You can't simply cut down working hours, since the problem isn't that there aren't enough jobs for people - it's that there are people who are unable to be productive enough to fill a job.
The UBI gradually transfers responsibility for someone from the government to an employer, as opposed to a minimum wage + welfare system, where the transfer is a lot more sharp.
(I haven't decided if I agree with this, and how plausible it actually is - but I think this is the argument for why UBIs are necessary, and necessary now.)
On the other hand customers may not value the work enough and the job is just not viable, there is no market. Then you have to either bring the costs down by improving efficiency or automating it, or the job has to go away. Not paying a livable wage to the employers is just exploitation, giving benefits to the employers just means subsidizing the business owners and customers.
I am a bit unsure about the scenario when we just let the job go away and have a new unemployed we may have to support with benefits. Wouldn't it have been better to just subsidize the job a bit instead of having to pay for a new unemployed? But that of course creates incentives to underpay employees and take advantage of subsidies. It is probably harder to reason about this case because it is now a dynamic scenario and it is not obvious how things will turn out.
I am still struggling a bit to follow your thought process but I think you may have a point. I will probably have to add something later.
If we are in a situation where a part of the population is plainly unable to perform any work that pays for a living and we are unable to improve their skills, then we are really is some kind of trouble. They would essentially be like handicapped people. In analogy we would have a moral obligation to support them and it seems better to let them do some work not paying for a living and provide benefits on top of that instead of just having them fully on benefits. Kind of contradicting what I wrote above. And we are also back at the point from above of creating incentives to underpay employees.
The obvious solution would be to not get into this situation in the first place, to heavily invest into education and training. But if that is not good enough? How does reality compare to this scenario? What is the outlook? It is also not obvious to me whether a universal basic income or minimum wages and a conventional welfare system would provide better incentives. But I think I now at least understand the argument.
And that's exactly the situation UBI is intended to solve because that's where automation is taking us. In the near future, only the very intelligent or machines will work because the machines will put most people out of work leaving only room for the very skilled.
> The obvious solution would be to not get into this situation in the first place, to heavily invest into education and training.
That is not a solution because it assumes wrongly that everyone is capable of performing knowledge work; they aren't. A very large minority of people simply won't be able to do anything worth paying them for, they won't have the capacity to do anything we can't get machines to do for far cheaper. When the machines take over blue collar work, and they will, the economy will have to change to something like UBI for it to continue working.
- being punctual
- staying healthy
- staying positive/motivated, not making excuses
- presenting and speaking well
- importance of attention to detail and initiative
Anecdotally, I did work as a kid, didn't learn anything useful, did not learn responsibility, a bit of money I didn't really need, and it felt like a waste of time and left a bad taste overall.
I fully believe that in many, possibly most cases, work is beneficial for kids (as long as they're not from poor families in which case there will be too much pressure to overwork, affecting school/homework and taking away whatever little time they have to enjoy childhood).
"We'll just automate your job away" is one of the biggest empty threats along with "we'll just fire everybody, causing mass unemployment".
Employers fear a rising minimum wage because it eats into their profits. That fear translates into histrionics, threats and utopianistic predictions about the near future state of robot technology.
In the end when it happens they just deal with it and end up posting lower profits. As is the case in Seattle.
That combination looks bad for fast food front of house workers...
https://en.wikipedia.org/wiki/Automat#/media/File:Stollwerck...
Those things are bound to replace most food service workers by the 1920s at the very latest.
Did you also know that original automats from the 30s mostly went bankrupt in the same decades (60s/70s) that the inflation adjusted minimum wage was at its highest and Americans had the most disposable income?
Funny that.
Which doesn't work when jobs require uncommon abilities or highly specialized training and thus either can't be done by the other people or would be highly inefficient to train them to do and then not have them working full time.
> Some jobs don't provide enough income to make a living? Then have sufficient minimum wages, there is no point in doing any work that does not pay well enough to make a living.
And then any jobs whose economic value is below that minimum wage disappear, leading back to the first problem.
> Also universality, what is the point? Above some income you are essentially just paying yourself.
You are. Which means it has a built in phase out -- you effectively stop getting it once you've paid more taxes than you receive in basic income. Adding another phase out causes the marginal tax rate on middle income people to be unreasonably high and takes money away from them that would otherwise have come from higher income people.
