Lots of people are arguing governments should provide all citizens with an unconditional basic income. One problem with this is that it would be very expensive. If the government would give each person say 30 % of GDP per capita to each person (not a very high standard of living), then that would force them to raise 30 % of GDP in taxes to cover for that.
On the other hand, means-tested benefits have disadvantages too. It is administratively costly. Receiving them is seen as shameful in many countries. Most importantly, it is hard to create a means-tested system that doesn’t create perverse incentives for those on benefits, since when you start working, you will both lose your benefits and start paying taxes under such a system. That may mean that the net income can be a very small proportion of the gross income for certain groups, incentivizing them to stay unemployed.
One middle route I’ve been toying with is that the government could provide people with cheap goods and services. People who were satisfied with them could settle for them, whereas those who wanted something more fancy would have to pay out of their own pockets. The government would thus provide people with no-frills food—Soylent, perhaps—no-frills housing, etc, for free or for highly subsidized prices (it is important that they produce enough and/or set the prices so that demand doesn’t outstrip supply, since otherwise you get queues—a perennial problem of subsidized goods and services).
Of course some well-off people might choose to consume these subsidized goods and services, and some poor people might not choose to do that. Still, it should in general be very redistributionary. The advantage over the basic income system is that it would be considerably cheaper, since these goods and services would only be used by a part of the population. The advantage over the means-tested system is that people will still be allowed to use these goods and services if their income goes up, so it doesn’t create perverse incentives.
Another advantage with this system is that it could perhaps rein in rampant consumerism somewhat. Parts of the population will be habituated to smaller apartments and less fancy food. Those who want to distinguish themselves from the masses—who want to consume conspiciously—will also be affected, since they will have to spend less to stand out from the crowd.
I guess this system to some extent exist—e.g. in many countries, the government does provide you with education and health care, but rich people opt to go for private health-care and private education. So the idea isn’t novel—my suggestion is just to take it a bit further.
A sharp divide between basic, subsidized, no-frills good and services and other ones didn’t work in the socialist German Democratic Republic (long story, reply if you need it). What does seem to be for various countries is different rates of value-added tax depending on the good or service—the greater the difference in taxation, the closer you get to the system you’ve described, but it is more gradual and can be fine-tuned. Maybe that could work for sales tax, too?
A sharp divide between basic, subsidized, no-frills good and services and other ones didn’t work in the socialist German Democratic Republic (long story, reply if you need it).
I’m no economist, but as a former citizen of that former country, this is what I could see.
There was a divide of basic goods and services and luxury ones. Basic ones would get subsidies and be sold pretty much at cost, luxury ones would get taxed extra to finance those subsidies.
The (practically entirely state-owned) industries that provided the basic type of goods and services were making very little profit and had no real incentive to improve their products, except to produce them cheaper and more numerously. Nobody was doing comparison shopping on those, after all. (Products from imperalist countries were expected to be better in every way, but that would often be explained away by capitalist exploitation, not seen as evidence homemade ones could be better.) So for example, the country’s standard (and almost only) car did not see significant improvements for decades, although the manufacturer had many ideas for new models. The old model had been defined as sufficient, so to improve it was considered wasteful and all such plans were rejected by the economy planners.
The basic goods were of course popular, and due to their low price, demand was frequently not met. People would chance upon a shop that happened to have gotten a shipment of something rare and stand in line for hours to buy as much of that thing as they would be permitted to buy, to trade later. In the case of the (Trabant) car, you could register to buy one at a seriously discounted price if you went via an ever-growing waiting list that, near the end, might have you wait for more than 15 years. Of course many who got a car this way sold it afterwards, and pocketed a premium the buyer paid for not waiting.
Arguably more importantly, money was a lot better at getting you basic goods than luxury ones. So people tended to use money mostly for basic goods and services, and would naturally compare a luxury buy’s value with those. When you can buy a (luxury) color TV at ten times the price of a (basic) black-and-white TV, it feels like you’d pay nine basic TVs for adding color to the one you use. Empirically, people often simply saved their money and thus kept it out of circulation.
Housing was a mess, too. Any rent was decreed to have to be very small. So there was no profit in renting out apartments, which again created a shortage of supply. (Private landownership was considered bourgeouis and thus not subsidized.) It got so bad many young couples decided to have child as early as possible, because that’d help them in the application to receive a flat of their own, and move out from their parents. And of course most buildings fell into disrepair—after all, there was no incentive to invest in providing higher quality for renters. This demonstrates again that to be making a basic good or service meant you’d always have demand, but that demand wouldn’t benefit you much.
