STUMP » Articles » The Stupid Idea That Will Not Die: Universal Basic Income Might Come to Chicago » 14 February 2019, 20:38

Where Stu & MP spout off about everything.

The Stupid Idea That Will Not Die: Universal Basic Income Might Come to Chicago  

by

14 February 2019, 20:38

Universal Basic Income Pilot In Chicago Takes Cues From California

A Chicago task force dedicated to studying economic inequality released on Thursday its recommendation to explore a guaranteed income pilot and expand the Earned Income Tax Credit.

The recommendations were included in a 50-page report filled with data about stagnant wages and growing income inequality and highlighting personal stories of Chicagoans struggling to make ends meet despite working multiple jobs and sticking to strict budgets. According to the task force, these proposals would put additional money in the pockets of low- and middle-income families to keep them above water financially.

Guaranteed income, often called universal basic income, is the concept of giving residents a no-strings-attached payment. In Chicago, the recently formed Chicago Resilient Families Task Force is recommending a trial to give 1,000 selected participants a $1,000 payment every month for a year and a half. In all, the pilot would cost $1 million a month or $18 million, in all.

The aim of the trial, to be paid for with philanthropic dollars, is to see if receiving a guaranteed amount every month would help struggling residents through “improved school attendance, an increase in savings, and improvements to health and well-being.”

The task force’s recommendations to change the Earned Income Tax Credit, or EITC, includes broadening eligibility for the credit, increasing the minimum credit, spreading out the payments over the year, and creating an automatic filing option. The EITC is a tax credit for low- and moderate-income workers.

Okay, interesting choices — those are a couple things that can be measured in those goals. They can definitely see if the kids go to school more regularly, and if there are any savings whatsoever. Health and well-being may be more iffy in measurement.

PROPOSAL DOCUMENT

The proposal is here. Let me grab some items from that proposal.

…What does the top 1% have to do with anything? The point here was to make sure people can live – food, shelter, etc. One doesn’t need a fancy home.

I seriously do not care about the top percentiles. How have the bottom percentiles done? How well do they live? They’ve increased in real terms for wages… so…. this is a bad thing? (Also — I’ve been climbing in the percentiles myself as I’m entering my peak earning years. I used to be in the lowest quintile in grad school.)

Anyway, another item to address — They had some text about other UBI projects in the text.

ONTARIO BASIC INCOME PILOT

Ontario, Canada is home to the largest pilot in North America, in terms of number of participants and size of cash transfer. The provincial government committed to a three-year pilot of basic income for 4,000 Ontario adult residents beginning in 2018. Based on 75% of Canada’s National Low Income Measure, participants received approximately $1400/month for single households or $2000/month for couples, less 50% of earned income. According to the policymakers, this amount “would provide an income that will meet household costs and average health-related spending.” Some existing social benefits were swapped out dollar-for-dollar with the basic income transfer, while others—disability, child benefits, and healthcare— were left as-is. This program was messaged to Canadians as a potential additional benefit, which would accommodate those who are currently underserved by the existing social safety net and was framed as a benefit that would allow and encourage recipients to create better circumstances for themselves by investing in education, improved living conditions, and a host of other activities which boost human capital and overall health and well-being. The transfers are slated to end on March 25, 2019, but may run longer depending on court decisions.

Y COMBINATOR RESEARCH BASIC INCOME RESEARCH DEMONSTRATION

In the U.S., the largest basic income pilot announced to date is a privately funded and operated randomized controlled trial to be launched in multiple locations. Y Combinator Research is implementing this pilot and are currently testing and refining a pilot design that will eventually include 3,000 recipients (1,000 treatment, 2,000 control). The cash transfer of $1,000/month—enough to cover basic needs—will be given to participants for three to five years (control group participants will receive $50/month). Effects of the cash transfer are to be evaluated along eight parameters: time use, subjective well-being and objective health, financial health, time and risk preferences, political and social behaviors and attitudes, crime, effects on children, and spillover and network effects outside the household.

STOCKTON ECONOMIC EMPOWERMENT DEMONSTRATION (SEED)

California is home to the Stockton Economic Empowerment Demonstration, a publicly operated, privately funded pilot aimed to glean informative and compelling stories from the lives of the recipients as well as robust descriptive and correlational statistics which can complement the aforementioned stories. Beginning in 2019, disbursements of $500/month will go to 100 participants for 18 months. This study will also use a randomized control trial design, with a control group of 200. Though the amount is not considered enough to cover basic needs, it is aimed to alleviate poverty and income inequality by targeting residents of the city whose income is below the area median income level. This pilot has a strong community engagement component, working closely with established community organizations in Stockton to both inform and get feedback and input from Stockton residents.

