UBI, work and unions

by John Quiggin on January 2, 2018

I’m working with Troy Henderson from the University of Sydney on a book chapter looking at union responses to the idea of a universal basic income (UBI),which have covered a range from supportive to strongly hostile, with the latter view predominant in Australia. Here’s a draft of my section of the chapter. Comments much appreciated.


UBI, work and unions



The concept of a universal basic income (UBI), has been advanced in a number of different forms, notably including guaranteed minimum income (GMI) and negative income tax (NIT). Although these policies are essentially equivalent, they have been put forward in support of radically different political agendas, ranging from a libertarian desire to eliminate the welfare state to a utopian vision of a post-scarcity society.


As a result, the idea of a UBI has acquired a highly disparate group of supporters, and also a disparate group of opponents. In particular, trade unions have often been critical or suspicious of the concept. It’s important for progressive advocates of a UBI to consider the grounds for this criticism and to show how a UBI policy can serve the interests of workers.


As I’ve argued elsewhere, the most promising model to focus on is that of a GMI, achieved by reducing and ultimately eliminating the conditionality of existing unemployment and disability benefits. as well as raising these benefits to a level consistent with a decent long-term standard of living.


Most existing experiments with UBI-style schemes are in line with this approach: that is, participation is limited to people who are unemployed, at least at the start of the scheme.


An unconditional GMI means that people can live decently without paid work and without being required to search for work. However, this leaves open a crucial question: can people choose whether or not to work?


Much recent advocacy of GMI-style schemes takes it for granted that this choice is already unavailable to many, and will become unavailable to most people in the future. The central idea, simply put is that ‘robots will take your job’. More complex and realistic versions of this argument take account of the interaction between technology and labour markets that produces the ‘gig economy’. In this context, a GMI may be seen as easing the path of adjustment towards the replacement of paid work by involuntary unemployment.


An alternative interpretation of technological progress is that it provides us, as a society, with the resources to allow everyone a meaningful choice between paid employment and other activities, including unpaid contributions to society and creative use of leisure. To make such a choice a reality, it is necessary to combine a GMI with some form of employment guarantee and to maintain minimum wages at a level significantly higher than the GMI.


Benefits for workers and unions


The combination of a GMI and a Jobs Guarantee would greatly improve the bargaining position of workers relative to employers, both individually and in aggregate. For the individual worker, the Jobs Guarantee weaken the ability of any individual employer to threaten unemployment. Moreover, the GMI would provide an ‘outside’ option that could be taken if employers attempted to cut costs through work intensification, removal of working conditions and so on. At the aggregate level, the power of employers as a class depends, to a critical extent, on the belief that ‘business confidence’ is essential to economic prosperity.


These points imply substantial benefits to unions. The capacity of employers to resist unionisation will be reduced, and the bargaining power of unions will increase.


The closest approximation to the conditions of a combined GMI and Jobs Guarantee was the thirty-year period of near full employment during and after World War II, which also saw the establishment of most of the elements of the modern welfare state, including easy access to unemployment and disability benefits for workers (the process varied from country to country – Australia introduced unemployment benefits in 1945). During this period, workers and unions did very well, and the distribution of market income became much less unequal.


Reasons for union opposition


* Even an ideal UBI/GMI, with a Jobs Guarantee implies a fundamental transformation of society in a way in which makes paid work less central to life. Since unions are concerned with representing people in their capacity as paid workers, this gives them a more marginal role than they had in the 20th century industrial economy.


* Unions are organized on an occupational or industry basis, and therefore have a natural tendency to resist changes that would result in the decline of their particular occupation or industry. In this sense, there is a natural tendency to technological conservatism, sometimes reflected in the idea that long-established types of work (particularly manual work) represent ‘real jobs’ while newer jobs are not. By contrast, the movement towards UBI/GMI is characterized by an embrace of technological change and a focus on work associated with the 21st century digital economy.



{ 56 comments }

1

Martin Bento 01.02.18 at 6:24 am

First of all, I would note that both of the union objections amount to: this is bad for unions. Not this is bad for society or even for workers. I don’t find that a compelling argument. Unions should be a tool, not an end in themselves.

I disagree that a GMI requires either a jobs guarantee or a minimum wage higher than the GMI. If people no longer need to work but choose to for some combination of the marginal income and the intrinsic satisfaction employment provides them, I think a better solution is to provide the GMI regardless of employment. Then we can still have those jobs available that satisfy a real economic need to society and pay enough and provide enough intrinsic satisfaction that people are willing to do them for reasons other than economic desperation, Those that make it just on intrinsic satisfaction are volunteer work.

If we assume that 50% of working-age people would be unemployed in the future under the free labor market and at current wages, I’m not sure denying benefits to the employed even saves money, relative to all the make-work guaranteed employment implies and the fact that all wages, including for all that make-work, would have to be well above a “living wage”, since the point would be to provide a living wage as the GMI.

2

Murali 01.02.18 at 8:26 am

Also, a sufficiently high UBI undercuts the moral basis for union action. One big reason why union demands for higher wages has moral purchase is that existing wages are insufficient for a person to support their family on. If everybody is already guaranteed a sufficiently high income that can support them, the demand for higher wages has far less grip. Similarly with working conditions and hours. What is primarily objectionable about such conditions is that people have little choice to take such conditions as they would starve if they did not accept the job, conditions and all.

Moving away from the welfarist perspective, as an analysis of power, unions exist to make up for the power differential between employers and workers. But that power differential is largely a function of a wealth differential. The employer can, by and large, afford to wait out the worker. A UBI reverses/nullifies that power differential. Now, if the employer wants a profit, he’ll have to offer sufficiently good conditions.

Now, if all we care about is worker power/well-being the fact that a UBI renders unions unnecessary (because increasing the UBI becomes a matter of electoral politics instead of worker-firm negotiation) is a thing to be rejoiced. However, if you are more fundamentally anti-capitalist, and you view unions as a breeding ground for socialist sentiment, a UBI which renders unions irrelevant would stabilise capitalism and end up preserving it. If your support for unions comes from such deep anti-capitalism, you may view a UBI as preventing capitalism from collapsing under its own contradictions. Or you may see the lesser role for unions as objectionable because one of the forces that could potentially destabilise capitalism has become much weaker.

