☆ UBI is really just a sugar high
Local political commentator Denise Kalm digs into Mountain View's upcoming University Basic Income (UBI) plan, and finds (not surprisingly) that previous cities' experiments give users a near-term pop but zero long-term improvement. An Opp Now exclusive.
Abstract: Guaranteed or basic income program pilots have sprouted out across the county, offering a relatively small, monthly income for the poor, but for a limited period of time. While politicians cite how good it makes them feel to help, you have to ask—does it really help the low-income community? Does it work? Studies have been carefully done, and the results are in. This article speaks to what would work better.
Mountain View, a reasonably pricey place to live, is trying out a guaranteed income program (GIP) for those residents who are struggling with affordability issues. They plan to send a check for $500 every month for two years to low-income families. It will cost about $2.57MM, which is mostly derived from federal American Rescue funds. A surprising $570K will go to administration; and since most communities have welfare/support personnel already, it is hard to understand this expense.
With Silicon Valley a close-by employer, it isn’t surprising to learn that the median income is $144,000. Low-income people get a minimum wage of $17.10/hour. This group, if they have children or are caregivers, can apply for this tax-free allotment. The idea was that as each family has different needs, the organizers didn’t want the money to be tied to any particular cost; but yet, when people spend as they like, their choices may help their families, or hurt them.
The goal is to “lift families out of poverty.” Let’s analyze this, as a scientist would. Is $500 significant to these families? For those unable to afford food, it will help—but only as long as they get the money, and as long as it is spent to feed (and possibly house) their family. But we don’t know how they would spend it. And, more importantly, how does it change their situation in the future? “What we’re hoping to see is that it provides just enough space, enough breathing room, for folks to complete training, to get certified, or get the education or credentialing they need to move upward economically, to get a better job and also to stabilize their family,” Ramirez told San José Spotlight.
While it may feel good to “help,” a temporary fix with nothing else in the mix doesn’t change the reality of these people. In what way does $500 incentivize anyone to start a training program, acquire skills, or otherwise position themselves to get a better job? It simply is a feel-good policy for politicians who don’t understand the challenges poor people have to better themselves. One person gets it. Marroquín said it might be “wishful thinking” to expect $500 per month to be enough to allow people earning very low incomes to go back to school or drastically improve their careers in just two years’ time. “I don’t think it’s going to make a lot of difference for people who can barely eat and barely live in this area,” she said.
Real-World Studies
Anyone studying a hypothesis knows to consult the literature. Has anyone else tried to do the same thing? What were the results? Is there enough data to support or refute the hypothesis? This is how science is supposed to work, but it isn’t how politics usually works.
However, 19 counties in Texas and Illinois tested a Universal Basic Income (UBI—same as guaranteed income) program that provided an unconditional $1,000 check every month for three years to a group of lottery-selected individuals. All were between the ages of 21 and 40 and had incomes below 300 percent of the poverty level. Seems like a good population for these 19 studies.
The results were pretty clear. One: this program, if applied more generally, would cost about $1.1 TT/year. And the result shows that while it temporarily elevates people, it doesn’t translate to a long-term gain for them personally. They simply stay on the dole; it doesn’t change things except to make them more dependent on the government. Some politicians like this; it makes it easier for them to get re-elected. But is that a good reason to support programs like this?
The results are as follows, which should introduce a cautionary approach to anyone thinking this is a good idea:
The program caused people to work and earn less. Studies showed that people worked on average 4–5% less, rather than stepping up their game. In fact, as the study proceeded, people worked even less as time went on. Excluding the money the government provided, they ended up with an average of $2,500 less than before.
While they worked less, they pursued more leisure activities rather than finding educational opportunities, better jobs, or even more time caring for family. One might hope children would benefit somewhat here, but it doesn’t appear to be true.
Lengths of time spent unemployed were not reduced, nor did the quality of the jobs improve. On average, people on the program were unemployed 1.1 months more than the control group.
One big hope was a change in food insecurity, but even that didn’t happen. Initially, people seemed to be doing better, but this was short-lived compared to the controls.
After beginning to receive the money, the recipients began to complain of more disabilities limiting the kind and amount of work they could do. It appears that the additional money made them feel they could “game” the system, rather than move up through work.
Healthcare improvements were another goal, but recipients were no more likely to opt for preventive care than before, nor did they report any difference in being able to access or pay for care. This is probably due to doctors/hospitals treating people regardless of their income.
Another goal was mental health improvements. The studies showed no improvement in this area after the first year, where some slight improvement was noticed. It isn’t too surprising; people get used to an increase in income very quickly.
Most notable was the finding that personal finances showed no improvement. Instead, participants simply increased their debt and spending.
What Does Work
Point 8 really goes to the root of the problem with the vast majority of poor people. They’ve never learned any aspect of financial literacy. You can’t blame them. Who is teaching them to save? Who tells them that credit cards are dangerous? Who shows them how to shop for affordable, nutritious food? Meanwhile, taxpayers who work hard and are trying to save for their kids’ college, emergencies, and retirement are hurt by this outlay of money with such poor outcomes.
Some of this money could better be used to offer education and support to get people to be able to compete for better jobs. To understand how and why to budget. To be able to go for low-pay or free internships and apprenticeships with a goal of moving up the ladder. Right now, you can “volunteer” only for 501-C charities (or the government). That’s crazy. And every child should get a good grounding in financial facts in school. That’s far more important than a lot of subjects mandated. Reading, writing, arithmetic and money management. With these in hand, anyone could self-educate on other subjects of interest to them. Almost any subject could offer financial information. Math, certainly, but history is rife with topics of money mismanagement. English has stories of the poor who successfully achieved success with an understanding of money.
Too many who support these programs talk about how they help people with self-respect and dignity, but being long-term dependent on the government doesn’t really help with either value. Instead, people who find they can now provide for their families obtain earned self-respect and dignity. No one but the extremely disabled should be “on the dole” for their lifetime. And many people who even have substantial limitations have found productive work lifting them up and keeping them free of government intrusion.
Why shouldn’t we try something new, instead of a provably “feel-good” project for politicians? Long-term guaranteed income isn’t affordable, isn’t fair to hard-working people, and is demeaning and destructive to those it purports to serve.
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