Yves here. We’ve been featuring a lot of posts on the Universal Basic Income and the Job Guarantee, which reflects the fact that both ideas are now tolerated in mainstream discourse, to the degree that the Center on Budget and Policy Priorities and the Levy Institute have published and costed out job guarantee plans.
But as (and a post yesterday) stressed, when advocates discuss a universal basic income, they often have very different programs in mind, and understanding how they would work is critical in evaluating their potential impact.
SHARMINI PERIES: It’s The Real News Network, I’m Sharmini Peries, coming to you from Baltimore. A universal basic income– it could be a solution to inequality and economic instability. The basic idea is that people should be able to receive a certain amount of money as a guaranteed source of income. It should be paid out to every man, woman, and child. It could be paid monthly, it could be paid quarterly, but primarily, through easy electronic transfers to your bank account, the way that other payments by the state are made. Well, Finland ran such an experiment, which began in 2017, and they did it with about two thousand people who received approximately $690.00 per month. But recently, they announced that they will end their income experiment in 2019. But this week, The World Bank also published a call to abolish minimum wage around the world. The World Bank argues that this would help protect workers from competition with robots. Well, joining me now to discuss all of this is Professor Katherine A. Moos. She teaches economics at the University of Massachusetts Amherst, and is a member of the Political Economy Research Institute at UMass. Katherine, I thank you again for joining us here on The Real News Network.
KATHERINE MOOS: It’s my pleasure.
SHARMINI PERIES: All right. Katherine, let’s start off with the basic income. It’s considered, by most people, a progressive tool, mainly because it redistributes income and improves a worker’s negotiating power, while reducing the stigma associated with welfare. And also, it eliminates this humiliating income test for welfare recipients, that they have to undergo, and declare all kinds of personal issues and details about their lives. Now, on the other hand, basic income is also sometimes praised by neoliberals because it can be used to justify eliminating other forms of welfare, and its redistributive powers, then, are limited. What do you think of this basic income, and is it progressive or is it a regressive tool?
KATHERINE MOOS: Yeah. Well, I think that whether or not universal basic income, or UBI, is progressive or regressive, is really still an open question. And the way I look at it is that it would really depend on two different, sort of, sets of factors. One is the details of the program; how is it implemented, how is it designed, how is it funded? Is it truly universal, is it truly unconditional, and what is the funding mechanism that makes that possible? All of that is going to determine a lot of very important things about the program. The second piece of it, which will determine whether it’s progressive or regressive, depends on how UBI would fit into the overall policy framework, the social/labor policy mix, in terms of; are there also high minimum wages, or minimum wages at all? Are there other labor market institutions that protect workers?
So, if a UBI program were implemented, and it was truly unconditional, and it was at a high level of funding, it could be a progressive tool, as long as there were also labor market institutions to protect workers who were, in fact, working. I f this UBI is implemented in such a way, either that it’s at very low benefit level, it’s funded in a regressive way, or if it implemented, and then other social programs are taken away, causing a net loss for workers, then it would be regressive. So, when we talk about it, we really need to understand the details before we can assess whether it’s going to be progressive or regressive.
SHARMINI PERIES: All right. Katherine, now as I said off the top, Finland was running an experiment with about two thousand people. Now, they have announced that this is coming to an end in 2019, just after two years. Now, is this enough time to draw conclusions about the social impact of this basic income program, and also, is the experiment not skewed from the start, because the Finnish government chose to apply it to two thousand people who were already unemployed at the start of the program?
KATHERINE MOOS: Yeah. So, from what I understand, some of the researchers working on this UBI experiment in Finland do believe that they would have benefited from more time to study this, and do believe that the experiment was cut short. The fact that the stipend was given only to unemployed workers is part of the design of the study. So, in Finland, they were trying to understand; if you supplied a universal basic income which was unconditional, would that make unemployed people more likely to go back to work, to find jobs or to engage in some kind of entrepreneurial endeavor, as opposed to a traditional unemployment insurance program, which decreased as people gain more income or gain work?
So, traditional unemployment insurance– the concern is that it discourages people from going back to work, because their benefit level will decrease. So, for that purpose, the purpose of this study, it makes sense that they only studied the effect on unemployed workers. That being said, there is another criticism of the design of the Finnish study, which is that the stipend level was about 500 a month, which is not enough to live. It doesn’t actually free someone from the necessity of working. So, a criticism of the design of this study is that it actually– universal basic income of this type could actually be used as a way to subsidize, or promote, low wage or part time employment. So, that’s another criticism of the way this particular study was designed.