The production of luxury goods went better, partly because these were often exported for hard currency. The GDR had some industries that were fairly skilled at stealing capitalist innovations and producing products that had them, for sale at fairly competitive prices. Artificially low prices and subsidies for certain goods and products made pretty sure most of domestic consumption never benefitted from that skill.
“Those who want to distinguish themselves from the masses—who want to consume conspiciously—will also be affected, since they will have to spend less to stand out from the crowd”—maybe I’ve misunderstood this, but surely it would have the opposite result? Let’s say rents are ~$20/sqm (adjust for your own city; the principle stays the same). If I want my apartment to be 50 sqm rather than 40 sqm, that’s an extra $200. But if 40 sqm apartments were free, the price difference would be the full $1000/month price of the bigger apartment. You’ve still got a cliff, just like in the means-tested welfare case; it’s just that now it’s on the consumption side.
In practice this would probably destroy the market for mid-priced goods—who wants to pay $1000/month just for an extra 10 square meters? Non-subsidized goods will only start being attractive when they get much better than the stuff the government provides, not just slightly better.
Also, if you give out goods rather than money, you’re going to have to provide a huge range of different goods/services, because otherwise there will be whole categories of products that people who legitimately can’t work (elderly, disabled etc) won’t have access to. And if you do that, the efficiency of your economy is going to go way down—not just because the government is generally less efficient than the free market, but also because people can’t use money to allocate resources according to their own preferences.
You’ve still got a cliff, just like in the means-tested welfare case; it’s just that now it’s on the consumption side.
Yes, that’s what it’s like (only the cliff is actually usually less steep under means-tested welfare). And you’re also right about this:
In practice this would probably destroy the market for mid-priced goods—who wants to pay $1000/month just for an extra 10 square meters?
To clarify, I should say that my idea was that these subsidized or free goods and services would be so frugal that they would in effect not be an option to the majority of the population. Hence, it’s not exactly the market for mid-priced goods, but the market for “low-priced but not extremely low-priced goods” that would get destroyed.
To your main point: since some people go down in standard, thanks to the fact that they by doing so they can get significantly cheaper goods, the average standard will go down. Now say that to get the average standard before this reform you had to pay 1000 dollars a month, but after the reform you just have to pay 900 dollars a month (because the average standard is now lower). Then those who want higher than the average standard will only have to pay more than 900 dollars rather than more than 1000.
The actual story might be more complicated than this—e.g., what some people really might be interested in is having a higher standard than the mean, or the the eight first deciles, or what-not. But generally it seems to me intuitive that if parts of the population lower their standards, then this should mean that those who want to consume consipiciously will also lower their standards.
Also, if you give out goods rather than money, you’re going to have to provide a huge range of different goods/services, because otherwise there will be whole categories of products that people who legitimately can’t work (elderly, disabled etc) won’t have access to.
I don’t see this as a comprehensive system: rather, you would just use it for some important goods and services: food, housing, education, health, public transport (in fact, the system is already used in the three latter; possibly housing too, though most subsidized housing is means-tested which it wouldn’t be under this system). The system would be too complicated otherwise. Possibly it could be combined with a low UBI.
If the government would give each person say 30 % of GDP per capita to each person (not a very high standard of living), then that would force them to raise 30 % of GDP in taxes to cover for that.
I think that would be too high anyway. Since anyone who bothers to work can make more than that, and the reduction in labor supply would increase pay, and any money you save will last you longer, there’s little reason to make it enough for people to be well off, as opposed to getting just enough to scrape by.
It’s also worth noting that most people will get a significant portion of that money back. If you make below the mean income (which most people do, since it’s positively skewed) you will end up getting all of it back.
It seems unfair to charge people the entire price to get slightly better goods. Thus, if you want to get slightly better goods, the government should still reimburse you for the price of the cheap goods. At this point, it’s just unconditional basic income with the government selling cheap goods.
As a minor point, Soylent as it is now can’t be considered no-frills food. If you buy it ready-made, it costs around $10 a day.
It seems unfair to charge people the entire price to get slightly better goods. Thus, if you want to get slightly better goods, the government should still reimburse you for the price of the cheap goods. At this point, it’s just unconditional basic income with the government selling cheap goods.