3

Tim Worstall 01.02.18 at 10:07 am

“as well as raising these benefits to a level consistent with a decent long-term standard of living.”

That’s where the problem is, not the unions. For we already define that decent long-term standard of living at 60% of median household income – or at least that those not receiving it are in poverty. At which point it’s very difficult indeed to make the sums add up.

Whether we talk of UBI or GMI the important words are “basic” and “minimum”.

I’m all in favour of the basic idea precisely because it does increase worker power vis a vis employers. But the sums still need to add up.

4

ph 01.02.18 at 10:19 am

Unions Turn Out For Trump Politico Nov, 2016

“…Nationally, Clinton outperformed Trump among union households by just 8 percent, the smallest Democratic advantage since Walter Mondale’s failed campaign against Ronald Reagan in 1984…Clinton’s poor performance among union households appeared to especially damage her in crucial Midwestern states. Obama won Ohio in 2012, besting Romney in those households by 23 percentage points. Clinton actually lost Ohio’s union households to Trump by 9 points, according to exit polls. The state went to Trump.”

Pavel A. CT Jan, 2018

“…pretty much every libertarian is a pro-pedophile now… I
guess  [union members and others voting Republican]…consider the pro-segregationist, pro-white
supremacist, pro-pedophile party as being “moderate right…”

So, one way to win back union support for Democrats who voted for Obama in 2012, but switched to Trump in 2016, might be to take a page from Pavel A’s playbook.  Any other suggestions?

5

Larry Hamelin 01.02.18 at 11:08 am

Under the right conditions, a UBI could work; however, under the right conditions, laissez-faire libertarian capitalism could work, and so could Soviet-style communism. But just slapping a UBI on top of the 21st century U.S. capitalist plutocracy, seems to present some problems, even assuming the UBI does not cause too few people to choose to work, collapsing the real economy.

Who would set the amount of the UBI? Elected officials in our present gerrymandered and non-proportional electoral system, who see exiting to K Street or corporate boards as preferable to winning reelection?

Our economy is becoming dominated by rent-seeking monopolies. Why wouldn’t these rentiers just suck up the UBI, so that an ordinary person would have to have the UBI and a full-time job just to survive?

If we’re going to inject a lot of money into the economy through a UBI, we will have to manage the growth/inflation trade-off carefully. How do we take the money out again? Who gives it up? Who takes it?

I don’t see how a UBI can work “by itself”; the present capitalist economy will just adjust around it, leaving us at best where we are today, but with different accounting. To be effective, I think a UBI would have to be paired with other, deeper, structural changes to the economy.

6

Tom 01.02.18 at 12:53 pm

This may be somewhat off the main topic, but in the context of a UBI it drives me nuts when people refer to ‘work’ when they really mean ’employment’. I think it’s important to distinguish the two since one of the big advantages of a UBI is that it enables types of work outside of traditional employment.

7

Trader Joe 01.02.18 at 2:17 pm

I think the jobs guarantee aspect of the proposal is doing a lot more work in being attractive to the unions than the GMI.

As you note the unions enjoyed their greatest power in the post WWII years when the workforce was sufficiently stretched and labor wasn’t sufficiently replaceable (i.e. automation not a factor) that they had meaningful bargaining clout. A jobs guarantee could create similar conditions.

I’m not clear if your perspective is meant to be ‘global’ or Australian. I’d only note that from a US perspective, the unions that continue to have any sort of power at all are primarily service oriented (teachers, mechanics, teamsters) rather than manufacturing oriented. These are jobs which by nature are somewhat less prone to capital substitution and accordingly the union approach in the US has been decidedly more about building a moat around existing jobs and forcing benefits (rather than wages) higher – as compared to building a bridge and trying to make the unions larger and more inclusive.

8

steven t johnson 01.02.18 at 2:45 pm

It would be helpful to add quotes from the proposals for a combined universal basic income and jobs guarantee. Or at least name which institutions, whether unions or other, have done so. This is especially the case when the promotion of such schemes seems to rely heavily on people who see it as a needed reform in the faced of continued mass structural unemployment.

And it would be even more useful to quote from the unions objections. The two reasons given above may be the real reasons, but the reasons they profess would still be informative, I think.

In a regressive taxation system, isn’t a UBI in partil transformed into an intraclass transfer payment system? The employed workers subsidize the unemployed workers, while employers are relieved of their share of unemployment benefits? Also, it is very unclear as to why employers should be contributing to workmen’s comp and FICA when income is separated from employment. And, on the national scale, doesn’t that mean central banks are relieved of all responsibility for maintaining full employment?

Obviously these issues don’t really arise in a situation where the tax system is highly progressive or the political direction of the central bank requires support for a full employment economy. But since those don’t really seem to be the case in the real world…

But the observation that the full employment economy in the post-war US showed many of the characteristics one might expect under a full employment economy, one might ask why the good times stopped rolling? It had something to do I expect with war and international competition and the insatiable desire for more inspiring a relentless campaign of class war in polity and economy, none of which I see being done away with by UBI, with or without jobs guarantee.

9

Ed 01.02.18 at 5:17 pm

I’ll admit to skipping past the post on comments on this one, but this is a really easy question, and something that commentators on an academic/ left identifying/ economics blog should be hitting out of the park.

An universal basic income (UBI) acts effectively as a minimum wage, and this is one feature it retains for once regardless of the details of the UBI* . Once you pay people an income that they can get without working, they now have a threshold wage that they can demand in order to get employment. And presumably the UBI is universal, which means unlike many poverty assistance program its not deliberately designed to exclude the people mostly likely and expected to seek employment, working age men.

As with the actual minimum wage, as well as unemployment insurance, something like this can only increase the bargaining power of unions. On top of that, the UBI would be very helpful in situations where unions chose to go on strike.

I could see fake company and government unions opposing something like this. An union that was really trying to get better wages and working conditions for its membership should love it.