SHARMINI PERIES: All right. Katherine, off the top I said that The World Bank’s most recent policy recommendation is to eliminate the minimum wage. And they’re saying that, in order to– they say, to protect workers. Why are they saying that?
KATHERINE MOOS: Yes. So, the World Bank recently released a working draft of the World Development Report, and in it, they say that minimum wages and other labor market institutions increase the cost of hiring workers, relative to automation. So, the idea is that, if the minimum wage were eliminated, then hiring workers would be less expensive and firms would be more likely to hire them, as opposed to investing in labor-saving technology. And so, there is a logic, into the fact that firms do invest in labor saving technology, they do look to automation as the way to cut costs. But the World Bank is drawing the wrong policy and political conclusions here. Minimum wages and other labor market institutions are necessary to protect workers. Without them, there will be a race to the bottom where firms are paying lower and lower wages, because there hasn’t been legal wage floor set by the minimum wage.
So, the World Bank is basically saying that work will not pay for the needs of people anymore. It’s going to– work is going to pay very low wages, and that there should be some sort of universal basic income, or some other kind of social insurance, to soften these low wages, and sort of pick up the slack, and maintain what they call a societal minimum standard, or minimum standard of living. And so, they’re saying that because the quality and quantity of work has been degraded all over the world, they believe that we should continue to allow firms to pay low wages, and therefore subsidize low paying work.
SHARMINI PERIES: And how does what the World Bank is recommending compliment or differ from what Bernie Sanders, this week, is talking about, which is a guaranteed jobs program?
KATHERINE MOOS: Yes. So, this is a very important point. So, the World Bank is saying, “Let’s get rid of the minimum wage and other labor market institutions, and instead we could have a UBI, or some other kinds of stipends, to subsidize low wage work.” Whereas Bernie Sanders, and others, are now proposing a full employment jobs guarantee, which would actually guarantee a good paying job, with good benefits, to all workers who wanted them. So, the idea of job guarantee is that the public sector would actually create jobs that produce useful goods and services.
So, we’re talking about investing in infrastructure, we’re talking about investing in child care, elder care, things that people really need and want, and then also, good paying jobs along with it. So, is sort of the opposite approach to what the World Bank is saying. The World Bank is saying, “Job quality– good jobs are scarce, so let’s lower the cost of hiring workers, so that they’re not completely replaced by machines.” And Bernie Sanders, and others who are in favor of job guarantee, are saying, “Let’s actually create some good jobs.” So, I really see these as sort of opposite approaches for dealing with the problem of not enough good jobs for the people who want them.
SHARMINI PERIES: Katherine, socially, we are entering a phase where jobs will be eliminated because of automation. We are entering a phase where all kinds of industries are going to be restructured as a result of automation. Now, is there something going on here, in terms of what the World Bank is recommending, and say, what Bernie Sanders is now pushing for, in terms of a guaranteed jobs program, or even this guaranteed income program? Are we entering a stage in our industrial world where we are preparing to address some issues that might emerge?
KATHERINE MOOS: I think that it’s certainly the case that we have a large-scale problem when it comes to good jobs, and there’s a lot of concern about automation. And it’s something that economist Guy Standing calls “the global precariat,” which is precariously employed proletariat. And so, I think that this is a big concern. And what we see from the World Bank’s perspective is that they’re saying, “Work has changed, work is not going to provide for people’s basic needs, so there should be something done to provide [what they call] a societal minimum standard, but it might not come from work.”
Now, Bernie Sanders’ plan, which– the details have not been released, but the general idea is to invest in things like infrastructure, and also things like child care and elder care, which, while there are some technologies that automate these, much of this actually does need to be done by people in place, when we talk about caring for children, caring for elderly people, and even infrastructure projects. So, we’re seeing, now, a response, and different political points of view, of how to resolve this very serious problem of both poor quality of jobs and the threat of automation.
SHARMINI PERIES: All right, Katherine. Katherine is with the Political Economy Research Institute at UMass, Massachusetts. She also teaches economics. Katherine, I thank you so much for joining us today.
KATHERINE MOOS: It’s my pleasure. Thank you for having me.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.