Universal Basic Income in the U.S. and Advanced Countries
National Tax Association, 111th Annual Conference New Orleans, November 15-17, 2018 Hilary Hoynes Professor of Economics and Public Policy Haas Distinguished Chair of Economic Disparities University of California Berkeley
Despiteallofthis…• Attentionmayberunningaheadofactualpolicydevelopment
• LittleagreementaboutwhataUBIis• Whatspecificproblemisittryingtosolve?• Howdoesitrelatetoandcomparetoexistingprograms?
• Whatarethekeyresearchquestionsthatneedtobeanswered?
Outline
• WhatproblemistheUBItryingtosolve?• WhatisaUBI(andhowdoesitcomparetootherincomesupportpolicies?)
• Distributionalconsequencesandcost• Economicissuesandwhatcanwelearnfrompilotsandexperiments?
*FrompaperinpreparationforAnnualReviewofEconomics,jointwithJesseRothstein.
Outline
• WhatproblemistheUBItryingtosolve?• WhatisaUBI(andhowdoesitcomparetootherincomesupportpolicies?)
• Distributionalconsequencesandcost• Economicissuesandwhatcanwelearnfrompilotsandexperiments?
Falling Labor Force Participation
And looking to the future, concerns about “the robot apocalypse” (Lowrey) and the loss of work.
Or less futuristic … Stagnating Wages
And Rising Inequality
OtherargumentsforUBI• Replacecurrentpatchworkoftransferprograms(incomplete,sometimeswithhighcumulativemarginaltaxrates)
• Insufficientbenefitsofcurrentpolicies(postwelfarereformlossofoutofworkbenefits,potentialbenefitsofmoreuniversalprograms?)
Thewhymattersbecauseitfeedsintoanalysisofhowmuchyoucareabout,say,laborsupplyeffects
Outline
• WhatproblemistheUBItryingtosolve?• WhatisaUBI(andhowdoesitcomparetootherincomesupportpolicies?)
• Distributionalconsequencesandcost• Economicissuesandwhatcanwelearnfrompilotsandexperiments?
WhatisaUBI?(basedonourreadingofthework)
• Universal:threedimensionscomeup:– Paidtoall,nodemographictargeting– Paidtothosewithoutearnedincome(andwithoutanyefforttofindwork)
– Paidto“all”,eventhosewith“high”earnedincome
• Basic:(basicincome)largeenoughtomeetbasicneeds
• Income:cashratherthanin-kind
Howdoesthiscomparetootherpolicyinstruments?
• ThisisadiscussionaboutUBIinadvancedeconomies(fordevelopingcountriesseeHannaandOkun2018,Banerjeeetal2018)
• Advancedeconomieshavesocialsafetynetpolicies.Thisraisesquestionsaround:– WhatistheUBIprovidingthatisn’t(orcan’t)beprovidedbythecurrentsocialsafetynet?
– IstheUBIareplacementfororanadditiontotheexistingsocialsafetynet(superrelevantfordistributionalandcostconsiderations)
UBIcomparedtootherprograms:Asimpleframework
UBIcomparedtocurrentUSpolicies
Outline
• WhatproblemistheUBItryingtosolve?• WhatisaUBI(andhowdoesitcomparetootherincomesupportpolicies?)
• Distributionalconsequencesandcost• Economicissuesandwhatcanwelearnfrompilotsandexperiments?
Cost
• Pureuniversalwithbenefitsetatpovertyline($12K/yr)àtotalcost=$3trillionforcoveringalladults
• Costis1storderissue– 75%oftotalfederalexpenditures– 2XthecostofallUSnon-healthtransfers(dropMedicare,Medicaid)
– 6XthecostofallUSnon-health,non-socialsecuritytransfers
Cost
• Solvingcostproblembyaddingaphase-outàthenwearemovingtowardscanonicalwelfareprogramorNIT(morephase-out,morelaborsupplydistortions;usualprotectionvs.distortiontradeoff)
• Solvingcostproblembyreducingthebenefit(andpreservinguniversality)ànotbasicincome
DistributionalImplications
• Usefultocomparetothedistributionaleffectsofourcurrentsocialsafetynetprograms
• Weanalyzethisusingthe2017CurrentPopulationSurvey
• Wemeasurehouseholdbenefitsandcalculatetheaverageperperson,usingOECDequivalencescale
#1:Hugedifferencesacrossdemographicgroups
#2:Benefitstonon-elderly,non-disabledaremoretargeted(lessuniversal)
DistributionalimpactsofUBI
• ReplacingcurrentsocialsafetynetwithUBIwouldleadto– Redistributionfromlowearnerstohigherearners– Transfersawayfromelderlyanddisabled
Outline
• WhatproblemistheUBItryingtosolve?• WhatisaUBI(andhowdoesitcomparetootherincomesupportpolicies?)
• Distributionalconsequencesandcost• Economicissuesandwhatcanwelearnfrompilotsandexperiments?
EconomicIssuesandwhatwecanlearnfromcurrentpilotprograms
• Highprofilepilots– StocktonCalifornia:EconomicSecurityProject,$6K/yrfor100familiesfor12-18months
– YCombinator:$100millioninfunding,$12K/yrfor1,000peoplewithincomebelowcountymedian,for3or5years
• WhatcanwelearnfromthesepilotsandhowdoesthatrelatetothekeyeconomicissuesunderlyingaUBI?
1. Laborsupply:Lotsofevidencefromtheexistingliterature;howmuchwecareaboutpotentiallaborsupplydistortionsdependsonwhetherweareinwagestagnationworldorrobotapocalypseworldàlittlenewtolearnfrompilots
2. Universality:Wouldatrulyuniversalprogramleadtoreductionsinstigmaandincreasesintakeupthatwouldgeneratewelfaregains?àcan’tlearnfromapilot
Otherquestionsaboutwhichwehavelittleevidenceyetashort-termpilotisnotwellsuitedtoanswer:• Greaterhumancapitalinvestmentandtraining(andthushigherwagesinthelongerterm)
• Greaterentrepreneurialactivity• Higherwagesofthenextgenerationduetogreaterresourcesinchildhood
Also,apilotprogramdoesn’thavetograpplewiththecostandthetaxes/spendingcutsthatareneededtosupporttheUBI.
Concludingthoughts• Thisisagoodconversationtobehaving;attentiontostagnating
incomesandwhatisworkingornotworkinginourexistingsocialsafetynetisimportant
• NotalotofclarityonwhatmakesaUBIandwhyourcurrentprogramscannotservetheneed
• A“pure”UBIwouldbeextremelyexpensive(2Xtotalexistingtransfers)
• ReplacingthecurrentsocialsafetynetwithaUBIwouldbehighlyregressive
• Thecriticaloutstandingquestions,abouttheeconomiceffectsofaUBIarenotlikelytobeansweredwithshorttermsmallpilotprograms