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Government The Almighty Buck United States

'Universal Basic Income Doesn't Work' (theguardian.com) 1022

An anonymous reader shares an opinion piece from The Guardian, written by analyst, writer and head of social policy for the New Economics Foundation, Anna Coote: A study published this week sheds doubt on ambitious claims made for universal basic income (UBI), the scheme that would give everyone regular, unconditional cash payments that are enough to live on. Its advocates claim it would help to reduce poverty, narrow inequalities and tackle the effects of automation on jobs and income. Research conducted for Public Services International, a global trade union federation, reviewed for the first time 16 practical projects that have tested different ways of distributing regular cash payments to individuals across a range of poor, middle-income and rich countries, as well as copious literature on the topic.

It could find no evidence to suggest that such a scheme could be sustained for all individuals in any country in the short, medium or longer term -- or that this approach could achieve lasting improvements in wellbeing or equality. The research confirms the importance of generous, non-stigmatizing income support, but everything turns on how much money is paid, under what conditions and with what consequences for the welfare system as a whole. [...] The cost of a sufficient UBI scheme would be extremely high according to the International Labor Office, which estimates average costs equivalent to 20-30% of GDP in most countries. Costs can be reduced -- and have been in most trials -- by paying smaller amounts to fewer individuals. But there is no evidence to suggest that a partial or conditional UBI scheme could do anything to mitigate, let alone reverse, current trends towards worsening poverty, inequality and labor insecurity. Costs may be offset by raising taxes or shifting expenditure from other kinds of public expenditure, but either way there are huge and risky trade-offs.
As this week's report observes, "If cash payments are allowed to take precedence, there's a serious risk of crowding out efforts to build collaborative, sustainable services and infrastructure -- and setting a pattern for future development that promotes commodification rather than emancipation."

The report concludes that the money needed to pay for an adequate UBI scheme "would be better spent on reforming social protection systems, and building more and better-quality public services."
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'Universal Basic Income Doesn't Work'

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  • Of course... (Score:5, Insightful)

    by xlsior ( 524145 ) on Monday May 06, 2019 @10:38PM (#58549816)
    The more things get automated, the larger of a percentage of the population will become perpetually unemployable in the process as well -- that doesn't work either, in the long term.

    You'll either end up with some kind of basic income, or you'll have an exceedingly tiny % of the population doing great while all the others are left to starve. The French revolution showed us the outcome of that scenario.
    • Re:Of course... (Score:4, Interesting)

      by Solandri ( 704621 ) on Monday May 06, 2019 @11:18PM (#58549954)
      What people who believe this don't understand is that the vast majority of the economic activity in developed nations is controlled by the middle class. If you look at the IRS tax stats for 2016 [irs.gov], the bulk of the income in the country (columns I and J) is made by those making $50k-$500k per year. Those making over $500k account for just 20% of the income. (This is why increases taxes only on rich people doesn't work. Even if you taxed people making over $500k at 100%, that would only get you $1.9 trillion. If you taxed everyone making over $200k at 100%, that would get you $3.5 trillion. The 2018 Federal budget was $4.1 trillion, with another $2 trillion for state budgets. You have to tax the middle class to generate enough revenue to fund any substantial government programs.)

      This is what Henry Ford accidentally stumbled upon when he paid his workers double the prevailing wage at the time. Those workers could suddenly afford to buy the cars they were building, which they did, which created more work for them, which required hiring more workers at that wage, which resulted in them buying more cars, which created more work, etc. That economic feedback loop catapulted Ford into the richest man alive at the time. Economic efficiency is increased when the people doing the labor get paid a greater share of the overall productivity, not have it siphoned off by an economic elite. So in developed countries, the rich don't get and stay rich by selling to each other. The get and stay rich by selling to the masses.

      The trope of a rich elite owning and controlling the country's economy is only true for the early stage of developing nations. Countries which aren't able to rise past this stage due to the corrupt influence of their rich elite generally stagnate at a GDP of around $7k-$15k per capita [wikipedia.org]. To rise past this point requires the development of a middle class, with the middle class becoming the dominant economic power at the higher levels of GDP per capita.