What you do then is in effect (if I understand you correctly) to give them a “food voucher” (and similarly a “housing voucher”, etc) worth a certain amount which they would be able to spend as they saw fit (but only on food/housing, what-not). Such as a system doesn’t seem very clever (as you imply): in that case, it would be better to just give people money in the form of an unconditional basic income.
I’m not sure why it would be so unfair not to reimburse people who want more expensive goods, though. Of course, the government does to a certain extent discriminate in favour of those with more frugal preferences in this set-up. But one of my points is precisely that we want people to develop more frugal tastes—to spend less on, e.g. housing and food. There is a “conspicious consumption” arms race going on concerning these and many other goods which this system is intended to mitigate to some point.
Different people have different needs. Some people would be happy in cheap housing and others wouldn’t—maybe they’re more sensitive to sounds, environmental conditions or whatever else is the difference is between cheap housing and more expensive housing.
The point is, there’s no basic standard that would satisfy everyone (unless that’s a reasonably high standard, which isn’t what is proposed here). Some people would consider more expensive goods and services NEEDS rather than luxuries, and for good reason—consuming cheaper alternatives might not kill them, but it would make them depressed, less healthy and less productive (for example)
So it is unfair to subsidize certain goods and services and not others—one might wonder “why is my neighbor getting her needs met for cheap, while I have to pay full price to meet my needs?”
I’m not sure why it would be so unfair not to reimburse people who want more expensive goods, though.
If it costs $1.00 to make the basic food, and $1.10 to make slightly better food, and someone is willing to pay the difference, shouldn’t they get the slightly better food?
Maybe it’s not a big deal that nobody will eat anything that costs between $1.00 and $2.00. That’s not a lot of deadweight cost. It’s only around a dollar a person. But this will apply to everything you’re paying for, which we have established is significant. If it costs $300 a month for cheap housing, and you virtually eliminate any housing that costs less than $600 a month, that is a lot of deadweight cost.
If a government produces goods, the results tend to be low quality (education may be an exception in some places).
The cost of a guaranteed minimum income may not be quite as high as you think—it would replace a lot of more complicated government support. Also, it might be possible to build in some social rewards for not taking it if you don’t need it.
The government wouldn’t have to produce the low-standard/cheap goods and services. They could be produced by private companies. My point is just that the government would subsidize them (possibly to the point where they become free).
The advantage over the basic income system is that it would be considerably cheaper, since these goods and services would only be used by a part of the population. The advantage over the means-tested system is that people will still be allowed to use these goods and services if their income goes up, so it doesn’t create perverse incentives.
The universal basic income schemes that seem the most reasonable to me adjust the taxation so that, while the UBI itself is never taxed, if you make a lot of money then your non-UBI earnings get an extra tax so that the whole reform ends up having very little direct effect on you. In effect, that ends up covering the “only used by a part of the population” criteria. The perverse incentives can’t be avoided entirely, but they can be mitigated somewhat if the tax system is set up so that you’re always better off working than not working.
For a concrete example, there’s e.g. this 2007 proposal by the Finnish Green party. Your working wage (in euros per month) is on the X-axis, your total income after is on the Y-axis. Light green is the basic income, dark green is your after-tax wage, red is paid in tax. According to their calculations, this scheme would have been approximately cost neutral (compared to what the Finnish state normally gets in tax income and pays out in welfare).
Thanks, that’s interesting. 440 euro is not a lot, though—could you live in Helsinki on that (in 2007)? Is this supposed to replace for instance unemployment benefits (which I’m sure are much higher)? It so, this system would make some people who aren’t that well off worse off.
One thing that is seldom noted is that the Scandinavian “general welfare states” are in effect half-way to the UBI. In Sweden, and I would guess the other Scandinavian countries as well, everyone gets a significant pension no-matter what, child benefits are not means-tested, etc. Also virtually everyone uses public schools, public health-care, public universities and public child-care (all of which are either heavily subsidized or free). So it’s not a question of either you have an Anglo-saxon system where benefits mostly go to the poor or a UBI system, but there are other options.
