I would wager there will be people who will take advantage of the system and use it as a opportunity to not work and laze around all day however those people will be the one who are not particularly productive in their work anyway.
They might find something else to do they might not but that's OK it is an acceptable loss.
On the other end companies which used to take advantage of the job market and the fact that everybody needs a job to survive will have a hard time to find employees since now people can afford to be selective.
When survival is off the table nothing is more important than enjoying your job since you spend a great deal of the day doing it.
Another possibility is part-time work being more sought after since some people may want to work but wouldn't like to spend 8 hours every day doing it.
Overall i believe it will have a positive effect on society if you don't get hung up on the fact that some people will take advantage of it which most politicians tend to do even with the benefit system in the UK.
I imagine partitioning living NEEDS [housing, food, transportation] as an area of the economy with its own money/token/basic-income-credits system separate from the WANT economy of everything else.
Maybe, but there's strong evidence (from the field of macroeconomics) that allowing people to just receive money (rather than payments in kind) makes them even better off. Although you may fret about people using the money for bad things, in reality mostly they don't, but they are better at allocating resources than a central planner. Think of it this way, to the citizen who actually wants to be better off, would you rather be able to cut your spending in order to make a smart investment or not be able to do so?
They can also better fit their own needs. Maybe a smaller worse shelter wouldn't be an issue for them, but they would much prefer to have warmer clothing (smaller and warmer in comparison to peers in the same location). Maybe they forgo milk to buy even more lentils.
The problem is the intractable dispute about what things should go into which category. Empirically, there has been a strong historical tendency to move things into the "NEED" category that were traditionally in the "WANT" category.
For example, indoor plumbing was considered a grossly extravagant luxury for almost all of human history. Within the last hundred years, the richer societies have made laws (building codes) that have switched it to a "NEED". The same thing happend with indoor heating systems.
As for food, most medieval European peasants considered themselves lucky if they got a bowl of thin gruel every day. Asian peasants thought they were lucky to get a bowl of rice. Many didn't get anything on many days. Now in the US the government is talking about "food deserts" and shifting many previously "luxury" fresh nutritious foods into the "NEED" category.
>For example, indoor plumbing was considered a grossly extravagant luxury for almost all of human history. Within the last hundred years, the richer societies have made laws (building codes) that have switched it to a "NEED". The same thing happend with indoor heating systems.
Yes, we rather do like preventing dysentery, bubonic plague, and flu epidemics. Public health is indeed a necessity rather than a luxury.
This is precisely my point. For almost all of human history, public health was indeed a luxury rather than a necessity. In many parts of the world, it still is today.
The details of a specific proposal are not relevant. No matter what specific items you choose for these categories, eventually people will want things you say are "extravagant luxuries" and call them "needs".
Progress will always shift things from "WANT" to "NEED".
If you want to play that game living past your 30's is a "WANT" rather than a "NEED". You probably won't find many people who think this particular "WANT" isn't a "NEED".
"Progress" is a nebulous and heavily opinion-based concept. It is not a well defined factual, monotonic process whereby society invariably moves from "bad old ways" to "better new ways".
This is not a game, and I'm not arguing the merits of any specific proposals. It's an empirical analysis of what has actually happened in world history.
Things you think are "needs" today were considered extravagant luxuries for almost all of history, and many of the things you personally view as luxuries will be called "needs" by others. Thus, the parent comment's plan to divide the economy into "wants" and "needs" is not tractable, since these categories are both shifting through time and also heavily disputed from one person to the next at any given point in time.
I am not arguing in favor of this arrangement. I'm pointing out that that's simply the way it actually is, regardless of our personal preferences or judgements of the situation.
What if items from the WANT category are moved to the NEED category when either 1 of 2 things are met. It's empirically shown to improve the health of the owners. Or it's possible to create the item for everyone on earth, meaning we have the resources/manufacturing without harming the biosphere.
