Tag: economics

Is the U.S. Ready for Universal Basic Income?

Posted on by robbie

It used to be considered radical. But the idea that a society could ease poverty and increase productivity by giving every one of its citizens a monthly or annual stipend, no strings attached, is no longer a far-fetched one in other parts of the world. And now some progressive leaders in the U.S. are pointing to the economic model’s alleged success in Europe in the hope that the notion takes root here, too.
The concept, known as a universal basic income (or UBI for short), is simple enough: Give citizens enough money every year, gratis, so that they can pay for necessary living expenses, like housing and food. In return, people will have the bandwidth to flex their creativity, become more productive and enjoy a better quality of life.
Not surprisingly, fiscal hawks and critics of entitlement programs are not on board.
“Unfortunately, a welfare state by any other name is still a welfare state. And a [UBI] is just replacing one pricey system for another,” writes Brittany Hunter, an editor with the Foundation for Economic Education. “Unlike the current welfare state, which has standards for determining who qualifies for certain aid, a UBI would be given to everyone. This would dramatically increase the pool of citizens receiving benefits from the state and inflict massive expenses across the board.”
Hunter’s critique came on the heels of a study conducted by the left-leaning Roosevelt Institute, which found that providing $12,000 each year to Americans would increase jobs by 2 percent and grow the economy by $2.5 trillion by 2025.   
Though the idea of a universal basic income in the U.S. has been tossed around for decades, the rise in automation has put the idea at the forefront of current economic arguments in developed countries, where robots are poised to take over more jobs and provide less opportunities in the future.

THE VIEW ACROSS THE POND

In mid-September, the University of Bath’s Institute for Policy Research found that nearly half of Britons would welcome a basic level of income to cover essential needs, with only 26 percent of those surveyed opposing its introduction. The reactions aren’t necessarily surprising, as the Scottish government recently announced plans to test a UBI system by giving citizens £150, or about $200, per week.
Though the move is revolutionary in the United Kingdom, it’s not unheard of in other parts of Europe. Last year, several European countries introduced the idea of trying out basic income, ranging from giving a modest €560 a month to 2,000 unemployed adults in Finland (the equivalent of about $660) to doling out 2,500 Swiss francs ($2,573) each month in Switzerland.
The Swiss held a vote for the monthly stipend in June 2016 — the first time a country has ever put the proposal on a ballot — but it was overwhelmingly voted against by nearly 3 to 1. Opposition groups claimed that the country’s high living standard, combined with its open borders, would make for complications.
Finland, meanwhile, has boasted anecdotal evidence of success, with residents reporting that the basic income has allowed them to start their own businesses and has reduced stress. But some economists argue that the Finnish program, which was implemented to replace unemployment benefits (though recipients are still awarded the monthly stipend even after they secure work), has only pushed people to lower-paying jobs with lower productivity.
“Universal basic income can only succeed if the effort is sustained and widespread — and not available only to the unemployed,” wrote economists Antti Jauhiainen and Joona-Hermanni Mäkinen in The New York Times. “The program should not be intended to force people into low-paying jobs.”

ONE NATION, UNDER UBI

So can a UBI model work in America?
In a way, it’s already here, to some extent. Alaskan residents have gotten a portion of the state’s $55 billion oil fund each year for the past four decades. Last year, the dividend from the fund was $2,052 each for 643,000 Alaskans, before Gov. Bill Walker axed that amount by half.
Farther south in Silicon Valley, the tech incubator Y Combinator has launched a UBl study that aims to provide roughly 1,000 Oakland families with up to $2,000 a month.
“I think it’s good to start studying this early,” wrote Y Combinator President Sam Altman in a blog post. “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.”
The reality is that automation in America will reduce jobs for low- and even middle-wage workers by close to 50 percent, according to some estimates, and there is a worry that cashiers who are put out of work won’t exactly be in the position to become engineers overnight. The U.S. has already started to feel the squeeze, with about 5 million jobs lost as a result of automation.
American business leaders and progressive politicians have taken notice. Vermont Sen. Bernie Sanders and Facebook CEO Mark Zuckerberg, among others, have all endorsed the idea of a UBI.
“There will be fewer and fewer jobs that a robot cannot do better,” echoed Elon Musk, CEO of Tesla and SpaceX, earlier this year. “And if my assessment is correct and [jobs are lost to automation], then we have to think about: What are we going to do about it? I think some kind of universal basic income is going to be necessary.”
Continue reading “Is the U.S. Ready for Universal Basic Income?”

