I don't plan on going too deep into this one as much of it is stuff I've beaten to death on here. Mostly discussing the more practical aspects of UBI. In this chapter, Van Parijs went into UBI studies, and ways of funding it.
First he went into studies into the subject and how limited they are. It's common knowledge within the UBI academic community that despite promising results from UBI trials, UBI trials are flawed and are imperfect simulations of UBI. They are temporary programs, often done via a negative income tax format, with lots of observation involved (observing people changes their behavior if they know of being observed), and are often not universal and can't properly simulate what would happen if a full UBI were implemented.
He discussed inflation and how macro inflation was unlikely to happen from income transfers, but localized inflation could occur for various goods due to how redistributing income redistributes demand. he also focused on work disincentives, which is something I want to talk about. Van parijs seems to think that an income tax funded basic income could reduce work incentive more than one would think, pointing to econometric models. Basically, while a UBI would potentially increase work effort for those at the bottom of the spectrum, the higher taxes could reduce working hours among the people in the more middle and affluent ends of the spectrum. This is something I tend to discount in my own approach to UBI. I generally assume that the biggest issue is the bottom of the spectrum and those marginally attached to the labor force, but he seems to think that people who make more would stop working as much because of the substution effect and how higher taxes combined with a free income would reduce work incentives. I generally assume that the labor supply above the bottom of the income distribution is more inelastic. I base this on the idea that even if you make $80k a year, you pay $14400 more in taxes, but get $14400 back, you're not going to change much, and you're not going to quit over that. You aren't going to want to give up $80k a year ot live on $14400. The same applies further down. At $40k you might be taxed for an additional $7200 with face the same extra 18% tax, but you're not going to quit to live on $14400. And if you make $160k, you're likely not going to work less because youre taxed an extra $28800 and get an extra $14400 to compensate. Most jobs and labor market opportunities arent structured to allow people to set their own hours (although I think that this should be more common), and many jobs are set up in a "take it or leave it" type of way where you have to accept the package deal or not at all. Often times "voluntary overtime" isnt voluntary, and even when it is, people often want the extra money. It's possible an extra 18% to taxes might cause some people to work less, but I really tend to question the logic here. Like a lot of economic models also think raising the minimum wage increases unemployment when in practice it just leads to inflation if anything as the demand for labor is a lot less elastic than predicted.
So I'm not really sure if I buy that. I understand the logical argument that higher marginal tax rates tend to decrease work effort, and that higher levels of UBI can do that too, but in practice, I really question how elastic that is. Most concerns with work effort reduction are focused toward the bottom and those who are more marginally attached to the market. People in part time and gig work and stuff. Those in a traditional 40 week job at a good salary may be less inclined to quit, especially if their actual working hours aren't under their control and they would likely not reduce their income significantly just to live on UBI. I know models are models, but models are based on assumptions, and as long as the tax rate is below the laffer curve rates, I'm not going to be too concerned here.
Still, Van parijs did look at other methods of taxation too. And all of them have flaws. I discussed them before. VAT means that youre taxing the UBI itself when people spend it. A lot of taxes like wealth, inheritance, and corporate taxes tend to only raise a few hundred billion each if that. Land taxes are hard to really implement properly, and i have a personal concern about fairness and freedom there. And he didn't seem to think they could be implemented at a high enough level anyway.
He considered more limited versions of UBI, which would only go to certain people, and would go against my own, and many others' ideas of fairness and freedom. He considered implementing a more NIT type system aimed at higher marginal tax rates at the bottom of the distribution where econometric models would expect a work increase as we shift from a welfare system full of welfare traps, but a lower tax on higher earners to stop them from not working. But honestly, not only is that regressive, but it's kind of stupid. Do we really think higher earners would reduce their earnings that much? Again, below laffer curve rates (say, 70% marginal tax rate), I don't see a ton of evidence of people reducing their work efforts much in say, Europe. And my own UBI plan would make our tax scheme similar to Europe with like a 40% marginal tax rate at the low end, and a 70% at the high end, with it being around 50% in the middle.Of course Van Parijs, being a European, did seem to acknowledge that implementing the idea in Europe would lead to higher taxes than the US due to the already generous welfare state there anyway. Still, he did seem to think it would lead to like a 55% tax rate here. I dont know what plan he wants to implement exactly, but I do know his idea is a UBI plan at 25% of GDP per capita, which would be $18k a year this year, or 19k if we go by the new 76k GDP per capita data. I only want $14,400 with this year's plan, likely to increase to $15,000 or $15,600 next year.
And then he basically considered, well, what if we did a partial UBI, which is basically what I would do. if we cant implement UBI in its full form, we should push it as far as we can and cap it at the highest sustainable amount. I would also recommend implementing a full UBI over time, say, 5-10 years or something. Say $3,000 year 1, $6,000 year 2, $9,000 year 3, $12,000 year 4, $15,000 year 5, with us adjusting to whatever ~$15k is now 5 years in the future for year 6, maybe $16-17k by then. Something like that. We implement minimum wage increases in the same way. if we were to implement a minimum wage increase from $7.25 to $15 overnight, it would be rather chaotic. Most plans I've seen to implement a $15 minimum wage phase it in over...say....5 years. Going in $1-3 increments a year. UBI should be done similarly. This would allow us to implement it slowly, observe the effects, and put the brakes on if something bad happens. We've already discussed this. but yeah, that is my solution, more or less, too.
Honestly? We don't really know. That's the problem. We won't know with UBI until we actually implement it. I'd say the actual data from studies doesnt seem to produce data suggesting a large scale labor withdrawal i would consider problematic, but actual studies are flawed. Econometrics, according to Van parijs, seems to predict a bigger labor participation drop among middle and higher income earners, but I think this is counter intuitive, makes little sense, and is based on simplistic econ 101 logic and ignores factors like elasticity/inelasticity. Yes, if the market is elastic, yeah, you could see more of a drop. If it's less elastic, I would expect the drop to be less. To put it simply, I would say higher earners are less of a "flight risk" so to speak than low earners. Even if UBI provides a nice income you can live on, work will always be rewarded with more income. And while we can argue reducing the overall rewards structure could lead to less work effort, I really do think there would be some inelasticity there.
Take, for example, my dad. My dad got full social security benefits at 66, and that amount was similar to what a UBI would be for all three of us. But he worked until 70. Why? Because he liked the money. He liked the nice christmases, the weekends out, the vacations, that working on top of getting his social security provided. It's possible an extra 18% taxes could have reduced that somewhat, but at the same time, I really dont think a lot of people would full on quit. A lot of people like the extra money.
Still, I do admit, we really don't know. We won't know until we implement it. We can do studies and make models all we want, but they will never be able to gauge what a full implementation will do. Studies have limiting factors and models are only as good as the assumptions. And reality is complex. So really, we need to get this implemented to see how it works. And it goes without saying, given its uncertain nature, yeah, we need to do it slowly. Implement it in over a period of years, start small and grow it over time. I dont think we should shy away from a "full basic income" or intentionally stifle our ambitions over this, but I do think that doing it slowly, over a period of years, would be better for the economy than just pushing it all at once and letting the pieces fall where they may. The former allows us to properly address issues as they arise, the latter can shock the economy leading to the idea failing and future discussion and implementations of it stigmatized.
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