440 euros is almost the same amount as direct student benefits were in 2007, though that’s not taking into account the fact that most students also have access to subsidized housing which helps substantially. On the other hand, the proposed UBI model would have maintained as separate systems the current Finnish system of “housing benefits” (which pays a part of your rent if you’re low-income, exact amount depending on the city so as to take into account varying price levels around the country) as well as “income support”, which is supposed to be a last-resort aid that pays for your expenses if you can show that you have reasonable needs that you just can’t meet in any other way. So we might be able to say that in total, the effective total support paid to someone on basic income would have been roughly comparable to that paid to a student in 2007.
Some students manage to live on that whereas some need to take part-time jobs to supplement it, which seems to be roughly the right level to aim for—doable if you’re really frugal about your expenses, but low enough that it will still encourage you to find work regardless. Might need to increase child benefits a bit in order to ensure that it’s doable even if you’re having a family, though.
The Greens’ proposed UBI would have replaced “all welfare’s minimum benefits”, so other benefits that currently pay out about the same amount. That would include student benefits and the very lowest level of unemployment benefit (which you AFAIK get if your former job paid you hardly anything, basically), but it wouldn’t replace e.g. higher levels of unemployment benefits.
Housing benefits are an alternative to the idea discussed here; i.e. subsidizing particular low-cost, low-standard flats. However, the problem with housing benefits is that you tend to get more of them if you have higher rent, and thus you in effect reward people with more expensive tastes, which leads to a general increase of housing consumption. My proposal is intended to have the exact opposite consequence.
I’m not that adverse to the UBI but there is something counter-intuitive about the idea that rich people first pay taxes and then get benefits back. This forces you to either lower the level of basic income (or other government expenditure) or raise taxes. My suggestion is intended to take care of this without having to resort to means-testing.
Lots of people are arguing governments should provide all citizens with an unconditional basic income. One problem with this is that it would be very expensive.
You are missing the point. It’s cheaper to give the poor unconditional basic income than to have a huge bureaucratic administration that makes sure that they pass certain conditions to be eligible for welfare payments.
That might mean a low basic income but it would still be an unconditional basic income. Don’t confuse the debate for a unconditional income with the debate about how high it or welfare payments to the poorest should be.
I guess this system to some extent exist—e.g. in many countries, the government does provide you with education and health care
Actually you are looking at the wrong countries. Countries like Iran would be an example where essential goods like food get’s heavily subventioned.
There are many reasons why subventions are a bad idea. The produce incentives for companies to lobby heavily to be included. The encourage people to waste products that get subventioned. They need bureaucracy to be organised. The prevent innovation because new products usually don’t fit into the template along with old products are subventioned.
It’s cheaper to give the poor unconditional basic income than to have a huge bureaucratic administration that makes sure that they pass certain conditions to be eligible for welfare payments.
Finally, the report estimated that the federal administrative costs amounted to $12,452,000,000 for the 11 programs studied -- 6.4 percent of total federal expenditures on these programs.
Lots of people are arguing governments should provide all citizens with an unconditional basic income. One problem with this is that it would be very expensive. If the government would give each person say 30 % of GDP per capita to each person (not a very high standard of living), then that would force them to raise 30 % of GDP in taxes to cover for that.
On the other hand, means-tested benefits have disadvantages too. It is administratively costly. Receiving them is seen as shameful in many countries. Most importantly, it is hard to create a means-tested system that doesn’t create perverse incentives for those on benefits, since when you start working, you will both lose your benefits and start paying taxes under such a system. That may mean that the net income can be a very small proportion of the gross income for certain groups, incentivizing them to stay unemployed.
One middle route I’ve been toying with is that the government could provide people with cheap goods and services. People who were satisfied with them could settle for them, whereas those who wanted something more fancy would have to pay out of their own pockets. The government would thus provide people with no-frills food—Soylent, perhaps—no-frills housing, etc, for free or for highly subsidized prices (it is important that they produce enough and/or set the prices so that demand doesn’t outstrip supply, since otherwise you get queues—a perennial problem of subsidized goods and services).
Of course some well-off people might choose to consume these subsidized goods and services, and some poor people might not choose to do that. Still, it should in general be very redistributionary. The advantage over the basic income system is that it would be considerably cheaper, since these goods and services would only be used by a part of the population. The advantage over the means-tested system is that people will still be allowed to use these goods and services if their income goes up, so it doesn’t create perverse incentives.
Another advantage with this system is that it could perhaps rein in rampant consumerism somewhat. Parts of the population will be habituated to smaller apartments and less fancy food. Those who want to distinguish themselves from the masses—who want to consume conspiciously—will also be affected, since they will have to spend less to stand out from the crowd.
