Monday, 4 June 2018

Killer Arguments Against Citizen's Income, Not (17)

From Medium.com:

The author misses no opportunity to make an unsubstantiated claim and then contradict herself as to what the effect might be:

A Universal Basic Income is capitulation to capitalism

Capitalism is A Very Good Thing indeed, if you strip out the rent-seeking. UBI goes with the flow of capitalism, so must also be A Very Good Thing.

While sovereign governments (those that issue their own currency) can certainly afford a UBI, simply throwing money at a problem, instead of addressing its root cause presents serious concerns.

Firstly, it ignores overwhelming psychological evidence regarding the impact employment has on our physical and mental wellbeing. We derive our sense of self-worth from work. It is where we meet many of our friends, partners. Income replacement does not sufficiently offset the impacts of involuntary unemployment.


Agreed, it's nice to have a job that is reasonably bearable/well paid, and it is horrible being made redundant and then having all your job applications turned down. A UBI softens the blow of unemployment, so is a good safety net for people on the margins.

More to the point, a UBI is paid, by definition, to those not in a position to seek and/or accept work - stay at home parents, other carers, the disabled, students, the enforced early retired.

Second, a UBI is designed to work as a partial or complete substitute for existing welfare and social security programs.

Correct, that reduces the cost enormously. I also fail to see why a welfare claimant would prefer to have all the means-testing, bureaucracy, conditionality, cheating (on both sides).

It was only a matter of years ago politicians were railing against handouts. But former tech executive, and Presidential candidate, Andrew Yang told the New York times that a UBI is necessary for capitalism to continue. Andrew Yang — in his words “I’m not a career politician… I’m an entrepreneur who understands the economy.” Oh, and he is running for US president in 2020.

If the Silicon Valley suite love the idea, you can bet your socks it’s one that works against the interests of most people.


Non-argument, don't blame a message for its supporters, as Bayard always says.

Here are four reasons why a UBI is a bad idea:

1. A UBI is a smokescreen for the destruction of the social safety net

The godfather of neoliberalism himself, Milton Friedman, argued in his book Capitalism and Freedom that a UBI is an efficient way to eliminate and privatise public sector programs including welfare, social security, the minimum wage, public health, housing, hospitals, pensions and aged-care. “If enacted as a substitute for the present rag-bag of measures directed at the same end, the total administrative burden would surely be reduced,” he wrote.

Paying out of pocket for things once provided by the public sector means it is not a Universal Basic Income at all, but a poor tax by another name.


UBI is not "destruction of the social safety net", it IS the social safety net and the best kind of safety net, it's always there. How on earth is a cash payout a 'poor tax'? Again, she's damning the idea for its supporters, most proponents just want to replace cash benefits and would leave the NHS and state education as quite separate universal benefits.

2. A UBI has the potential to further drive down wages

Some advocates claim a UBI empowers workers to reject jobs with insufficient compensation. To the contrary, a UBI that covers the cost of living creates zero incentive for employers to provide wages that do the same and encourages the continuation of outsourcing.


See what she did there? UBI recipients can refuse very low paid work (correct), which ought to put upward pressure on wages - not downward as she says. She makes the equal and opposite claim (which has some substance) that employers will use UBI as an excuse to reduce wages. The two largely cancel out and overall, the impact will be negligible.

But, if we go with her incorrect assumption that wages fall, why would this encourage outsourcing? Outsourcing and automation are employers' response to HIGH wages, or not-so-high wages plus HIGH payroll taxes!

3. Tax implications may render the UBI redundant

Economist, Ian Gogh has described a UBI as a “powerful new tax engine that pulls along a tiny cart.” Particularly for the middle and working class (who already pay more than their fair share proportionally), a UBI risks driving workers into higher tax brackets, meaning their “free money” will inevitably land back in government coffers, defeating the purpose of a UBI in the first place.