A universal basic income has rich people paying poor people and middle income people paying themselves. A basic income with a phase out instead has middle income people paying poor people so the rich can have a tax cut.
A universal basic income has rich people paying poor people and middle income people paying themselves. A basic income with a phase out instead has middle income people paying poor people so the rich can have a tax cut.
This does not have to be true. You can simply phase it out and then adjust the tax structure accordingly. It is a zero sum game, you lower taxes by the same amount you cut the basic income for that person. At the high end you take away 11k basic income and reduce taxes by 11k, somewhere in the middle you reduce the basic income and taxes by 6k each and at the lower end you do nothing.
With matching tax structures there is really no difference between paying an universal basic income to everyone or only paying it towards the lower income range. I am not disagreeing that a flat basic income might be a lot simpler than trying to carefully adjust tax rates.
If there is literally no difference then what benefit is to be gained from the added complexity?
One of the big advantages of a universal basic income is that it gives you effective progressive taxation without a complicated system amoral people can game. If you have different tax rates then it creates opportunities for tax arbitrage and rich people can avoid paying the higher rates by doing things like paying a middle income salary to their otherwise zero-income college-attending children who pay a lower rate.
But flat tax + UBI is inherently progressive, so that's it. No phase outs + no tax brackets does exactly what everyone wanted anyway, but everyone universally pays the same rate and receives the same UBI so there is nothing to game. You get one choice, what the flat tax rate should be, which sets the amount of the UBI and determines how progressive the system is. It takes away all the knobs that politicians who don't know what they're doing (or corrupt politicians who know exactly what they're doing) can use to screw up the economy or shift more of the tax burden from the rich to the middle class.
Just look at Murray's proposal. All social programs get eliminated and now a single mother with 3 kids has to make do with $10,000 a year? Impossible; a cruel joke. An elderly person on disability? They get half the money a healthy 22yo couple gets. This isn't a serious proposal.
Actually, under Murray's proposal, she has to make do with 10k per year plus whatever she can earn. If she's earning very, then she's probably doing all the childcare herself and her living costs are not much more than a single, childless woman. If she works full time, then her total income (earned and unearned) will be 30k at minimum.
I'm not saying I support the proposal, but I do think your rhetorical question mischaracterizes it.
1) the subsidies are sufficient for both groups to do OK. This is fine in theory, but taxes would have to go up by a lot to have the minimum take care of the needy with the largest expenses. The UBI would have to be closer to 25,000 USD. If it's politically impossible to raise taxes to the level needed to let poor people live in dignity today, then what are the odds the American people sign off on the massive tax hikes needed to fund a non-destitution basic income?
2) the UBI simply isn't sufficient. Some people are getting money they don't need and other people are getting much less than they need just to survive. Every dollar that goes to the first group means there's less for those who really need it. In other words, the proposed system is a cruel dismantling of the welfare state.
Raising 3 children is practically a full time job, just one that happens to be unpaid. With the UBI the minimum wage would go away, meaning that the single mother is going to make a few dollars an hour in her part time job. That will barely cover the cost of the car she needs to get to her job, and the cost of the babysitter. The suggestion that being a single mother isn't much more expensive than a being a single young adult is absurd. I really struggle to respond to this. Just think about it: a single person can share an apartment and bike everywhere, enjoy the simple bohemian lifestyle. Being a beach bum doesn't cost anything. Do side jobs and hustle whenever you need a few bucks. The single mother in contrast needs a car and a house with rooms, just to start. That's going to take a big chunk out of the 10,000. Just living nearby a school is already expensive, and not optional. And the children themselves cost money too, in a million little ways. Diapers, clothing, entertainment, food, trips to the doctor, the list is endless.
I don't believe I'm misrepresenting the situation, this is just how the math works out. If the UBI means giving money to people who don't really need it then taxes must go up by a lot or the poor are getting a really raw deal.
And we're in agreement that properly raising three kids is a tremendous undertaking that demands either a whole bunch of money or almost all of your time.
I take issue, though, with the idea that a family of 4 living on other people's money should spend so extravagantly. You do not need a car. You need a 2-bedroom home within 2 miles of a school. Housing will almost certainly be more than half of your expenses. Food for 4 people is a few thousand more. Clothing, entertainment, and diapers cost almost nothing (do not use disposable diapers except on special occasions). If you want to work part time then find another mom who will swap days with you or pay you to take her kids while she's working. I could see $10k turning out to be slightly less than what's really needed, but it shouldn't be considered "cruel joke" territory.