With these 2 rules we should see a steady increase in QoL for everyone.
The main problem with the whole idea is that it is inevitable that an exchange rate will be set and they will be traded. What does a NEED collector do with the collected NEED currency?
I've thought about this, too but I can't figure out how you'd prevent those tokens from being bartered for more traditional currency outside of the necessary conversion by landlords and grocers and other providers.
With ubiquitous computing now available to everyone we might be able to fully track that sub set of transactions with 'currency with state and history' as opposed to traditional 'dumb dollars' but I think it would be a hard problem getting it to play nice with the traditional currency economy.
It won't. The more industrious will barter at a gain while others will barter at a loss. Consider food stamps. Some will trade them $2 of stamps for $1 of cash. But others will buy food, cook and then sell the food, bringing in $2 dollars of cash for $1 of stamps.
Food stamps are a decent example. It's not perfect yes, but it basically becomes undesirable to trade the cash of the WANT economy for the goods of the NEEDs economy.
Is physical intimacy (no, this doesn't mean sex, though that is one form) a want or a need? Consider the mortality rate of infants who receive no physical touch but have all their classical needs met compared to infants who are held and cared for.
Thanks. I need to read this when I have the time -- my initial reaction (from skimming) is that it keeps insisting that increasing money supply does not cause inflation because of the Fed pumping money into the economy, and giving it to investors who are not spending it.
Giving it to the poor, who have a higher marginal utility for their dollars, should cause more inflation than giving it to the rich. Again, from skimming, they seem to mention the idea of it being more useful for the poor, but dance around actually addressing it directly.
Inflation doesn't necessarily follow. If everyone was given a 10% raise then you would get inflation, but a fixed distribution results in a very different effect. One possibility is that people would purchase roughly the same amount with the lower classes having free time to educate themselves rather than working minimum wage jobs. I mean, I can't imagine somebody throwing their lives away just to buy another loaf of bread or bottle of milk every week.
What incentive do they have to educate themselves? After all they currently had an incentive to educate themselves during their period of compulsory education yet still ended up working in a minimum wage job they value so little they'd quit if they were given a minimum wage.
You don't see masses of low waged workers in countries with maximum working hours (and thus some leisure time) educating themselves.
The modern economy is hit driven. 1 J. K. Rowling pays for a lot of not J.K. Rowlings.
Individual's fortunes look a whole lot like a random walk. Some people, get over their crack addiction and become writers for the new york times, some people get over their wall street addiction and become crack smokers. It's tough to say where a particular person will be in 20 years. Before you start listing off titans of silicon valley, i'd like to point at all the super rich Vanderbilts running around.
It's up to us as a civilization to decide how low to make the floor. any benefit will have fraud. Straight up anarchy, you keep what you kill sounds rough. If that's your plan, i'm going to get together with my friends and stop you. Nobody works ever, also sounds dumb. I'm going to get together with some other friends and stop that too.
So, we pick a spot somewhere between the two extremes. Historically, value was created by people. More and more, value is created by machines. Cab drivers, sports writers and port masters are all on the way out.
I'm not at all sure how civilization works when only the top 10% or 1% of people are actually capable of being useful to the economy, regardless of level of training.
Very wonderfully put, this is the basic premise in which I see no other way than a form of basic income for developed nations in the future. The interesting question is one of timeframe and methods.
Free education via internet + age/experience + potential for income at a level significantly about basic income.
I don't think comparing how a 15 year old treated mandatory education and how a 25 might treat the opportunity to educate themselves to better their lives is very fair.
I'd assume the maximum working hours in those countries are above 0. When you have to take an hour long bus each way from an exhausting minimum wage job there's not a lot of time to make significant progress in education.
You seem to assume that every school gives an equally good education and accommodates all students' individual strengths and difficulties perfectly.
In some parts of the world, like the US, better school districts are correlated to areas with higher property tax revenue.
