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Do Andrew Yang’s Basic Income Ideas Make Sense? – Bob’s Economics – Medium

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I’m an economist. Let’s look at what Mr. Yang says.

Image: Yang’s official campaign website

Andrew Yang is running for President of the United States of America. The central plank of his campaign so far and probably the main reason he’s attracted as much attention as he has, is that he’s promising to implement a Basic Income system if he becomes president.

For anyone who doesn’t know; Basic Income is a regular, unconditional payment for all resident citizens, sufficient for them to live on. It should provide people with the money they need for necessities, regardless of their circumstances. Yang’s specific proposal is that “every American adult over the age of 18” will receive a Basic Income of $1,000 per month.

Now, I’m not going to retread here the general arguments about whether Basic Income is or isn’t a good idea. There are many other articles that deal with many of those issues. And if you’re looking for a brief overview of Basic Income, you might find this video helpful. This article, however, is about what Yang says.

I’m an economist and I accept that Basic Income has many potential benefits and that it is entirely possible (from an Economics perspective, at least) to have a very successful Basic Income system. But, a poorly implemented Basic Income system might not be successful. So, looking specifically at Andrew Yang’s Basic Income ideas, do they make sense to me, as an economist?

I’ve looked through Yang’s Basic Income Question and Answer section on his official campaign website and these are the things that particularly drew my attention:

(1) The most striking thing to me about Yang’s proposals, is that he doesn’t seem to have any plans for children to receive a Basic Income. But children have got to eat, just like the rest of us. Alternative Basic Income proposals do usually suggest children should be paid a lower amount than adults, but if children don’t get Basic Income at all, then the system can’t be relied upon to keep children out of poverty.

(2) $1000 a month per adult seems quite generous for a Basic Income — at least compared to most Basic Income proposals that I have read about. I’m not saying it’s too much or that it isn’t affordable, but it’s probably rather more than would normally be strictly necessary to pay for essentials, provided that it was combined with free healthcare. My expectation is that the first fully-implemented Basic Income system will involve a considerably lower Basic Income than Yang envisages. Then, when it is clear that Basic Income at that lower level will be affordable and won’t undermine work incentives, a more generous Basic Income might then be considered.

Of course, if you’re a single adult with four children to look after, $1000 a month doesn’t look generous at all — so we’re left to wondering why Yang is proposing such a generous Basic Income for adults, without making any provision for children.

(3) Under Yang’s proposals, “Current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally.” And to me, this seems odd, because some of the major benefits of having a Basic Income system stem from its simplicity. A simple Basic Income system would enable large savings to be made in terms of bureaucracy, for example. Allowing all existing welfare schemes to run in parallel with Basic Income, however, would produce an unnecessarily complicated, wasteful and expensive system. And by continuing to have means-tested welfare payments, we would be perpetuating some of the damaging disincentives to work and save that we have at the moment.

(4) Yang’s most prominent reason for believing a Basic Income system should be introduced, is the threat automation poses to jobs. I think the trouble here is that whilst automation clearly does threaten individual jobs, it is far from proven that it is likely to lead to increased unemployment across the whole economy. Yang’s website says that “the smartest people in the world now predict that a third of all working Americans will lose their job to automation in the next 12 years.” But that’s a little misleading, because, even if these people do lose their jobs to automation, this doesn’t mean they won’t be able to find new jobs.

It’s perfectly reasonable to say that automation often causes people to have to change jobs and that Basic Income will greatly help individuals as they transition between jobs. It’s reasonable to say that some people whose jobs are affected by automation end up being unemployed for a long time and that Basic Income can help them through this period and may even enable them to successfully retrain. It’s rather speculative, however, to suggest we are about to go through a major economic crisis caused by increased automation.

(5) Yang also makes some suspect claims about the impact Basic Income will have on ‘the economy.’ Basic Income may indeed boost the economy in many ways. Yang’s website, however, says: “Imagine a small town in Missouri with 5,000 qualifying residents. A $12,000 UBI would bring an extra $60 million of additional income into the community, most of which would be spent locally.” But really, it’s misleading to call it ‘additional’ income. The Basic Income money isn’t really ‘extra’ money. It’s money people will get instead of other welfare payments. And, under Yang’s proposals, some of it will have to be paid back as VAT.

(6) In broad terms, Yang is right about the potential benefits of Basic Income.

(7) Although I haven’t done a full quantitative analysis of the matter, Yang seems to have some reasonable proposals for how Basic Income could be paid for. He doesn’t mention that Basic Income will probably replace some tax allowances — although it very probably would.

(8) Yang doesn’t propose varying Basic Income levels to take account of varying housing costs. Instead he sees it as a good thing to have a more mobile workforce, with Basic Income enabling people to move to where they can better afford to live — potentially regenerating rundown areas in the process. I think he is right.

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