      If automation ends up making a substantial percentage of the population unemployable, then those people will be unable to buy stuff anymore. Which will result in the incomes of rich people decreasing. That means it will become a problem that everyone - poor *and* rich - will want to solve.
      • Re: Of course... (Score:5, Insightful)

        by BytePusher ( 209961 ) on Tuesday May 07, 2019 @12:18AM (#58550164) Homepage
        You intentionally left out unearned, investment income which is where the majority of hyper wealthy individuals income comes from. Tax that appropriately and wealth inequality starts to normalize.
        • Re: Of course... (Score:5, Interesting)

          by DarkOx ( 621550 ) on Tuesday May 07, 2019 @08:19AM (#58551450) Journal

          You should not be penalized for being right. Investing enables economic activity to take place. What we need to clamp down on is income from trading. That generates no real value. If you buy shares in ABC corp and they use that revenue to build another widget factory that puts people to work. If I buy your ABC shares and speculate about ABCs future and sell them for a few pennies more to bob - that does nothing really for the economy.

          However you can't take trading off the table because few will want to invest if they can't cash out when they need their capital back for other users. So you need third party buyers.

          My proposal is simple - make investors pay tax when they buy rather than when they sell. This does two things.

          The first: It means taxes on investment are collected win or lose. Unlike today where you don't pay capital gain unless you have gains. This means short term trading would result in large tax liabilities. So it would disincentivize high speed and day trading and make investing in things one really believes are longer terms growth prospects practical. (Or shorts etc)

          The second: It eliminates all the complex book keeping around basis cost and wash sales etc. This will also level the playing field. Small retail investors who don't have enough capital to spread across as many vehicles won't face a punative tax situation like we have today where the big guys get to write their gains off against other losses. Which in many cases shifts large portion of those losses effectively onto the public.

        • Re: Of course... (Score:5, Insightful)

          by Keick ( 252453 ) on Tuesday May 07, 2019 @08:21AM (#58551454)

          You intentionally left out unearned, investment income which is where the majority of hyper wealthy individuals income comes from. Tax that appropriately and wealth inequality starts to normalize.

          Disregarding the hyper wealth for a second...

          Are your suggesting that we should tax folks that have the forethought and discipline to invest their money on a steady and consistent basis?

          Have you actually meet an 'everyday millionaire'? I have on many occasions and I guarantee you couldn't pick them out of a small crowd. They drive old cars, because they still work. They live in small houses, because that's all they need. You wont see them blowing their money at Starbucks. They spent their entire working career living frugal lives, just so they than retire in dignity and do what they want later.

          And you do realize, those wealthy and hyper wealthly folks are the ones that are 'investing' like mad into the economy. I mean, you do know where investment money goes right? Here's a hint; it's likely in some part the money for your house, the money for your car, the money that built your rental unit, the money that built Amazon so that you can buy better products for less money....

          Those are the folks that you want to tax because you think their money is evil somehow?

      • Re:Of course... (Score:5, Interesting)

        by phantomfive ( 622387 ) on Tuesday May 07, 2019 @12:38AM (#58550234) Journal
        That's why you need a wealth tax, not an income tax. It hits people who hide their income behind the capital gains laws.
        • Re:Of course... (Score:4, Insightful)

          by Jody Bruchon ( 3404363 ) on Tuesday May 07, 2019 @08:05AM (#58551374)
          And how do you plan to tax all of the offshore wealth, exactly? How about when that offshore wealth explodes in size due to threatening to tax wealth? Economies are not simple systems where you turn one knob and one or two meters change their value; there are a lot of effects for every single minor tweak you make. Remember when the ACA wasn't even law and employers were already looking at cutting back workers and wages and acting more conservatively in their growth strategies? You don't even have to pass the law to have significant effects; just TALKING about doing something can bring about big negative reactions for long periods of time. All you'll do if you threaten to dock peoples' assets to fund government programs is trigger the creation of more shell corps and increased investment in emerging markets. Ask New Jersey how their screwing down the wealthy has served them, [nj1015.com] or perhaps New York might have a more dire tale to tell. [patch.com] Oh, and the wealthy have been renouncing U.S. citizenship and bailing out for good for some time now, [thestreet.com] and FATCA has greatly exacerbated that movement. [repealfatca.com]