MAGNOLIA MOTHERS TRUST

Jackson, Mississippi is home to a small, privately funded basic income program launched in December 2018 called Magnolia Mothers. This one-year pilot will provide $1,000/month to 15 black mothers in Jackson. One of the goals of this small pilot is to develop of proof of concept, that, if successful, will develop into a three-year pilot and study of 100 Jackson, MI families. The program seeks to address head on the racial and gender-based elements of poverty by targeting black mothers and providing them with a range of voluntary support services in additional to the unconditional cash transfer.

So, I noticed one place was missing on that list: Finland.

I wrote about Finland’s UBI experiment here: February 2018: Friday Foolery: Stockton Tries Universal Basic Income… Maybe and August 2018: Chicago Stupidity: Universal Basic Income, Pension Obligation Bonds, and Divestment.

From that second one:

By the way, Hemel says Chicago would be the second U.S. city to try this (and first major city in the U.S.) — and he has to qualify it that way because UBI has been tried elsewhere. It’s in the dang Wiki article, after all.

Let’s check on a few, eh?

Finland tried it. Here’s what happened:

“Finland paid unemployed people a basic income of $685 every month. It didn’t work out – for now

“Finland’s basic income program that drew international attention is coming to an end, the Finnish government announced Tuesday. [24 April 2018]”

We just had more recent news about the Finland UBI experiment.

Finland basic income trial left people ‘happier but jobless’

Giving jobless people in Finland a basic income for two years did not lead them to find work, researchers said.

From January 2017 until December 2018, 2,000 unemployed Finns got a monthly flat payment of €560 (£490; $634).

The aim was to see if a guaranteed safety net would help people find jobs, and support them if they had to take insecure gig economy work.

While employment levels did not improve, participants said they felt happier and less stressed.

When it launched the pilot scheme back in 2017, Finland became the first European country to test out the idea of an unconditional basic income. It was run by the Social Insurance Institution (Kela), a Finnish government agency, and involved 2,000 randomly-selected people on unemployment benefits.

It immediately attracted international interest – but these results have now raised questions about the effectiveness of such schemes.

Depends on how you define “effective”.

If it means the people who get goodies for free will vote for the politicians giving them free goodies… that may be effective for the politicians.

So, did it work?
That depends what you mean by ‘work’.

Did it help unemployed people in Finland find jobs, as the centre-right Finnish government had hoped? No, not really.

Mr Simanainen says that while some individuals found work, they were no more likely to do so than a control group of people who weren’t given the money. They are still trying to work out exactly why this is, for the final report that will be published in 2020.

So…. people who aren’t given money find work? Does that really need explaining?

But for many people, the original goal of getting people into work was flawed to begin with. If instead the aim were to make people generally happier, the scheme would have been considered a triumph.

One participant, former newspaper editor Tuomas, pretty much summed this up when he told BBC News about how the basic income had affected him.

“I am still without a job,” he explained. “I can’t say that the basic income has changed a lot in my life. OK, psychologically yes, but financially – not so much.”

I don’t even see the logic behind “give people money, no strings attached, and they’ll seek out jobs”. If you didn’t give them the money… what do you think they would do?

Ok, that was the BBC. Let’s try CNN.

Free Money for Everyone Sounds Great, But Finland Proves Basic Income is a Bust

Finland implemented a universal basic income program on a trial basis to help its low-income citizens. Simply put, they received money from the government, whether or not they had a job or even wanted to work.

Adopted in 2017, early results released this week indicate that the downsides outweigh any economic benefits.

Participants received monthly payments equal to $634 from January 2017 through December 2018. Officials wanted to see if the payments could be a safety net for those looking for work. For those who needed work to tide them over until they found higher-paying jobs, these payments were thought to be of help.

Finland’s foray into providing free money cost the government about $22.7 million. The expected positive effect on the country’s employment rate didn’t materialize.

The early results showed that while employment levels did not improve, participants said they felt happier and less stressed. Unfortunately, the problem of getting people who’d lost their jobs back into the job market remains.

Seriously, guys. Do y’all know how unemployment insurance works in the U.S.?

I do wonder about people sometimes with their underpants gnomes ideas. It’s like people can’t even think through basic cause-effect and human behavioral patterns.

STOCKTON’S PROJECT

Back to the original article:

Nationwide, other cities have been experimenting with the idea of guaranteed or universal basic income for its residents, and Chicago’s task force looked to leadership in places like Ontario, Canada; Jackson, Mississippi; and Stockton, California to form its own pilot.

The Stockton pilot may be of keen interest since it’s set to kick off this month. Starting Feb. 15, 100 Stockton residents will receive $500 payments every month for 18 months.

The leader championing that effort, Stockton Mayor Michael Tubbs, said that as the son of a single mother, he knows the struggles of low-income families all too well.