You don't mention the fact it's completely unworkable mathematically. In the UK I believe it'd cost £240 billion a year. Where the hell would anyone be able to find that money from? (Tackling tax avoidance from Starbucks isn't a credible answer).
Just to put it in context, that's twice the entire NHS's budget, or 5 times our defence spending.
To put it further into context £240 billion is slightly less than what the UK government spends on pensions and welfare. Since basic income would replace much of the need for pensions and welfare, it might just end up more or less balancing out.
Note that this £240 billion will have the overheads of running the welfare system built into it too. So the actual pension checks are only a percentage of that figure, with a basic income that's not means tested the government has far less overhead.
We wouldn't need money for most benefits any more (pensions, income support, etc) so that's about £120bn of the £240bn found immediately. You mention the NHS - we'd be able to spend a lot less on that if people didn't have poverty-induced health problems, so there's another £35bn (assuming a 30% reduction of the £110bn). It's not unreasonable to assume that the difference of £85bn would essentially pay for itself by increasing the tax revenue from people spending their basic income. over time the country's GDP and tax revenue would increase due to people being better off (they go hand-in-hand).
> It's not unreasonable to assume that the difference of £85bn would essentially pay for itself by increasing the tax revenue from people spending their basic income.
If the idea is to give everybody money so that you can tax it more, you're engaging in economic waste. Without being able to increase productivity in other areas to cover the lost value, you will, hopefully slowly, but eventually trend towards zero, and a failure of the system overall.
Encouraging economic productivity in an environment in which nobody has to be productive may or may not be possible, I honestly haven't any idea, but its certainty doesn't seem terribly obvious to me.
It's also worth remembering that at the moment everyone in the UK gets a tax free allowance of £10,600 and an NI free allowance of about £8000 (in 2015/16). The basic income is expected to replace that as well, which means if everyone continues to earn the same amounts that's an extra £2000 per person earning more than £10k (roughly, assuming it's now taxed at 20% in the first tax bracket). NI would be less, and is probably more complex as employers pay some of that, but just assuming that only the employees contributions are now paid on what was previously NI free you're still looking at another £1k each. It's not much individually, but when you take out the costs of administering all of that it'll add up.
Why would poverty related health problems disappear unless the basic income is significantly higher than the current unemployment or disability benefits as you're saying those are being replaced.
A basic income doesn't remove the potential for poverty.
Yeah I'm sure you could find that missing £85bn down the back of a sofa in whitehall.
Sorry, but the whole idea is laughable. Not to mention the fact that it's another incentive to have more children and bigger families because the state will give you more money.
My inner pessimist is expecting to see a "there was this Daily Mail article one time".
Everywhere I look, I see the opposite. Families with a comfortable amount of disposable income have the 2.4 kids, but those in poverty (and particularly the working poor) have 3, or upwards. Anecdotal, but I'm yet to see evidence to the contrary
is it a smooth relationship, or is it more of a step function with 1 steps?
I always suspected that the reality was more like "people who are able to afford children and able to make long-term plans tend to have only as many children as they want, when they feel they are ready, but people who aren't able to afford children or who don't make long-term plans will tend to take a more devil-may-care attitude towards procreation."
From what I heard, in very poor countries children are often treated as investment. A child can start paying itself off by working as soon as even 5 years after being born. As a parent, you want someone to take care of you when you're old, and given high children mortality, you're better off making more of them in hope at least one survives to adulthood. Basically, those people are too poor to afford not having many children.
This is rapidly becoming ancient history. There's a wonderful youtube video showing all the countries on earth, moving on a multimensional chart by infant mortality and standard of living. The origin is ideal. All countries but 1 or two have shot like arrows toward the origin over the last century.
Across countries this is a very noisy cloud of points where, if you go out and calculate a regression it's pointing down. Like every other social variable.
Since population explosion has felt out of fashion, there's a long time that I didn't see such plot. But what I've seen has a much clearer tendency than most social correlations people use at real decisions. It's about as clear as most correlations of quality of life with GDP.
