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Doesn’t a de facto version already exist? There are about 3.5 million fast food employees in the US, there are a million and a half American Walmart employees (so maybe a million clerks), there are over 6 million entertainment attendants (e.g. ticket takers, etc.), well over a million cashiers in the retail sector outside of these, and so on. The point is not that these are jobs anyone can have to get themselves rich, but the point is that these are jobs almost anyone could secure at any time with almost no or little training or “skill” to speak of. This observation covers many people who are variously not born lucky physically or mentally as well. My local McDonalds is always hiring, and they pay $10.25 an hour for entry level jobs. At full-time this is over $20,000 per year, and it includes benefits, training, career mobility and a community of people to interact with.

My point is not that it is easy for someone to transition to these jobs in the family labor supply sense – there are issues of child care, parent-care, transportation, and such, that make labor supply decisions more complicated (though a vast many people are able to navigate these challenges, especially if family structure is intact), the point is that it is certainly “easy” to find employment that pays considerably more than any level of UBI could ever promise to pay. If one reason to support a UBI is to enable people to take risks and to have peace of mind about their uncertain futures, then why is an annual $8,000-$10,000 cash grant via UBI much more attractive than a $20,000 per year job with upside? Or even if someone works part-time at McDonalds, that is $10,000 per year, plus all of the time to get additional education, take entrepreneurial risks, and so on?  One reason people support the UBI is something like, “people can live together and share it.” Well, if multiple adults all live together working at McDonalds, that is a good amount of income too, and all of that without burdening taxpayers or the potential negative incentives of cash grants – leaving a heck of a lot more resources available to fund basic research, maintain infrastructure, expand health-care access, and so on.

Just think about it. If things REALLY went into the crapper for my wife and I, we could each very easily secure a job at McDonalds or Walmart, earning a combined $40,000. We could easily rent a smaller place than we live in today and be comfortable, we could send our kids to the “free” public school, we would easily qualify for ACA subsidies, we could shop more intelligently, and we could keep our current cars for a little while longer. No, we wouldn’t be taking weeklong ski vacations or securing cottages in Maine, but we’d live pretty similarly to how we live today. Knowing that this option is always out there for us is a very fine insurance policy, and surely influences the way we are currently living.

I think it is high time to raise the status of “crappy low-wage” jobs.

5 Responses to “Universal Basic Income”

  1. Jack says:

    I have a couple different problems with this argument. I’ll try to lay them out cogently.

    First off, you assume it’s easy to get full-time employment at a McDonald’s. I agree it’s easy to get part-time employment, but the same benefits that you laud for full-time workers (and that are required by the federal government) create a massive disincentive for McDonald’s to ever hire full-time. It’s hard to find solid numbers, and I’m supposed to be writing a paper so I’m not going to look, but most sources I’ve read indicate the vast majority of McDonald’s workers are part time.

    Second, you assume that no black swans will happen. No unforeseen crises that could prevent you from working (and getting paid). Car accident, house burning down, getting sick, your local McDonald’s closes down or cuts hours, etc. Individually, each risk is small. Lumped altogether and considered over many years, you’re pretty much certain to have a crisis that will upend everything.

    So, the UBI is to not replace full time employment, but to get rid of the necessity of full time employment. When paid for by a properly designed income tax, the UBI never creates a perverse incentive where working for an extra $1 ends up setting back your net income several hundred dollars (like with the current set up of SNAP (food stamps) or Section 8.

    The idea behind UBI is not that people never have to work, it’s that if their work is interrupted, it’s not a life-changing disaster.

    This is important, because it changes the dynamics of a negotiation. Let’s concentrate on the micro here – ultimately, every time someone is hired, it’s a negotiation between the employer and the soon to be employee. If the employee is desperate – if they need to work – then their negotiating position is going to be weaker than the employer’s. “well, I don’t like the pay, but I need the work,” is a grumbling admission you hear all the time. Meanwhile, the employer knows that there is always someone else, also desperate, willing to take the job.

    The employer then offers the least amount he can in order to hire the employee. An UBI changes this dynamic. The employee with an UBI can say “take this job, and shove it, I’ll live off pasta for the next few months while I search for a better job/study or otherwise improve my human capital/pursue this art project I’ve been wanting to do/wait for you to offer me a better wage.” A labor force that is able to choose more freely, that is able to pursue education with less cost, that is able to allocate itself without the distortion of desperation hanging over its head, is the more productive labor force.

