I’ve discussed the idea of a guaranteed annual income several times. The biggest concern with the idea of a guaranteed annual income is the impact that it would have on people’s incentives to work. Essentially, the argument is that if people don’t need to work to survive, they’ll sit around and do nothing, and this would be a bad thing. Frank, one of the commenters on the blog, recently suggested one solution to this issue.
On ‘Cross Country Checkup’ (24 Jan 2016) the guaranteed annual income issue was raised with stress on the incentive to do something useful within the society. The caller felt that no incentive would lead to many ‘gaming the system’ and choosing not to work toward anything. The caller’s solution was to require those on GAC to demonstrate that they were directly involved in educational upgrading or demonstrably working for the public good (volunteering?). ie. you have the GAC as long as you demonstrate that you are trying to improve life.
On the face of it, this seems like a reasonable solution. However, I’m not a big fan of it for several reasons.
In Canada, we have an employment insurance (EI) system. Employees and employers pay into the system an amount equal to 1.88% and 2.632% of the employees’ income, respectively, up to an annual cap. If the employee gets laid off, then they get a weekly income for up to 45 weeks or until they find a job.
Just over a decade ago—soon after my newborn son arrived—I was laid off from a business that was failing. As such, I was qualified for EI. However, I didn’t want to look for a new job. I wanted to start my own business.
The problem was, EI doesn’t actually allow people to start their own business, or at least not in a way that anyone would actually want to use. At the time, if you wanted to start a business, you had to jump through a variety of hoops—taking hours of time every week—just to prove to the government that you weren’t trying to exploit the system.
And when you’re starting a business, time matters. Spending time convincing bureaucrats that you’re doing something useful is a complete waste of time. Possibly the most important component of entrepreneurialism is enthusiasm and momentum. If that enthusiasm and momentum gets blunted—such as by wasting time doing “make-work” tasks—it makes it far more difficult to succeed. And that seemed obvious to me, and probably to everyone else who isn’t a civil servant or politician.
This was frustrating. I might fail, but I wasn’t going to fail because the government sabotaged my ability to succeed. And, I’ve always been pretty good with money, so I had savings. Thus, I decided to not even bother applying for EI, but just start the business without it, living off my savings.
It turned out well. The business hit 30 employees within a few years.
That experience makes me biased against the idea of bureaucrats and politicians deciding what is a productive use of people’s time. My business idea was good, yet if I hadn’t had those savings, I wouldn’t have been able to start that business. I had a baby. I couldn’t put my family’s well-being at risk to pursue a dream.
So what happens to the people who don’t have those savings? I think the answer is, they are forced go work for someone else. They don’t innovate, don’t create new products, and don’t have the chance to build a business that provides jobs to 30 people.
To me, that seems like a bad thing.
So, when you talk about adding a “doing worthwhile” criterion to a guaranteed income proposal, it raises the question of what the government considers worthwhile. Is starting a business worthwhile? Is writing a novel? Is creating music? Is taking care of children? How about writing a blog? Is learning only worthwhile if it’s done at an accredited school? Is research only worthwhile, if it’s done at university, rather than on your own, like Da Vinci?
The issues I have
Thus, I’m not a big fan of adding a “doing worthwhile things” criterion on guaranteed annual income payments. First, if “worthwhile” isn’t broad enough, it seems like many productive activities fall on the outside. If it is broad enough, then the criterion is a waste of time, because then almost anything could be justified. It’s not even clear to me that “productivity” is the right criterion. (Do we really care about maximizing the productivity of society, or happiness, or well-being, or something else?)
Second, I’m not a fan of governments deciding what’s productive because I don’t think they’re good at it.
Third, it seems to me that the infrastructure to monitor people to determine if what they’re doing is worthwhile has a good chance of being more costly than any savings we’d get from adding that infrastructure. The cost isn’t limited to the legions of “monitoring bureaucrats”, but also the time people spend appeasing those monitoring bureaucrats, and the lost opportunities from people not doing what they want because doing so would make dealing with the monitoring bureaucrats more difficult. What’s more, I suspect the latter two costs would be the highest, and they likely wouldn’t even be measured.
Finally, this solution doesn’t take care of the “excess labor as a result of automation” issue. If production becomes automated to the extent that we don’t need people to act as laborers, it’s not clear that forcing people to use their excess time on “government-approved” activities helps things at all.
I wonder, when we have this sort of discussion, how much of this “people must be productive” attitude comes from a Puritanical work ethics and a belief that people are intrinsically evil and lazy. To me, it’s not that clear that people are intrinsically lazy and would be non-productive if they didn’t actually need to work. I suspect that people would still do productive things because otherwise they’d be bored. Heck, even Paris Hilton is productive—she’s young and doesn’t need to work, but has made more money than most people will in their lifetimes.
Of course, this argument doesn’t address the other big issue with guaranteed income—whether we can afford it. But, to me, it makes sense to do what we can to implement a simple guaranteed income system without “worthiness” criteria initially, rather than deciding that a guaranteed income can’t possibly work and sabotaging it with arbitrary Puritanical restrictions right from the start.
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Interest is spreading?