In the spirit of not paying people more than they need, I could suggest paying the young adult who gets free housing from her parents only $3k per year, but that opens a huge can of worms that'll have kids pretending to rent their own apartment to get more UBI while really living at their parent's house, etc.
Again, I think we're in agreement on the flaws of this UBI proposal. But I assert that, until such time as our society reaches a level of technological advancement where no one needs to work, the amount of extra work that working people are required to do to support nonworking people should be no more than the minimum amount to maintain their health and physical comfort. If you think people should get more than that, I'd like to know how you propose to decide how much.
As for the example: Rural poverty is a huge problem, and not everybody can live in cities. Without a car you're stuck in the house because you can't leave your kids unattended. You need to drive miles just for groceries. People around you live in squalor and substance abuse is ubiquitous. Finding a sitter on short notice? Forget it. Move? With what money? Living on a tight budget is easy when you're young, healthy, educated, etc. In the real world poverty doesn't look like that. You can make a back of the envelope calculation where 10k a year is sufficient for a one parent family of four, but I don't think it holds up in the face of all the struggles poor people face.
I don't think people should be jumping into parenthood without knowing what it really entails (costs and brutal demands on your time) so I'm sympathetic to your angle, but reality plays out differently. And kids are the result of some pretty basic urges that are obviously difficult for many to deal with appropriately (think ahead, get/use contraceptives, actually abstain, whatever).
Look what the birth rate was 200 years ago when children were considered retirement investments (or elsewhere in the world where that's still true).
Obviously there has to be a strong balance between an incentive that keeps a reasonable birthrate and one that overly encourages those desperate for money to procreate. The latter is disastrous for countless reasons.
Not sure how they'd balance it with a UBI.
>Or consider the unemployed young man who fathers a child. Today, society is unable to make him shoulder responsibility. Under a UBI, a judge could order part of his monthly grant to be extracted for child support before he ever sees it. The lesson wouldn’t be lost on his male friends.
> Or consider teenage girls from poor neighborhoods who have friends turning 21. They watch—and learn—as some of their older friends use their new monthly income to rent their own apartments, buy nice clothes or pay for tuition, while others have to use the money to pay for diapers and baby food, still living with their mothers because they need help with day care.
The author seems to be proposing that child support for 3 children can/should be taken from their fathers' UBI grants. Therefore, the mother would receive a larger grant based on her number of children.
Either way, that doesn't really affect the argument that a BI payment supposed to be a minimum for one person to live off is unlikely to stretch to paying for the food, living space and private health insurance costs for another three, even if another parent's minimum payment is also being garnished to help.
The author's arguments you've cited essentially amount to the view that children of single parents should be punished for their parents' life decisions. It looks particularly crass in the context of accompanying arguments in favour of spending money on adults who choose to "idle away their time" and including those fortunate enough to be "already living off other people’s money".
Whether this "solves" anything depends. Initial experiments are very limited, but fairly positive. Giving money to people in rural India may not translate too well to giving money to people in New Delhi, much less people in Cleveland. But I think it's worth a try to see how things work out.
If your income drops below 404.00 Euro per month plus rent in Germany, you get the difference. Nobody will become homeless, nobody will starve. At least in theory. They will bug you to get a job as quickly as possible, make you do courses to improve your skills. The authorities are said to be kind of control freaks, supposedly to avoid abuse.
So it is a basic income. Universal? Well, the authorities won't just let you develop you new product idea for two years. If you don't try to get a job, they will bug you a lot. If you don't play by the rules, they can even cut some of the benefits.
So maybe we should just add a program that allows you to ask for benefits for a certain amount of time so that you can develop a business idea. Maybe there are already things like that. You certainly can get support if you want to educate yourself, attend a university and so on.
This introduces inefficiency. One worker working 8 hours is more useful than 2 workers working 4 hours. While this might end up being a good trade off (as workers might be willing to sell 4 hours of work for less than half the price of 8 hours), attempting to legislate this would be a market distortion.
>Then have sufficient minimum wages. Minimum wages distort the market.