          I totally understand why you have proposed what you have, and I would not disagree if I was only looking at piles of money and where money is needed. When you look beyond that at the "loopholes" (or perhaps the "escape hatches" is a better way to frame it) you immediately see that the wealthy will bail out at even more alarming rates and the new taxes will end up only being applied in full to people who don't have the wealth to escape the tax. We're talking about the real-world effect being the government taking money from the retirement and pension investments for teachers and other low-to-middle-class workers that are probably already suffering under high fees and scummy kickbacks more so than taking a big chunk from the mountains of gold owned by Bill Gates or Larry Page or all those Shark Tank people.
      • Re:Of course... (Score:5, Interesting)

        by MatthiasF ( 1853064 ) on Tuesday May 07, 2019 @04:14AM (#58550724)

        While I agree with most of your statements but suggesting increasing taxes only on the rich won't help is very disingenuous.

        You're framing the issue on tax burden using statistics that only show influence after the rich lobbied for huge tax loopholes and the massive tax-cuts on the top tier brackets over the last 30+ years that has allowed the rich to accumulate a ton of capital from the economy.

        https://en.wikipedia.org/wiki/... [wikipedia.org]

        This increased the tax burden on the middle class, who are the most important aspect of the economy as you suggest, while also allowing the wealthy to horde capital on the fringes of the economy. Allowing this to happen has lead to monetary limitations and repeated bubbles (which we have seen since the 1980s) that have weaken GDP growth over the last twenty years and caused three financial crises.

    • "The more things get automated, the larger of a percentage of the population will become perpetually unemployable"

      Or we could, you know, redistribute ownership of the means of production.

    • I agree... now.

      I used to be against the whole concept of UBI, but eventually it will make sense.

      One reason is the advancement of technology. 500 years ago it probably would have taken ~500 people to farm 200 acres by hand. Today it might take 20 people. Eventually it will require less than 1 person, what with robots coming forth. As far as I can recall, technology at first makes jobs proliferate, then contract as technology is able to replace human workers. Nobody today is shedding a tear that 'in the
    • Re:Of course... (Score:4, Interesting)

      by Humbubba ( 2443838 ) on Tuesday May 07, 2019 @12:23AM (#58550180)
      xlsior said

      You'll either end up with some kind of basic income, or you'll have an exceedingly tiny % of the population doing great while all the others are left to starve. The French revolution showed us the outcome of that scenario.

      Oh I agree, and I agree that a universal basic income doesn't work. In fact, I even agree with Aristotle:

      Yet the true friend of the people should see that they be not too poor, for extreme povery lowers the character of the democracy; measures therefore should be taken which will give them lasting prosperity; and as this is equally the interest of all classes, the proceeds of the public revenues should be accumulated and distributed among its poor...

      ...Every effort therefore must be made to perpetuate prosperity. And, since that is to the advantage of the rich as well as the poor, all that accrues from the revenues should be collected into a single fund and distributed in block grants to those in need, if possible in lump sums large enough for the acquisition of a small piece of land, but if not, enough to start a business, or work in agriculture...

    • Re: (Score:3, Insightful)

      Uh....no.

      Every tech increase creates new need for people. Somebody has to service the new things. Automation cannot replace a human brain, period. Forge the bs from Musk and the other AI people who peddle FUD as clickbait and the scam idiot hedge fund children.

      Your idea only works if human thought stops. Queen Victoria knighted a guy for his research which "proved" the world economy would stop because there weren't enough wales to supply whale oil as fuel. Ethernally mythical human replacement AI/automation

  • by Camel Pilot ( 78781 ) on Monday May 06, 2019 @10:46PM (#58549838) Homepage Journal

    Why not talk about something way more practical like lowering the retirement age, or decreasing the work week, etc.

    Besides if you start handing out money, that money will be spent on goods and services that are scarce (and even more limited as fewer people will enter the workforce) so inflation takes off rapidly.

    • by PopeRatzo ( 965947 ) on Monday May 06, 2019 @11:02PM (#58549890) Journal

      Besides if you start handing out money, that money will be spent on goods and services that are scarce

      Care to explain that? It sounds like you're applying behavior of the very wealthy to those in the lower 1/3.

