Why does the benefit of the pandemic provide problems for basic universal income?
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The writer is the editor-in-chief of MoneyWeek
Suppose you are unemployed and someone offers you $ 15 an hour for 40 hours a week to work as a shift manager at McDonald’s in the US. That will give you $ 600 a week. It’s not fortune. It’s not terrifying either. So all other things being equal, if you needed a job you would probably take it. But what if someone else offers you more than $ 600 a week if you don’t take it? $ 650 maybe – to stay home. I think you are he can think twice.
That could be part of an explanation for the problems U.S. companies are currently hiring. In the last 18 months US government in addition to throwing punctual stimuli at the entire population, it has far exceeded the unemployment rate. People have been able to claim more and more than ever (more than 39 weeks than 26 weeks). The country’s average weekly unemployment benefit is now well over $ 600, and some states pay more than $ 700.
The numbers were not as good as in the first part of the pandemic, when the average replacement rate (percentage of income replaced as a result of job loss) rose from 48 percent to 145% before the pandemic. But it offers a reason for many people to decide, as the Economy of Time says, that “projected income from employment is less than the value of government transfers and free time.”
This could be especially true when you add a pandemic savings cushion built by homes – money that allows them to save their time before they re-enter the market. The short-term wealth effect can also be here: if the price of your home rises by 10%, you may feel less economic pressure in the long run. Note a slightly higher percentage Americans said they felt financially safer in 2020 than in 2019.
The numbers show the result of all this – the lack of supply in the labor market. The number of jobs in April has shown 75 percent fewer people job placement than most analysts expected. That can’t be put on the doorstep of demand – there are plenty of vacancies. There are other issues as well: think about health issues (who wants a house without leaving the vaccine?) And kindergartens (not all schools in the US are open). All of this is fair (60% of job seekers want to be remote). But these last two points probably only come into play in many homes, for better benefits and saving the pandemic.
All of this has been hard to measure during the pandemic. But if there is a healthy study, it suggests that the more people pay the less they work and the less they work, and we will soon know if the posts after coronavirus are good. As Capital Economics points out, some U.S. states have opted for improved Federal Programs (which are “incentives,” says the Montana governor), which could explain the recent “faster decline in jobless claims”.
All of this seems obvious. But it’s a problem for those who believe in universal basic income (UBI) – and those who think it should be a pandemic that is accelerating entry into developed countries. The basic premise of UBI is that if you find money to cover all the unconditional income to cover all your basic needs, they will be happier, healthier, more productive and, above all, less likely to be unemployed.
It’s a beautiful idea. But beyond the very obvious cost problem, it comes with a problem: a lot of small experiments have been done, and none of them have created evidence that it works. The only national randomized test conducted to date has been in Finnish a few years ago. There was a clear finding: those who earned a basic income were much happier than those in the control group. Not surprisingly. It’s hard to think that money for free makes many people less happy. However, if it was on the subject of employment no clear consequences.
You can say that the “real UBI” has never been tried: most of the experiments and promises are to provide a guaranteed minimum income to a limited number of people. See if the Scottish government has recently mentioned a minimum income of £ 37,000 if it ensures an independent Scotland. And when it comes to free money, you can say that time scales can cause a big change. If you know you’re getting $ 600 a month for free in three months, you can choose to put your feet up. You know it’s forever, it’s probably more about working out a long-term career plan.
What you can’t argue is that we now have more evidence that a UBI would be good for employment than it was two years ago. Some fans may say that it doesn’t matter: there’s a branch that believes automation will destroy the job market, turning it into just a UBI a dynamizer of better leisure.
But if that’s your argument, you need to make sure you’re right in the workplace. Because the pandemic is one of the things we have been taught to do if you provide financial support that allows people to get rid of their work, a large number of them will probably give it up. And that doesn’t help anyone in the long run. Just ask that 44 percent of U.S. small businesses say they can’t find anyone to take on the jobs they offer.
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