*unless its implemented as one of those cynical policy initiatives that are designed to do the exact opposite of what their name implies

10

SamChevre 01.02.18 at 6:43 pm

An universal basic income (UBI) acts effectively as a minimum wage, and this is one feature it retains for once regardless of the details of the UBI* .

Can you expand? I think of the UBI as very very different from a minimum wage–you don’t lose it by earning a wage, so any wages you might earn are in addition to the UBI (until you reach some level). So it would set a floor on living standards, but tend to lower wages.

11

J-D 01.02.18 at 7:38 pm

kidneystones

Any other suggestions?

Yes. I suggest that it is rude to burst into other people’s discussion to raise a different topic just because you think it is more important. It’s rude even if your topic actually is more important.

I’ve made this suggestion more than once before, but perhaps you’ve forgotten?

12

Gareth Wilson 01.02.18 at 8:12 pm

I’m all in favour of a UBI, as soon as we decide how many children someone on the UBI is allowed to have.

13

Stephen 01.02.18 at 8:12 pm

I think this query might have been raised before, but it may be worth making it again.

Is UBI to apply to all residents of a country, or to all citizens?

If to all residents, will the country not need very stringent immigration controls, unlikely to be acceptable to many advocates of UBI?

If to all citizens, then unless citizenship follows almost immediately and automatically from residence – but then you get the dilemma above – will the country not have a significant non-citizen resident population who need to work for whatever jobs, well-paid or very often otherwise, the citizens don’t care for? Will they not be exploited, living in hopeless poverty, etc: all the things UBI was intended to avoid?

You could of course impose very stringent immigration controls to avoid that, but …

14

Stephen 01.02.18 at 8:42 pm

Afterthought.

In logic, you could rightly state that CBI, being for citizens, must apply to citizens only, not residents. But even before the apparition of President Trump, it seemed doubtful that strict logic is always relevant to politics. There are, surely, enough examples of people demanding that rights which were intended only for citizens, or for those with valid visas, are really human rights and so must be extended to everybody else. Given CBI, how long before there is a call for it to be extended to non-documented citizens?

15

Stephen 01.02.18 at 8:44 pm

Non-duplicated comment: afterthought.

In logic, you could rightly state that CBI, being for citizens, must apply to citizens only, not residents. But even before the apparition of President Trump, it seemed doubtful that strict logic is always relevant to politics. There are, surely, enough examples of people demanding that rights which were intended only for citizens, or for those with valid visas, are really human rights and so must be extended to everybody else. Given CBI, how long before there is a call for it to be extended to non-documented citizens?

16

Wayne McMillan 01.02.18 at 9:43 pm

My only concern with a UBI is that it could become a political football, depending on which political party is in power. The capacity for governments to cut or increase other welfare payments is also a concern. A meaningful job guarantee, including relevant training with a decent minimum wage, for anyone who wants to work, no doubt is more attractive to unions as it puts pressure on employers to provide decent working conditions and pay. In addition a job guarantee can provide valuable community services that are missing locally in an area that would not be provided by the private sector. Therefore I believe a job guarantee must come first, before the introduction of a UBI.

17

Matt 01.02.18 at 10:06 pm

But the observation that the full employment economy in the post-war US showed many of the characteristics one might expect under a full employment economy, one might ask why the good times stopped rolling? It had something to do I expect with war and international competition and the insatiable desire for more inspiring a relentless campaign of class war in polity and economy, none of which I see being done away with by UBI, with or without jobs guarantee.

I see the intensified class war more as an effect than a cause of the end of the “good times” decades US businesses enjoyed after WW II. With the end of fast easy growth, capitalists had to look inward rather than outward to maintain their expected returns, and the workers’ share of the pie was one of the biggest and easiest-to-claim. Owner/worker conflict was muted when firms were still growing rapidly off the outside world, and both groups were happy with what they were seeing each year. For a modern example, see the excellent pay and benefits for entry level software developers at Facebook, and their generally non-antagonistic relationship with management/owners.

What ended the good times in the 1970s, and kept them from returning afterward? A non-exhaustive list:

* International competition. Not only did other countries start replacing imports from the US with domestic products, they started competing for the demand from the remaining importers.

* Declining rates of population growth. US population growth rate peaked in 1957; global growth peaked in 1963.

* Belated recognition of limits on natural sinks: laws and technical measures added to protect and clean up air, water, and soil.

* Belated recognition of limits on natural sources: mineral resources (especially petroleum), mature timber, and fertile soil (among others) no longer available as freely as during the boom times.

* Environmental debts coming due from the previous two items, after the good times. From the perspective of 1988, that transformer factory next to the river looks like an economic and environmental disaster. In 1970 people saw the benefits from the factory’s wages and property taxes, not the inedible fish and blighted Superfund site to come less than a generation later. The golden decades would look less prosperous if the environmental debts hadn’t been kept off the books at the time.

* Slowing growth of scientific knowledge that could be easily translated to profitable technologies. (Much remains to discover about the universe, but whatever surprises space telescopes or the Large Hadron Collider might uncover are unlikely to translate into mass-market technologies.) Between WW II and 1972 antibiotics, television, synthetic pesticides, plastics, hormonal birth control, artificial satellites, nuclear power, transistors, digital computers, lasers, radar, and jet aircraft reached commercial availability in the US. Information and communication technologies maintained robust YoY improvements for decades longer, but none of these can be introduced for the first time more than once.

* Diminishing marginal utility and satiety effects. It’s harder to sell someone an additional or improved car/washing machine/vacuum cleaner/refrigerator/microwave/air conditioner/television than their very first one. If there are no really compelling features introduced year-over-year, new units have to compete with used even among first-time buyers. It’s also harder to get people to eat another portion of french fries when they’re no longer hungry, and even if achieving that feat would boost growth in restaurants and agriculture, it wouldn’t be an improvement for the citizenry in general. Consumption per capita of automobiles, butter, cosmetology, or anything else eventually reaches the point where another doubling makes consumers a lot worse off instead of a little better off.