    • by shanen ( 462549 ) on Tuesday May 07, 2019 @02:17AM (#58550478) Homepage Journal

      Your subject triggered an ancient memory, but I sure don't see the basis of moderating your comment "insightful", even if you'd remembered your question mark in the body. So far I'm mostly just dazzled that at 1/16 o'clock on the frontpage timer it already has over 200 comments. So the linking question is:

      Why the fascination with UBI going back over 40 years?

      That's when it was the national debate topic of the year. At the time I was never able to devise a convincing affirmative case, but I've always been a rather slow thinker. I can do it now, and amusingly enough, it ties into your second paragraph about how the money is spent.

      So the premise of the case for the UBI is based on ekronomics, a time-based version of economics. Ekronomics 101 stars by dividing time into essential working time, investment-related working time, and recreational working time. The crisis that not only justifies but even requires a UBI is the collapse of essential working time in advanced societies. Various complexities on top, but the key problem is that about 90% of the work in advanced countries is not essential (limiting the focus to the official 40 hours/week of full-time work).

      What happens to the rest of the workers whose time is not essential?

      That's where the UBI comes in. Either that or you might as well kill them off. The real question is how you juggle the investment and recreational time. And now we're back to the spending question. My latest solution idea is basically a different kind of sales tax, where essential goods and services are tax free, recreational goods are taxed at the highest rate, and investment stuff is in between.

      As usual, I bid you ADSAuPR, atAJG.

    • The obsession with UBI is that it has the air of being "closer to" a market-based solution. Money is given out, but what people do with it from there is exactly the same. It's an intellectually lazy solution: simply input a minimum income floor into the system.

      But what people need isn't money. What they need are things like water and housing. My gut instinct tells me that providing those things directly will be more efficient than having all kinds of middlemen (landlords, Pepsi co) in charge of administer
  • by GuB-42 ( 2483988 ) on Monday May 06, 2019 @10:54PM (#58549860)

    UBI is universal, that's in the name. If it is somehow restricted, it isn't universal anymore.

    One of the major argument for UBI is that it simplifies welfare programs. If everyone gets the same thing, there is no need to spend resources making sure the right amount go to the right person.

    In all the experiments I've seen, what they called UBI was just a particularly generous welfare program, with none of the simplifications.

  • No Evidence. (Score:5, Insightful)

    by Kaenneth ( 82978 ) on Monday May 06, 2019 @11:03PM (#58549894) Journal

    Absence of Evidence is not Evidence of Absence.

    There is no proof it *doesn't* work.

    • Re: (Score:3, Insightful)

      by techm ( 5418240 )
      Absolutely. All these "studies" are either manufactured nonsense pandering to a predetermined point of view and/or cite poorly conducted or incomplete pilot projects. We just just saw the UBI pilot in Ontario, Canada trashed last year before it could be completed. It's not a failure because the politician that supported the corporate detractors cancelled the program prematurely.
  • by mschaffer ( 97223 ) on Monday May 06, 2019 @11:05PM (#58549902)

    If there is nobody with an income lower than the UBI, then this is the new flat broke. Inflation will adjust to this level and the UBI will need to increase until the new UBI is a living wage. Then the cycle repeats, and so on, and so on....

    Eventually our robot overlords will try to kill us all, muttering something about being a virus...

    • That is assuming it is the lower end which controls inflation. It is shortages in the real economy that drive inflation. As long as the real economy can supply what people need to live(meaning people or machines are doing enough labor to support the population), then inflation won't spiral out of control. One advantage/example will be that communities can emerge outside of major cities that are financially self supporting, relieving housing pressure in urban areas and creating jobs for housing constructio
  • by Pfhorrest ( 545131 ) on Monday May 06, 2019 @11:07PM (#58549908) Homepage Journal

    If you give everyone some payment of X% the mean income as the basic income payment, and tax everyone X% of their income to fund that, that is a revenue-neutral basic income, mathematically guaranteed. How do they reckon the "cost" of that? Is it zero? That's what "revenue-neutral" means. Is it X%? If you're giving everyone a basic income of 20-30% of the mean income, and raising total taxes of 20-30% GDP to fund that, but everyone below the mean income (which is about 75% of the population) ends up getting more out of that scheme than they pay into it, it's not really fair to say that it "costs 20-30% of the GDP". That's not money gone out of the economy, that's all money still in the economy, just different people get to decide how to spend it than they otherwise would. Instead of one rich person buying themselves a new summer house (and one other rich person getting the money from that sale), 20,000 people who might not have made their rent this month will get to keep a roof over their head instead (and 20,000 landlords don't miss a month's rent payment).

