UBI FOR THE USA?

Welfare policy in the United States (and in most other rich countries) also needs a reset. There are too many angry people who feel that for too long things have not been going their way.

If voters are persuaded government is on the right track, they may be less resistant to paying the increase in taxes necessary to fund it. According to a Pew Research Center study,⁴⁷ 61 percent of Americans are in favor of a government policy offering all Americans a guaranteed income that would meet their basic needs in case robots become capable of doing most human jobs. Among Democrats, 77 percent are in favor. Among Republicans, 38 percent are in favor. Sixty-five percent of Democrats (but only 30 percent of Republicans) say the government has a responsibility to help displaced workers, even if it involves raising taxes. Given this level of support and the fact that the United States is undertaxed by global standards, one can imagine taxes going up from 26 percent to 31.2 percent of GDP. This would allow every American to get $3,000 per year.⁴⁸ For a family of four, this would be $12,000 per year, half the poverty line. It is not a fortune, but is a significant amount of money for anyone in the poorest third. If it is financed by a tax on capital, and the share of capital in the economy grows because of automation, UBI could become more generous over time. In Europe, there is less space for taxes to be raised, but a whole range of social transfers (housing, income support, etc.) could be collapsed into a single payment with few restrictions on how it could be spent. This is in effect what was tried out in Finland in 2017 and 2018, where 2,000 unemployed workers were randomized to get a UBI replacing all traditional assistance programs (housing, employment assistance, etc.).

But would a UBI really make the left-behind people feel that much less angry? Many proponents of UBI, but not the poor, seem to see it as a way to buy off those who will be made unproductive by the new economy and won’t be able to find work. If they had the UBI, they would be content to stop looking for work and do something else instead. But everything we know so far seems to say this is very unlikely. We asked those who responded to our survey this question: “Do you think that if there was a universal basic income of $13,000 a year (with no strings attached) you would stop working or stop looking for work?” Eighty-seven percent said they would not.⁵⁰ All the evidence scattered through this book suggests most people actually want to work, not just because they need the money; work brings with it a sense of purpose, belonging, and dignity.

In 2015, the Rand Corporation conducted an in-depth survey of the working conditions of about three thousand Americans.⁵¹ Those surveyed were asked how often their work provides them with the following: “satisfaction of work well done,” “feeling of doing useful work,” “sense of personal accomplishment,” “opportunity to make positive impact on community/society,” “opportunities to fully use talents,” and “goals to aspire to.” They found four out of five US workers reported their job provides at least one of these sources of meaning always or most of the time.

Around the same time, the Pew Research Center collected data on Americans’ satisfaction with their job and asked respondents whether they felt their job gave them a sense of identity.⁵² About half (51 percent) of employed Americans said they got a sense of identity from their job, while the other half (47 percent) said their job is just what they do for a living.

It is not entirely clear how the numbers from these two studies fit together, but there is no question many people care about having a job in a way that goes beyond just getting paid. However, it is the workers with more education and those who earn more who tend to see their job as part of their identity; only 37 percent of those who make $30,000 per year or less report getting a sense of identity from their job. There are also some significant differences by industry. For example, 62 percent of adults working in the healthcare industry and 70 percent of those working in education say they get a sense of identity from their job, compared with 42 percent of people working in hospitality and 36 percent in retail or wholesale trade.

People think in terms of good jobs and bad jobs, or at least meaningful jobs and less meaningful jobs. Better-paid jobs are on average better jobs, but what you do matters as well. People may resist having to move from the job they love to a job they perceive as worthless, even if their income would be more or less unchanged. And, in fact, people do not really land on their feet when they lose a job they have had for many years. Many studies have found that, on average, displaced workers never fully recover in terms of earnings after a mass layoff. On average, the jobs they find are less well paid, less stable, and do not have the same benefits.⁵³

This is probably partly related to the fact, which we discussed in chapter 2, that labor markets are a lot about finding the right match between employers and employees; finding an employer who trusts and values you and whom you trust and value is a matter of luck. Once you find one, it is natural to try to stay, leading to a more stable and rewarding career, both economically and otherwise. Once you lose that connection, it is hard to reestablish it, especially if you are older and set in your ways.