Most of these limits on growth can’t be removed by policy. Maybe we’d have better policy if people gave up on their three-decades-and-counting memorial service for an exceptional three decades now departed and focused on what remains changeable. Debates about how to boost growth and private employment in developed countries often seem akin to debating whether Lutheran or Greek Orthodox prayers would be more effective in ending Californian drought. (For full employment, “have the government give a job to everyone who wants one but can’t find it in the private sector” is at least possible, but it’s not much like the golden decades people are pining for either.)

18

Matt 01.02.18 at 11:07 pm

My only concern with a UBI is that it could become a political football, depending on which political party is in power. The capacity for governments to cut or increase other welfare payments is also a concern. A meaningful job guarantee, including relevant training with a decent minimum wage, for anyone who wants to work, no doubt is more attractive to unions as it puts pressure on employers to provide decent working conditions and pay. In addition a job guarantee can provide valuable community services that are missing locally in an area that would not be provided by the private sector. Therefore I believe a job guarantee must come first, before the introduction of a UBI.

The point about providing community services that businesses can’t perform profitably is a good one. I don’t see how a job guarantee would be less of a political football, though. Even if it’s enormously popular with voters, like Social Security, I presume that it will have enemies working to end it and/or sabotage it so that other people will want to end it, like Social Security.

Presuming for the moment that it’s not sabotaged, a jobs guarantee could be a great way to prevent UBI from being effectively absorbed by rentiers, as other commenters fear might happen. Government could pay workers to build housing and infrastructure services at cost, likewise manufacture common medical devices and off-patent drugs, and otherwise provide a counterweight against the incentives and abilities of the world’s landlords, Comcasts, and Martin Shkrelis to extract large rents.

19

Ed 01.02.18 at 11:31 pm

“Can you expand? I think of the UBI as very very different from a minimum wage”

Its the exact same effect on the labor market. I’m actually surprised people here don’t get this.

Consider a minimum wage of $10 an hour or whatever it is. Assuming this is enforced, no companies will offer jobs for less than $10 an hour and no workers will go to work for that amount. Employment that used to be offer at lower than $10 an hour either won’t exist or will exist at a higher wave (greater than $10 an hour).

Now consider no minimum wage, but a worker is guarantee the equivalent of $10 an hour regardless of employment. Unlike with a minimum wage, yeah in theory the worker can agree to go to work at a lower wage. But he will not do this unless he or she is crazy. Being paid $10 an hour and not working is better than being paid $10 an hour and working, and this includes a wage guarantee where the worker can work for less and the government will supplement the salary so it hits the income target. Effectively, with jobs less than this amount, employers will either have to raise their wage to over $10 an hour or not offer the job at all.

(yes, the existence of unpaid internships undercut my argument, but fortunately these are still limited to certain sectors)

Even in instances where this is a straight transfer payment, and not an income guarantee, if its enough to live on, even with a very low standard of living, a worker has an alternative to taking a low wage job, they can just take the guaranteed income and accept they won’t have as much money as with the income + the wage. Employment imposes considerable costs in hours cut from ones days and commute costs (with commute costs often being so high that the employee is pretty much just breaking even), and even as a matter of income maximization its usually better to turn down low wage jobs and continue to search for higher wage jobs, and this is now without any income guarantee.

Any sort of guaranteed income or income guarantee will raise the bargaining power of employees over wages -and working conditions- and hence that of unions. Existing transfer payments don’t have this effect, since at least in the US they are not quite deliberately designed to go to the people least likely to be in the labor force. A universal transfer payment is very different. For similar reasons, some sort of job guarantee with a requirement that people take the job offered will have the effect of lowering wages.

20

Whirrlaway 01.03.18 at 12:11 am

Unions also do training and grievances and hopefully participate in workplace development. If they didn’t have to be always arguing about money maybe they could pay more attention to that other stuff?

21

Raja Junankar 01.03.18 at 12:37 am

Although I agree with you (John Quiggin) that a GMI and a Job Guarantee would be a great social change, I cannot see the powerful capitalist forces agreeing to such a change as it would erode their power in society. This is a crucial question: how do you persuade the capitalist class to give up its power!

22

steven t johnson 01.03.18 at 1:13 am

Matt@17 Most of these items I think are much more ambiguous in reality than in the comment. Perhaps the best example of this is including the slowing of population growth. It cites the US peak in 1957. But the relevant statistic is the labor force, and there has been a massive increase in the US because of the entry of women in the paid economy on a very large scale. And along the way there have been periods of large immigration, formal or not. To top it off, it is not immediately clear that decline in the number of laborers doesn’t act to increase wages.

The thing is, economics is such a strange thing it isn’t even clear whether an increase in wages counts as growth, or not. Similarly, it is not clear that economics doesn’t count expenditures on environmental cleanup as growth, or as debits from growth.

But then, I am a heathen who doesn’t believe. Reflecting, I would have to content myself with repeating that naming (and quoting preferably) whoever is advocating UBI+jobs guaranteed, and quoting union criticisms of UBI would strengthen the section.

23

Moz of Yarramulla 01.03.18 at 1:21 am

Ed@19: you’re assuming that every single citizen works all the time. Or, less kindly, you appear to only care about people in paid work (and implicitly full time work).

A lot of people on minimum wage in the US don’t meet your criteria. They work, but not full time, and often don’t have reliable work. So if the homeless-and-starving line is $5000/year and minimum wage is $10/hour, they don’t just need 500 hours work a year, they need 10 hours work every single week to avoid being homeless-and-starving that week. Or they need cheap, convenient banking without penalties for saving so they can average their annual income … provided they know what that income will be in advance. Etc. And all of those are demonstrably not available to poor people in the US.

The point of UBI is that it removes a lot of those conditions by being a reliable, known income that can be planned and budgeted around. Sure,they might get a few days a week or a few weeks a year of paid employment, but it doesn’t matter whether that work is reliable or even well paid, because the UBI is always there.

24

Howard 01.03.18 at 2:05 am

Ed

What you said is certainly if the government is supplementing incomeup to the guarantee. I think other people were envisioning a direct lump-sum transfer.

Tim Worstall

“For we already define that decent long-term standard of living at 60% of median household income – or at least that those not receiving it are in poverty. At which point it’s very difficult indeed to make the sums add up.”