I guess this system to some extent exist—e.g. in many countries, the government does provide you with education and health care, but rich people opt to go for private health-care and private education. So the idea isn’t novel—my suggestion is just to take it a bit further.
A sharp divide between basic, subsidized, no-frills good and services and other ones didn’t work in the socialist German Democratic Republic (long story, reply if you need it). What does seem to be for various countries is different rates of value-added tax depending on the good or service—the greater the difference in taxation, the closer you get to the system you’ve described, but it is more gradual and can be fine-tuned. Maybe that could work for sales tax, too?
I’d be interested in hearing about this.
I’m no economist, but as a former citizen of that former country, this is what I could see.
There was a divide of basic goods and services and luxury ones. Basic ones would get subsidies and be sold pretty much at cost, luxury ones would get taxed extra to finance those subsidies.
The (practically entirely state-owned) industries that provided the basic type of goods and services were making very little profit and had no real incentive to improve their products, except to produce them cheaper and more numerously. Nobody was doing comparison shopping on those, after all. (Products from imperalist countries were expected to be better in every way, but that would often be explained away by capitalist exploitation, not seen as evidence homemade ones could be better.) So for example, the country’s standard (and almost only) car did not see significant improvements for decades, although the manufacturer had many ideas for new models. The old model had been defined as sufficient, so to improve it was considered wasteful and all such plans were rejected by the economy planners.
The basic goods were of course popular, and due to their low price, demand was frequently not met. People would chance upon a shop that happened to have gotten a shipment of something rare and stand in line for hours to buy as much of that thing as they would be permitted to buy, to trade later. In the case of the (Trabant) car, you could register to buy one at a seriously discounted price if you went via an ever-growing waiting list that, near the end, might have you wait for more than 15 years. Of course many who got a car this way sold it afterwards, and pocketed a premium the buyer paid for not waiting.
Arguably more importantly, money was a lot better at getting you basic goods than luxury ones. So people tended to use money mostly for basic goods and services, and would naturally compare a luxury buy’s value with those. When you can buy a (luxury) color TV at ten times the price of a (basic) black-and-white TV, it feels like you’d pay nine basic TVs for adding color to the one you use. Empirically, people often simply saved their money and thus kept it out of circulation.
Housing was a mess, too. Any rent was decreed to have to be very small. So there was no profit in renting out apartments, which again created a shortage of supply. (Private landownership was considered bourgeouis and thus not subsidized.) It got so bad many young couples decided to have child as early as possible, because that’d help them in the application to receive a flat of their own, and move out from their parents. And of course most buildings fell into disrepair—after all, there was no incentive to invest in providing higher quality for renters. This demonstrates again that to be making a basic good or service meant you’d always have demand, but that demand wouldn’t benefit you much.
The production of luxury goods went better, partly because these were often exported for hard currency. The GDR had some industries that were fairly skilled at stealing capitalist innovations and producing products that had them, for sale at fairly competitive prices. Artificially low prices and subsidies for certain goods and products made pretty sure most of domestic consumption never benefitted from that skill.
Start by googling
"hard currency shop".Nor did it in other Soviet block countries, e.g. People’s Republic of Poland.
“Those who want to distinguish themselves from the masses—who want to consume conspiciously—will also be affected, since they will have to spend less to stand out from the crowd”—maybe I’ve misunderstood this, but surely it would have the opposite result? Let’s say rents are ~$20/sqm (adjust for your own city; the principle stays the same). If I want my apartment to be 50 sqm rather than 40 sqm, that’s an extra $200. But if 40 sqm apartments were free, the price difference would be the full $1000/month price of the bigger apartment. You’ve still got a cliff, just like in the means-tested welfare case; it’s just that now it’s on the consumption side.
In practice this would probably destroy the market for mid-priced goods—who wants to pay $1000/month just for an extra 10 square meters? Non-subsidized goods will only start being attractive when they get much better than the stuff the government provides, not just slightly better.
Also, if you give out goods rather than money, you’re going to have to provide a huge range of different goods/services, because otherwise there will be whole categories of products that people who legitimately can’t work (elderly, disabled etc) won’t have access to. And if you do that, the efficiency of your economy is going to go way down—not just because the government is generally less efficient than the free market, but also because people can’t use money to allocate resources according to their own preferences.