Why Behavioral Science Has Become the Next Big Thing for Solving Society’s Problems

Posted on by robbie

Ever since Dr. Stanley Milgram conducted his notorious experiment in the early 1960s, in which he asked participants to obediently administer a high-voltage “shock” to a victim, researchers have uncovered a wealth of fascinating insights into the human mind. But much of this study has been confined to laboratories and academia. As managing director at ideas42, NationSwell Council member Alissa Fishbane is bucking that trend by applying the lessons from behavioral science to the social sector. At ideas42, her team advises governments and nonprofits about how to better structure their programs in education, healthcare, criminal justice, finance and energy based on what we know about human psychology. NationSwell spoke to Fishbane at her office in Lower Manhattan.
What is behavioral science, and why is it so important for policymakers to understand?
Behavioral sciences are really pulling together all the research in social psychology, neuroscience and behavioral economics. This field is so important because people often behave in ways that are strange and peculiar. You want to go to the gym five times a week, you want to stay on this diet and you want to save more for retirement. Why isn’t that happening? We all tell ourselves what we want to do, then it doesn’t quite happen. Why not? We as human beings struggle to follow through on certain decisions, particularly things that are very important to us. But programs and policies in the social sector are often created in ways that don’t account for this fundamental aspect, how we behave as humans. That’s really where we come in.
What’s an example of how this looks in practice?
One thing we’re looking at is how to help students complete college. There’s been a lot of great work in this area, but we’ve taken a different approach, which is the holistic student experience. How do we take the pulse of a student as they go through the process, day-to-day and semester-to-semester? How do we understand their various decisions, actions, habits? Knowing that there are constant hurdles a student needs to jump over — “Did I apply? Did I matriculate? Did I get my aid? Did I study? Did I pass?” — even a small one can trip them up. The solution isn’t any one piece; it’s creating a system that supports them throughout all of their college years.
It can be very simple, like reminders to complete the FAFSA. With something that small, we almost doubled the early application rate at one university we worked with. We also take on tougher problems, like working with a college to figure out how to keep students from dropping out in the first year. We realized a big part of the problem for students was feeling like they didn’t belong on campus. For that, we embedded a video into orientation showing how lots of other students went through similar challenges, the way they overcame them and how thrilled they are now to be there. We were able to raise the retention rate from 83 to 91 percent, which is pretty amazing, just by understanding what these students experienced.
What kinds of issues have you worked on locally, in New York City?
Summons are tickets for low-level infractions that people get for things like having an open container of alcohol in public or riding a bike on the sidewalk. Lots of people are getting these tickets — big city, you know, lots going on — but what’s really scary is that if you get a ticket and don’t show up to court, a bench warrant is put out for you. The next time you have any sort of encounter with police, you will be arrested immediately and put in jail. Almost 40 percent of New Yorkers aren’t showing up, which is an extraordinarily high number. That’s really concerning because for families that don’t have flexible jobs, it’s hugely disruptive. Even if you’re out in 24 hours, you could lose your job. And it’s even worse if you’re undocumented.
We partnered with the mayor’s office, the NYPD and a state entity, the Office of Court Administration, to change what the ticket looks like. Even changing the title makes it clearer. Before it said “Complaint/Information”; now, it says “Criminal Court Appearance Ticket.” Instead of a date and time in chicken-scratch on the back, that info is now at the top along with writing that says that you will get an arrest warrant if you don’t show up.
Then, their next touch point is 12 weeks later. Most people think they have plenty of time, but they forget, lose the ticket or don’t put the date in their calendar. We’re coupling the revised form with a series of text-message reminders. We know people need to ask for time off work, so it comes a week ahead of time to help them plan. In case they forgot, it comes three days before. Then, it comes the day before.
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Are there any ethical dilemmas to watch out for in applying behavioral research to policy?
No matter how you design anything, consciously or unconsciously, you create an outcome. The way anything is built, just in its structure, is nudging people one way or another. We try to de-bias that and help people make the decision they want to be making. In the social sector, we’re really focused on how we help people move from intention to action. So we’re not trying to tell people, “Now, do this,” but rather, helping them follow through.
How do you apply these insights to your own life?
We don’t realize everything else that’s going on in the lives of others; we don’t see the full picture of anyone’s environment. It’s easy to say, “I can’t believe you didn’t make it to the gym five times,” but then you don’t either. I can make these assumptions like, “Oh, she doesn’t have discipline,” but then come up with an excuse for my own lack of discipline. Understanding human behavior makes us more generous about others and ourselves. I’ve become much more forgiving of myself, knowing that lots of these things are funny quirks about human behavior.
To learn more about the NationSwell Council, click here.