I’m not sure what you mean. For the US, median household income is $59,000 x 0.6 x 126 million households = $4.5 trillion. US net domestic product = $15.7 trillion. So we’d have to redistributte 29% of income. Granted, this is a lot, but bear in mind that *everyone* is getting a check in the mail.

25

David Peetz 01.03.18 at 6:41 am

John,

the criticism that many form the left have made about UBI concerns adequacy and numbers, ie can/will it be set at a high enough level to guarantee worker well-being and bargaining power, or will it be too parsimonious (and just part of the right-wing roll-back of the welfare state). eg Gerhard Bosch in Germany made a very negative critique along these lines. To be persuasive, I think it’s necessary to put some numbers to it—at what level should it be set, under what conditions, financed in what way?

David

26

Brett 01.03.18 at 9:00 am

@Steve Johnson

Central banks and fiscal authorities throughout the Postwar Period were kind of fighting the last war when it came to economics. They were using Keynesian theories that ran into trouble when stagflation popped up, and they were so afraid of short-circuiting growth that they kept letting inflation escalate.

Now we have the opposite problem, with a whole generation of economists and central bankers who are more afraid of inflation than anything else, to the point where they let recessions and downturns drag on much longer than they have to (or even let them happen at all – IIRC Quiggin’s Australia hasn’t had a technical recession in a quarter century).

27

Tim Worstall 01.03.18 at 10:06 am

” So we’d have to redistributte 29% of income.”

Current total tax take is 26% of GDP. Difficult to boost it that much…..

28

Miguel Madeira 01.03.18 at 1:01 pm

Now consider no minimum wage, but a worker is guarantee the equivalent of $10 an hour regardless of employment. Unlike with a minimum wage, yeah in theory the worker can agree to go to work at a lower wage. But he will not do this unless he or she is crazy. Being paid $10 an hour and not working is better than being paid $10 an hour and working,

An UBI does not work that way – you receive the $10/hour (or most probably some monthly value), plus the money that you earn in your job – it is perfectly possible that some people could prefer $13 ($10 from UBI + $3 of wage) and working instead $10 and not working.

The scenario of “Being paid $10 an hour and not working is better than being paid $10 an hour and working” only applies in a case where salary is… $0 (and, even without UBI, most workers don’t accept jobs earning $0)

29

steven t johnson 01.03.18 at 1:02 pm

Brett@26 As to your first paragraph, the point is that somehow the Good Old Days of the Fifties etc. which approximated (per the OP) the effect of a combined UBI/jobs guarantee led not to continued happiness conducive to political and economic stability, but to stagflation. I think it’s true that the orthodoxy is that it was all the Fed’s fault for easy money, but Paul Volcker should have restored paradise were this true. (The increase in profits for some may count as an earthly Eden, to be sure.) This story seems to me to be Milton Friedman’s literary epic (a lifetime in the writing!) But again, I am one of the heathen, and don’t believe.

As to your second paragraph, I am afraid I am firmly of the persuasion that when economists in financial institutions, from the Federal Reserve and the Treasury Department down, talk about inflation, they mean full employment. Whatever the economics departments preach in their sermons, in practice most finance people seem to me to act as if they believe in a Marxian theory of unemployment, where an industrial reserve of the unemployed is good for profits. What the preachers in the lecture halls really believe is unclear. But I tend to think expecting religious thinkers to properly think is oxymoronic. Again, though, this is clearly heathen wickedness.

30

harry b 01.03.18 at 1:57 pm

“I’m all in favour of a UBI, as soon as we decide how many children someone on the UBI is allowed to have.”

Why does this matter? The UBI kicks in at adulthood. You sound like you’re worried about people having lots of kids, but I would have thought the worry should be that they might have even fewer than they do now.

31

Z 01.03.18 at 2:12 pm

John, since you explicitly ask for comments, I would like to say that I don’t think your section entitled “Reasons for union opposition” represents the best or fairest summary available of the variety of reasons that have been advanced by unions against a UBI. I apologize for not supplementing this negative remark with a concrete suggestion of improvement.

32

AnthonyB 01.03.18 at 6:10 pm

33

Matt 01.03.18 at 7:02 pm

Most of these items I think are much more ambiguous in reality than in the comment. Perhaps the best example of this is including the slowing of population growth. It cites the US peak in 1957. But the relevant statistic is the labor force, and there has been a massive increase in the US because of the entry of women in the paid economy on a very large scale.

Maybe I should have made my assumptions clearer: I believe that the rapid economic growth of the US postwar golden era allowed wages and profits to rise simultaneously and softened owner-worker conflict. I believe that slowing economic growth is more fundamentally from slowed consumption-growth than from lagging capacity to produce — though the environmental constraints I noted affect both.

Where does economic consumption growth come from?

– Bringing existing people into the market economy (enclosure acts, colonial imposition (“hut tax”), formerly communist or still-communist-at-least-in-name countries introducing more market logic…)

– Introducing additional consumers into the market economy by birth

– Getting people to consume more per capita, enticing them with new things (introduction of television, or less dramatically and later, better televisions – color, flat screen, high definition…)

– Getting people to consume more per capita, quantitatively (more-of-the-same; enticing people to have 3 televisions in the house instead of one)

My contention is that the first three of these consumption growth drivers peaked already for the developed economies, decades ago. Quantitatively, consumption per capita in the US has also peaked for some important commodities (petroleum, steel, coal). Consumption per capita is still growing globally, but global population growth has peaked already, so a permanent slowdown in global growth seems to be in order eventually too. The end game is (hopefully) Planet Japan – very high human development indicators everywhere, static or slowly contracting human populations, and extremely low (by the standards of 1960) economic growth. The bad scenario is a war big enough that people can (eventually) experience a few golden decades of rapid economic growth again, after the survivors’ descendants rediscover electricity.

If the end of labor’s postwar golden age were due to increased labor supply from more women entering the work force, I would have expected American export business to continue thriving even as its labor force endured stagnant or declining pay. But the US hasn’t had a trade surplus since 1975.