    • by Solandri ( 704621 ) on Monday May 06, 2019 @11:40PM (#58550032)
      Your error is analyzing this in terms of money. Yes it's neutral in money. The problem is money is not an absolute representation of value (just look at Venezuela). Productivity is the absolute representation of value, not money. Money is a representation of productivity; but the ratio of money to productivity does not remain fixed. It changes based on how much money is out there versus how much productivity your citizens are generating (this was the entire problem with the gold standard, and why all modern economies have moved to a fiat currency).

      If a UBI encourages some people to stop working, then it becomes productivity-negative* even if it remains money-neutral. Meaning the purchasing power of your UBI decreases even though the dollar amount stays the same. Or put another way, the country's GDP decreases because some people opt not to work, so the percentage of GDP that the UBI costs increases. If you adjust the UBI up to compensate for the loss in purchasing power, that creates a feedback loop with more people opting not to work, further reducing GDP, raising the percentage of GDP that the UBI costs, forcing you to adjust its dollar amount upward to compensate again, etc.

      * It's conceivable that a UBI could be productivity-positive. e.g. If it discourages people from resorting to crime. The productivity gain from that could conceivably offset the productivity loss of people choosing not to work. That's why it's worth running experiments with it even if it's fundamentally flawed and doesn't work. There could be localized regimes in the solution space where it or a smaller version of it helps.
    • Gosh darn it, this is politics, you're not supposed to use "math" and "logic"!

      As long as it's paid for by higher income taxes, not additional deficits, the UBI is a smoothing algorithm for net income.

      But it's not just that. It would be:
      - a stable floor of economic activity (poor people are more likely to spend the money);
      - a replacement for welfare programs that require far more administrative burden and intrusive oversight;
      - a significant help for people who want to go to university or trade school without

  • by stikves ( 127823 ) on Monday May 06, 2019 @11:08PM (#58549914) Homepage

    It sounds good, in theory, to live in a Star Trek style utopia. However reality is much hasher. We are nowhere near the productivity levels that can sustain a human population without meaningful work. We still need people to lay bricks, clean toilets, cook meals, and even write computer programs.

    And one would not want to live in a situation where entire population is fed by an automated farm. For each optimistic Star Trek, we have many "Soylen Green" situations. If you do not contribute, we might as well contribute as "food material" for other people.

  • Oh really? (Score:5, Insightful)

    by Chibi Merrow ( 226057 ) <mrmerrow&monkeyinfinity,net> on Monday May 06, 2019 @11:14PM (#58549936) Homepage Journal

    The report concludes that the money needed to pay for an adequate UBI scheme "would be better spent on reforming social protection systems, and building more and better-quality public services."

    ... says a report commissioned by the trade unions who staff those public services?

    I think Phillip Morris has a report that says everyone should smoke cigarettes to prevent Alzheimer's, too.

  • by technosaurus ( 1704630 ) on Monday May 06, 2019 @11:39PM (#58550024)
    Once you give poor people a guaranteed source of income, a payday-loan-like industry will spring up to exploit it.
  • Trouble with UBI (Score:5, Interesting)

    by rsilvergun ( 571051 ) on Monday May 06, 2019 @11:40PM (#58550030)
    is it only works when it's Universal and guaranteed. First, it cannot be means tested. If it is then it breaks down quickly. Yes, this means billionaires get their UBI payment. Next, it goes to everyone, even the people you don't like.

    What makes it valuable is a) you save money not trying to guess who deserves it and b) you save money because you're not spending cash cleaning up the mess left by poverty. e.g. malnourished kids crammed into dirty cities where the jobs their parents need are getting no education and little supervision and eventually turning into drug addicts and/or criminals.