Ask the Experts: Why Should Americans Care About Income Inequality?

Posted on by robbie

It was a focus of President Barack Obama’s State of the Union address in January. It’s consistently been a hot topic on political talk shows, in news magazines and at your dinner table. It’s a politically polarizing and passion-invoking topic of discussion. And it’s almost impossible to nail down.

It’s income inequality.

A commonly accepted view is that the United States has one of the highest levels of income inequality among the world’s industrialized nations. But is this true? Well, it depends on whom you ask or, more specifically, how you measure it. Judging from the Gini coefficient — a statistical measure of a country’s distribution of income — you might agree that, yes, the U.S. has seen a rise in income inequality over the past few decades.

However, economists like Richard Burkhauser of Cornell University have written extensively that the way we measure inequality is flat-out wrong. In a 2011 paper for the National Bureau of Economic Research, Burkhauser and co-authors Jeff Larrimore and Kosali Simon argued that income should be measured post-tax, size-adjusted for households, and after accounting for benefits such as health care. When those items are factored in, Burkhauser and his co-authors claimed, income inequality isn’t as big an issue in the U.S. after all.

MORE: Could a National Sales Tax Ease American Inequality?

In this first installment of a new series for NationSwell in which we ask experts to weigh in on the major issues facing America, we asked our panel to contemplate this highly controversial topic. The main question we asked is: Why should (or shouldn’t) Americans care about income inequality? And, of course, what are the solutions to the problem?

The answers we got were surprisingly wide-ranging. Read on for the panel’s thought-provoking perspectives, and then join the conversation by leaving your own ideas in the comments box.

Dan Crawford

Spokesman for the Economic Policy Institute

NationSwell: Why should Americans care about income inequality?

Dan Crawford: Income inequality is far from an abstract issue. Since the 1970s, the productivity of the American economy has soared, but workers’ wages have stagnated. Inequality doesn’t just mean the rich are getting richer — it means the middle class isn’t sharing in the country’s overall prosperity. Americans should care about inequality because, since so much economic power is concentrated in the hands of the top 1 percent, the middle class keeps falling further behind. We’re not seeing the increases in living standards that should be emblematic of a healthy economy. For most Americans, inequality means they won’t see their incomes or living standards grow in any meaningful way.

NS: How do we fix it?

DC: There’s no easy fix to slowing or reversing the growth of inequality, but there are a number of steps that policymakers can take, such as making full employment a priority, raising the minimum wage, strengthening labor standards and protecting workers’ rights to bargain collectively.

ALSO: This State May Have Discovered the Secret to Saving Tax Dollars While Doing Good

William McBride

Chief Economist at the Tax Foundation

NS: Why should Americans care about income inequality?

William McBride: First of all, I’m not sure they should. Income inequality is, in a general sense, a negative thing. You look around the world, there are certain places and times where it manifests itself as very problematic. For example, Brazil has such economic extremes, where the wealth and income is highly concentrated, and you have a real problem in terms of opportunity. You have a permanent “underclass” type of situation. Does that state of affairs exist in the U.S.? Well, it’s hard to get a handle on it.