The UBI itself is not taxable, and unless "middle and working class people" have a marginal tax rate of 100%, the claim is clearly nonsense.

4. A UBI is expensive & barely makes a dent in working-age poverty

Experts have predicted a UBI could cost anywhere between 6.5% (UK), to 35% of GDP (France and Finland), but barely makes a dent in working-aged poverty which would decline by less than 2%, according to a report by Compass, by less than 1% for pensioners. Though child poverty could decline from 16–9%, a UBI still doesn’t deliver the necessary bang for the government’s buck.


In the intro, she writes that a sovereign government can always afford to pay a UBI, why is she now whining about the 'cost'. It is not a cost, it is a transfer, and the net transfer will be a small fraction of the gross 'cost' - the more equal a society is to start with, the lower the net transfer.

The rest of this claim is not without substance, it's something Malcolm Torry worries about but I don't. The way to fix this particular perceived issue is to have a higher UBI entitlement with some measure of income based withdrawal.

But of course, it is a bit fatuous of here to highlight the impacts on child poverty and pensioner poverty, two groups who would clearly have nothing to gain from a Job Guarantee, her preferred alternative, see below.

If we’re going to spend that kind of money, it is not unreasonable to demand an ROI that equips current and future workers with transferable skills capable of earning them a lifetime’s worth of income. This is why a job guarantee program is essential not only for eradicating poverty but ensuring the future health of the global economy.

Aha, she's a JG-er... What about the aforementioned stay-at-home home parents, other carers, the disabled, students, the enforced early retired? You'd still need welfare for them, and the level of income they receive would have to be somewhat lower than the income from a Job Guarantee, or else few will sign up to it unless forced to.

Why a job guarantee trumps a UBI any day

Even the most ardent neoliberal recognises that for capitalism to continue, more people need to afford to buy, lease or invest in non-essential items.

A job guarantee ensures a permanent pool of skilled workers the private sector can call on when their need for staff increases, and creates an employer of last resort in lean times to keep the economy ticking over. If the private sector has a problem with a job guarantee, it can defeat it entirely by employing more people.


Still no catering for the stay-at-home parents etc. And what makes her think that the government can correctly guess which skills will be needed and what the best kind of training is? Why does she think that businesses will suddenly stop automating and outsourcing? Does she not realise that a UBI also "keeps the economy ticking over"?

There are plenty of industries within the public sector badly in need of both human and financial resources. The Department of Child services comes to mind, along with mental health, domestic violence services and shelters, police resources for sexual assault investigations (including provisions for rape-kit testing) and white collar crime (hello RBS), not to mention skills training, the sciences and education.

That's not Job Guarantee, that's Job Creation. Some of that stuff might be worth doing, in which case the government should be paying for it to be done anyway, the rest is digging and filling in potholes. And however well trained or experienced somebody is in those jobs, it does not equip them for working in the private sector.

While some small-scale UBI experiments have been trialed in countries like Finland and Canada, no economy-wide tests have been conducted.

Yes they have.

The same cannot be said about a Job Guarantee which has already been proven to work in the US, UK and Australia whose post-war full-employment policies were responsible for the creation of the middle class and the subsequent prosperity that lasted all the way-through to the late ’80s, early ‘90s.

Is she talking about British Leyland?

Unfortunately, permanent poverty is no longer seen as a problem to overcome but a policy tool to maintain price stability, which is why we are unlikely to see any similar guarantees anytime soon.

Woah! Try telling UBI campaigners to their face that they don't see "poverty as a problem to be overcome"!

A UBI is an ideological surrender to capitalism. It should be renamed ‘Not My Problem’: because it formalises the complete abdication of the government’s responsibility for employment.

Capitalism is good, see above. Does she seriously credit a load of bureaucrats to know exactly what sort of training each individual needs, and to provide it? Beyond a certain point, people are best off making their own decisions.

EPIC FAIL.

21 comments:

Lola said...