Ok, I think I should have written "international scale", I apologize for the confusion.
I don't know of any study on national level, i.e. of families in a single country. The only thing I know of are anecdotes and stories about very poor families having 5+ children.
Basically if you have two groups of American born, collage educated men, with of the same age then income positively correlates with number of children. But, if you compare collage dropouts vs. people that have PHD's then the PHD population makes more money and has fewer kids. So, education is a huge confounding factor.
We went from 14 being a reasonable age to start a family to 24 or even 34 being the 'reasonable age' that's a huge impact. But, ‘wealth’ as an independent factor aka adjusted for age, education, country etc becomes a positive factor.
PS: Historically, starvation also limited family size.
Checking the latest figures for 2016: 155B for pensions and welfare 56B. I assume the point is to replace both of those completely with the basic income so the net cost is not 240B, it is 29B. Not cheap, but not pie in the sky either. Sell a bank or two :)
£240 billion / 64.1 million people in the UK = £3,744/year (assuming no government overhead).
Seems low. That works out to be £312/mo/person. That certainly wouldn't seem to replace many costs (especially pensions and the like).
Let's say you wanted it to be £500/mo/person. That'd run you £384.6 billion/year. Add in, say, 5% overhead and you're at £403 billion/year. Where does that money come from? If you stick with the idea that the income is universal, you're dishing out £6,000/person/year, waiting a year, then taking it right back via taxes. Which seems incredibly wasteful, and might drive up that 5% overhead number.
You also have to factor in the fact that for most government welfare-type agencies a large portion of their budgets are spent running the bureaucracy, rather than going out to the people. Universal Basic Income greatly reduces the overhead costs. So £1 of Basic Income doesn't replace £1 of a current welfare program; it replaces £2 or £3 of the current program.
Put another way, if the current welfare spending is £120 billion/year, the recipients are only getting £40-£60 billion/year. So that's all of the Basic Income you need to replace the welfare spending, leaving you with a £60-£80 billion/year surplus.
Obviously, the actual amounts depend on the detailed overhead costs for each agency that would be replaced by a UBI program. But I'd be willing to bet on anywhere from 20% to 60% savings for each agency. UBI can be highly automated; with electronic payments and ties to a tax database, it can be as little as a smallish office of administrators and DevOps, and a server farm.
Eh, government bureaucracies in first-world aren't as inefficient as some people make a living claiming. In the US, administrative expenses for Social Security run less than 1% of the budget. Medicaid and Medicare run with similar margins. Compare this to private-sector insurance in the US, where 80-85% "medical loss ratios" (ie, the fraction of premiums paid out for medical care, as opposed to the fraction kept for administration, advertising, and profits) are common; even in the good old days (before the excesses of modern executive compensation, profits, and advertising) MLR peaked at around 95%.
The simple fact is that many social welfare programs are just expensive, because there are a lot of people being helped and the quantity of money you need to spend to make any difference is just adds up.
Bear in mind that "administrative expenses" can mean one thing to ordinary people, and something quite different to a government-sponsored accountant.
When Medicare/Medicaid pays $150 for the same type of crutch that sells in a local pharmacy for $15, that difference does not go into "administrative expenses". I might prefer the expense of a human employee driving to Walgreens, buying a crutch off the shelf, and delivering it by hand to the patient that needs it, rather than paying a hospital that big markup just because that's the most they can charge without the benefits management program automatically denying the expense. Because even if it costs $135 in labor and transportation for a human to do all that, the mere possibility that might happen would discourage the hospital from charging significantly more than the pharmacy across the street for exactly the same item, or from charging different prices to different people based on their insurance plans.
It would even work to just give the patient $150 in cash, and tell them to buy a crutch with it and keep the change. Or carve one out of a tree branch and keep all of it. If they end up not having a crutch, it won't be because they couldn't afford it.