If competition from other countries caused American businesses and their workers to no longer thrive like in the golden age, I’d expect to see American consumption-per-capita to continue growing for key commodities, simply imported instead of produced domestically. But apparent consumption of steel in the US was 97.8 million metric tons in 2012, slightly below the 1965 level of 99.7 million metric tons, when the US had 120 million fewer people. Presidents and members of Congress can try to bring back heavy industry and hard-hat jobs with America-first trade policy. But even if Americans procure 100% of their steel from domestic sources, consumption remains below golden-age figures, consumption per capita further below, workers needed in modern facilities to supply that consumption even further below.

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Thilak 01.03.18 at 7:31 pm

Hi John
Nice topic – given the prolong low growth and increasing in equality of opportunity for a living wage, some transformation of the economic system is necessary to allow the basis of society to hold firm in the near future.

I prefer the UBI to be a social right and to be treated as a public good. Then the priviledge for work also becomes a social benefit and would not incur tax. From the other side of the ledger, all consumption needs to be taxed to pay for all this, supplemented by a resource rent tax to safeguard exploitation.

Given the current context has resulted from international trade or globalisation in other words, making an alternate system work in an economic island may not fe feasible.

Keen to see the numbers and how will it all stack up.

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Gareth Wilson 01.04.18 at 1:29 am

“Why does this matter? The UBI kicks in at adulthood.”

It does? If you don’t want people to have to work, you’re obviously going to pay adults with eight kids more than adults with no kids. Since the whole idea is simplicity, why not start it at birth? Either way, UBI means you can have as many children as you want without ever producing any tax revenue to pay for them. What if people have too many?

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Howard 01.04.18 at 2:27 am

Tim Worstall

“So we’d have to redistributte 29% of income.”

Current total tax take is 26% of GDP. Difficult to boost it that much…..

Well, yeah, if you’re going to do this, you can’t pretend it’s just another government program that you’re going to squeeze into the existing tax system. But consider that the top 1% get roughly 20% of the income, and 90-99th percentilers get another 25%. So it doesnn’t require huge tax rates.

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John Quiggin 01.04.18 at 2:40 am

I’m hoping to have a post on the financing of UBI/GMI soon. Bottom line: we need an increase in government revenue of around 10 per cent of national income, and an effective marginal tax rate* of about 60 per cent.

* That’s the sum of the marginal tax rate and the rate at which income-tested benefits are withdrawn. The balance between the two depends on the details of UBI/GMI/NIT design. Lots of benefit recipients currently face higher rates, and high income earners faced similar or higher rates until fairly recently.

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John Quiggin 01.04.18 at 2:41 am

Z @31 I’m aware that the final paras are too negative, and would really like some concrete positive suggestions on reasons for union opposition and how they can be addressed.

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Howard 01.04.18 at 5:34 am

JQ@36

This comment leaves me confused, though perhaps I should just wait. Are you saying that Ed’s interpretation is correctm and the government just pays enough to bring people to the minimum? That has wildly different incentive effects than giving everyone a lump sum. And is the marginal rate equal to the average rate, i.e., disregarding exemptions and deductions, everyone pays 60%?

40

Z 01.04.18 at 7:15 am

and would really like some concrete positive suggestions on reasons for union opposition and how they can be addressed

Just to spell it out, what I didn’t like about your final paragraphs is that they do not look so much like what the unions say about a UBI than what a critic of the unions say unions say about a UBI. I’m a very unqualified person to provide an appropriate version of what the unions say about a UBI, especially if the emphasis is at least somewhat on the Australian context, yet here follows a number of scattered point that I have seen been put forward by unions in France that are not (I think) fairly summarized by your two existing points as currently worded (I present them as I have seen them presented, but there should be no presumption I agree with them).

-Working, defined as engaging in a socially productive activity, is an inherently desirable situation (not to be identified with employment). The society which we should aspire to is one in which everyone’s decent existence is guaranteed by the recognition of the social value of the valuable productive work a person engages in, not one in which “active” people subsidize “non-active” people through a UBI. A better alternative is to organize society so that everyone engages in a socially recognized valuable activity.

-If the UBI is directed (at least initially) to poor, unemployed people, then society (and the state) may consider that enough has been done once the UBI has been given and thus suppress programs aimed at social integration, with a likely consequence being that the entire well-being of the target category will ultimately depend on the amount of the UBI, a number highly amenable to political manipulation. A better alternative is to finance program that will help target people achieve a productive place in society so that their well-being depend mostly on themselves and not the (political) good-will of others.

-With a UBI in place, owners of capital and managers might campaign for the abolition of any work regulations, socially owned and socially controlled system of social redistributions financed by profits socialization etc. on the ground that anyone engaging in salaried work is now really doing it willingly so that rather than strengthening the bargaining power of workers, a UBI will eliminate it. A better alternative is to mandate a quota of worker representation with full voting rights in the boards of companies and to raise the ratio of private profit that is socialized.

-Finally, a UBI is ultimately a preservation and extension of the logic of capitalism, whereas the aim should be the replacement of this logic by a better one (typically, planned economy based on ecological sustainability).

If you are looking for sources or direct quotations, there are easy to find (see http://webcache.googleusercontent.com/search?q=cache:j_JrO98tis8J:https://www.humanite.fr/revenu-de-base-lenfer-pave-de-bonnes-intentions-629807&num=1&client=safari&hl=fr&gl=fr&strip=1&vwsrc=0 for a start) as a UBI was the core and signature proposal of the presidential candidate for the formerly dominant French center-left party, so that there has been extensive discussions of his proposal from a left-leaning perspective in the context of the last presidential election (he went on to get 6,5% of votes in the first round – while his predecessor got 29% in the previous one -, effectively killing the idea of UBI within French politics for a generation).

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John Quiggin 01.04.18 at 7:35 am

@40 Thanks for the link. I believe most of these objections are addressed by the Job Guarantee and by ideas like participation income, which I referenced as ” a meaningful choice between paid employment and other activities, including unpaid contributions to society and creative use of leisure. “

The final section is meant to ask whether even an ideal UBI would still attract union opposition. But it obviously needs more work.