Epically stupid. All jobs 'created' in the taxpayer funded sector that she espouses must come ate the price of jobs in the productive sector. Sigh.

Ben Jamin' said...

In work there is freedom. Ummm. What nice people said that.

Let's tax people for not working. Then we'll all be happier. Right?

Ben Jamin' said...


From Georgism Reddit. Some nice Germans.

https://www.welt.de/regionales/bayern/article176872852/Steigende-Grundstueckspreise-Der-Boden-gehoert-allen.html

Mark Wadsworth said...

L, some might be worth doing, some are make work wealth destruction. Separate issue.

Mike W said...

MW
Yes, she is using the policy preference model from MMT the JG.
I dispair that the framers of MMT and the UBI (who I admire deeply) have come to this 'either or position'. I wholey agree with you that they miss that UBI is a 'welfare reform' above all else.

First we desire to sweep away the 'unworkable', unfair means testing we have and apply something better for the most weak and vulnerable. Human dignity. MMT/UBI/LVT are not about destroying capitalism, but transforming it. What some MMTers, who also support the JG policy all to ofen, passover, is that it is a JG for those who attend a job center and insist they wish to work, and are able to work, and are willing to travel to do so. The 'employer of last resort' model.
They are not identical policy solutions. As you say, what about the left behind? A work house?

However, putting my MMT/JG hat on, I would point out that Warren Mosler, years ago,also provided a sociological argument for JG. It is made more likely that someone who works year in a JG can move into a job that someone moving from 'pure' unemployment. So I disagree with that part of your (state/private divide) conclusion.

Also Randall Wray has very recently argued that GT is mostly in the public sector sure, but devolved down to local (city/ regional direction) and will/can involve training. But, importantly the jobs are set at a states Minimum Wage, and I would add, if I may dare, with 12 month, 18 month contracts. Importantly, even he admits you can be fired from JG program he advocates! So I think the greatest MMTer's(Bill, Randy, Steph) flow charts can still end up back at UBI for many.

Most JG critics, seem to focus on the inflation aspects of this model Lola. Your case above, would only hold at 'full employment' surely? In which circumstances you certainly stop JG programmes. We all agree on that.

MW, with reagrd to your conclusion it seems to me we will need UBI to replace what we have. GT to moved the willing from the dole, if they can show the commitment, effort and discipline to work. And finally something like your/ Adam Smith Institute, 'Education Voucher Scheme' but for life long training.I'm assuming we close 50 odd universities and rebuild the FE sector in each city to match demand :)

Thus, the citizen of the future can choose which of the three: UBI, UBI+work, JG(at minimum wage) or EVS(in industry led FE). However they 'finance' their working/training lives is up to them.

Mike W said...

Sorry can't think why Gin and Tonic, GT slipped in to above.Hope I havent confused anybody :)

James James said...

Scott Alexander has a good article against basic jobs, with some original arguments.

http://slatestarcodex.com/2018/05/16/basic-income-not-basic-jobs-against-hijacking-utopia/
http://slatestarcodex.com/2018/05/28/highlights-from-the-comments-on-basic-jobs/

To my mind, a major problem with basic jobs is that if you have a horrible basic job, with an abusive manager or terrible conditions, you can't leave it without getting your benefits cut. Basic jobs are compulsory jobs, almost slavery.

To my mind, one of the advantages of Citizen's Income is that job centres would stop being compulsory. They could still be available on a voluntary basis, but fewer people would use them, even if they were looking for a job. You could conduct your job search in the way you believe is most efficient, rather than what the Job Centre thinks is most efficient.


Also, she seems to think the private sector is an organised conspiracy against the workers. "If the private sector has a problem with a job guarantee, it can defeat it entirely by employing more people." The private sector isn't a monolithic agent that can "have a problem with" anything.


"A UBI is an ideological surrender to capitalism. It should be renamed ‘Not My Problem’: because it formalises the complete abdication of the government’s responsibility for employment."

