Arguments Against Basic Income Are Straw Men

Timely topic considering the way ever increasing automation is hammering down the employment door...


Arguments Against Basic Income Are Straw Men
By Martin Ravallion Jul 16, 2017

There is much talk these days about the idea of a basic income. This is an untargeted transfer, set at the same level for all recipients within a domain. It is variously called ‘citizenship income’, ‘universal basic income’ or (my favourite) ‘basic income guarantee’ (BIG). The debate for and against the BIG idea spans the globe. A BIG is often contrasted with a set of targeted transfers that would fill all the poverty gaps.

Both sides of this debate have set up straw men.

Straw man 1: A BIG is too expensive

Critics of the BIG idea argue that it costs far too much to be considered seriously. Some BIG proposals have had scary price tags, but that misses the point. Most countries (including many poor countries) already spend public money on poverty reduction. If the same resources would be better spent fighting poverty using a BIG, then that’s what should be done. We can ask this question for any given level of the basic income......

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Straw man 4: A BIG destroys incentives to work

This one is surprising, because a BIG would probably be the most non-distortionary policy imaginable. Nobody would be able to do anything to change how much they got. Granted, there would probably be a positive income effect on demand for leisure. As with all transfers, however, one must also consider impacts on other relevant constraints facing poor families, including uninsured risk and credit constraints. Transfers can help relax these constraints on employment. There is evidence that South Africa’s ‘older persons grant’ did this for recipient families (Ardington et al. 2009).

Incentive effects should not be ignored........

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What then is the debate about?

I doubt if there will ever be a truly universal BIG in which everyone gets a fixed lump-sum. More likely we will see some form of a ‘state-contingent’ basic income, meaning that the transfer would be uniform within some category of households or type of people. It might be defined by where people live, their age, or employment status. This might not achieve the vision of a full citizenship income that advocates have wanted, but it can also help reduce the concerns about fine targeting.

But, wait a minute – a state-contingent basic income is nothing more than a targeted policy based on categorical poverty indicators, and so we have come full circle..........

More at http://wallstreetpit.com/113820-arguments-basic-income-straw-men/