Why pandemic benefits will bring trouble to the basic income of all people

The author is the editor-in-chief of MoneyWeek

Suppose you are unemployed, and someone provides you with a salary of $15 an hour and allows you to work 40 hours a week as a shift manager at McDonald’s in the United States. This will earn you $600 a week. This is not a wealth. This is not terrible. Therefore, if all other conditions are equal, if you need to work, you may accept it. But if you don’t accept it, what if someone gives you a little more than $600 a week? Maybe 650 dollars-but stay at home.My guess is you Might think twice.

This may be part of the reason why U.S. companies are currently difficult to recruit. For most of the past 18 months, American government Not only conducted a one-time stimulus check on ordinary people, but also provided a substantial increase in unemployment benefits. People have been able to file more and longer claims than ever before (39 weeks instead of 26 weeks). The national average weekly unemployment benefit is now well over $600, and some states pay more than $700.

These numbers are not as good as those at the beginning of the pandemic, when the average replacement rate (the percentage of income replaced by unemployment) rose from 48% before the pandemic to 145%. But it does provide a reason for many people. As intertemporal economics says, “the expected income of employment is lower than the value of government transfer payments and free time.”

This may be especially true when you add to the pandemic savings buffer that the family has already established-cash allows them to wait time before re-entering the market. There may also be a short-term wealth effect: if your house price rises by 10%, you may feel less long-term financial pressure.Please note that a Slightly higher percentage Of Americans say they feel financially safe in 2020 compared to 2019.

The figures show the result of all this-insufficient supply in the job market. April employment data shows 75% reduction in headcount Returning to work is more than most analysts expected. This cannot be placed at the door of demand-there are many vacancies. There are other issues-think about health issues (who wants to leave home without getting vaccinated?) and childcare issues (not all American schools are open). This is fair (approximately 60% of job seekers want to work remotely for a reason). However, due to increased welfare and pandemic savings, the latter two points will certainly only work for many families.

During a pandemic, all this is difficult to measure. But there is a lot of research showing that the more you pay people who don’t work, the less work they have, and we will soon find out whether this is effective after the coronavirus. As Capital Partners pointed out, some states in the United States have now opted out of the enhanced federal program (the governor of Montana said “incentives are important”), which can explain the recent “decline in unemployment claims” .

All this seems obvious. But for those who believe in universal basic income (UBI), this is a problem-they believe that the pandemic should be a catalyst to accelerate its introduction in developed countries. The basic premise of UBI is that if you can find cash and provide everyone with unconditional income without means-tested to meet all their basic needs, they will become happier, healthier, more productive, and – The most important thing is-the possibility of unemployment is even smaller.

this is a good idea. But in addition to the very obvious cost issue, it also brings a problem: many small experiments have been conducted, but no evidence has been provided to prove that it is effective.The only national randomized controlled trial completed so far is men Finland Years ago. There is a clear finding: people with basic income are much happier than those in the control group. This is not surprising-it is hard to imagine that free money will make many people unhappy.But on the issue of employment No clear conclusion.

You can argue that “real UBI” has never been tried: most experiments and promises are more about providing a guaranteed minimum income for a limited number of people. Witness that the Scottish government recently mentioned a minimum income of £37,000 if it ensures the independence of Scotland. You can argue that when it comes to free money, the timetable can have a major impact. If you know that you can get $600 a month for free for three months, you might choose to cheer up. If you know it is eternal, you are definitely more likely to develop a long-term career plan.

What you can’t do is argue that we now have more evidence that UBI is better for employment than it was two years ago.Some fans may say that it’s okay: there is a view that automation will destroy the job market, making UBI just a Better leisure facilitator.

But if this is your argument, you need to make sure you are right at work. Because one thing the pandemic tells us is that if you provide people with financial support to enable them to withdraw from work, then many of them might do. In the long run, this will not help anyone. Ask 44% of small businesses in the United States and they say they can’t find someone to accept the job they offer.