Ideological surrender to capitalism and the abdication of the government's supposed responsibility for employment sound great to me.

I am very interested to see what UBI does for attitudes towards the homeless and/or begging (not the same thing). If anyone is homeless and/or begging after UBI, it won't be for lack of money, but either mental problems (https://www.newyorker.com/magazine/2006/02/13/million-dollar-murray), laziness/greed, or something else. To what extent will it lead to the abdication of our responsibility to each other? "They've got their UBI; any remaining problems are their own fault/they can deal with themselves."

Mark Wadsworth said...

BJ, for society as a whole, work is clearly good, because stuff gets created. Apart from that, there's nothing particularly noble about it (but better than living off rent).

BJ, that German proposal is merely to capture the uplift when planning is granted, not proper LVT. But at least they recognise it is unearned.

MW, largely agreed. No harm in the government offering basic training in certain things (three Rs), if people on a UBI want to voluntarily take part, then at least that shows potential employers that the person has a bit of initiative.

JJ, good links, ta. He's nailed it with some proper practical objections.

Lola said...

MarkW Indeed. Some are 'worth doing' - system of justice, defence included. But they will come at the cost of jobs in wealth creating private business. Or, they are a necessary overhead that is better carried out by the state collectively as an agent for us all. The authors point was that she would 'create jobs' for people. How, exactly? And how would they be 'productive'?

mombers said...

JG does smack of a work house, and does not do anything for those providing the c. 50% of unpaid labour (home-makers, carers, etc.)

Mark Wadsworth said...

L, agreed.

M, exactly.

Mike W said...

Lola,

The authors point was that she would 'create jobs' for people. How, exactly? And how would they be 'productive'?

In the same way the council 'rat catcher' is productive and her catch/wages contributes to GDP :)

Randall Wray would say to us (1) the UK economy is not like the 1930s USA. We are not talking about public sector, gaint dam projects across Dorset. But (2) council and citywide projects. Focus support on local, Minimum Wage jobs on short contracts. Government stimulus moves to those in need at the bottom. NOT - NOT, middle class, civil servants already on good salaries and just pocketing a government tax bung. (3)It is in fact one of the charges made by the JG/MMTers against UBI, that it is the most unproductive solution. Folks my choose to do nothing under UBI. In the JG, MMTers argue they produce some contribution via new goods and services.

On this last point, MW above puts his finger on the deeper: work = 'nobility' aspect also playing out in this debate. For the left, this comes from Marx and for the right it comes from Samuel Smiles. Interesting how they completely agree on this question.

Bayard said...

"In the JG, MMTers argue they produce some contribution via new goods and services."

But that is assuming that there is a demand for those new goods and services. If that is the case, then why are those goods and services not being produced already?

What the JGers seem not to want to see is that it is perfectly possible for an economy to have more potential workers in it than there are jobs for them to usefully do. The alternatives then are either to create useless jobs for them to do, pay them enough to keep them from starving, allow them to starve to death or starve them into emigrating, hence exporting the problem somewhere else. If you are going to take the second option, then it is better not to ban those who are being paid from working, as they can then work part time and one job can be shared between two people, meaning that two people can do half a useful job instead of one person doing a useful job and one doing a useless one, plus the advantage to employers of having a fully trained and knowledgeable cover for holidays and sickness.

Bayard said...

I have to hand it to Claire Connelly, not one, but four KCIs, each one new and each one stupider than the last. She seems to display a complete lack of understanding as to the purpose of a UBI, which is, AFAICS to prevent the unemployed becoming desperate enough to riot in the most cost efficient way. It is not 1. a payment to replace all publicly provided services, 2. a means to prevent jobs being exported by outsourcing, 3. a means by which everyone can be paid more or 4. supposed to make us all rich.

In point of fact her KCN No 3 is actually a feature, not a bug. Yes, most people will end up paying exactly the same in extra tax as they receive in UBI. That's what's supposed to happen, it's how the whole scheme is affordable.

