Wednesday, May 31, 2017

Bill Mitchell — A Basic Income Guarantee does not reduce poverty

… the introduction of a Job Guarantee would eliminate poverty arising from unemployment and the working poor because the Government could condition the minimum wage by where it set the Job Guarantee wage. If it truly desired to end poverty among those in employment then it would set the Job Guarantee accordingly. Others argue that a more direct way of dealing with poverty and lack of income is to just provide the income via a Basic Income Guarantee (BIG). The BIG idea has captured the progressive side of politics and many on the Right. It is another one of those sneaky neo-liberal ideas that look good on the surface but are rotten not far below. Supporters of BIG are really absolving currency-issuing governments of their responsibility to use their fiscal capacities to ensure there are sufficient jobs created – whether in the non-government or government sector. They are thus going along with the neo-liberal attack on the right to work. Moreover, closer analysis reveals that the introduction of the BIG would not, under current institutional arrangements reduce poverty at all....
I think Bill on to an ket point in saying that basic income is neoliberal, based on neoclassical economics including New Keynesianism. This implies that the JG is based on social welfare based on Keynesian economics, including Post Keynesianism and MMT.

The key point is the difference between creating a buffers stock of employed to ensure full employment in the sense of a job offer for everyone willing and able to work, and buffer stock of unemployed that must be supported by transfer payments over one sort or another.

Basic income does not address this key point, and obscures the tradeoffs by emphasizing the benefits while minimizing the costs and externalties. Basic income is like treating a serious wasting disease with an analgesic like aspirin.
Bill Mitchell – billy blog
A Basic Income Guarantee does not reduce poverty
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Dan Lynch said...

the major reason for people having a lack of income is unemployment.

False. 63% of the poor who are able to work already have jobs.

So the main causes of poverty are low wages, disablity, old age, or attending school, not unemployment as Bill claimed.

the government could condition the minimum wage by where it set the JG wage.

The government could condition the existing minimum wage, but the capitalist who run the world will not allow it, nor will they allow a living wage JG. Real life JG's, like the Argentine JEFE program, have paid below poverty level (AND MMT SUPPORTED IT!).

Bill confuses a UBI with a BIG -- they are two completely different things. I have long advocated a weekly means-tested BIG that pays just above the poverty level. By definition, my BIG would completely eliminate poverty for adults no if's, and's, or but's (support for children would need to be addressed with separate programs and that is also true for a JG).

A targeted BIG is typically rejected by proponents.

False. I advocate a means-tested BIG, Martin Luther King advocated a means-tested BIG, Milt Friedman advocated a means-tested BIG, and so on.

The endless trumpeting of a JG and discouraging alternative ideas to help poor people merely highlights MMT's cult-like qualities. Far from attracting people to MMT, it's a huge turn-off.

Bob said...

JG advocates had better take Bill's academic work and translate it into terms the public can understand. You are losing the popular debate to UBI advocates.

Matthew Franko said...

"Poverty by choice is not a problem in my world."


Tom Hickey said...

I agree, Dan, for several reasons.

First the argument should be about buffer stock of employed or buffer stock of unemployed and the tradeoffs involved in each. The buffer stock of employed is more effective socially, politically and economically, and it is more efficient economically.

There also needs to be some kind of basic income as the basis for a welfare state.

I argue that a combination of a direct transfer of money and also federally funded access to benefits like health care is best suited to this rather than only a money grant.

Children and the elderly are a separate issue in my view.

An adequate pension and benefits like health care and long term care are needed for the elderly.

Children should be provided with the basis for equal opportunity in life in societies based on competition to make the system fair.

Unknown said...

The Iran results seem to belie Bilbo's arguments.

Tom Hickey said...

I am not sure that the economies of underdeveloped, emerging, and developed nations can be compared directly. The contexts are quite different.

Ignacio said...

The problem I think there is with the BIG is that I think it's much harder to justify long term (not being an UBI, it will be spin as usual as some welfare program to be abused by certain elements of the population that "you are paying for", remember a lot of people still hates things like food stamps or is viciously against any sort of socialised healthcare). Although, truth be said, the same can be said for a working and functional JG (which would require a lot of funding and organisation), which will be characterised as a program where "you get paid for digging and filling holes".

