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