Yes, that’s what it’s like (only the cliff is actually usually less steep under means-tested welfare). And you’re also right about this:
To clarify, I should say that my idea was that these subsidized or free goods and services would be so frugal that they would in effect not be an option to the majority of the population. Hence, it’s not exactly the market for mid-priced goods, but the market for “low-priced but not extremely low-priced goods” that would get destroyed.
To your main point: since some people go down in standard, thanks to the fact that they by doing so they can get significantly cheaper goods, the average standard will go down. Now say that to get the average standard before this reform you had to pay 1000 dollars a month, but after the reform you just have to pay 900 dollars a month (because the average standard is now lower). Then those who want higher than the average standard will only have to pay more than 900 dollars rather than more than 1000.
The actual story might be more complicated than this—e.g., what some people really might be interested in is having a higher standard than the mean, or the the eight first deciles, or what-not. But generally it seems to me intuitive that if parts of the population lower their standards, then this should mean that those who want to consume consipiciously will also lower their standards.
I don’t see this as a comprehensive system: rather, you would just use it for some important goods and services: food, housing, education, health, public transport (in fact, the system is already used in the three latter; possibly housing too, though most subsidized housing is means-tested which it wouldn’t be under this system). The system would be too complicated otherwise. Possibly it could be combined with a low UBI.
In 2002, total U.S. social welfare expenditure constitutes over 35% of GDP
I think that would be too high anyway. Since anyone who bothers to work can make more than that, and the reduction in labor supply would increase pay, and any money you save will last you longer, there’s little reason to make it enough for people to be well off, as opposed to getting just enough to scrape by.
It’s also worth noting that most people will get a significant portion of that money back. If you make below the mean income (which most people do, since it’s positively skewed) you will end up getting all of it back.
It seems unfair to charge people the entire price to get slightly better goods. Thus, if you want to get slightly better goods, the government should still reimburse you for the price of the cheap goods. At this point, it’s just unconditional basic income with the government selling cheap goods.
As a minor point, Soylent as it is now can’t be considered no-frills food. If you buy it ready-made, it costs around $10 a day.
What you do then is in effect (if I understand you correctly) to give them a “food voucher” (and similarly a “housing voucher”, etc) worth a certain amount which they would be able to spend as they saw fit (but only on food/housing, what-not). Such as a system doesn’t seem very clever (as you imply): in that case, it would be better to just give people money in the form of an unconditional basic income.
I’m not sure why it would be so unfair not to reimburse people who want more expensive goods, though. Of course, the government does to a certain extent discriminate in favour of those with more frugal preferences in this set-up. But one of my points is precisely that we want people to develop more frugal tastes—to spend less on, e.g. housing and food. There is a “conspicious consumption” arms race going on concerning these and many other goods which this system is intended to mitigate to some point.
Different people have different needs. Some people would be happy in cheap housing and others wouldn’t—maybe they’re more sensitive to sounds, environmental conditions or whatever else is the difference is between cheap housing and more expensive housing.
The point is, there’s no basic standard that would satisfy everyone (unless that’s a reasonably high standard, which isn’t what is proposed here). Some people would consider more expensive goods and services NEEDS rather than luxuries, and for good reason—consuming cheaper alternatives might not kill them, but it would make them depressed, less healthy and less productive (for example)
So it is unfair to subsidize certain goods and services and not others—one might wonder “why is my neighbor getting her needs met for cheap, while I have to pay full price to meet my needs?”
If it costs $1.00 to make the basic food, and $1.10 to make slightly better food, and someone is willing to pay the difference, shouldn’t they get the slightly better food?
Maybe it’s not a big deal that nobody will eat anything that costs between $1.00 and $2.00. That’s not a lot of deadweight cost. It’s only around a dollar a person. But this will apply to everything you’re paying for, which we have established is significant. If it costs $300 a month for cheap housing, and you virtually eliminate any housing that costs less than $600 a month, that is a lot of deadweight cost.
If a government produces goods, the results tend to be low quality (education may be an exception in some places).
The cost of a guaranteed minimum income may not be quite as high as you think—it would replace a lot of more complicated government support. Also, it might be possible to build in some social rewards for not taking it if you don’t need it.
The government wouldn’t have to produce the low-standard/cheap goods and services. They could be produced by private companies. My point is just that the government would subsidize them (possibly to the point where they become free).
