The problem of work for a guaranteed or basic income
“Although the practical implementation challenges make a GAI reform implausible in Canada, evidence from five North American experiments with a negative income tax style GAI provides some valuable insights. A negative income tax discourages recipients from working because it subsidizes leisure and reduces the marginal benefit of working. The results from the experiments generally point to a reduction in hours worked by recipients, reinforcing the concern about work disincentives.”
– The Fraser Institute: The Practical Challenges of Creating a Guaranteed Annual Income in Canada; Jan 6, 2015
Well there you have it! Implement a guaranteed annual income and instead of mounting a platform on which work becomes more economically viable, you end up with guaranteed annual laziness. Give people more money and they goof off.
Heinlein had a different view of things seeing laziness as channeling a will to invention.
The truth is that we are not going to solve this one unless we can de-couple work from income in the eyes of the public. And chances are we won’t be able to do that. It’s one of those emotional issues that hover over the design of any sort of basic guarantee.
We all know that there are multi-millionaires who work 14 hour days who seem to work hard even though they have money. There is plenty of literature and testimonies on that. What’s wrong with them? Why don’t they stop working once they have lots of money?
Similarly, there are people who want to work who are unable to work because they do not have sufficient resources to sustain the life stability that even marginal work requires. For example, it’s hard to keep a job if you’re homeless.
We know from the gossip pages that there are lazy millionaires just as there are low income people who have trouble staying in work even when they have the resources to do so. But it’s this latter group that causes the policy problem for designers of a guaranteed or basic income. They comprise the group that the Fraser Institute fears – people who would reduce their work effort in favour of perceived leisure when they get a few bucks in their pockets.
It’s similar in some ways to the anecdote that bedevils the homelessness issue. If there is a large enough group discussing the issue of homelessness (or if we are to look into the views of the ‘commentariat’ in an online column on homelessness), there will invariably someone who says that there are some people ‘who want to be homeless’.
When asked for evidence of people who want to be homeless, they generally say that they have a friend who had a sister-in-law who knew a man who had an uncle who had a friend who met a homeless person who said he wanted to be homeless. In other words, the evidence is flimsy but is still important enough to them to recommend that nothing be done about homelessness because of the apocryphal ‘voluntary homeless’ population.
Let me translate: there are people who are homeless who at present do not have the capacity to deal with the issues that led to their homelessness such as addictions, disabilities, discrimination etc.
I want to do a similar translation for low income people who supposedly don’t want to work. They believe they do not have the capacity to deal with the issues that have led to their unemployment like lack of education, training, lack of jobs etc. These issues have little to do with having an income that would allow them to live in frugal comfort.
The reality is that we live in a society that worships paid work. It gives us self-esteem. It is a tonic for the soul. It heals mental illness. Kids want to work. People with disabilities want to work. A huge reversal in the work experience of Canada’s aging population tells us that older people want to work.
I still want to work and I have a public service pension that is easily double what any guarantee or basic income would ever pay me.
On the other had there are generally too few jobs. We have unused economic capacity. People are pounding the pavement for work.
But when we meet people, we ask what they do. By that, they mean “what is your work?” It is a common denominator in most initial conversations.
So why are we worried about low income people who supposedly don’t want to work? Why should that govern our incomes policy when we know that an income of double any guarantee would be insufficient to keep most of us from continuing to work?
The reason is that especially for low income people, there are huge barriers to work and huge disincentives in the form of high marginal effective tax rates. When we blame low income people for not working, it’s the same as hitting them over the head and blaming them for falling. In fact, I will unveil a rule of low income that I have been hinting at in this blog series. The rule is: the poorer you are, the older you are and the more female you are, the greater will be your penalties for working.
The Fraser Institute is wrong in generalizing about reduced work effort through a negative income tax as any properly designed program would provide real incentives to work rather than inventing new barriers to work. In any event, only an economist could say that fewer hours increases leisure when we all know that less work in our society usually reduces leisure. Leisure costs money the last time I checked.
Reduced work lowers self-esteem, provides fewer dollars to subsidize leisure and generally creates more pain.
And in the end, pain and leisure are different.
My conclusion is that low income people who succumb to barriers to work present a design problem and not a problem of morality. We have had too many programs and policies that are based on moral values. That’s true of everything from residential schools to our policies on homelessness.
And the moral value at play can be put in the form of a maxim that states that people will not work unless motivated by deprivation. Yet that’s not true of millionaires and not true of you or me. It’s not true of people who receive their income from welfare-based programs, not true for lone parents, not true for people with disabilities and not true now for seniors.
But for some of us, there is a belief that there are people who are motivated to work by deprivation – usually people we don’t know and who are forever suspect. And it only needs to be true for one person just as we need only one member of the ‘voluntary homeless’ to exist before we scuttle good programs that are five times less expensive than the programs in place to keep people on the streets.
And to the commentariat who is angered or upset by people who they feel will work less if they have enough money to live in frugal comfort, I would want to ask them how much they want to pay for their anger. The reason is that if we don’t implement a basic income, the default is welfare-based programs that will ensure that people don’t work – and those programs are wicked expensive.