Wednesday, 24 July 2013

Basic Income or Job Guarantee?

(3/3) So if both the BI and the JG have many overlapping advantages (assisting the worst-off, ensuring there is demand in the economy), how are we to choose between the BI and JG? For one thing it will be necessary to emphasise their differences. The way to judge these differences, however, is from the perspective of distributive justice. The fairer approach is the one we should prefer.

I indicated some of the differences between BI and JG in my first post on this topic. The BI is provided to everyone without any conditions, while the JG is only provided to those who perform what is required of them by the programme. BI will be cheaper to administer, but the JG will not pay out to those unwilling to work. It is difficult to say in the abstract which one will be cheaper, but there is an important difference. The JG will make people more likely to seek work in the market, particularly if it is combined (as I argue it should be) with a generous earning subsidy for those on a low hourly wage. This will push more people into work, whereas the BI will push more people into a life of leisure.

The greater amount of work performed in a JG society should broadly reduce prices (as more will be produced), and also ensure that socially useful activities are performed by those who would otherwise be unemployed. These are benefits of the scheme not accounted for in the cost to government. Advocates of the BI may claim that the BI will produce these positive outcomes anyway – if people get money for nothing they will spontaneously do something useful with their time. I’m sure many would, but I’m equally sure many wouldn’t. Indeed, a very small minority might cause more trouble if they have more leisure than they would if they were working.

Coppolla makes a very perceptive point regarding the differences between proponents of the JG and those of the BI. One difference might be that JG supporters are “managerialist” and want to make sure people are doing something useful. BI supporters love freedom, on the other hand (like Van Parijs), and are happy to leave it up to people to decide for themselves what they wish to do with their time. As a liberal myself, my sympathies here are on the side of freedom. However, the likely extra costs to society of this freedom are what tip me towards the JG approach. Furthermore, there is something democratic in asking people to do what their community has decided (perhaps via public suggestions which are voted upon) to be useful work projects.

My primary reason for preferring the JG relates to the economic advantages it offers to low-paid workers. Giving more resources to leisure-lovers will mean less resources available to support low-earners who are keen to work (whether because they want to consume more, save more, gift more, or just have a strong work-ethic). Better to channel resources to the low-paid rather than to leisure-lovers.

In the post-scarcity economy, of course, it might not be necessary to impose the work requirement. If there really was nothing that people had to do to make their society a better one in which to live then there is no point in forcing people to work. However, I imagine that it will always be possible to improve things, and it would be fair to apportion the corresponding work (and any ensuing pay) as fairly as possible.

The argument for the JG with earning-subsidy approach arises where there is tax revenue scarcity, particularly if there are useful things that people could do if they were appropriately directed. In this case the JG approach is superior unless we assume that a particular notion of freedom is of primary importance (as it seems to me Van Parijs does).

Automation and the post-scarcity economy: The economic argument for basic income

Many people have argued for a basic income because they think it would make for a fairer society. The work of Phillipe Van Parijs since the early 1990s is no doubt the pre-eminent example, and a comprehensive bibliography is available online. However, I have more recently seen arguments for basic income premised on its superior economic performance, at least in the long term and if certain trends continue. I will follow my previous blog on basic income and job guarantee programmes by, belatedly, writing on this topic.

There are certain links between Van Parijs’ argument in Real Freedom For All and the economic argument. Both begin from the premise that jobs are scarce and that some people get this scarce resource while others are left out. The economic argument begins by extending trends in robotics and computerisation that seem to reduce the employment available in many sectors. Robots are increasingly cheaper or more efficient than human workers, and so capitalists will gradually replace their workforces with these robots. This is the post-scarcity economy that Marx thought would lead to communism (though he thought that socialism would be a stepping stone to this rather than an economic and political disaster).

If robots are producing more and more it would seem that we would be entering a wonderful utopia, indeed a post-scarcity economy. However, while there would plenty for all many people would have no access to these bountiful goods. The haves will keep it all and less will be shared with workers, since workers will be employed (and presumably at lower wages if there is a surplus of workers). However, if most people have no resources and cannot find work, then who is going to buy all the items that are produced by the robots? The wealthy might well run out of things to buy – there are only so many hours in the day in which the rich can consume. This is the intuitively sensible idea that the poor have a higher propensity to consume their income on which Keynesian arguments are usually based. Coppola therefore refers to this robotic cornucopia as a “demand-constrained economy”

The economic argument for the BI is that it will redistribute to those who are unemployed and thereby increase demand. This demand will be good for the economy as it will provide a market for the produce of the robots, as well—presumably—as increasing demand for non-robot services as well.

One counter-argument to this is to point out that technological advances have been happening for centuries, and people have still been able to find employment. This has largely been through the creation of new products and services, which create jobs which replace the old ones. Indeed, I am unconvinced by the article by David Rotman which seems to have been a catalyst for the economic argument. Rotman mentions this counter-argument in his article and does not really rebut it. Technological advancement might just change the nature of work but not remove the need for it entirely. For example, if there are lots of robots then someone will need to make and fix them. Furthermore, if consumer prices are much lower then paid work could be shared around much more, with more people working much fewer hours than they currently do. If it is cheap to consume then many people might be happy to earn a little and then to retire to a life of leisure.

