October 29, 2016

Tyler Cowen on Universal Basic Income

When I disagree with Tyler Cowen, polymath genius and Niskanen Center advisory board member, I assume that I’m missing something. So I assume that I’m missing something in Tyler’s argument against a universal basic income (UBI) in his latest column at Bloomberg View.

Tyler is concerned, first of all, that a UBI “eventually would choke off immigration to the U.S.” because “[v]oters don’t like sending money to immigrants.” Tyler observes that poorer-to-richer country immigration has a greater humanitarian upside than domestic transfers. Therefore, even if a UBI left Americans better off overall, it could reduce global welfare relative to the status quo.

Second, Tyler worries that a UBI, which wouldn’t require recipients to work or to seek work, might damage our culture’s work ethic.  He admits that our current welfare system, which tends to tie eligibility to work, leaves a lot of holes in the safety net. But Tyler speculates “that this cultural and symbolic commitment to work might do greater humanitarian good than a transfer policy that is on the surface more generous.”

Last, Tyler doubts that a UBI addresses the “real problem,” which is, Tyler says, low prime-age male labor force participation. Thus, the challenge is to “make the work that’s available to [workforce dropouts] sufficiently rewarding, in cultural as well as economic terms.” Tyler doesn’t really know how to do that, but doubts a UBI would help.

Tyler’s argument is so interesting to me, a tentative advocate of a UBI, because it’s grounded in a globalist, cosmopolitan, humanitarian moral vision, which I share. Moreover, I think that arguments about a UBI’s likely effects on America’s immigration policy and work habits pose the biggest substantive intellectual challenges to the advisability of a UBI. However, the form that these arguments take in Tyler’s column is a little puzzling to me, and I don’t find myself persuaded by them.

I have some misgivings about the method by which Tyler comes to his conclusion that a UBI “would do more harm than good.” It seems that he’s holding the status quo constant, adding a UBI, and then imagining what might happen. But isn’t this a confusing way to proceed? A world in which a UBI were politically feasible would be different in many other ways.

For example, the fact that “voters don’t like sending money to immigrants” is a reason we’re unlikely to get a UBI in the first place. The alternate reality in which the United States does have a UBI is one in which Americans aren’t so annoyed about sending money to immigrants. At the very least, it’s a world in which they aren’t so worried that it’s going to happen. In that world, the influence of a UBI on the public’s openness to immigration isn’t so clear. So the force of Tyler’s argument here is a bit obscure.

What else would need to be different for a UBI to work? I don’t think a UBI would make sense with our current tax system. The revenue required to finance a UBI would likely require shifting away from income taxes toward some sort of national sales tax or value-added tax. (Which is a good idea anyway.) One effect of basing our fiscal system more heavily on consumption taxes is that resident non-citizens, who wouldn’t be eligible for basic income transfers, wouldn’t be able to avoid paying into the system and helping to finance the UBI. Wouldn’t that make immigrants more popular?

The humanitarian benefits of poorer-to-richer country immigration flow from residency and work, not from citizenship. If UBI eligibility is triggered by citizenship, you might expect voters in UBI America to support measures that would make it harder for immigrants likely to become net fiscal recipients to obtain citizenship. That might mean orienting immigration policy away from family unification, or reconsidering birthright citizenship. But there would be no real incentive to keep immigrants out.

If we’re financing the UBI with a consumption tax, non-citizen immigrants won’t have a choice but to pay more in than they take out of the system, because they’re going to need to buy stuff, and that means they’re paying taxes like everybody else. In any case, there would be every incentive to extend the prospect of citizenship to immigrants most likely to become net fiscal contributors. Canada’s socialized health-care system hasn’t led Canada to a restrictive immigration policy. On the contrary, it has led to a very liberal immigration policy that focuses on inviting economically valuable high-skilled foreigners to become Canadians.

Canada isn’t contiguous with, and economically dependent on labor from, a huge, middle-income country. So it will never make sense for the U.S. to simply adopt Canada’s high-skilled-focused immigration policy, as some conservatives would like to do. We’re going to continue to need, and to continue to have, a good deal of lower-skilled immigration from Mexico and Central America. Like Tyler, I think this is a grand thing from both a humanitarian and cultural perspective. But it’s not clear to me that a UBI mainly financed through consumption taxes would make Americans less open to the presence of people who pay into but don’t benefit from the system. Won’t voters who “don’t like sending money to immigrants” like immigrants sending money to them?