    So, to me, the comparison is between: no UBI and dead end jobs that people have to work and fear any interruption, or UBI and the freedom to pursue the most productive work for that individual.

    • wintercow20 says:

      Well, I hate having to quote myself, but reread my post for I explicitly say that finding work may not be easy due to many challenges, and that this argument doesn’t cover people born unlucky.

      Further, the point, and I can go job by job if you like, is that there are MILLIONS of these jobs out there – so using anecdote about how hard it is to find full time work at McDonalds is not really opposing the general point. Our labor market rules are already a good reason why finding full-time work is hard, it is not because the McDonalds or many other places WANT to hire only part-time. That belies the point of why my particular job is full-time and pays more.

      On the sad, ironic side, perhaps banning immigrants is a way to help labor “allocate itself without the distortion of desperation hanging over its head” …less competition at the low end, right, so that should work the same as a UBI. See New Orleans post Katrina for a case study.

      • Jack says:

        I got the point regarding there are millions of jobs available. But either I didn’t explain the point I was trying to make well, or you missed it. Probably the former.

        Here is the point I was trying to make: Lacking an income makes people more desperate for work, and results in them being more inefficiently allocated, then those who have income.

        Let’s take a simple example: Imagine two people, completely identical in preferences, abilities, etc, looking for jobs, but one has an income and the other does not. At the end of their job search, do we expect them to have the same jobs? If not, what differences do we expect to see?

        If we take the view that both people are rational utility maximizers, and their respective utility functions are something like:
        U = I^a + L^b, I = income, L = leisure, 0< a, b < 1, then we would expect the person with the already existing income to accept a lower paying job to have more leisure. If this is true, I'd expect a universal basic income to be counterproductive. The person with the income would produce less than the person without the income.

        But, if we take the view that the psychological pressures of not having an income negatively effect the job search – for instance, if the person without an income is more desperate and thus willing to accept a lower wage, or a position less suited for himself, or finds that poverty impedes his cognitive function and thus makes him a less attractive employee prospect (http://science.sciencemag.org/content/341/6149/976). Then, we could see the person without an income accepting a job that pays less, that produces less. We extend this over a larger segment of the population, and we see that this segment of society is less productive without the basic income. The question then becomes is the added productive ability of this segment of the population large enough to outweigh the hit from the deadweight loss in increased income taxes (presumably) necessary to pay for the income.

        We can't derive which model is correct just from first principles. And similarly, we can't tell if it's worth the deadweight loss or not just from theory. We'll have to rely on empirical observation – either digging through the old Dalphin MINCOME experiment data, or by watching the new Finland basic income experiment.

  2. Jack says:

    On other points:
    1) I used “then” instead of “than,” among other grammatical mistakes. Interpret charitably, please.
    2) The size of the labor supply doesn’t alter this analysis. So increasing or limiting immigration shouldn’t matter.
    3) I agree that labor market rules are inefficient.
    4) You don’t consider the “born unlucky” in your analysis, so neither did I – but they’re still part of society. We pay for them no matter how we slice it – either through medical care, charity, and food stamps, etc, or, if we’re uncharitable, through the emotional cost of watching them suffer. I think that having a basic income is a more efficient form of social assistance that the collection of other programs.

  3. Mike says:

    First of all, the time and energy spent having to work miserable low-order service industry jobs is a tragic waste of human potential. The idea that a mere wage makes labor inherently valuable is arbitrary and suspiciously convenient for employers. Whoever takes Walmart or McDonald’s jobs, we live in a hierarchical society that for a obvious reasons considers low-wage work demeaning and undignified. This won’t change without significant change to our present system. You end this post by saying “let’s raise the status” of these jobs, as if the jobs’ lowly status were a mere misunderstanding personally overcome, and not, perhaps, an integral mechanism of a broader system that just doesn’t allow (or isn’t designed for) the social mobility of people who find themselves having to take these sorts of jobs. Every advanced society furnishes for the well-off a narrative that allows them to feel superior to the lower orders. The undignified status of low-wage labor is just one of these effects.

    But when it comes to whether we “already have UBI”, wouldn’t it make more sense to focus on the many forms of *passive* income that already in fact exist, like capital gains, rents, various tax breaks and subsidies, etc.?

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