After a long political hibernation, basic income is back. Switzerland is set to vote on a referendum under which each Swiss citizen would receive approximately $2800 a month from the government as a minimum income. While it's unclear whether this proposal will actually pass (I suspect not), it has provoked a great deal of conversation on the topic. As Annie Lowry puts it, "[g]o to a cocktail party in Berlin, and there is always someone spouting off about the benefits of a basic income." I confess I haven't been to many cocktail parties in Berlin recently, but the idea has been all over the place in the wonkier parts of American media (see here, here, here, and here).
Compared to the messy, kludgy reality of existing social serviced, the pristine simplicity of the basic income idea has obvious appeal. Unfortunately, much of the discussion of basic income seems to be focused on the wrong things, or is based on misapprehensions. For example, Lowrey says that one of the big advantages of having a basic income is that '[p]overty would disappear." That may or may not be true, but if it is true, this would have less to do with the actual effects of the basic income program than with how the poverty rate is calculated. As Tim Worstall recently noted, the poverty rate (at least in the U.S.) is calculated based on a person's income pre-taxes and transfers:
[T]he four major poverty reduction programs are Medicaid, SNAP, EITC and Section 8 vouchers. And we include none of them, not one single groat of that money spent, in our current estimates of poverty.
So, while our definition of poverty has not changed (three times a low-cost food budget for a household in the early 1960s upgraded for inflation) what we’re actually measuring is now completely different. The US poverty numbers today do not measure the number of people still in poverty after the aid given: they measure the number of people in poverty before aid is given.
If one were to take account of the effect of current anti-poverty programs, the poverty rate would be nearly zero. Similarly, if we were to replace existing anti-poverty programs with a basic income and didn't include that income in calculating the poverty rate, then the direct effect on poverty of enacting a basic income would be minimal.
The real difference between a basic income and the status quo is not how it would effect the poor, but how it would effect the middle class. Medicaid, SNAP, EITC, and Section 8 are all means tested programs, meaning that they aren't available to people who make over a certain income. By contrast, whether billed as a replacement for existing welfare programs or as an add on to it, basic income plans are typically not means tested. If you are a doctor making $200,000, you get the same government stipend as if you are making $10,000 working part time at Wal-Mart.
The fact that the basic income isn't means tested has its advantages. It means, for example, that low income workers don't face the high implicit marginal tax rates that can come from means tested programs. But it also means that any disincentive to work based on the extra income provided by the government will apply across the whole of society.
Which brings us to another issue with the current coverage of the basic income idea. As is typically noted in the recent coverage, back in the 1960s and early 1970s, basic income plans were all the rage. Martin Luther King, Jr. was supportive, as was Milton Friedman. Richard Nixon and George McGovern both put forward basic income proposals. And then, nothing. The idea kind of just faded out of existence. At least, that's the impression one gets from reading some of the recent accounts.
While I'm sure there were many reasons basic income lost its luster, one big factor was the results of a series of experimental implementations of the idea. Between 1968 and 1982, the government sponsored four separate randomized trials, providing $63 million in basic income to more than ten thousand individuals. These studies concluded that a basic income set at the current poverty rate significantly reduced the average amount of time worked by recipients by the equivalent of 2-4 weeks of full time employment, as compared to the existing welfare system. The experiments also seemed to suggest that providing a basic income increased the likelihood of family breakup. While there have been a few smaller studies since then that are more encouraging, it's not surprising that many policymakers reacted to these studies by concluding, in the words of Jim Manzi, of basic income that it "is a fascinating and useful thought experiment, but it's not useful public policy."
Personally, I remain a fan of the Earned Income Tax Credit, which, unlike basic income proposals, is tied to work (and, unlike such proposals, has been successfully implemented and expanded for decades). But while I admire the simplicity of the basic income idea, I'm afraid I'm with Jim Manzi.