Judging from the media coverage, there’s a lot of support - popular, academic, and empirical - for the Universal Basic Income (UBI). But what, exactly, is a Universal Basic Income? There is no consensus definition, but here’s a good one provided by a couple economists: UBI is a cash transfer program that 1) provides a sufficiently generous cash benefit to live on, without other earnings; 2) does not phase out or phases out only slowly as earnings rise; and, 3) is available to a large proportion of the population, rather than being targeted to a particular subset, e.g., to single mothers (Hoynes and Rothstein, 2019).
Based on this definition, infrequent, unpredictable, and very small cash payments do not count as UBI. For example, the Alaska Permanent Fund disbursements of $300 - $2000 a year (average of $1224 a year since 2010) don’t count, ditto the 75 cents a day given to some Kenyans*; ditto most lottery winnings. While these payments may benefit recipients in various ways, they are not enough to live on or rely on, and so there is no reason to expect such payments to have much of an effect on labor market participation. Since a major concern about the UBI is that many recipients would work less or not at all if they received a monthly cash benefit large enough to live on, UBI studies that matter are those where the benefit is large enough to provide a decent alternative to working - and where participants receive the benefit long enough to influence their work-related plans.
So where has such a UBI, stringently defined, been implemented and evaluated? Two places: North Carolina and Finland**. Specifically, the Eastern Band of Cherokee Indians Casino Dividend “natural experiment” and (to a lesser extent) Finland’s 2017-18 UBI study. In this post we’ll look at the Eastern Band of Cherokees natural experiment, which is widely viewed as a UBI success story. Here’s a typically gushing description:
“Another long-running program is the Eastern Band of Cherokee Indians Casino Dividend in North Carolina. Since 1997, revenue from a casino on tribal land has been given to every tribal member, no strings attached. Each person gets on average somewhere between $4,000 and $6,000 per year. Economists found that it doesn’t make them work less. It does lead to improved education and mental health, and decreased addiction and crime.” - Everywhere basic income has been tried, in one map, by Sigal Samuel/Vox Feb 19, 2020
Several questions come to mind: Were the results statistically significant? Did the researchers control for other variables (possible “confounders”) that might have explained the findings? Did the researchers compare Cherokee data with what was happening in the state overall or with other North Carolina Indian tribes, to see if broader trends were in play that had nothing to do with the UBI, e.g. improvements in healthcare, education outcomes, employment rates? How did the researchers measure work participation, mental health, education outcomes and crime? How did the researchers know the UBI truly “led” to improved education, mental health, etc.? In other words, on what basis did the researchers conclude the relationship was causal and not mere correlation? How many years of data were the findings based on? Were follow-up studies done? If so, did the outcome data vary over time? Were the researchers strong conclusions justified by the data, or did they overstate the significance of their findings? These are the types of questions scientists ask: they interrogate research studies, looking for possible confounders, alternate explanations, errors in statistical analysis, and study limitations.
In an attempt to answer at least some of these questions, I searched for the original research paper on Eastern Band of Cherokee Indians but the link in the Vox article didn’t work and I could not find it through the standard archives. So I did a little digging and this is what I found: as of 2012 (15 years after payments began), the Eastern Band of Cherokees had an unemployment rate of 46.3%, compared to 8.8% statewide (North Carolina) and 4.3%-16.4% for other Indian Tribes in North Carolina. Just 2.8% were currently enrolled in college or graduate school, compared to 27.0% statewide and 15.6%-32.0% for other tribes in North Carolina.
That’s a UBI success story?
Next: The results are in! What we learned from Finland’s UBI study.
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* Per the World Bank, GDP per capita in Kenya was $1710 in 2018. A cash payment of $.75/day adds up to $274 a year. Such a payment would clearly benefit poor Kenyans but is only enough to take the edge off deep poverty and wouldn’t be expected to replace other means of making money.
** The Ontario Basic Income Pilot would have been another decent UBI study but was cancelled prior to completion. Other UBI studies are in progress. For more info on these studies, go to https://basicincome.stanford.edu/research/basic-income-experiments/
References:
“Data Profiles of the North Carolina American Indian population” Prepared by Kelly Karres/Census Bureau on behalf of the Commission on Indian Affairs June 2012
Hoynes, Hilary Williamson and Rothstein, Jesse, Universal Basic Income in the Us and Advanced Countries (February 2019). NBER Working Paper No. w25538. Available at SSRN: https://ssrn.com/abstract=3332286