You can't rely on a bureaucracy's reports on itself to reveal the inefficiencies of that bureaucracy. There is just too much political pressure to cook the books.
What distinguishes normal accountants from these apparently corrupt "government-sponsored accountants" who "cook the books"? Do they have pointy ears or forked tongues?
Your basic math is assuming the money is distributed to everyone. Wouldn't it make more sense to only give it to adults? That knocks out probably about 25% of the population so you're looking at 48 million. That gets us to £5000/year. Of course the article mentions differences between what single people get and what couples/families get which would also bring down the numbers.
The reason for that is to cover the cost of raising kids (in my extremely basic example). If the idea is to replace things like welfare, food stamps or whichever programs cover the cost of raising children, I think it's easiest to assume that everybody gets the same dollar amount (the de-facto average amount). There's a lot of ways to try to dice up the numbers (family size, married/unmarried, etc), but I think as a basic example, the numbers are fairly solid.
I did a back of the envelope calculation on this last year (so using 2013 figures) which I've pasted below. It works out not too bad; it's certainly within the realm of reason. I think it would probably be better to start it very low, around £20 a week, and slowly scale it up and let it replace welfare payments gradually.
If you think my figures are significantly out, I'd appreciate any corrections.
[There were requests for "back of a napkin" calculations, so I've done some for the UK. To convert to USD, just add 50%, as a rough measure.]
Firstly, I prefer to refer to this as a "Citizen's Dividend" rather than a "Basic Income", as I know for a fact that anyone on a low income would prefer to get a guaranteed £20 a week extra rather than hear a politician say, "We can't afford to pay £75 pounds a week to everyone, so we're doing nothing." Tell me if I'm wrong. But "Basic Income" if the preferred name, so I'll refer to it as that from now on.
The UK government spends £732 billion. If we subtract £222 billion for Social Protection (we're replacing all of it with our BI), we get £510 billion required. If we add up all government income except Income Tax - Business Rates, Excise, etc - we get £481 billion.
That leaves us a shortfall of £29 billion. For the sake of simplicity, I'm going to assume that reductions in crime, the increase in VAT revenue, better health, etc are going to cover that. Let's call it close enough for government work. At the end of the day, we currently borrow £84 billion anyway, so at worst I've slashed the deficit!
Income Tax brings in £167 billion. UK population I'm going to take at 60 million. So, as a starting point, that gives us a BI of £2,783 annually, or £54 ($80) a week. Well, that's not a bad start! Let's consider what it means for actual people. Thus far:
Who loves me:
- Right-wingers. I've eliminated (or vastly reduced) the deficit, effectively increased the income tax allowance by £2,783 and given them this amount in cash, while reducing welfare payments to lazy, single-mother immigrants. I should be head of the Conservative party.
- Most people on Job Seekers Allowance (unemployment benefit). While I've cut the amount they actually get, I've also cut out all the paperwork, visits to the job centre, taking money off them if they happen to earn something that week, etc etc. Money without the hassle.
- Low wage workers. This is a big boost above Working Tax Credit and is hassle free (you don't lose it by earning more). It also allows some degree of security in the event of losing their job.
Who hates me:
- Left-wingers. While I've helped some low paid workers, I've also slashed benefits, there's no housing support...in short I've cut welfare while giving more money to wealthy people. I should be head of the Conservative party.
- People who're claiming several benefits. People who're on sickness benefit. Basically, all the folk who've had their income reduced below a living wage.
- Pensioners. The state pension has been cut significantly (and illegally).
Ok, I think I need to balance it a bit more. I'm going to reduce the Income Tax allowance from £10,000 (current) to £6,000. This should balance out at the end. I'm going to assume this increases income tax revenue by 25% (I've no idea if this is remotely close. If anyone can be bothered finding out, please let me know). More controversially, I'm also going to increase income tax by 25%, so the basic rate is now 25% rather than 20%.