"The rest of this claim (No 4) is not without substance, it's something Malcolm Torry worries about but I don't. The way to fix this particular perceived issue is to have a higher UBI entitlement with some measure of income based withdrawal."

I disagree. Without the nil tax band at the bottom of the pay scale, workers will be paying tax on all their wages, which will reduce their take-home pay, so the opportunity for an employer to reduce their wages to allow for the UBI is limited without there being a reduction in total earnings. There is also the minimum wage to take into account: in most cases people who are earning little enough for the amount they gain from their UBI to be greater than what they lose through extra tax are almost certainly going to be on the minimum wage, thus it would be illegal for their employers to reduce their pay.

Mike W said...

Bayard,
'If that is the case, then why are those goods and services not being produced already?'

Because business thinks it cannot make a profit from investing in the factors including the labour at that time? Even if you have pushed interest rates down to say 0%

'The alternatives then are either to create useless jobs for them to do, pay them enough to keep them from starving, allow them to starve to death or starve them into emigrating, hence exporting the problem somewhere else.' Agreed except for the wording 'useless' :)

My issue, which I wanted to run past folks here, is that if we look at Randall Wray above, and my local public sector, rat catcher jobs etc, how quickly will inflation start to kick in in this minimum wage model?

Shiney said...

@MikeW

"Because business thinks it cannot make a profit from investing in the factors including the labour at that time".....

You answered your own question. - the value 'created' by the job being done is less than the value expended - i.e. the payment for the work done. Wealth is therefore destroyed.

Mark Wadsworth said...

MW, agreed, *some* UBI recipients "may choose to do nothing". That is expected and planned, the carers, students etc won't.

And by definition, no JG recipient can choose to do nothing.

But the whole population gets UBI, and presumably only a tiny minority would be forced into JG, so it's comparing apples and pears.

B, ta re KCN#3, good point.

I disagree hotly on your counter-counter-argument to 4:

"Without the nil tax band at the bottom of the pay scale, workers will be paying tax on all their wages, which will reduce their take-home pay.."

Under the current means-testing rules, with income tax on top, overall withdrawal rates are between 70% and 100% of earnings all the way up to a median income. Despite this, half of people are prepared to work for a median income or less.

The point is to get the 70% - 100% rate down as low as possible, to a humane amount like 30% or something, whether we call that income tax or benefits withdrawal or anything else.

Sh, thanks and agreed.

James James said...

"in most cases people... are almost certainly going to be on the minimum wage, thus it would be illegal for their employers to reduce their pay"

Surely if we had a Basic Income, the minimum wage should be abolished along with the personal allowance? Abolishing the minimum wage is one of the appeals of a Basic Income.

Bayard said...

Mark, apologies, I misunderstood you, I thought you were arguing for a means-tested UBI, not that "some measure of income based withdrawal." meant income tax.

"Abolishing the minimum wage is one of the appeals of a Basic Income."

As with the point above, I was looking at the introduction of a UBI into the existing tax system i.e keeping income tax and VAT etc. Abolishing the personal allowance is a necessity, abolishing the minimum wage is not and therefore probably wouldn't happen, though I agree it would be a good idea to the extent that it would create employment. Where it is not a good idea is where employers would reduce wages to allow for the additional income for their employees provided by the UBI.

Mark Wadsworth said...

B, that's the point. Income tax *IS* income-based benefits withdrawal. We've got the tax system in place, with PAYE codes, self-assessment etc, we don't need a parallel and far more expensive and intrusive means-testing system.

B and JJ, on National Minimum Wage I am agnostic, it is neither as bad as its detractors claim nor as good as its proponents claim.

mombers said...

A modest minimum wage is essential under UBI. Businesses are encouraged to increase productivity by automating low skill tasks instead of hiring someone for a pittance in a dead end job. Those with caring responsibilities can also get a reasonable extra bit of income by working part time.