For the last week or so, I’ve been preparing to speak against a Universal Basic Income (UBI) motion at a debate club.  Here’s the Motion:

The Motion: This House Supports a Basic Income for All US Residents

Motion Summary:  Basic income recipients would include children and adults; the employed and unemployed; and citizens, permanent residents, and all other residents who could prove a residency duration of at least three years. The amount given would start at $1,000 per person per month and be pegged to GDP growth going forward. No programs in the existing social safety would be replaced by this policy.

Here we continue to look at how government benefits might influence the decision to work, especially when the benefits are not means-tested or not means-tested until a significant income threshold is reached. For your consideration:

  1. Individuals on Social Security Disability Insurance (SSDI) are allowed to work up to 10 hours a week or so and earn up to about $1100/month without it affecting their benefit payments, but just 3% take full advantage of this opportunity to earn an extra $10,000 a year – even though the ability to work a few hours a week on a regular basis does not disqualify them from their SSDI benefits. Surely more than 3% could do so if they were so inclined, e.g., many of the 25% who get SSDI for mental health issues and the 26% who have musculoskeletal disorders like back pain.
  2. Recipients of early retirement pensions who are granted full retirement benefits in their 50s could work and still get their pensions but most choose not to.  Which is one reason why a lot of European countries (like Germany and Austria) have raised the retirement age for pensions – to increase the labor market participation rate and improve their tax base. When pension retirement age goes up, job “exits” go down.
  3. Finland’s “Home-Care” Allowance, which enables parents to stay at home up to three years after the birth of the child - €338.34 ($415) per month, plus a “supplemental” allowance of €181.07 ($222) for one child under 3 years of age and is not affected by the family's income.  Government Economists’ Verdict: “the home care allowance has led to a reduction in female labour force participation”. Recommendation: “Reduce the duration of the home-care allowance”

Plus there’s lots of evidence that individuals receiving government benefits for whom job search activity is neither required nor monitored simply will not look for work, e.g.,

  1. Up to 2008, single parents in the UK received something very like an UBI when not working. They had no obligation to actively seek work but if they did return to work, the financial support of tax credits ensured that most would be significantly better off. But they weren’t returning to work and the UK unemployment rate remained stubbornly high (even during boom years) so in 2008  the government imposed obligations to look for work.  By 2014 the employment rate outside London had risen from 57% to 61%. In London the increase was dramatic from a lower baseline: from 45% to 57%.
  2. In Europe, high unemployment has been associated with the following: “generous unemployment benefits that are allowed to run on indefinitely, combined with little or no pressure on the unemployed to obtain work and low levels of active intervention to increase the ability and willingness of the unemployed to work…” (Nickell 1997)

What is it about work, and looking for work, that so many people would prefer not to? Next.

Sources and Links:

https://www.americanprogress.org/issues/poverty/reports/2013/05/30/64681/the-facts-on-social-security-disability-insurance-and-supplemental-security-income-for-workers-with-disabilities/ 

http://www.perfar.eu/policy/family-children/finland

https://www.slideshare.net/oecdeconomy/finlands-challengesforgrowthoecdeconomics   

https://www.theguardian.com/commentisfree/2015/dec/10/finland-universal-basic-income-ubi-social-security

https://www.americanprogress.org/issues/poverty/reports/2013/05/30/64681/the-facts-on-social-security-disability-insurance-and-supplemental-security-income-for-workers-with-disabilities/

Zeitschrift für Gerontologie und Geriatrie January 2018, Volume 51, Issue 1, pp 98–104 Expected and preferred retirement age in Germany. Manoli, Dayanand; Weber, Andrea (2016) : The Effects of the Early Retirement Age on Retirement Decisions, IZA Discussion Papers, No. 10154

Stephen Nickell. Unemployment and Labor Market Rigidities: Europe versus North America Journal of Economic Perspectives, Volume 11, Number 3, Summer 1997; 55–74. https://www.jstor.org/stable/2138184?seq=1#page_scan_tab_contents