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Martin Bento 01.04.18 at 9:25 am

It seems to me treating UBI and GMI as equivalent is fundamentally wrong and is leading to a lot of confusion. UBI goes to everyone unconditionally. That’s the definition. It does not go just to the poor or unemployed initially, because then it is not UBI, though it could be something else intended to lead to UBI. Here is the wikipedia definition:

“A basic income (also called basic income guarantee, citizen’s income, unconditional basic income, universal basic income (UBI), basic living stipend (BLS) or universal demogrant) is typically a form of social security or welfare regime, in which all citizens (or permanent residents) of a country receive a regular, liveable and unconditional sum of money, from the government. Payments does not require the recipient to work or look for work, and is independent of any other income”

Here is the definition of GMI:

“Guaranteed minimum income (GMI), also called minimum income, is a system[1] of social welfare provision that guarantees that all citizens or families have an income sufficient to live on, provided they meet certain conditions. Eligibility is typically determined by citizenship, a means test, and either availability for the labour market or a willingness to perform community services. The primary goal of a guaranteed minimum income is to reduce poverty. If citizenship is the only requirement, the system turns into a universal basic income.”

Both articles expressly contrast the two concepts.

The implications are quite different. Under UBI, all income from working is marginal and above necessity level. Wages are therefore likely to decline on average, as your working income is all luxury. You don’t need a jobs guarantee for the purpose of supporting people; you only need one if you think the intrinsic value of work is something that should be subsidized in addition to the UBI and that the personal satisfaction of doing this intrinsically-valuable work is not sufficient compensation. A general decline in wages will tend to make many goods and especially services cheaper as well. It effectively removes the fundamental leftist grievance that the workers are compelled into employment arrangements by economic necessity. It also eliminates poverty, defined as income below wherever we decide to set the UBI.

A GMI shares some, but not all of these features. It is much more complex to administer because eligibility must be determined and efforts to prevent fraud must be made. It won’t cost as much. It will retain the current situation where there is a constant conflict between those who receive the subsidies and those who do not, playing out across the political landscape and interacting with other political conflicts, such as racism. Even though some will pay more into a UBI than they receive, namely the well-off, the universality is liable to make them much more popular and politically supported, as we see with Social Security and Medicare, as compared to “welfare”.

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MisterMr 01.04.18 at 10:38 am

While I’m moderately pro UBI, I think that it is oversold by its proponents.
I think the UBI would replace unemployment benefits and perhaps social security, and as such, it needs to be fairly high to not be regressive (i.e. it has to be at least on par or possibly higher than existing unemployment benefits).
But the main problem of the argument for the UBI is that it assumes that human labor is not necessarious anymore because of robots, and unemploiment comes from this.
But in reality this is BS, what happens is that worker’s bargaining power is lower, they (we) get lower wages as a share of the economy and worse employment conditions (gig economy).
As a consequence the number of people working cannot really fall, and if it could it would be better to put some limit to working hours and have everybody work 30 hours a week than having an arbitrary number of people choosing not to work.

Also, I don’t think that a job guarantee necessariously leads to make-work jobs, this is a confusion between a job that is useful enough to justify the wage it pays and a job that is is useful enough to justify the wage+ profits for the employer, this second part of the total costs continuously growing.

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Miguel Madeira 01.04.18 at 10:46 am

Martin Bento:

Under UBI, all income from working is marginal and above necessity level. Wages are therefore likely to decline on average, as your working income is all luxury.

Why? If people will have less need to have a job, bosses will have to pay more (not less) to find workers.

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Ed 01.04.18 at 5:12 pm

To comment on Martin Bento’s comment above, he doesn’t cite where he gets the definitions he puts in quotes, but there is absolutely no intrinsic reason why an income guarantee has to be conditional. You can have an unconditional income guarantee. Likewise, if the government is sending out lump sum checks to people, it can certainly put all sorts of eligibility conditions along with that, like governments do now.

For those confused, the income guarantee is an income target and the government will supplement whatever income those who don’t make it have in order to ensure everyone gets at last the targeted income. The object is to ensure everyone has a minimum standard of living. It differs from current welfare programs in that this is not reserved only for people who are supposed to be out of the labor force. Basic income, like the Alaska permanent fund, involves giving everyone a lump sum payment regardless of their income level. Actually the federal old age programs in the US come close in that there is at least only one condition, which is age related. Among other things, unless the basic income is very generous you can still receive it and be quite poor.

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Ed 01.04.18 at 5:16 pm

A UBI for adults would be sort of like the existing social security system, just lower the age of eligibility to 18.

An income guarantee would work closer to the standard individual deduction on the US federal income tax, just greatly expanded and everyone would file and, if their income was low enough, get a refund, even homeless and institutionalized people.

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Ogden Wernstrom 01.04.18 at 6:59 pm

Martin Bento:

Even though some will pay more into a UBI than they receive, namely the well-off, the universality is liable to make them much more popular and politically supported, as we see with Social Security and Medicare, as compared to “welfare”.

I’ll note that those politically-supported taxes are regressive. Social Security has a marginal rate of zero for high incomes – for 2017, the zero rate kicks in after $127 200. Both of those taxes apply to earned income – thus, many forms of investment- or rent-extraction-income pay zero of these taxes. (Many individuals who have a lot of “unearned” income have enough earned income to hit the zero-marginal-rate for SS tax, and they will be used as counterexamples if I claim they are avoiding SS tax.)

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Z 01.04.18 at 8:58 pm

I believe most of these objections are addressed by the Job Guarantee and by ideas like participation income

Yes, I agree (but unless I missed it you did not really specify what you had in mind under the name Job Guarantee).

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Moz of Yarramulla 01.04.18 at 10:19 pm

Martin@42: your last point doesn’t seem especially relevant to the USA, where many people mark a sharp distinction between “bad welfare” (anything poor people get) and “good support” (largely defined as any regressive tax measure). Not to mention their inability to let anything be simple (all governments seem to have that but the US much more so than most). A UBI would likely be classified as bad purely because poor people get it, the same as Medicare and TANF. Which means that GMI is probably not especially disadvantaged in the long term.

I’d like to think we can get from UBI to a decent society, and I think it’s worth making the attempt. It seems more realistic than the BAU or revolution options, put it that way.