This explains something rather remarkable and frightening. A study found that when workers with long tenure get fired during mass layoffs, they are more likely to die in the years immediately afterward.⁵⁴ Losing a job seems to literally give people heart attacks.

Transitions are costly in ways most economic analysis ignores. As economists, we worry about the income loss and the time and effort involved in finding a new job, but the cost of losing the job itself appears nowhere in our models. It is probably no surprise that UBI, an idea economists instinctively gravitate toward, also ignores it. It imagines a world in which laid-off workers see themselves as freed from the obligation of working. Young retirees living off UBI find new meaning in their lives, working at home, volunteering in their communities, taking up crafts, or exploring the world. Unfortunately, evidence suggests that it is actually difficult for people to find meaning outside the structure of their work. Since the start of the American Time Use Survey (ATUS) in the 1960s, time spent on leisure activities has increased quite a bit, both for men and women.⁵⁵ For young men, a sizeable part of this time, since 2004, has been devoted to video games.⁵⁶ For all the other groups, the bulk of this time has been absorbed by watching television. In 2017, men spent on average five and a half hours per day on leisure activities (including browsing the internet, watching TV, socializing, and volunteering), and women five hours. Watching TV was the leisure activity occupying the most time (2.8 hours per day). Socializing outside the home came a distant second at thirty-eight minutes.⁵⁷ During the Great Recession, when time spent on work outside the home declined, television and sleep took up half the slack.⁵⁸

But apparently watching television and sleeping do not necessarily make us happy. Daniel Kahneman and Alan Krueger showed, using surveys where they asked people to reconstruct their day and how they felt about each moment, that among leisure activities, watching TV, using the computer, and napping gave the least immediate pleasure and the least sense of achievement.

It seems that it is very hard for people to individually figure out how to build meaning into their lives. Most of us need the discipline provided by a structured work environment, to which we then add significance or meaning. This is something that comes up when individuals worry about automation. In the Pew Research Center survey, 64 percent of respondents said they expect people will have a hard time finding things to do with their lives if forced to compete with advanced robots and computers for jobs.⁶⁰ Indeed, people who have more time on their hands (retirees, the unemployed, those outside the labor force) are if anything less likely to volunteer than those employed full time.⁶¹ Volunteering is something we do on top of our regular activities, not instead of them.

In other words, if we are right that the real crisis in rich countries is that many people who used to think of themselves as the middle class have lost the sense of self-worth they used to derive from their jobs, UBI is not the answer. The reason we have different answers to the question in rich and poor countries is twofold. First, UBI is easy, and many poor countries lack the governance capacity to run more complicated programs. This is not true of the United States, and even less true of France or Japan.

Second, in most developing countries, the average person would also certainly like a stable job with a good income and benefits, but it is not what they think they are entitled to. A very large proportion of the world’s poor and near-poor, who essentially all live in the developing world, are self-employed. They don’t like being self-employed, but they are used to it. They know they might have to switch from one occupation to a very different one within the space of a month or even a day, depending on what opportunities are available. They sell snacks in the morning and work as seamstresses in the afternoon.

Partly for that reason, they do not build their lives around their work; they are careful to maintain connections with their neighbors, their relatives, their caste and religious groups, their formal and informal associations. In Abhijit’s native West Bengal, the club (or in Bangla pronunciation, the klaab) is a key institution; most villages and urban neighborhoods have at least one. The members are men between the ages of sixteen and thirty-five; they meet nearly every day to play cricket or soccer or cards or the uniquely South Asian tabletop sport carrom. They often describe themselves as social workers, and when, say, there is a death in some family, they show up and help. But they also practice a mild form of extortion in the name of “social work” or religious observances, and this, along with contributions from local politicians who use them as foot soldiers, pays for the club and its occasional celebrations. Mostly, however, it serves as a way to keep the local bloods from getting into more trouble, in a setting where most of them are either not working or working at a job they don’t enjoy. It provides a modicum of meaning.