>Also universality, what is the point?
The "universality" has two components. One is that there are no strings attached (eg. you are not required to be seeking employment). The other one is that it is not dependent on your income. As I explained in another comment, making a BI decrease as ones income increases is equivalent to a progressive tax. As we already have a progressive tax system, we can achieve the same result by modify our tax brackets, which is mathematically equivalent but easier to understand.
What does inefficiency matter if there is not enough work for everyone anyway? It may be a problem during the transition but I am not sure about that. But in the end two people working five hours each seems a better and fairer solution to me than one working eight hours and giving half of what he produced to the other guy for free.
Minimum wages distort the market.
Why? I am not arguing for arbitrarily high minimum wages, just high enough to be able to make a living. Working for less makes no sense - if you work full time and can not live from the income, what is the point? It's exploitation, slavery if you like. If the state provides benefits to make it a livable income, then the tax payers are just subsidizing your employer or customer. I am here not worrying about all the edge case, being frech out of school with little experience, already having enough money and voluntarily working for little or no money and whatnot.
The "universality" has two components. One is that there are no strings attached (eg. you are not required to be seeking employment).
This is feature and bug. It will for example remove incentives to get a job but it will also allow you to take time to develop a new product or something like that. I am neutral on that.
The other one is that it is not dependent on your income. As I explained in another comment, making a BI decrease as ones income increases is equivalent to a progressive tax. As we already have a progressive tax system, we can achieve the same result by modify our tax brackets, which is mathematically equivalent but easier to understand.
I am not sure what you want to say here, seems like it does no harm and provides no benefits.
I am using the term "efficiency" in a technical sense. An inefficiency means that there exists an alternative way of distributing resources (including time) such that no one is worse off, and at least one person is better off. By this definition if their is an inefficient, then we would have a strictly better world if we could remove that inefficiency without causing any secondary effects.
Suppose we have a widget X that can be produced by person A in 8 hours, or by persons A and B in 10 man-hours (at 5 hours each). Further, assume that both A and B value their time at a constant $100/hr [0].
Suppose that we live in the second world, where A and B each spend 5 hours working on X. At the end of the day, A and B are both down by 5 hours of their time, and up by $500, and society is up by 1 X.
Suppose that, the next day, B hire A to do his share of the work. We have defined that A can do the entire job 8 hours, which means that this transaction only add 3 hours of work to A's day, meaning that A would be willing to do this for only $300. At the end of this day, A is down by 8 hours, and up by $800, B is up by $200, and society is up by 1 X. Again, A breaks even in this exchange, and society still has just as many Xs, however by B got $200 out of thin air.
We can modify the above example to where B pays A $400, in which case both A and B can $100 worth of value out of this exchange. This extra wealth is not just fictitious money. In doing this exchange, we saved 2 hours of human time, which is a real, limited, resource.
Of course, in the above situation, there is no way of deciding how exactly how much B should pay A, all we know is that any value between $300 and $500 produces an efficient system. However, we may, as a society prefer, the situation where the profit is split, and both A and B walk away with a surplus $100. In fact, we may prefer this possibility so much, that we are willing to destroy $2 of wealth somewhere else in the system to assure that A and B split the surplus. The argument for a BI is that a minimum wage achieves the desired result by destroying wealth (in the form of exchanges that never get made), whereas a BI can achieve the same desired goals while destroying less wealth. If that is the case, then a BI is strictly better than a minimum wage.
Of course, a BI itself introduces a market distortion (in the form of tax). The questions that need to be answered is how much wealth does the BI tax destroy, how much wealth does the minimum wage destroy, and how effective are both the BI and minimum wage at achieving the social goal of providing resources for all citizens.
>I am not sure what you want to say here, seems like it does no harm and provides no benefits.
In a society of perfectly rational actors, this would be correct. However, having multiple contributors to the effective marginal tax rate obscures the issue, and is how we get into situations where we have unreasonably high (in some cases >100%) rates.
[0] This is clearly a simplification, but it should not affect the analysis. The important thing is that there exists an "indifference" curve, whereby for any quantity of time, there exists a dollar value at which the worker is equally happy getting paid for doing the work as he is with doing nothing and not getting paid. The only potentially important assumption about this curve that I can think of is that the derivative is non-decreasing. This means that if I am willing to sell my first hour of labor at $100, I will sell my next hour for no less than $100, although I may need more than an extra $100 to be willing to spend an extra hour.