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Sebastian H 01.05.18 at 6:22 am

This has always been a problem when unions get involved on issues well past typical union workplace concerns–they aren’t interested in the good of the workers so much as the health of their own institutional power. (Why unions should have an opinion on the death penalty in the US for example makes no sense to me).

Regarding the UBI, I’ve never understood how we are going to avoid it all getting eaten up by rent seekers at crucial choke points like, well actual rent for housing. It is similar to the problem we see with US college tuition–the grants and loans initially provide better access to poor people year one, but very quickly that gets gobbled up in increased prices at the choke point (the college). Won’t a similar dynamic either create a nasty inflationary spiral (with the UBI always trying to catch up) or cause the UBI to just get captured by increased rents leaving the recipients not much better off than before for anything with any kind of a positional component (access to housing, access to higher education, etc.?).

Counterpoint I suppose, if you don’t have to work it might be easier to expand the suburbs to get cheaper places to live because you don’t have to commute to work.

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Faustusnotes 01.05.18 at 8:44 am

Sebastian_h, how do unions increase their own institutional power by having an opinion on the death penalty?

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J-D 01.05.18 at 9:13 am

Sebastian H

This has always been a problem when unions get involved on issues well past typical union workplace concerns–they aren’t interested in the good of the workers so much as the health of their own institutional power. (Why unions should have an opinion on the death penalty in the US for example makes no sense to me).

You don’t seem to have noticed that your second sentence contradicts your first. If unions take a position on the death penalty, it’s not out of concern for their own institutional power.

Inevitably, union members, union activists, and union leaders are motivated by a mixture of the immediate workplace interests of workers, the immediate institutional interests of the organisation, and a variety of broader concerns: this is true both when unions are dealing directly with workplace issues and when they become involved in campaigns on other issues.

So you’re muddling up two separate issues. One question is ‘How should unions balance the interests of workers with their own institutional interests?’ to which I would answer ‘In principle they should put the interests of workers ahead of their own institutional interests, although it’s unrealistic to expect them to live up to this principle perfectly, but in any case more often than not it’s true in practice that maintaining the institutional strength of unions is important to defending the interests of workers’. A separate question is ‘To what extent should unions get involved in issues beyond immediate workplace concerns?’ to which it appears your answer is ‘Not at all’; but it’s still not the same as the first question.

For example, suppose a union requests, or demands, that an employer provide free office facilities for the union. In this case, the union is not involving itself in issues outside the workplace, but it is still obviously concerned with its own strength as a union; but what strengthens the union in this instance is also in the interest of the workers.

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Miguel Madeira 01.05.18 at 10:40 am

Regarding the UBI, I’ve never understood how we are going to avoid it all getting eaten up by rent seekers at crucial choke

But how this could happen? A subside to buy something makes the price of that thing increase (Econ 101); but how an incoditional subsidy will make the price of something go up?

UBI to just get captured by increased rents leaving the recipients not much better off than before for anything with any kind of a positional component (access to housing, access to higher education, etc.?).

This only will occur if:

a) all the increase of the demand from the peope who are net beneficiaries from UBI (by
“net beneficiaries” I mean people who receive more from UBI than what they will pay more in taxes to the UBI) goes to goods with a rigid supply

b) nothing of the decrease in the demand from the people who are net contributors to UBI (by “net contribitors” I mean people who receive less from UBI than what they will pay more in taxes to the UBI) will afect goods with a rigid supply

These 2 conditions reunited seem very unprobable.

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MisterMr 01.05.18 at 10:47 am

@Sebastian H 50

I assume that the UBI would be paid by taking money from incomes, so it’s not the same that subsidized loans (that expand the “money base”), the inflation is checked because some people would have less direct income.

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Sebastian H 01.05.18 at 4:44 pm

I don’t think that is right because the magnitude effects aren’t the same.

Take housing. So long as we limit construction as sharply as most of us do or otherwise screw with the housing production stock (which we should clearly stop doing or at least sharply reduce, but that has been clear for 50+ years so I don’t think we can just assume it away).

On the good side, now more people have more money for housing. On the bad side now everyone has more money for housing. Because we’ve been stupid about constructing enough housing in most of the major cities, housing ends up having a large positional component. For goods with a large positional component, more money just means you bid up higher prices.

So in order to avoid a scenario where the housing prices just get bid up, you have to assume that the purchasing power of the net contributors is being decreased by more than purchasing power of the net beneficiaries is being increased.

That seems like a bad assumption because the purchasing power for housing is NOT limited to the UBI. The net contributors are much richer than the net beneficiaries in any of the proposed numbers I’ve seen. So unless I’m missing something obvious (which is totally possible as smarter minds than me seem to back the UBI) things like housing could eat up the gains as the rich continue to bid up the prices. They will use a slightly larger portion of their money on housing, but enough to eat up the gains of the UBI.

Now not ALL in housing probably. But in goods like housing.

As I said before, it is possible that in an end of work scenario city housing won’t be as valuable because you won’t care about living close to work—letting even larger sprawling suburbs dominate. But I don’t think we can just assume that (especially at relatively low UBI levels).

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Tim Worstall 01.06.18 at 10:19 am

“Well, yeah, if you’re going to do this, you can’t pretend it’s just another government program that you’re going to squeeze into the existing tax system. But consider that the top 1% get roughly 20% of the income, and 90-99th percentilers get another 25%. So it doesnn’t require huge tax rates.”

Say we’re to try to finance this just from that 10% – sure, we don’t need to make that assumption but let’s just try it. They’re getting 45% of income. We need 29% of income. So, they need to be paying average tax rates of something like 60% of income (eyeballing, not calculated).

Average, not marginal.

Oh, and that’s on top of the current taxes they pay.

It really is difficult to make these sums add up.

“we need an increase in government revenue of around 10 per cent of national income, and an effective marginal tax rate* of about 60 per cent.”

In high income tax states (say, CA, Feds plus 13% state income tax) or UK (add 45% rate and 13.8% employer NI) we’re pretty much there. Don’t see that moving to 60% marginal will raise 10% of GDP.

Unless we’re saying that it should be a 60% marginal rate for everyone at least.

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