Blog Post

AEIdeas

Who turns down free money? Well, the Swiss did on Sunday, voting down by a 3-1 margin an initiative that would have guaranteed all Swiss residents a minimum income, maybe $2,500 or so. Of course the Swiss probably didn’t view it as free money, which it really wouldn’t be. Es gibt keinen Baum Geld! There is no Money Tree! The basic income would have meant big tax hikes, even if some social spending were cut. This was not a “replace the welfare state with a government check” kind of basic income. It was additive.

So what next for the big policy idea of 2016? (Maybe next to Donald Trump’s MexicoMegaWall™, that is.) Finland and the Netherlands are planning limited experiments, as is the American startup accelerator Y Combinator. If you believe automation fears have driven renewed interest in the basic income, then the idea should have some staying power. It has proponents both on the left (“Yay, redistribution!”) and the right (“Yay, no more intrusive welfare state!”). In that way, the basic income has an edge over another policy also offering an appealing elegance and simplicity, at least in theory: the flat tax. Then again, the basic income also has opponents on the left and right.

But as I recently wrote in The Week, the basic income is a disruptive and risky policy choice lacking a truly compelling rationale. A big answer needs a big question. And widespread technological unemployment might be just that.

Yet, if the past is a good guide to the future, such fears are overblown. Then again, given what’s happening in artificial intelligence and robotics, maybe the past isn’t such a good guide this time. Perhaps my AEI colleague Charles Murray is right when he argues, “We are approaching a labor market in which entire trades and professions will be mere shadows of what they once were.” I wouldn’t bet against it, at least not much.

For now, though, more incremental reform– at least compared to the basic income — seems the better choice. From The Economist:

Make no mistake: modern welfare states leave plenty to be desired. Disability benefits are for many people an unsatisfactory version of a basic income, providing those who will no longer work with enough to get by. But rather than upend society with radical welfare reforms premised on a job-killing technological revolution that has not yet happened, governments should make better use of the tools they already have. Labour-market reforms—to crack down on occupational licensing, say—would boost employment growth. More generous wage subsidies, such as an earned-income tax credit, would help people stay out of poverty. Long-overdue public investment in infrastructure would foster demand. Relaxing planning restrictions would create jobs in construction, and homes for workers in places with robust economies.

And let the experimentation continue.