“My mom … worked incredibly hard,” Tubbs said. “No matter how hard she worked, it was still hard at the end of the month to pay bills. So I would watch her [go to] the check cashing places, or watch her lose sleep, or watch her borrow from Peter to pay Paul all the time.”

Funding for Stockton’s pilot program and Chicago’s Resilient Families Task Force comes from the Economic Security Project. Chris Hughes, one of the organization’s co-chairs and a co-founder of Facebook, said the cities have two things in common: They have problems that reflect greater issues happening nationwide and they have leaders seeking innovative ways to solve them.

….
Others, like Deanna Grant, argue that there should be more to giving residents money — like requirements on how it’s spent or mandated education. Grant, who has specialized in tax accounting for 20 years, said reimagining EITC or giving other kinds of monthly disbursements are in vain without proper financial education on how to be a good steward of money.

“Whether you give it to (people) annually or monthly, it won’t matter,” Grant said.

Currently, neither the Stockton pilot nor the recommendation for a Chicago pilot include any requirements or additional services to those included in the study.

I don’t mind nonprofits running these things, but I do mind that they will ignore results of failed projects… and then ask the government to implement them.

HOW HIGH THE INCOME?

This was a very useful graph from the Chicago project proposal:

Note all those asterisked items… there are no footnotes for them (this probably came out of a serious research document without all the fancy formatting, but with all the footnotes). Some of them, I have no clue, but I do know the Alaska one is referring to the Alaska Permanent Fund. It’s been running since 1982, so they’ve got more than 25 years of experience there… and it’s not really a UBI situation anyway. I don’t think that’s why it was instituted (I assumed it was a way to hang onto population — people would probably like to leave ASAP, and this is a good way to entice them to stay) – also, the amount is really low.

Here’s the comment on the Wiki article:

A 2018 paper found that the Alaska Permanent Fund “dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent)… our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment.”28

Given how low the dividends paid are, I’m not surprised it has minimal employment effects.

My question: does it have effects on people sticking around?

OUT-OF-LABOR FORCE MEN DEEPLY UNHAPPY

So here’s the deal: throwing money at people who feel like their lives have no meaning is not going to make them feel a hell of a lot better:

An important driver of these inequalities is the decline in the status and wages of low-skilled labor at the same time that high-skilled workers have experienced increases. Relatedly, we have seen an increase in prime-age males (ages 25-54)—and, to a lesser extent, women—simply dropping out of the labor force: Fifteen percent have already dropped out and this number will likely increase to over 20 percent in the next few years. Yet despite their increasing numbers, these individuals fall out of the calculation of unemployment rate when they stop looking for work.

Meanwhile, U.S. life expectancy is falling due to suicides and drug and alcohol overdose (“deaths of despair”), primarily among less-than-college-educated whites in their middle-aged years. Out of the labor force (OLF) males are more likely than the average to be opioid users and on the disability rolls, as well as victim to deaths of despair. Our markers of well-being—and in particular the absence of hope—match the patterns in these deaths. Poor and working-class whites report much less hope for the future and more stress than do poor African Americans and Hispanics, even though the latter face higher objective disadvantages. And the same places that have higher levels of these kinds of deaths have lower average levels of well-being along the same dimensions.

…..
Another part of the narrative of white working class—strong marriages and religiosity—has also suffered. Marriage rates and civic and religious participation have fallen more for the working class relative to the college educated since the 1970s, in part related to labor force dropout. Trends in optimism for less-than-college-educated males also began to fall relative to women and African Americans during the same period, an early precursor to the trends in premature mortality. As a parallel to these trends, belief in the American dream and in the rewards to higher education fell at the same time that it remained strong for African Americans and Hispanics.

There is much more to learn about these worrisome declines in labor force participation and the associated ill-being that comes with them. While the problem is starkest among U.S. prime-age males, all four of these regions will continue to face the challenges that technology-driven growth poses for low-skilled workers. There are some lessons about the kinds of policies that can encourage the participation of low-skilled workers in the new global economy from economic renovations in some small cities in the U.S. heartland. There is also a growing literature based on interventions that enhance the well-being of those who can no longer work via new opportunities for community involvement and other forms of activities to prevent social isolation. More generally, our findings suggest a broader need to re-think our models of growth and indicators of progress.

I have talked about mortality trends before… and I’ll have more to talk about in the future.

But my main question is: what do you think Universal Basic Income is a fix for?

If it’s just to have basic needs satisfied, and not have people feel guilty about collecting welfare payments, perhaps that will work.

But it won’t actually improve the life of people who feel like they’re useless.

So.

Maybe think on that for a while.

A VIDEO

Because.

This time — Weird Al


Related Posts
Taxing Tuesday: Let's Soak the Rich...Hey, Where Are They Going?
Taxing Tuesday: Yadda yadda yadda
Taxing Tuesday: A Local Discussion on the SALT Cap, and Other State Options