    This is where "free" money comes from. If I give you $1000/mo and you use that to live well and stably then I might save $500/mo when I don't have to lock you up and another $500/mo when I don't have to treat the stage 4 cancer you got because it wasn't treated early on.

    All that said there is one case where UBI and other Social Democratic reforms don't pay off: If you're willing to let people die quick, painful deaths and to kill them brutally when they lash out before they die. As long as you're willing to brutally repress the lower caste (and to break society up into easily manageable castes ala skin color, job type, or just some random thing you picked) then you can save both the money on UBI and the money imprisoning and/or treating the very sick.

    If you're one of the ruling elite this is the ideal situation. Folks often ask, how will the Capitalist do without a middle class to buy his goods? The answer is he'll stop being a Capitalist and become an Oligarch. The King didn't need the peasants to buy his goods. He already owned everything there was to own. He was King.
  • by Truth_Quark ( 219407 ) on Monday May 06, 2019 @11:55PM (#58550082) Journal

    It is the expenditure equivalent of a flat tax and as such is regressive.

    Is it though?

    Looking at the homeless you find a lot of people who have difficutlies doing stuff because of psychological problems or disadvantaged groups. UBI should remove the hurdles for demonstrating need, which should be progressive for the bottom of the bottom.

  • I'll agree that UBI doesn't work... but only when viewed in the context of our current financial system. When you have a financial system that is based on Keynesian principles of debt and inflation, any implementation of UBI simply becomes a drain on everyone by adding even more money in to the economy and ending up as a burden that pushes closer to hyperinflation (whether it pushes over the edge or not depends on a million other factors)

    Under some other models such as most Austrian systems, I'd argue that UBI isn't actually even necessary.

    Under my preferred system - which is roughly Austrian based but nevertheless eschews libertarianism for a more balanced liberal view (definitely no time for a full explanation in a slashdot comment; but feel free to ask and maybe I can write more later) - there's a fixed monetary supply and a simplified tax system for funding public goods. In order for those unable to productively work and to encourage those who are unable to produce immediate income but want to work on longer projects that will eventually produce good income and strengthen the economy, a UBI does indeed make sense.

  • I don't believe it (Score:5, Insightful)

    by tsa ( 15680 ) on Tuesday May 07, 2019 @02:13AM (#58550468) Homepage

    Come back with a new report when you have done a good experiment.

  • by dcw3 ( 649211 ) on Tuesday May 07, 2019 @03:22AM (#58550586) Journal

    "Research conducted for Public Services International, a global trade union federation"

    You can stop reading right there. When the sponsor of the study has a vested interest in the outcome, you can just stop reading.

  • by ytene ( 4376651 ) on Tuesday May 07, 2019 @03:33AM (#58550622)
    Let me get this right.

    Prevailing economic wisdom suggests that it is a good idea to give tax cuts to the rich (which, in most cases, results in their net income rising by several large multiples of the proposed per-person UBI) then that's a good thing, because... umm... well, it is claimed that it helps promote more economic growth through things like trickle-down spending.

    But that same prevailing economic wisdom now wants to tell us that cutting out the middle-man [the super-wealthy] and giving money directly to those that need it most won't work. Huh?

    OK, OK, someone is going to reply and tell me that these are "two different things". Maybe, but only in method. The outcome is comparable, because the massive tax cuts put more money in the pockets of super-rich, while UBI is proposing to put more money in the pockets of everyone, with the maximum benefit going to those with the lowest income.

    Based on trends over the last 70 years or so, we are already at a point where a huge part of the population are [treated as] surfs in all but name. What's next? Indentured servitude?
  • by Wild_dog! ( 98536 ) on Tuesday May 07, 2019 @07:43AM (#58551276)

    Seems the linked article is more of an opinion piece.

    Studies would have some sort of scientific method.... not just the structure of a study with opinions and arguments populating the entire body of the text.

    Statements such as "It is a lazy utopian remedy" tend to deflate this in terms of an actual "Study"

The explanation requiring the fewest assumptions is the most likely to be correct. -- William of Occam

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