A further point to raise in response to the economic demand argument for a BI is that the BI is not the only way to redistribute resources. Another policy that will do just as good a job is a state-funded job guarantee scheme (JG), which I presented in the previous post. I prefer the JG to the BI and recently argued for the superiority of the JG in my PhD thesis. I will contrast the two approaches in the following post as well. For now I will highlight that the economic argument applies just as well to the JG scheme in a post-scarcity economy.

If the state were to employ the involuntarily unemployed then this would also redistribute income and create demand in the economy. Coppola of course admits as much. The problem is not that there is a lack of useful work to do, but rather that there is a lack of people wanting to buy the products of labour in the market.

So, if there is a demand-constrained economy then the BI and JG are two equally valid options to improve economic performance. In the final of the three blogs on this subject I will discuss the choice between the two rival policies.

Saturday, 20 July 2013

Basic Income, Guaranteed Jobs, both, or neither?

Certain corners of the internet have recently been engaged with discussions about the relative benefits of two rival policies to provide help to the less fortunate; basic income and the job guarantee.

I will be advocating a job guarantee scheme in my forthcoming book (rethinking taxation), to complement a novel form of earning subsidy, and so I have a horse in this race. I will therefore take this opportunity to weigh in on the subject. However, before doing so I will devote a post to setting out the terrain for the benefit of those who are less au fait with the discussion.

Basic Income (BI)
This is the idea that people with a low income should receive an income from the state, whether or not they are actively searching for work. The unconditional aspect of the basic income therefore contrasts with the conditional nature of unemployment benefits as they currently exist. Indeed, this unconditionality indicates why it is sometimes referred to as a UBI for unconditional or universal basic income. This and similar proposals have been proposed under a number of names such as a demogrant,  stakeholder grant.  It is related to similar proposals for basic capital,  or a “property owning democracy.”  The basic income was also proposed by the libertarian pin-up Milton Freidman, under the name of a “negative income tax.”

Job Guarantee Programme (JG)
The job guarantee is a programme whereby the state provides work to those who are unable to find it in the job market. This has also been referred to as state being the Employer of Last Resort (ELR),  or an Employment Assurance Policy (EAP).  These schemes all attempt to ensure that everyone is able to find work in society at a decent rate of pay. There are various methods of achieving this aim. One is obviously to have a centrally planned economy, though the programmes above assume a broadly capitalist job market, as do I. The proposals usually therefore require the state to create jobs for the unemployed. These jobs might conflict with “private” firms, and advocates usually indicate that this should be avoided where possible. Workers should therefore be employed to provide services that would not be provided by the market or would not be provided as a matter of course by government (central or local). I imagine that it is usually possible to create such work as it is always possible to improve the local environment and provide services that will benefit less well-off and vulnerable members of society—improving the quality of life and/or education of schoolchildren, the elderly, the disabled and prisoners. I imagine that people should be able to propose local projects that could be voted upon by the local populace, with administrators also setting schemes of the sort mentioned above.

How do the proposals help the worst off?
Basic income helps the worst off by providing a safety net. This will improve the bargaining position of workers as employers will have to ensure that the package they offer to workers is better than the default option of not working at all.
Job guarantees are beneficial to the worst off to the extent that they provide a higher income than alternative jobseekers benefits (such as the jobseekers allowance in the UK). It would also provide workers with more work experience, and the self-esteem benefits that follow from productive employment.
Both proposals should therefore improve things for the worst off in society, though they might be expected to be fairly expensive for the government. Basic income may be taken up by many people who are capable of work, thus increasing the cost of the scheme (or the amount that each person on it will receive). Job guarantee schemes are expensive to administer as they will have to create schemes to keep people working.

Most people advocate either one scheme or the other, and so advocates of the schemes often argue against the proponents of the alternative option. However, as many have acknowledged, the two proposals are not mutually exclusive. It is perfectly possible to provide both schemes in parallel – a JG programme for those who wish to work but cannot find any and a BI for those who do not wish to take any of the forms of employment available. However, few people advocate both schemes because this would then involve the higher costs of both schemes at the same time. Furthermore, since both schemes are aimed at benefitting the worse-off members of society there is a degree of duplication if both are provided together.

The differences, then, are as follows. One important issue is the conditionality of benefits. BI is unconditional whereas JG is conditional. JG is therefore closer to present benefit proposals in this regard. However, the JG goes beyond these existing schemes by more actively attempting to improve the position of the worst off.

Both of the proposals are fairly niche, and it seems that the passive and ungenerous schemes currently existing have a fairly widespread support in our punish-the-poor, reward-the-successful society. However, if one proposal were to win out with those interested in such things it would be easier to get more mainstream attention as an attractive alternative.

Further complementarities
BI and JG are intended to improve the position of the worst off in the labour market, though they are also compatible with other policies intended to achieve the same ends; the minimum wage and earnings subsidies.

I mentioned at the outset that I would suggest providing funding for the JG through the provision of an earning subsidy (a negative hourly tax). This means that every hour someone works below the 'minimum net wage' the state/society would subsidise that income to ensure the person receives a decent amount. This would enable a drop in the 'minimum GROSS wage' (i.e. the minimum wage as it is currently called). Most advocates of the JG do not imagine the scheme to work in such a way. Instead the national programme would itself pay the workers a reasonable wage, and so the minimum wage would need to be kept (or would not even be needed since firms paying less than this would struggle to attract workers from the JG scheme).

Hopefully that provides some background to the issue for those who are less familiar with the debates. In the following two blog posts I will engage with some recent debates on the subject.