By restricting the entire world to the two actors wanting to produce one X one can keep money out of the equation. I argue your analysis fails or at least may fail because you don't assign a value to the leisure time. Also the assignment of monetary values obscures things, where is this money coming from? From selling the X to the society? In that case you will have to take into account that producing one X may take either 8 or 10 hours - will this raise the price or decrease the monetary value of an hour of work?
I did consider the value of leisure time, which I arbitrarily set to $100/hr (I just called this time, but unsold time can be exchanged 1:1 for leisure time). You seem to be objecting to my assumption that the marginal value of time is constant for the workers. I agree with this objection (in fact, I raised it myself in the footnote). However, even without this simplifing assumption, there are still situations where selling ones time is a net positive.
>By restricting the entire world to the two actors wanting to produce one X one can keep money out of the equation.
My entire argument can be made without invoking money. Indeed, I believe the non monetary form is more compelling, but also more abstract. Again, I will invoke the idea indifference. We say that things X and Y have equal value to person A if she is just as happy receiving 1 X as she is receiving 1 Y. With this concept we can replace "money" with any object of value and have an equivalent analysis. Of course, the selected object would itself have diminishing returns, but this is equivalent to an increasing marginal value of ones time, which I have already addressed. Ultimately, to properly explore this route, I would formalize an abstract notion of "utility" as an equivalence class over indifference. I hope this explanation makes sense, doing it properly would take far to much effort to put into an internet comment.
>where is this money coming from, From selling the X to the society?
The above framework provides a nice way to sidestep this issue. Let U be the utility function. So U(5 hours) is the value of 5 hours of time. [0]. For simplicity, assume that A and B share a utility function.
Suppose that A and B are not selling X, but rather using it themselves (for simplicity, suppose that X is a widget that A and B can share without conflict). We know that X is worth at least 2 * U(5 hours). Suppose that 2 * U(5 hours) > U(8 hours). In this case, by my previous argument, it would be preferable for A to do all of the work, and B to barter something worth between U(8 hours) - U(5 hours) and U(5 hours) for his share of X.
Ultimately, this argument is just a rediscovery of the value of trade and specialization. To translate a minimum wage into this framework, we would define some artificial lower bound for the compensation A needs to be provided in a trade such as this. If this minimum value is less than U(8 hours) - U(5 hours) or U(5 hours), then we are just influencing how wealth gets distributed between A and B. However, if the minimum value to big, than the above trade is prohibited, even though we have seen that it is strictly beneficial.
>will this raise the price or decrease the monetary value of an hour of work?
What do you mean by "monetary value of an hour of work". Returning to a more realistic employer/employee example, there are two important monetary values: the value the employee gives to an hour of work, and the value the employer gives to an hour of work.
From the employer perspective, the value of an hour of work is V(X)/T, where V(X) is the value of X [1], and T is the time spent making it. V(X) is independent of how long it took to make, which means that as the work takes longer, the value of an hour goes down to the employer.
From the employee perspective, the issue is a question of their utility function. Assuming a reasonable utility function, I would expect the marginal value of an hour to increase to the employee. That is to say that the employee needs more money to be indifferent to working the last 2 hours than she does for any of the prior 2 hours. If this is the case, than the value of an hour to the employee goes up with the time.
[0] More formally, U(5 hours) is the equivalance class of objects for which the person would be indifferent to spending 5 hours of time to obtain.
[1] Or rather, V(X) is the labor-excluded profit of X.
So this looks somewhat like the prisoner's dilemma. Let A and B be the scenario that agent A respectively agent B works 8 hours and AB the scenario that both agents work 5 hours each. Then the preferences for agent A are B > AB > A and for agent B they are A > AB > B. But that doesn't help much, no matter which transition you consider, one agent will be better off and one will be worse off.
So there is still a conflict. I acknowledge that an inefficiency gets introduced when the work is split but also want to maintain that 3 hours of leisure time twice is more valuable than 8 hours of leisure time once. Surly value can not increase and decrease at the same time. I am more certain that the inefficiency is real than what the shape of the value function for leisure time is so I will pick the former one and conclude that 8 hours of leisure time are - contrary to my earlier comment - more valuable than 3 hours of leisure time twice.
