than a 2 person household. If we don't supply UBI to the children / wards of the children then we risk needing to recreate social assistance programs. Although it does run the risk of having kids for money, which admittedly probably already happens.
I was making the point that a UBI can have age exclusions and still be simple. I would be reluctant to provide a full UBI to children since they don't have the freedom to spend the money themselves.
I agree those are all huge hurdles and it's incredibly risky, too, as it could be catastrophic if doesn't work, and you would have to cut all of those jobs, and then you also have to revert all the social programs back back. It could turn into a decade of pain for that society.
However, I think this pilot will at least tell us if a basic income works from the point of view of whether it can be sustainable on itself and whether 90% of the working people will quit working or not. Right now we have no clue whether something like that would happen or not, and it's probably the riskiest thing about a basic income - having 9 out of 10 people sit around and do nothing while the other 1 out of 10 have to support them.
If the outcome for that is a positive one and most people continue to get jobs, then we can start making a well thought-out plan on how to do the transition with the minimum damage possible to the society (until the transition is complete and then there's a net positive from the basic income for everyone).
I love the idea -- you could even come up with a 30-40 year plan to reduce working hours to 20 hrs/week while gradually increasing a basic income. Perhaps we could end up in that Star Trek future we've all been hoping for.
Implementation, however, looks tricky. I'm not at all sure it will roll out the way people think it's going to roll out. There's a lot of hand-waving about the effects, but it's mostly smoke and no fire. We really need some real-world data from various experiments to make better choices. There's also a vast difference between the slogan "basic income" and the actual details of how it would all work.
But as you point out, aside from all of that, there's a very real political problem: we've created a large political caste that likes identifying some great misjustice and passing various social programs to fix them. These cost money. For existing programs, lots of folks have intricate ideas about how to tweak things so that they work even better. These take simple systems and make them opaque. In short, we might be able to create enough wealth over the next few decades such that we could see an incredible change in the living styles of most people -- but dang if I can see the political system actually letting that come to pass. Oddly enough, it's not because of direct opposition. It's the "embrace and extend" folks that could cause far more damage than anybody else.
> The best chance (IMO) is for very a small country to try it first.
How about a city?
"The city of Utrecht announced that it would give no-strings-attached money to some of its residents, other Dutch cities are getting on board for social experiments with “basic income,” a regular and unconditional stipend to cover living costs."
I worry that these trials being conducted in certain regions and cities that are part of a larger economic area will end up being used to argue against BI due to the strange incentives that are created. One way I could see this going is that a large chunk of people who are on welfare today will move to the city to get a better deal. At the end of the trial, the numbers will show that productivity for the city as a whole declined. But that may not be representative of what would have happened if the whole country/EU/whatever had done it.
(This is just one example of how this could be spun in the media. I'm sure there will be many perverse incentives created that will cause inefficiency that can be pointed to as a case that BI "does not work").
One of the big selling points is that basic income is
funded largely by replacing different welfare state
institutions
...which presumably means some people are going to receive less total income under basic income than they did before. And, of those people receiving less total income, some will be the very model of the worthy types people had in mind when they created those benefits.
People in wheelchairs who can no longer afford the specially adapted vehicle they need to get to the shops. Hard-working parents losing their homes (in the city where all homes are expensive) because they can't afford the rent, even though they've only been out of work for a few weeks.
Setting the basic income high enough to cover specially adapted vehicles and family homes in expensive cities would of course be an expensive affair.
I can't remember where I read it (probably reddit, check out /r/basicincome), but I believe many proponents of basic income suggest that it will replace institutions that provide income to people such as social security, but not benefits such as medical benefits as you described above, or benefits provided to soldiers, et al.
This is so true. Milton Friedman's negative income tax proposal was implemented in the 70s as the watered down earned income tax credit. Welfare reform didn't occur in any meaningful way until the late nineties.
Living in Scandinavia (Norway), once thing that's become clear to me is that the welfare system really requires you to work to capture most of the benefits. You won't get normal disability pay, unemployment payments, and maternity/paternity leave if you haven't been working and paying into the system.
If you're income and asset poor, you'll get some minimal benefits, even housing. But these benefits are heavily means tested and much less generous than the regular system.
Scandinavian countries have some of the highest workforce participation rates in the world, so I think they've structured the incentives right. They need to, to make they generous systems possible. It would be interesting to see Finland take a different path.
Ate the savings the diff between the salaries bureaucrats had and the basic income they'd receive now that their positions are eliminated, given that some may not find full time employment after the cuts?
My impression was that the savings were from reduced externalities and increased spending power by those on basic income.
Why would you want it to replace other institutions?
Why not simply add it to the mix?
Politically, the way to make it happen would be to campaign for a small one to be introduced. This would get the infrastructure in place. Then ramp it up gradually over time.
Basic income is the type of idea that is very, very hard to implement within our current (possibly any) political systems. There is very little room for compromise, half measures and gradualism. It does not lend well to caveats exemptions, and design by committee.
One of the big selling points is that basic income is funded largely by replacing different welfare state institutions: unemployment benefits, child benefits, housing subsidies, state housing, pensions… This allows (A) A big enough basic income (B) big savings on welfare institutions running costs, (C) the simplicity needed for a clean re-write of incentives.
Where do the "efficiency savings" come from? Largely they come by cutting salaries associated with managing a welfare system. Can a government reduce public sector employment to that extent?
The danger for any country implementing this is that once they get into the political procee, they will chop and compromise and water down the idea until it is just another item on the big list of ingredient in the social welfare soup €212.13 per month that you qualify for while keeping everything else that exists.
Reforming the tax system and the welfare system as radically as required in a short time is a tall order. Maybe the Finnish can pull it off. They have a good track record. More broadly, I expect that this would have a high failure rate.
The best chance (IMO) is for very a small country to try it first.