That should give me a total revenue increase of 50% from Income Tax which gives me a BI of £4,175 annually or £80 ($120) per week.
There is a problem: we've neglected the people who require more than that either because they're owed it (e.g pensioners) or because they have extra requirements (e.g. orphaned children), so having increased the BI up to £80, I'm now going to cut it again down to £60 a week. This will cover pensioners, people claiming benefits which are currently in excess of £60 and support for vulnerable children (note that children also receive the BI, so 'child benefit' has seen a massive boost from the regular £20 per week maximum).
I'm assuming that 20% of people fall into one of the above categories, so cutting £20 off the BI gives us £160 a week to help these people. This is more than the current basic state pension (£113.10/week) so that's a fairly big increase. I don't want to complicate the calculations any further, so the small number of people who require more than this will have to be paid out of the £50 billion we haven't borrowed.
That's us at £60 per week basic income and up to £160 per week for pensioners and vulnerable people.
And I think I'll leave it there. We might still need to borrow (or cut spending elsewhere) to make up other shortfalls, but as long as these borrowings total less than £50 billion we still come out ahead. It might be more natural to cut the payment to £50 for everyone in order to free up some cash for other payments. In the real world, you wouldn't exclusively reserve Income Tax to one specific spending area anyway, but it makes things simple enough to get a rough measure.
Do a thought experiment. Imagine that the entire UK were walled in by an impenetrable barrier enclosing the country out to the boundary of its exclusive economic zone, and every record and memory of ownership were wiped away, such that no one could be entirely certain who owned what. Stimpson J. Cat pushed the History Eraser Button.
On the morning following the event, some boffins assemble and work out an emergency plan for re-establishing a workable economy, on the assumption that one existed before everyone forgot what it was.
Now, with no memory of the past, does the UK have the land, labor, and capital to completely provide for the needs of its people? If that costs £X per year, can the people of the UK produce £X of economic output per year, and with the correct proportions of goods and services?
(For your reference, the UK represents approximately 4% of the global economy.)
I reached my own conclusion as a result. It is completely workable mathematically. It just doesn't work within the existing legal tradition. That's the one that respects property and contracts--the one we all like because it's what we rely on to assure ourselves that the car we drove to work will still be there when we knock off for the day, and the house we go back to won't be full of grubby squatters when we get there.
But as much as we like it, those with more wealth, who lack the will or the imagination to spend what they earn--to keep the production-consumption economy circulating efficiently--like it more. It keeps the grubby middle class from building ugly-but-productive anthills and beehives within sight of their beautiful-but-inefficient homes, yachts, and luxury resorts. And that is what stops the socialist schemes to erase poverty--we just don't have the stones to commit armed robbery to do it. The middle class largely pays for itself, and no more, so the only available source for the necessary resources to haul the lower classes out of poverty is the rich, including the synthetic rich people better known as corporations.
So you swallow your lofty free-market, shalt-not-steal ideals, abandon your pipe dreams of one day being in the upper class, and you tax the rich at near-extortionate rates. Naturally, they would want to flee such a tax regime. Let them. Just stop them from taking the productive capital with them as they go.
It might work out like France. It might work out like Venezuela. It might work out like the USSR. But if it doesn't work out, it won't be because it is a mathematical impossibility. It will just be because someone made a wrong assumption in one of the thousands of possible places to make a mistake when trying to re-engineer an entire national economy.
They might find something else to do they might not but that's OK it is an acceptable loss.
On the other end companies which used to take advantage of the job market and the fact that everybody needs a job to survive will have a hard time to find employees since now people can afford to be selective.
When survival is off the table nothing is more important than enjoying your job since you spend a great deal of the day doing it.
Another possibility is part-time work being more sought after since some people may want to work but wouldn't like to spend 8 hours every day doing it.
Overall i believe it will have a positive effect on society if you don't get hung up on the fact that some people will take advantage of it which most politicians tend to do even with the benefit system in the UK.