So do I have to say that maximizing the total value is the wrong metric? Do I have to try to assign a value to the fairness of work distribution? Why wouldn't that already show up in the individual value functions? I am a bit stuck here. But I may have a way around that, I am just not sure how good the argument is. One obvious problem is that in case agent A does all the work, then agent B has no means to transfer some of the additional value from his additional leisure time to A. Maybe he could give away some of his share of X.
But now I can no longer ignore the value function for X and that hopefully saves my argument and I avoid the conflict between decreasing and increasing total value without the need to explicitly appeal to the value of fair work work distribution because it is in the two value functions for X and leisure time. But I am not sure, I did not think this fully through.
I think in the end it boils down to nonlinearities between the individual and the global view, i.e. we can globally waste 2 hours of work but still increase the total value because we have to take the global set of things, split it up for all individuals, push them through the nonlinear value functions and then sum it up again. Now it is no longer necessary that a global loss of 2 hours results in a global loss of value even if all the individual value functions are monotone.
Increasing minimum wages will only just accelerate automation and exacerbate the problem.
My concern about UBI is that it won't properly track inflation and will quickly become not enough and all the welfare programs are gone, so people are doubly screwed.
Other than that, I like it. I'd like to see more "pay to go to school" programs, though. We'd end up with fewer Trumps...
That is only a real problem if the population does not keep up with this development. I can not tell whether requirements are (now) growing faster then capabilities but both certainly grew ever since. The other thing is that it seems to me that - at least to some extend - the capabilities are the controlling factor here. The economy can demand whatever it needs, if it is not available the economy will have to adopt.
Increasing minimum wages will only just accelerate automation and exacerbate the problem.
I did not mean to increase minimum wages more and more just to make any job viable, this of course only leads to inflation. I meant to let non-viable [EDIT: This read »no viable« before.] jobs die or automate. If people are not willing to pay enough for getting their lawn mowed - not sure if that is a good example - to make a living from it, then there never was a market for lawn mowing. Subsidizing it by the rest of the population with government benefits of any kind is not a solution.
Are you saying you'd outlaw self-service gas pumps and checkout stations? Robotic assembly lines and autonomous vehicles?
A large fraction of the population has no distinguishing skills. That segment of the population is going to find itself with ever fewer ways to earn a living.
Besides that I am not sure about you comment, I am not sure how you interpreted my comment with the spelling error. I am especially confused because your first paragraph sounds like you are arguing for automation, the second paragraphs sounds like you consider it harmful for unskilled workers. I don't want to outlaw any automation, quite the opposite, I would consider the ultimate goal a world where all work is done by robots and nobody has to work.
Now, in which system can a neighbor earn an extra $20 a week for a morning of work? In which system does my front garden look nicer from the sidewalk? Someone (probably a teen) gets some walking around money, the whole neighborhood gets a nicer sidewalk view, and I don't have to do an optional job that I dislike. Sounds like a winner all around to me, but no way is "pulling weeds" a full-time, live alone and without additional support career.
All of which perpetuates the cash/grey economy (and the off-shoring of garment-making jobs in your example).
The thing about UBI is that it allows employees to turn down bad economic deals without starving. Sure, you can't live in a 2000 ft^2 house, drive a new car, eat and party out all the time, but you probably don't have to take a job with ridiculously bad conditions just so you can buy a can of beans or Ramen.
There are all sorts of things that people will pay a handful of dollars for, but that they won't/can't pay $10/hr for. Mine was just a concrete example of a low skill required task that I don't enjoy and that someone whose basic needs were already covered might be interested in doing, much like I did when I was a kid/teen and wanted to earn some extra money.
I am in favor of automation (for the same reasons you are, I think), and automation does harm unskilled workers.
Between the present day and the future golden age of robotics that we both desire is a period of time in which some fraction of the population, who have specialized skills that are hard to automate, will work for a living, while another fraction (probably larger than the first) of the population will have nothing to offer in return for money. I don't see any way around the first group subsidizing the existence of the second.
You are actually in favor of outlawing lawn mowing as a job? My 14 year old kid can't take a $20 from my neighbor to get some fresh air and weekend spending money? Are you serious????
Have the Fed stop causing inflation?
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