I think a lot of researchers have tried to draw connections from income inequality to taxes. If we take from the rich and give to the poor through taxation, we can make our cultural problems better. That’s a very tenuous argument, and I think those who put it forth have yet to provide any evidence of it. [In fact,] the standard approach to economics tells a different story. It says that the economy works by different income groups cooperating, and employers hiring employees to produce wealth and income. Disrupting that process by redistribution from owners of assets to workers — or to retirees and nonworkers — that is a severe disruption to a basic economic process. We have very strong evidence that that destroys wealth — not just for the rich, but for the workers and future workers, as well.
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Additionally, the measurement of income inequality has been very flawed and politicized. To what degree do we have inequality? There are different ways to measure it. There’s IRS tax return-based measures and census survey data, and they come to totally different conclusions. The census-based data — which the CBO [Congressional Budget Office] uses that — that measure is more comprehensive, but it’s not the full story, either. When you add in what’s missing from that, you get a more complete picture of compensation, including fringe benefits. Then, you’ll find there’s been no change in inequality in 30 years, since the 1980s.
NS: Does it need to be fixed?

WM: There are policies that can and need to change to improve opportunity, not necessarily to improve inequality. Inequality is an outcome. But what we need to do is to change the inputs. In regards to education, it’s widely known we have a very poor K-12 system relative to other countries, and it’s only gotten worse over time. We have public schools in rich neighborhoods that are excellent, while low-income neighborhoods get very bad public schools. It’s very much tied to income. We know this is a very big driver of the low mobility problems we’re talking about here. So we need to fundamentally revolutionize K-12 public schooling, and to do so we can look around the world to see what’s worked and try some bold experiments.

MORE: Why the U.S. Should Adopt the “Finnish Way” of Education

Branko Milanovic

Senior Scholar at the Luxembourg Income Study Center at the City University of New York

NS: Why should Americans care about income inequality?

Branko Milanovic: There are several reasons people should care. Studies show if we have high-income inequality — called inequality of outcome — then over time that can be transformed into inequality of opportunity. What happens is that if you have a very high income, you pass your money, privileges, connections and so on to your sons and daughters, and they start their lives with much greater advantages than others. Gradually, these advantages become cemented from generation to generation, which means that at the very beginning of one’s life, there’s already a disparity in opportunity. In other words, one can say that such a society would undermine the long-held American dream of equality of opportunity and upward mobility.

Secondly, there are arguments that inequality might actually slow the rate of economic growth.  We can argue that very rich people are saving and investing and so on, but if middle-class income doesn’t grow fast enough, then there’s no healthy demand provided by the bulk of the population. Again, we have seen this in the hollowing out of the middle class over the last 30 years, and possibly even in the run-up to the crisis, where the middle class basically compensated for the lack of growth by borrowing to unsustainable levels.

Lastly, in the long run, inequality has the tendency to undermine democracy. We have seen this, as well. Rich people try to buy legislation that is good for them. The political system gives them an unfair advantage over the others, which in turn makes them even richer. That’s how crony capitalism is born.

NS: How do we fix this problem?

BM: First, we can increase spending for education. Educated people are more productive. They participate in globalization, which is good for growth. And having more educated people in the country reduces the premium on university educations and reduces wage disparities, simply because the supply of highly educated people increases. Education is one of few instruments that we have which is a win-win strategy: It increases growth and reduces inequality. On top of that, basically everybody agrees that education is good in itself and for the entire nation.

Secondly, we can increase minimum wage to be in line with inflation. This would increase income for people at the bottom. But then of course, economists raise the issue of whether this could reduce demand for labor. So, one has to factor in this possibility too. Lastly, we can expand social spending and make it more generous — food stamps, Temporary Assistance for Needy Families (TANF), Medicaid, earned income tax credit. They will decrease inequality, even if it means increased taxation. But all these ideas have as their objective not only to reduce inequality but more importantly poverty, which has been extremely stubborn in the U.S. for about 40 years.

ALSO: How to Get People to Save When All They Want to Do Is Play the Lottery

If our experts’ responses are any indication, the issue of income inequality has no simple explanation or answer. But notice that everyone did agree on one thing: To increase equality, we need to invest in education. Hear that, Congress?
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