Universal Basic Income: The Next Generation

"Wait, you're saying that in the Federation you don't have to worry about money? You can just schlep around the galaxy seducing alien women?"

“Wait, you’re saying that in the Federation you don’t have to worry about money? You can just schlep around the galaxy seducing alien women?”

Over at Five Thirty Eight, there’s a nice piece by Daniel Flowers on the idea of a universal basic income (UBI). Proponents say it will allow people to choose their careers and live their lives without having to worry about ever being poor. A common criticism is that it will create a massive disincentive to work at all. Several experiments have already been run which have found small, but non-negligible effects on the willingness to work. It is one of the outcomes that a host of new experiments of giving people a long term guaranteed basic income will test.

I am a little worried that these new experiments won’t capture the long term, generational impact of a universal basic income. Let’s imagine I really wanted to be a filmmaker (*cough*), but decided to become an economist because filmmaking is more likely to leave me in poverty. If I’m half way through my career as an economist and I start receiving a basic income, it might be too late for me to really break into filmmaking. Even if I pull it off, adjustment costs will be high, and it’s likely I’d end up embarking on a career which would be less successful than if I had started at a much earlier age. It is these decisions that will largely be picked up when the targets of a UBI experiment are largely adult workers.

What is more interesting is the impact on the next generation. Let’s imagine the UBI is introduced and governments can credibility commit to providing it for one’s entire lifetime. Now, all those aspiring filmmakers can select into the job of their choice with lower adjustment costs and a higher likelihood of actually being accomplished at what they’d most like to do. Who knows if this would have a net positive or negative impact on the creation of value, but it certainly would lead to better sorting. But even the most ambitious UBI experiments which are being proposed are unlikely to pick up these effects. Instead what we need to do is find a group of high schoolers and offer some of them (randomly) a credible lifetime UBI, then sit back and see how it affects career decisions and labour market participation in the long run.

As a side note – how much does relative poverty in developing countries lead to sub-optimal career decisions?

5 thoughts on “Universal Basic Income: The Next Generation

  1. David

    April 25, 2016 at 2:57pm

    The idea of a guaranteed basic income is inspiring. Some concern on an issue not yet raised – if this was a standard practice in various wealthier countries, wouldn’t it increase the stakes further over decisions on immigration (and the incentives to get into said countries any way one could)? Seems like another generational effect that may be strongly negative, at least for a few generations…

  2. Matt

    April 25, 2016 at 4:29pm

    Hey David,

    I had the same thought while writing this. I suppose the best way to protect against that would be to limit the rights that immigrants have to UBCs for at least some interim period. Or, more controversially, make UBCs contingent on citizenship by birth.

    I’m not sure if those are good ideas though. It’s a thorny issue.

  3. Justin Williams

    April 25, 2016 at 8:58pm

    Hi Matt, thanks for the tip – interesting article, but apart from GiveDirectly’s pilot it majors on the debates in rich countries… for a very interesting take on the political possibilities of the basic income idea in Southern Africa see James Ferguson’s Give a Man a Fish (review by me here: https://developmentbookreview.com/2016/03/11/review-james-ferguson-give-a-man-a-fish/). Ferguson’s argument is along the lines of the technologists’ concern that at some point 95% of people won’t be able to contribute to the workforce. Already in South Africa huge numbers of people seem simply marginal to the economy and it seems unrealistic to expect that jobs could be created for them all. Ferguson sees some hope in the idea that people may start campaigning for basic income as a rightful share in national wealth.

  4. Clare

    April 27, 2016 at 3:29pm

    While I think I support the concept of a universal basic income, I think this does raise the question of whether people who could not enter the career of their choice due to there being an oversupply of, for example wannabe film-makers, would there be a shortage of people willing to do less desirable but important work. Is there research on what motivates people to work in jobs which offer less satisfaction in terms of creativity, pay, or status? Would a UBI be preferable to a very boring, low paid, low status job? Or is this where better education and social mobilty become important?

  5. Nikita Katenga-Kaunda

    May 6, 2016 at 9:07pm

    Very good article, Matt. Regarding the question you posed in your last paragraph – how much does relative poverty in developing countries lead to sub-optimal career paths? As a native of the poorest country in the word, Malawi, I can say poverty here (and the lack of job opportunities) very much dictates career choices and mostly does does drive folks to sub-optimal jobs; you have to put food on the table – there’s no other alternative. I recently obtained a degree in journalism. Haven’t found a job yet – neither have most of my old classmates. Some of my former classmates have gotten jobs they are way overqualified for.

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