Both sorts of programs will be sabotaged by political and government forces to fail, and then used as a perennial example of: "told you so", setting us decades back to try it again. I think we are not quite there yet, we need an other displacement from the labour market due to massive automation thanks to AI, which will take at least a few decades. By then the political climate will force some sort of solution probably, and a working one, because the alternative will be a wipe out of the establishment. Until then, seems we will get "muddle through".

Calgacus said...

Dan Lynch:Bill confuses a UBI with a BIG -- they are two completely different things.

Complain to the academic UBI/BIG ers, not Bill. They are the ones who use terminology atrociously. You use UBI to mean universal, untaxed to everyone. BIG to mean means-tested, targetted. Fine. This is a consistent and useful distinction, but one should not pretend that it is usually made, and with those acronyms, when the reverse is true. The proponents almost always confuse them and use mutually inconsistent features of each for their fairy tales. The discussion at Mike Norman is at a higher level than the academic literature. :-)

Ignacio: Although, truth be said, the same can be said for a working and functional JG (which would require a lot of funding and organisation), which will be characterised as a program where "you get paid for digging and filling holes".

It can be said, but not truthfully, about the JG, whose organizational requirements are not terribly daunting or difficult & have never proved so. What it needs is the government to write the check.

Both sorts of programs will be sabotaged by political and government forces to fail, and then used as a perennial example of: "told you so", setting us decades back to try it again.

Nope. It took the Second World War to get rid of the WPA, which Roosevelt had planned to make permanent and expand. Just before the war the most extensive welfare state in the world was the USA. The only people who understand how difficult a JG is to get rid of in a developed country, how successful, how powerful it is - are the very people who want to sabotage it. Who are the only people who spread the nonsense about digging and filling holes.

One of their ideas "to help poor people" is the BIG. Unlike BIG fans, they understand economics enough to know it will do the opposite.

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Matt Franko said...

The arts would flourish under the BIG/UBI .... not very much with a JG you'd have policy makers directing the arts, not ideal...

Ignacio said...

Calgacus, is true is very hard to "get rid" of something beneficial when a majority is enjoying it, that's why despite best efforts during decades by Tories and Blairites to derail and destroy the NHS is the UK, for example, the majority is still highly supportive of it and won't allow them to dismantle the service. Or why the establishment is fighting so hard tog et some sort of universal healthcare in USA (they know they won't be able to get rid of it or control it later).

However, I've mixed feelings about this applying to a JG or a BIG. I believe it wouldn't be perceived as a benefit for the majority of the population, and will be an other point of contention to throw people against each other and a highly politicised issue (hence not well designed and designed to fail). But yeah, there is a high chance that despite that it would carry forward due to its own nature as automatic estabilizer and is impossible to remove those without the system imploding when they are to ingrained in the economic fabric).

I disagree on the organisational issues, it's not simple by any means due to sheer weight of scale for any non-trivial/non-toy implementation of a working and functional JG to be implemented. I don't want to say much on the academic work of some MMT'ers as it would be unfair, as I haven't read any of the long books by Mitchell or Wray on the issue, so cannot discuss their merits or demerits, but from what I've read both on the Internet or on shorter papers the attention to detail or reality of implementing a JG at certain scales, with certain qualities, laves much to be desired (yes, I'm aware about the Argentina limited JG program and other smaller experiments all around).

I mean, for example, I read Neil and it all sounds very good on paper, but I've not seen desire or experiments to organize the programs in that vein anywhere (and is full). And I doubt our current political and bureaucratic apparachtik is up to the task. In that sense the proponents of the BIG are ahead because its complexity of implementation is order of magnitude lower than a well run JG.

Also, the opportunity for collusion of interests and meddling exists in both types of programs. Although with the BIG, at a larger systemic level (which as some of you guys suggest, it's basically a corporate trap), and with a JG, depends on the implementation.

Tyler Healey said...

Just have unemployment insurance pay $3,000 per month. Done and done.