Thursday, 31 March 2016

The UBI and the political constraint

I walk through the basics on universal basic incomes over at The Spinoff. After explaining Milligan's impossible trinity, I note the political constraint that I think blocks Gareth Morgan's proposed UBI. Morgan's proposed UBI would leave some very poor families worse off:
More importantly, though, while relatively low basic benefits could make the system affordable, they would not be politically stable. There would be pressure to layer a benefits system on top of the UBI, or to increase the UBI. It does not seem plausible that any government would be able to withstand the likely months’ long John Campbell campaign that would, every day, highlight a different family whose benefits were cut under the shift to a UBI. We would quickly have a welfare system layered on top of a UBI, increasing the costs while eroding the UBI’s benefits.
I could imagine pushing a button for a low UBI replacing existing income support programmes, combined with generous tax credits for contributions to charities that work to plug remaining gaps. But that button doesn't exist, and even if it did, it wouldn't be politically stable. You would have, every night, John Campbell featuring some family that has been made worse off. Because that is what John Campbell does, and because there is a market for those stories. Even if charitable support programmes were ramping up and would be more effective in the long run, the political constraint would bind. And then we wind up with UBI plus existing welfare.

Over at The Sandpit, I note a few additional problems that John Gibson raises:
[Gibson] then goes through five rather important potential unintended consequences of income transfer schemes, mostly looking at things in developing countries:
  1. Transfers targeted to types of need encourage Tullock-style competing for aid. He notes a programme in Brazil targeting poor families with kids wound up resulting in less weight gain per month for the targeted kids; the families feared that if their kids grew well, the transfers would stop.
  2. If being in formal work means you pay taxes to support protection schemes targeting those outside of formal work, then you get distortions towards informal work;
  3. Transfers to targeted rural households generate localised inflation that hurts non-targeted households;
  4. Programmes can erode existing informal safety nets where people rely on each other and family during tough times. The effect of programmes is then a bit harder to judge where the effective beneficiary is the person who would otherwise be supporting the recipient of aid.
  5. Programmes likely affect household composition, and consequently undermine targeting. He gives the example of the expansion of old age pensions in South Africa: adults with low skills wound up moving in with pensioners.

No comments:

Post a comment