A universal income is not such a silly idea

27th November, 2013

The concept of paying people to sit around has an upside, writes Tim Harford

‘Swiss to vote on 2,500 franc basic income for every adult.” Reuters, 4 October 2013

How much is that?

It’s about £1,700 a month – over £20,000 a year.

Payable to whom?

Everybody, or at least, every adult citizen. It’s called a “basic income” and everyone gets it, no strings attached.

You have to be joking.

We’ll have to see whether the Swiss think it’s funny or not – they are holding a referendum, which is something they do quite a lot. But the idea of a basic income suddenly seems to be back on the radar after many years of being out of fashion. The New York Times announced recently that at the cocktail parties of Berlin there is talk of little else; US policy wonks are getting excited about it too.

This sounds like some communist plot. How can anyone take seriously the idea of paying people to sit around on their backsides?

The idea is endorsed not only by experts on inequality such as Oxford’s Sir Tony Atkinson, but by the late Milton Friedman, an unlikely communist. The idea of a basic income is one that unites many left- and rightwingers while commanding very little support in the mainstream.

What on earth did Friedman see in the idea?

He saw an alternative to the current welfare state. We pay money to certain people of working age, but often only on the condition that they’re not working. Then, in an attempt to overcome the obvious problem that we’re paying people not to work, we chivvy them to get a job. Our efforts are demeaning and bureaucratic without being particularly effective. A basic income goes to all, whether they work or not.

And nobody would.

Well, maybe. If the basic income was something more modest than the Swiss campaigners have in mind – say, £75 a week, roughly the level at which the UK’s Income Support is paid – then I think most people would want to supplement that. There wouldn’t be a sudden withdrawal of benefits, so seeking part- or full-time work would be straightforward. Some advocates of a basic income see the prospect of voting with your backside as an advantage of the proposal: it would encourage employers to make low-paid jobs less uncomfortable and degrading.

Your strategy appears to be “try it and hope”.

I’m not entirely convinced of the idea myself, but I do think it should be taken more seriously than it currently is in the UK. Unlike many utopian policies, this has been tried with a set of rigorous experiments in the US in the late 1960s and 1970s. It turns out that people do work less if offered a basic income – but the effect is not dramatic by any means.

This can’t be affordable.

That depends on whether people withdraw en masse from the labour force. If most people keep working, as I would expect, the idea is less expensive than it might seem. The basic income could replace all sorts of benefits, and would also presumably replace the personal allowance for income tax. In some ways the size of the state would have to rise: some tax, such as VAT, income tax, or both, would have to raise more money. In other ways the size of the state would shrink. This is what appeals to some conservatives: Friedman believed that with a reasonable basic income for all, the welfare state as we know it would wither.

What about special cases – people with severe and expensive disabilities?

Friedman argued in Free to Choose, a book published in 1980, that such cases would be few enough that private charities would deal with them. I am not sure the modern world would accept that answer. And this does point to a general concern about basic income schemes: they look efficient and neat on paper but in reality one suspects that the complexities of the modern welfare state would fail to disappear. We would probably have exemptions for immigrants, housing allowances for Londoners, and all the rest.

I still think we’d get a country full of layabouts.

That’s the risk, I suppose. There is an alternative way to look at all this: an increasing number of economists are beginning to worry that technological change may make large numbers of people completely unemployable. In short, the robots are coming to take our jobs. These concerns have been wrong before, but perhaps this time really is different. If so, we’ll need an economic system that can cope when lots of people have no way to making a living. I wonder if everyone has a basic income in Star Trek.

Also published at ft.com.

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