1. BS Jobs: If you pay everybody a Basic Income, you don't have to pretend that it's a fair day's pay for a fair day's work. Even less do you have to pretend that it's a necessary incentive to earn the qualifications for the job. You can admit that it's a transfer payment, and make it appropriately modest. The same can't be said for the remuneration of a BS job, especially as it usually pays better than a real job. Through BS jobs, we pay for a Basic Income and get taskmasters and goons.
2. Minimum wages: But how “modest” should the BI be? The most basic of Basic Incomes is an unemployment benefit stripped of its earned-income test, so that it becomes payable to jobseekers and workers alike. With that definition, consider what it takes to achieve another “most basic” goal: paying workers enough to live on. If you have a BI but not a minimum legal wage, you set the BI so that the BI plus the minimum market wage is enough to live on. As this wage is decided by the market, it will not price anyone out of a job (and the argument that low wages cause unemployment by suppressing demand, whatever its merits, is not applicable here, because wages are supplemented by the BI). If, on the contrary, you have no BI, and try to raise the minimum wage so that this alone is enough to live on, you throw people out of work (and the argument that higher wages create demand is likewise not applicable, because dumping the BI offsets the higher minimum wage; the basis of comparison is that the sum of the two is the same). This loss of jobs is a net loss to the economy. It's the true macro cost, or deadweight cost, of having a minimum wage instead of a BI. Through minimum wages, we pay for a Basic Income without getting the benefit.
Moreover, if a BI creates jobs by lowering the cost of hiring, not all of those jobs will be BS. Some of them will be productive, in which case they will help to pay for the BI.
3. Income-tested welfare: An income-tested unemployment benefit is equivalent to a non –income-tested unemployment benefit (minimal BI) plus a tax at the same rate(s) on the same base as the income test. You can't do anything with income testing that you can't do with income taxation, except hide the ridiculously high Effective Marginal Tax Rates (EMTRs) in the income range over which the benefit is withdrawn. Through income testing, we pay for a Basic Income while pretending not to.
Wherever there is an income tax, the EMTRs faced by precariously-employed workers, due to the combination of income taxation and withdrawal of benefits, tend to be much higher than the marginal rate paid by the highest earners. If income testing were reclassified as taxation, so that the EMTRs became the official rates, public opinion would demand that the rates be smoothed in a revenue-neutral manner, in order to reduce the disincentives caused by high rates at low income levels. The loss of production due to the higher disincentive (relative to the lower) is the true macro cost of income testing.
But let's be clear about how the disincentive works. If the minimum wage compensates workers for the effect of income testing, it discourages hiring. If not, the demand for employers' products suffers. One way or the other, the disincentive to work becomes a disincentive to hire, which is the true proximate cause of the ensuing unemployment. If workers need a certain income to pay their bills, they need to go for it even if it's only slightly higher than the unemployment benefit. It's harder for workers to respond to a disincentive to work than for employers to respond to a disincentive to hire.
4. Land speculation: This one is different; its cost is limited only by how much we have to lose. BS jobs need some excuse for their existence. Minimum wages are political decisions subject to political push-back. Even if the severity of an income test flies under the political radar, the size of the income-tested benefit is subject to political and fiscal constraints. But the price of land rises until the rest of the economy is bled white.
To get a job, you need to live on residential land within reach of employers. To run a business, you need to use land within reach of the necessary workers, suppliers, and customers. But you can't produce land; you must rent it or buy it from an incumbent owner, and you must compete with other prospective tenants or buyers in order to do so, while the incumbent owners automatically constitute a cartel even if they make no effort to organize one. Winston Churchill put it this way:
If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or a new tramway, or the institution of an improved service of workmen's trains, or a lowering of fares, or a new invention, or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there.
Some years ago in London there was a toll-bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings appealed to the public conscience: an agitation was set on foot, municipal authorities were roused, and at the cost of the ratepayers the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week. Within a very short period from that time the rents on the south side of the river were found to have advanced by about sixpence a week, or the amount of the toll which had been remitted.
You can update those examples. Why did the second household income not solve the housing problem? Because it was competed away in higher rents and “house prices” (more precisely, the land or space component of “house prices”). Why did delaying parenthood not solve the problem? Because the savings and additional income were likewise competed away. Why did assistance for renters, and grants and tax breaks for home-buyers, not solve the problem? Because they were competed away. In general, any optional thing you do to ease your housing situation is on its way to being compulsory, because as soon as it becomes prevalent, the “market” prices it in: if you don't do it, you won't be competitive.
Land ownership is a Ponzi scheme in the sense that when you join the game, you pay for all the unearned “capital gains” previously made on the land that you buy. And you compete for the privilege! But it differs from a simple Ponzi scheme in three ways:
- Your ability to cash in your winnings is constrained by your continuing need for a place to live;
- Large shares of the winnings, including rents and accumulating “capital gains”, are creamed off by moneylenders under the guise of the interest margin; and
- Other outsiders, namely renters, pay into the scheme without sharing in the winnings—and again compete for the privilege.
Why am I saying all this in an article that's supposed to be about Basic Income? Because unless something is done about the intensity of competition for land, the benefits of any Basic Income will likewise be competed away in higher rents and land prices. To avoid this, land must be made a hot potato for unproductive owners: the tax system must make it prohibitively expensive to own residential land without housing people on it, and prohibitively expensive to own commercial/industrial land without employing people on it. When the demand for land for purely speculative purposes is eliminated, those who need access to land for productive purposes will be able to get it more cheaply (relative to their capacity to pay, which of course increases as production increases).
Conclusion: The grammar police will have wondered whether my title means four things that we already pay for, or a less expensive Basic Income that we already pay for. Now they know it means both. Three of those four things would no longer be needed if we had a Basic Income. The fourth would have to be curtailed in preparation for a Basic Income. Those who say we can't afford a Basic Income need to explain how we can afford the status quo.
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[This article can be considered the third of a series, of which the first and second installments were “An OFF-BUDGET Universal Basic Income” and “How a Basic Income CREATES JOBS”.]
