In response to a recent report form the RSA that everyone under 55 should receive £5,000 per year for two years “as compensation for the way jobs were changing.” A government spokesman referred to it as a Universal Basic Income [UBI], which led Steven Hail, who lectures in economics at the University of Adelaide, to suggest that the Job Guarantee [JG] was a much better alternative option.
As this has been a long standing point of interest for me (and I hope others on ProgressivePulse!) I have, with permission, first copied his objections to UBI verbatim:
The problems with a UBI are:
1) It will be too low to alleviate poverty, or too high to not be inflationary without tax rises people will not vote for.
2) It is a subsidy to low wage employers and underemployment.
3) It neglects the non-pecuniary benefits of employment.
4) It has no counter-cyclical element and no inflation anchor.
I’d suggest in relation to objection number 1 that many people (if not indeed most) would be happy to vote for a UBI, even if that meant some higher taxes – especially if these taxes were progressive.
As for it being a subsidy to low wage employers as stated in point 2, it is, of course, the same subsidy to high wage employers, so I’m not sure the disadvantage is obvious. On underemployment he may have a point. But with UBI people are able to choose to have jobs where they are underemployed, and I imagine most of these would be people opting for part-time employment or ‘light’ self employment and therefore would become only problematic if there was a distinct labour shortage, which is something that does not seem overly likely in the current environment.
Number 3 is back to the Protestant work ethic again, together with ‘being a part of society’ aka social inclusion. There is, however, no evidence that people prefer to do nothing all day. Indeed the number of people who choose voluntary work suggests precisely the opposite.
Point four is the strongest point, I suggest. Although there are other methods of counter-cyclical and inflation control, they would be likely to be less immediately impactful than a well-organised Job Guarantee.
The pluses for the Job Guarantee, Dr Hail outlines as follows (my paragraph numbers added):
I. It would be better to have a Job Guarantee with a much higher guaranteed income, backed up with a low basic income/welfare for those who chose not to contribute their efforts to the JG.
II.The retired should be paid as though participating in a JG.
III.Carers should be paid as part of a JG.
IV.Those genuinely unable to engage in employment should be paid as part of a JG.
Point I does clear up what has previously bothered me, which is that a Job Guarantee is not a Job Guarantee without coercion. It is, he is suggesting, more properly described, in fact, as a Job Offer.
Points II and III are really no different from a UBI – it is simply a matter of the level of pay and, combined with point IV, an effort to deny that, unless in very special circumstances, you get something for nothing. I think the something for nothing problem disappears when absolutely everyone gets it!
His article then concludes:
Basic income for all – yes. Abolish involuntary poverty – yes. Build social inclusion – yes.
I just don’t believe a UBI can do any of these things sustainably.
I am always willing to be persuaded, but so far I have seen nothing to persuade me.
The attraction of a UBI to politicians is that it involves them in nothing but signing a few cheques.
Really dealing with inequality, cohesion, and building a better world means they will have to take more responsibility for the kind of societies they want to create.
A JG is harder to plan, but would be more effective.
Just as similar – large-scale, but not quite JG – programs were successful in Argentina in 2002-5 and are relatively successful in India today.
These are general aims we could all agree on, but the real objection seems to be that UBI is too easy for politicians. If that is the case, I find that rather more of an advantage than not! That JG requires more planning is certainly true.
But on what grounds is the JG more effective? The only advantage over UBI is that we are told (point I above) that the JG would result in a higher guaranteed income, presumably because the JG recipients are forced to be ‘economically active’ – there certainly seems no other good reason. This may be significant though I’m not sure we know. By far the strongest argument in favour of the JG is, for me (summarised in the anti UBI point 4 above), that it is a counter-cyclical tool.
Although I believe Steven Hail’s fellow Modern Monetary Theorist Bill Mitchell has called the UBI “serfdom without the work”, I’d call that no serfdom at all. But when he continues “The [UBI] segments the work[force] into those who remain in the workplace and those who are prohibited by the lack of jobs,” he has a point. I agree, too, when he quotes Professor Diane Coyle, who argues that “Simply paying people will not help if the fabric of a thriving economy is lacking”. Although this seems to suggest that no other economic investment will be made, it has to be said that this is effectively the case in many parts of the UK now. If a JG were in place then it could be argued that the government’s hand would be forced. In effect this is a variation of the argument that it is a counter cyclical tool, but it suggests an automatic element that is attractive and theoretically at least, quick acting.
Gradually, I’m coming round to the view that we are probably going to have to construct a hybrid scheme encompassing some Universal Basic Services and some element of a Job Offer together with a core of UBI, which really must be renamed Universal Basic Capital.
Even if the basic part of Universal Basic Capital is still very basic, its great advantage is that it says to the recipient “We never forget you have a choice.”