The universal basic income schemes that seem the most reasonable to me adjust the taxation so that, while the UBI itself is never taxed, if you make a lot of money then your non-UBI earnings get an extra tax so that the whole reform ends up having very little direct effect on you. In effect, that ends up covering the “only used by a part of the population” criteria. The perverse incentives can’t be avoided entirely, but they can be mitigated somewhat if the tax system is set up so that you’re always better off working than not working.
For a concrete example, there’s e.g. this 2007 proposal by the Finnish Green party. Your working wage (in euros per month) is on the X-axis, your total income after is on the Y-axis. Light green is the basic income, dark green is your after-tax wage, red is paid in tax. According to their calculations, this scheme would have been approximately cost neutral (compared to what the Finnish state normally gets in tax income and pays out in welfare).
Thanks, that’s interesting. 440 euro is not a lot, though—could you live in Helsinki on that (in 2007)? Is this supposed to replace for instance unemployment benefits (which I’m sure are much higher)? It so, this system would make some people who aren’t that well off worse off.
One thing that is seldom noted is that the Scandinavian “general welfare states” are in effect half-way to the UBI. In Sweden, and I would guess the other Scandinavian countries as well, everyone gets a significant pension no-matter what, child benefits are not means-tested, etc. Also virtually everyone uses public schools, public health-care, public universities and public child-care (all of which are either heavily subsidized or free). So it’s not a question of either you have an Anglo-saxon system where benefits mostly go to the poor or a UBI system, but there are other options.
440 euros is almost the same amount as direct student benefits were in 2007, though that’s not taking into account the fact that most students also have access to subsidized housing which helps substantially. On the other hand, the proposed UBI model would have maintained as separate systems the current Finnish system of “housing benefits” (which pays a part of your rent if you’re low-income, exact amount depending on the city so as to take into account varying price levels around the country) as well as “income support”, which is supposed to be a last-resort aid that pays for your expenses if you can show that you have reasonable needs that you just can’t meet in any other way. So we might be able to say that in total, the effective total support paid to someone on basic income would have been roughly comparable to that paid to a student in 2007.
Some students manage to live on that whereas some need to take part-time jobs to supplement it, which seems to be roughly the right level to aim for—doable if you’re really frugal about your expenses, but low enough that it will still encourage you to find work regardless. Might need to increase child benefits a bit in order to ensure that it’s doable even if you’re having a family, though.
The Greens’ proposed UBI would have replaced “all welfare’s minimum benefits”, so other benefits that currently pay out about the same amount. That would include student benefits and the very lowest level of unemployment benefit (which you AFAIK get if your former job paid you hardly anything, basically), but it wouldn’t replace e.g. higher levels of unemployment benefits.
Thanks, that’s interesting and comprehensive.
Housing benefits are an alternative to the idea discussed here; i.e. subsidizing particular low-cost, low-standard flats. However, the problem with housing benefits is that you tend to get more of them if you have higher rent, and thus you in effect reward people with more expensive tastes, which leads to a general increase of housing consumption. My proposal is intended to have the exact opposite consequence.
I’m not that adverse to the UBI but there is something counter-intuitive about the idea that rich people first pay taxes and then get benefits back. This forces you to either lower the level of basic income (or other government expenditure) or raise taxes. My suggestion is intended to take care of this without having to resort to means-testing.
You are missing the point. It’s cheaper to give the poor unconditional basic income than to have a huge bureaucratic administration that makes sure that they pass certain conditions to be eligible for welfare payments.
That might mean a low basic income but it would still be an unconditional basic income. Don’t confuse the debate for a unconditional income with the debate about how high it or welfare payments to the poorest should be.
Actually you are looking at the wrong countries. Countries like Iran would be an example where essential goods like food get’s heavily subventioned.
There are many reasons why subventions are a bad idea. The produce incentives for companies to lobby heavily to be included. The encourage people to waste products that get subventioned. They need bureaucracy to be organised. The prevent innovation because new products usually don’t fit into the template along with old products are subventioned.
I decided to see what I could find on how much the administrative costs are, and I found this: http://mediamatters.org/research/2005/09/21/limbaugh-dramatically-overstated-administrative/133859
The most useful part seems to be this line:
That doesn’t sound like much of an issue.
This is a popular practice in the third world.
See e.g. this or this.
how is this better than Walmart and Mcdonalds?