Friday, June 10, 2016

Should the Swiss Have Rejected the Basic Universal Income Referendum?

Earlier this week, the Swiss people overwhelmingly rejected a referendum to enact a basic guaranteed monthly income of 2,500CHF, or about $30,000 annually. While $30,000 seems like a lot, Switzerland does have the highest cost of living in the world. What is interesting to note here is not so much the rejection of the referendum as is the fact it is even being considered. Switzerland would have been the first nation to have implemented basic income on a large scale. The basic income becomes ever closer to becoming a reality. In 2017, Finland is to conduct a social experiment by giving 10,000 randomized individuals €500 monthly. Ontario and Utrecht, the Netherlands are also conducting similar, smaller-scale experiments later this year. Were the Swiss right in rejecting such a referendum?

One thing that has to be said regarding the Swiss referendum specifically is that the basic income would have been additive, that is to say supplement the already-existing social welfare system. There is also the question of whether a basic universal income would be a good way to battle increased automation. I've taken a look at the arguments behind whether robots and automation will take over in the labor market, and the prevailing economic literature shows that concerns are overblown. What about as general poverty alleviation?

One of the bigger issues with a basic income, much like I elucidated upon when analyzing the topic a couple years back, is not simply that it disincentivizes work. It has the real potential to punish those who work. For basic income to work in a place such as the United States, the U.S. government would need to increase tax revenues as a percentage of GDP by another 10 percent and eliminate most non-health social spending. With more workers receiving a basic income, the tax burden more heavily shifts to workers. Alternatively, it would be economically more effective to scrap the convoluted welfare system for direct cash transfers. Libertarian economic scholar Charles Murray recently made such an argument. It would be enticing to take on Murray's proposal, assuming that it could be maintained. However, how much could we guarantee that the welfare system would be severely reduced or eradicated? How much could we guarantee that the basic universal income stays basic, and doesn't become another form of government largesse?

Ultimately, I am intrigued to see how the social experiments in Finland, Canada, and the Netherlands turn out because it can provide more conclusive insight on how well basic income may or may not work. I like the idea of a basic universal income replacing the welfare state in concept, but I have my severe reservations about basic universal income being implemented on a large scale. While the results of the aforementioned basic universal income experiments play out, might I suggest such more incremental alternatives, such as removing occupational licensing, allowing for unpaid internships, cutting back on unemployment insurance, just to name a few?

7-17-2016 Addendum: I came across this essay from the Center on Budget and Policy Priorities (CBPP) on why basic universal income is problematic. The author argues that a) having a basic income in addition to the welfare state is not politically viable, and b) having the basic income replace the welfare system would increase poverty because the spending isn't as well-targeted. The article is significant since CBPP is Left-leaning, and some of the major proponents of basic income are Left-of-center.

1 comment:

  1. I support basic universal income in theory. I say "in theory" because I'm not well-versed in economics or policy like yourself. It has the potential to eliminate a lot of income inequality, racial disparity and gender disparity. Basic income would give dignity to every citizen, possibly might end homelessness, and prevent people from exhausting themselves in shitty minimum-wage jobs for hours on end just to survive and get the basics. Overall, I think it'd be a nicer society, and possibly a more creative one. If a call-center worker, say, were suddenly freed by a basic income to pursue painting or theatre, wouldn't our society be more enriched by her painting or theatre? Of course, as you say, the implementation of basic income might result in massive government insolvency, a higher tax burden, or a political minefield, so that's why I'm saying things like "theory" and "potential" here.

    One story I heard is that when universal basic income was given a "test run" in various American cities in the 70s, social conservatives wound up disliking it, since the extra income motivated women to divorce their husbands, which is why the program was discontinued. Shock horror. LOL. It might just be a policy "urban legend".