More generally, it’s not clear to me that a UBI wouldn’t contribute to a more immigrant-friendly political climate. When economic insecurity is high, we’re more likely to see the economy as a zero-sum competition over resources. When we assume we’re in a state of zero-sum conflict, we tend to be hostile to immigration and trade. A robust safety net that effectively takes the edge off economic insecurity puts us in a more positive-sum frame of mind, which leaves us feeling sunnier about immigration. So, by contributing to a more stable and widespread sense of economic security, and eliciting a more cooperative attitude, a UBI would increase openness to immigration. Therefore, we needn’t worry that a UBI would buy increased American welfare at the expense of global welfare.

That may seem a little pat, but if we’re talking about a version of the U.S. in which a UBI is a done deal, I think my story is as at least as plausible as Tyler’s backlash story. Again, I suspect that a country in which policymakers react to a UBI in the way Tyler predicts is a country that would never have had a UBI. And maybe a UBI’s not feasible due to this sort of insider-outsider mindset, and we’ll all stop talking about it sooner or later because we’ll come to agree that it’s too politically fanciful to seriously consider. But political infeasibility is an argument against trying to have a UBI, or against trying to have one now, not an argument about what the consequences of a UBI would be in a country that actually voted one in.

Regarding work and the American work ethic, I sense an odd tension between Tyler’s second and third concerns. If work requirements have such great symbolic value in propping up our culture’s commitment to work, then why have so many men dropped out of the labor market? If welfare policy that “puts work first” corresponds with a troubling increase in working-age men simply giving up on work, then you might be tempted to conclude that it’s not, um … working.

It’s telling that Tyler chose to praise work requirements for their cultural value, rather than for their value in alleviating poverty by moving people off public assistance and into work. This suggests that he recognizes that they actually have little directly work-promoting, poverty-alleviating value. Indeed, the channel through which Tyler depicts work requirements doing their cultural work is quite surprising. If I understand him correctly, Tyler thinks that our work-centric welfare policy somehow attracts inventive, hard-working immigrants (“Work requirements for public assistance? Yes, this is the place for us, Vishal!”) and their presence here shapes America’s culture and economy in a way that sustains the U.S. “as the major source of innovation for the world”—a matter of momentous humanitarian importance.

This is a boldly inventive way to make lemonade out of the lemon of current American welfare policy, but I find it hard to credit. Tyler does not exactly say that an American UBI would threaten global well-being by leading the really good immigrants to choose to move elsewhere, knee-capping American and therefore world innovation and growth, but I do think he implies it. I don’t, however, understand how this line of reasoning works.

Are we meant to imagine that the UBI will lead to blowback against immigration so harsh that the U.S. is no longer issuing visas to the skilled immigrants who keep us on the bleeding edge of innovation? (Or is this argument wholly separate from the immigration blowback concern?) That seems unlikely, for the reasons I noted above. Perhaps the idea is that an American UBI, not being contingent on work or work-seeking, will signal to the really good immigrants that the U.S. isn’t a place for strivers. (“Sure, Google will pay you $100,000. But have you seen America’s unconditional basic income policy, Vishal? Is this a place where we can really get ahead?”) If that’s the problem, we’d better hope go-getting prospective immigrants aren’t checking our workforce participation and Social Security disability rates!

Whatever Tyler’s fuller argument about the symbolic value of work-contingent welfare transfers, it’s very interesting that he thinks that their invigorating effect on the American work ethic works, somehow, through immigration, rather than through the attitudes and behavior of America’s native stock. Indeed, Tyler thinks the real problem is that so many of America’s native sons won’t even look for a job.

Whatever we’re doing culturally to elevate the status of work, it’s not getting through to all those proud and shiftless American guys who’d rather not work at all than have to work as nurses or store clerks or call-center drones. This is the nut Tyler wants us to crack. It seems to me that Tyler recognizes that our symbolic commitment to work hasn’t done anything to crack it. And I don’t think he give us any reason to think doubling down on this commitment will start to crack it.

“I worry,” Tyler says, “that permanent subsidies for those who don’t work wouldn’t lead toward solutions.” But would it make the problem worse? Tyler doesn’t say it would, but he worries it would. I worry about this a lot, too.

No doubt some people would use a UBI to subsidize a preference for indolence. However, on the whole, I think a guaranteed minimum income would lead toward the solutions Tyler seeks. I think it would promote work, and a culture of work. But this is a complicated argument, and requires its own post.