Universal basic income policies don't cause people to leave workforce, study finds

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New research from the University of Chicago Harris School of Public Policy suggests that a universal basic income would not cause people to leave the workforce.

Such proposals, including one considered by Hillary Clinton during her 2016 presidential campaign, include direct payments that ensure each resident has a baseline of income to provide for basic needs. While previous research has focused on the effects of these unconditional cash transfers at the micro level—for example, winning the lottery— this study examined their large-scale impact by looking a government program that has supported Alaska residents for the past 25 years.

In a working paper released Feb. 12 by the National Bureau of Economic Research, Assoc. Prof. Damon Jones of Harris Public Policy and Asst. Prof. Ioana Marinescu of the University of Pennsylvania School of Social Policy and Practice (formerly of UChicago) examined the effect of unconditional cash transfers on labor markets using the Alaska Permanent Fund Dividend—a payout from a diversified portfolio of invested oil reserve royalties, established in 1982. They concluded unconditional cash transfers had no significant effect on , yet it increased part-time work.

"It is reasonable to expect an unconditional cash transfer, such as a universal income, to decrease employment," Jones said. "A key concern with a universal basic income is that it could discourage people from working, but our research shows that the possible reductions in employment seem to be offset by increases in spending that in turn increase the demand for more workers."

With only a few exceptions, every Alaskan who has been a resident for at least 12 months is entitled to a dividend from the Alaska Permanent Fund, which as of August 2017 is worth nearly $61 billion. In recent years, the payment, which residents receive through direct deposit, has averaged about $2,000 a year in a lump sum. But because it is a per-person amount, a household of four could receive more than $8,000.

Jones and Marinescu examined the effects of a large number of people receiving a cash transfer. Notably the researchers found that:

  • There is no significant effect, positive or negative, on employment as a whole, although part-time work does increase by 1.8 percentage points, or about 17 percent.
  • There is a difference in the effect of the unconditional cash transfer in sectors that produce goods or services that can be traded outside of Alaska and those that cannot. Part-time work increases and employment decreases in the tradable sector, but the effects in the non-tradable sector are insignificant.
  • Any negative effects in the non-tradable sector, meanwhile, are offset by positive macro effects.

Jones and Marinescu conclude that more research needs to be done to analyze universal basic proposals, including the effects of proposed funding models and possible impacts on the prices of local goods. They found that a major component, called the unconditional , has no on aggregate employment.

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More information: The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund. www.nber.org/papers/w24312.pdf
Citation: Universal basic income policies don't cause people to leave workforce, study finds (2018, February 15) retrieved 15 September 2019 from https://phys.org/news/2018-02-universal-basic-income-policies-dont.html
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Feb 15, 2018
This study is incomplete and fails to consider several facts. For one, the oil payments have been made for decades, secondly it failed to consider the crime and unemployment rates in Alaska compared to the other states. Their unemployment rate is currently high about 7.2% and their crime rate is among the highest in the nation with close to 600 serious crimes per 100,000 residences. I am not going to say these are connect but there could be a connection. After all basic income + a part time job seems to satisfy some, if so it just might be enough + a little crime to satisfy some others??

Instead of giving everyone a basic income how about giving every one that wants to work a basic job like cleaning the environment, recycling, and other types of work that are not profitable but make everybody lives a little more enjoyable?

Feb 15, 2018
but our research shows that the possible reductions in employment seem to be offset by increases in spending that in turn increase the demand for more workers

Anyone who's spent any time out of work could have told them that. When you have a lot of spare time you tend to spend more money than when you don't.

Most people feel the need to be useful (hey, we're a social species) - not very surprising that the number of people who 'abuse' such programs to simply quit doing anything is low. What it mostly does is lessen worries about one's future because you can be sure that there is some income - even if your employer's company folds. Not a bad thing.

Feb 15, 2018
When you have a lot of spare time you tend to spend more money than when you don't.

Aka. consume more, which translates into higher prices, which partially negates the basic income.

The other effect is that as demand for employment rises, so do wages, because you have to increase the reward to entice the people to work, and as wages rise so again do prices, so as time goes on the UBI becomes the new zero: without it you're actually poorer than nothing. You become dependent of the state.

So not only does the UBI not help people in the long run, it becomes a necessity and binds people to the government, which gains the ability to not only reward loyalty but punish disloyalty and cements its power. It's a sociopolitical nightmare.

The system works only as long as not -everybody- gets UBI, so the prices/wages keep in check. In the case of Alaska, it's the other states that provide the stability.

Feb 15, 2018
There's an old saying that goes, when the people can vote themselves money, democracy dies.

That's because the function of government becomes not about dealing with the people's mutual issues, but about buying votes for some small elite group to remain in power indefinitely. The government develops its own goals in the service of some special interest group, and offsets that by throwing bread and circus plays to the plebeians.

Now where have we seen that before?

Feb 15, 2018
you already have it now. It's called welfare. Generally people don't leave work to go on welfare. However it they lose their job and can't get back to work right away they do go on welfare. A percentage of those stay on it and a percentage of their children stay on it until finally they are permanently on it.

If you don't believe me, run the numbers since LBJ started the war on poverty to today. We have a huge number of families on multi-generational welfare and it increases every year.

Now, second - who is going to pay for all this? It'll bankrupt the country.

Feb 19, 2018
Generally people don't leave work to go on welfare.

That's because welfare comes with strings attached, and dealing with the bureaucracy can be a job in itself. Generally speaking, welfare is a temporary measure and offers only bare subsistence, which can be abused by some people who manage to get by on very little, with a little non-official income on the side, whereas the idea behind UBI is to provide a "living wage" no questions asked which is a totally different proposition.

In most countries, you're either on welfare or you're working. If you're able to draw both incomes at the same time, that's what really ruins the system, because it enables people to live comfortably with a little odd job here and there, without really pulling their weight in society despite being well able to and not actually in need of welfare in the first place.

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