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The Daily Signal
A Universal
Basic Income Is Anti-Work
Paul Winfree
February 26, 2016
In a recent article, Richard Reeves of the Brookings Institution
suggests that we should decouple income from work through a “universal
basic income” based on the premise that the labor market no longer
equitably distributes the gains from economic growth to those at the
bottom of the income distribution.
This is the wrong policy route for several reasons. First, a basic
income is anti-work.
The primary problem in the labor market isn’t that economic growth
hasn’t reached low-income workers, but that people aren’t working.
As James Sherk and I have written in National Interest, the primary
problem in the labor market isn’t that economic growth hasn’t reached
low-income workers, but that people aren’t working. A basic income
would not eliminate poverty—understood as a household’s ability to
sustain itself above subsistence without depending on government. Nor
would it necessarily increase economic opportunity.
According to economists V. Joseph Holtz and John Karl Scholz, when the
“negative income tax” was proposed in the 1960s, “President Johnson …
opposed the [negative income tax] and a leading alternative proposal at
the time, a guaranteed annual income, on the grounds that both
proposals undermined work effort.” Furthermore, state experimentation
with the negative income tax in the 1960s and 1970s shows that it tends
to reduce work without a significant effect on household consumption.
The current welfare system provides very generous benefits to low-wage
working parents. For example, a single mother working full-time or
nearly full-time at the minimum wage has a combined income from
earnings and welfare that is well above the poverty level. The main
effect of a “universal basic income” policy would be to raise the
government benefits of able-bodied adults who work very little or not
at all. Compared to the present system, such a policy would
significantly increase the rewards of non-work relative to work,
accelerating the trend to disengagement from labor and increasing
long-term dependence and welfare costs.
Why is it more important to focus on work rather than income alone?
In 1759, Voltaire expressed a fundamental truth in his “Candide, ou
l’Optimisme” in that “work saves us from three great evils: boredom,
vice, and need.” In the Malthusian world that existed before modernity,
material living standards declined as population increased, and income
was frozen at a subsistence level. Work and charity were the only ways
to fulfill a household’s needs.
To put bread on the table, one had to work. To put more bread on the
table, one had to work harder or be more industrious with one’s
talents. The relationship between output and input (if you needed more,
you had to put more in) was pretty constant from the beginning of
history until about 1850.
The industrial revolutions of the last three centuries ended this
static relationship and in the process turned hunger and premature
death into a cornucopia. As economist Deidre McCloskey has eloquently
phrased it, “we’re no longer asking ‘how will we eat, but where will we
do lunch?’”
Today, we are in the midst of the fourth industrial revolution, driven
by computers and other smart machines, which are again increasing the
“size of the economic pie” in a way that is replacing need with want,
both in the U.S. and globally.
Work is no longer a necessary condition required to save one from need
in the same way that Voltaire spoke about the relationship 257 years
ago. How we deal with the way in which this fundamental change affects
our culture and relationship with work has meaningful implications for
our future.
Sure enough, as the relationship between work and need has broken down,
there has been a real structural disengagement from work over the last
50 years. Groups of people that once participated in the economy
through work are leaving the labor market.
This disengagement is, in part, correlated with segmentation in skills
and a growth in the welfare system. Highly skilled workers in technical
fields (those working with the smart machines) have continued to work,
as they are able to collect higher returns for their labor than ever
before. At the same time, those in service industries with high initial
human capital costs—including medicine and law—have also been able to
collect high returns.
Likewise, we’ve realized record opportunity in the service economy,
which has spawned a variety of boutique industries increasing the
quality and quantity of goods available for consumption.
However, those not equipped to participate in the new economy are
disengaging at record numbers. And this trend started well before the
2007-2009 recession. In 1964, 94 percent of men between 25 and 54 were
working. Today, employment for this group has fallen to 83 percent. In
other words, while population has nearly doubled, employment has
increased by only 70 percent. For some time, women were making up for
the fall in employment of men. However, that trend has reversed, as
labor force participation for women between 25 and 54 is at its lowest
level in almost 25 years.160226_Working-men_fb
This record disengagement has also had a meaningful effect on our
culture, which has been weakened by the shrinking size of the
population that participates in the economy. This is especially true in
areas where labor participation is low and the norm is that men and
women are not working.
If work provides benefits besides monetary gains (e.g., providing a
greater connection to society), the substitution of leisure for labor
likely decreases well-being more than economists estimate. This shift
in cultural standards is already having deep effects in other areas,
such as the ability to build lasting relationships, that increase
opportunity and general fulfillment.
Given that the causes of the great disengagement seem to be structural
and long-term rather than cyclical, it is unlikely that higher levels
of economic growth will significantly increase employment. It is also
unfair to say that technology is the reason for unemployment
(technological unemployment is often predicted but never realized).
The policy challenge is not to find a more equitable way to distribute
national income, but rather to support opportunity and a strong civil
society through work.
This could be achieved by reducing the disincentive to work through
reforms of the tax and welfare systems, removing onerous and costly
federal regulations that prohibit job creation and innovation in human
capital markets, and reducing the burden of government that we pass to
each generation through continued deficit financing of consumption.
Read this and other articles at The
Daily Signal
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