It’s the wet dream of every student socialist and Bernie Bros: free money!
According to the proponents of Universal Basic Income, if the state simply hands over a monthly cheque, no questions asked, poverty will be eliminated! Where will the money come from, you ask? Why, silly, the taxes people pay on the money the government gives them. Duh!
The only thing that could be said in favour of a UBI is that – in theory, at least – it does away with most of the tax-hoovering infrastructure and inefficiencies of the welfare state.
On the other hand, it’s clearly ruinously expensive and, at best, seems to simply wash government money in a magical, monetary perpetual motion machine. Besides that, it doesn’t take much imagination to see what will happen if you give everyone free money: big-screen TV and game console sales will boom, while the rest of the economy goes to pot (probably literally).
In fact, that’s pretty much what happened when Finland tried it. Recipients happily sat at home and did nothing.
But, since when has failure of their pet theories ever worried a socialist? It’ll work next time, don’t worry!
Another widely cited study looks at income paid each year from the Alaska Permanent Fund. The economists estimate the payments haven’t caused Alaskans to decrease work and may even encourage beneficiaries to do more part-time work.
But the permanent fund isn’t true UBI either because payments are based on the state’s oil revenues and thus vary significantly year to year. So the permanent-fund payments actually increases Alaskans’ income risk, which is the opposite of what UBI is supposed to do.
A new study is examining exactly what happens when people suddenly get their claws on a pot of free money.
The economists reviewed lottery winners over a five-year period. Lottery winners are a good test for UBI because lottery winnings are large enough that the income they generate can be life-changing. The economists estimate the average winnings are equivalent to an extra $7,800 a year, similar to UBI proposals. Lottery winners are also chosen at random, which makes for a good experiment.
So do lottery winners suddenly, as UBI enthusiasts claim, become wealthy entrepreneurs and innovators, generating a cascading effect of enterprise? Or do they just blow the lot?
Guess. Go on, guess.
Contrary to unlocking creativity, motivation and entrepreneurship, the economists estimate lottery winners are unlikely to start a successful business. They also estimate that winners worked less and were more likely to change jobs to one paying a lower wage.
The economists also observed many winners moved soon after the lottery, usually to a more rural area. But few moved to a higher-quality neighborhood, in terms of college attainment of neighbors, average income and other metrics that are a proxy for opportunities available to them or their children. There was one positive effect: lottery winners are more likely to marry and less prone to divorce.
Still, living in the country is the dream for many people, surely? But there’s a reason young people have traditionally migrated from the country to the city, only returning (if ever) once they’d cleared most of the life hurdles and were ready to settle down.
Working less at a less-demanding job often means you forgo learning new skills and wage increases.
This may not be a big deal for people in middle age. But it can leave young people who are still establishing their careers and acquiring skills much worse off. Most wage increases occur in your 20s and 30s, and if you miss out on those years, odds are you won’t catch up.
Not only that, there’s a lot of truth in the old wisdom that “there’s only three generations from shit to shit”. The second generation, used to a life of ease guaranteed by their parents who founded the family fortune, too often leave sod-all for the grandchildren. Windfall winners cut the cycle even shorter.
Many lottery winners think the windfall will set them up for life, but they end up filing for bankruptcy and are then prone to depression and bad health (which is why you should always take the annuity option).
Japan Times
Another current obsession with the left is “reparations”. Supposedly, paying a bunch of people a whole lotta money for the wrongs inflicted generations ago will “fix” the economic disparities between, say, blacks and whites.
In some cases, where the wrong is clear and present – such as still-living Aboriginal rural workers and their children, whose wages were kept from them – compensation is obviously justified.
But experience suggests that handing out “compo” without question does nothing to fix economic hardship. Tasmania, for instance, handed out compensation for “stolen generations” claimants, up to tens of thousands of dollars each.
Over a decade later, where has it all gone?
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