Why I’m a Universal Basic Income skeptic, especially for poor countries

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New York Times published an article last week, titled “The Future of Not Working.” In it, Annie Lowrie discusses the universal basic income experiments in Kenya by GiveDirectly: no surprise there: you can look forward to more pieces in other popular outlets very soon, as soon as they return from the same villages visited by the Times. One paragraph of the article drew my attention in particular: “One estimate, generated by Laurence Chandy and Brina Seidel of the Brookings Institution, recently calculated that the global poverty gap — meaning how much it would take to get everyone above the poverty line — was just $66 billion. That is roughly what Americans spend on lottery tickets every year, and it is about half of what the world spends on foreign aid.”

Well, I don’t know about you, but that paragraph makes me think that if we just were able to divert 50% of the current foreign aid budget towards cash transfers, we would eliminate extreme poverty. But, is that really true? The answer is: “not even close.”

That is World Bank economist and blogger Berk Ozler. His reasons are here. The short answer is “it is very hard to know who the poor are, find them, and know how much to give them”.

I would have added a couple more points. One is that we don’t really know what will happen when we scale up seemingly successful anti-poverty programs.

Also, I doubt there is long term political support in rich countries for a UBI for the poor, even if it were cheaper and more effective than our current aid programs. Mexico is already trying to figure out ways to get out from under the financial burden of its famous conditional cash transfers program. It’s such a big behemoth of a program that cash transfers draw more attention than the accumulation of many smaller but worse programs. They’re also unpopular among some. UK newspapers are already waging wars against Britain’s excellent cash transfer programs.

A successful UBI program for the poor has to find some political insulation, and have some paths for people to graduate out of it by getting wealthier.

My last comment: has no one reminded the “end of work” people that we’ve heard this claim every 20 years since the sewing machine and combine were invented? It’s possible that robots and AI mean it will be different this time. But I do not see the early warning signs. If structural unemployment will eventually be 60%, then at some point it will need to be 20%, and I don’t think we are even close. Wake me up when we see that happening.