28 April 2018

Useless Basic Income


For some time now, Universal Basic Income has been one of the hippest ideas in politics. But this week the UBI bandwagon – which has picked up passengers from both the radical Left and the free-market Right – hit a major bump in the road.

Finland has decided not to expand a major experiment in whether the appealing-sounding idea – which involves replacing complex and conditional benefits with an unconditional lump sum – actually works. It turns out that handing out cash with no strings attached isn’t particularly popular with taxpayers, so the Finnish government’s enthusiasm for the scheme waned rather quickly.

For UBI advocates, the lesson from Finland would therefore appear to be that their treasured policy is, at least for the time being, outside the realm of the politically possible. In other words, the idea is still just a little too trendy for the mainstream.

But the real problems with UBI run much, much deeper. These days, Basic Income is presented as a fix for the problems posed by automation. In particular, it is said to be a way to counter the massive increase in inequality that many – including Mark Carney – worry will be a consequence of the coming rise of the robots.

Machines will do all the work, the machine owners will reap the rewards, and then those rewards will be heavily taxed to give the rest of us a basic income. That, UBI advocates claim, is how to avoid the unpleasant political turbulence that will follow on from automation-induced inequality and joblessness.

Such an approach doesn’t just misdiagnose the disease. It mistakes the cause for the cure.

American Enterprise Institute President Arthur Brooks was in London this week. In a speech at the Centre for Policy Studies on “Bringing People Together in the Age of Populism”, he argued that political expressions of anger such as the election of Donald Trump can partly be explained by the fact that “our societies have radically transformed, and that we’ve gone from needing poor people to helping poor people.”

The unhappiness reflected in the disturbing rise in “deaths of despair” in America is, according to Brooks, at least in part a product of not feeling needed. For Brooks, “as conservatives what should be written on our hearts is ‘making everybody necessary.'”

The implication of this line of thinking is to approach particular policy proposals not asking, “How much does this policy help poor people?” but rather, “Does this policy make poor people more necessary to society or less necessary to society?”

Apply that test to Universal Basic Income and it falls a long way short. It is tantamount to an admission of defeat, stripping away any pretence that someone is needed for anything and treating them, first and foremost, as a charity case.

Of course, being necessary to society isn’t the same thing as being necessary to the labour market. But for those of working age, work is a big part of feeling needed. And it is about more than money, which is why a government-issued Basic Income will never be the same as an earned wage. People who feel disposable need more than disposable income.

Just as the consequences of joblessness go beyond economics, its causes cannot be understood in strictly economic terms.

More than one in ten American men of prime working age (25-54) are not in work or looking for work. That is seven million men. The development is not a triumph of gender equality, with more and more men working as full-time parents and homemakers. The data shows that they are doing no extra childcare or housework. They are doing, well, nothing. There are towns in America with large out-of-work populations and thousands of unfilled job vacancies.

The case for UBI fails to acknowledge the complexity of why some people work and others don’t. There is considerably more to it than whether or not the robots have come for your job yet.

Time will tell whether predictions of mass joblessness because of automation are right. But when it comes to tackling that anticipated problem or the problems we face here and now, it is hard to believe that the answer doesn’t lie in Brooks’ prescription of making people needed again.

This article is taken from CapX’s Weekly Briefing email. Sign up here.

Oliver Wiseman is Editor of CapX.