Universal basic income may have merits, but not a longterm solution for job displacement

On Bloomberg, Noah Smith writes about the ideas of a basic income for everyone. Opining that a universal basic income is something that “can unite socialists and Silicon Valley libertarians”, he cites one possible implementation of what effectively would be a guaranteed income:

One potentially helpful analog is the negative income tax. This is where a government guarantees you a certain minimum income, which it takes away gradually as you start earning more money on the job. Negative income tax  is not a basic income, since it’s not unconditional — the phase-out of benefits acts like an income tax, which economic theory says should discourage work. But it’s a good starting point for thinking about universal basic income, because if a negative income tax doesn’t discourage work very much, then a similarly sized UBI almost certainly wouldn’t.

Smith also cites one particularly apt example of a guaranteed payment in the way of the Alaska Permanent Fund, which has been found not to discourage people from getting jobs.

Economists Damon Jones and Ioanna Marinescu found an example of a truly universal, unconditional transfer — the Alaska Permanent Fund. Since 1976, a percent of the revenues from natural resource extraction in Alaska is paid out to all state residents. This acts just like a universal basic income. In research presented at the American Economic Association meeting earlier this month, Jones and Marinescu compared Alaska to other states, and found that the introduction of the fund had no effect on employment in Alaska (though interestingly, it did cause a small shift from full-time to part-time work).

This finding represents convincing evidence that a true UBI doesn’t discourage people from working — at least, if it’s small. The Alaska Permanent Fund dividends are usually about $2,000 to $3,000 a year — not enough to live off of. A basic income of $10,000 or $20,000 might look very different, however.

The merits of a universal basic income for certainly segments can be debated, but it’s certainly not a productive longterm solution for job displacement due to automation (or any technology). The cited study already found that a guaranteed income did not discourage those from looking for employment, and there’s no apparent reason it would be any different now. The key is developing those new jobs in a way that they aren’t continually obsolete.

Read the full post A Basic Income for Everyone? It’s Not a Crazy Idea at Bloomberg.com

Is is better to be a runner up for Amazon HQ2?

Amazon’s HQ2 “sweepstakes” is quite similar to what pro sports teams have been doing for years by pressuring governments to give them incentives. Noah Smith acknowledges some of the drawbacks of catering to large companies, including the fact that the incentives likely have little value to Amazon (or another company) in the big picture yet cost cities far greater. Many urban policy experts feel it could be harmful. On the other hand, it’s easier to see how a company providing jobs can benefit a city/region. Beyond tax incentives, companies like Amazon are looking for great people and those people demand good schools, nice parks. etc. Given an incentive to improve chances of luring a company like Amazon, many cities (including the 20 finalists) may increase resources in those areas.

But there’s a worry that the scramble to lure HQ2 will give rise to wasteful urban policies and set a bad precedent. Already there is speculation that Apple Inc. will build an HQ2 of its own, sparking a similar competition. What if this sort of industrial sweepstakes, used in the past to win everything from auto plants to sports teams, becomes the norm?Many urban policy experts are worried that Amazon-style competitions will hurt cities, by enticing them to spend too much on tax incentives and other giveaways. A recent roundup of opinions by the Penn Institute for Urban Research showed that this concern is widespread.

from Noah Smith’s article Amazon Sweepstakes Can Be Great for the Losers at Bloomberg.com