Yves Smith: The Failure of a Past Basic Income Guarantee

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Jacob Richter
Yves Smith: The Failure of a Past Basic Income Guarantee

[url=http://www.nakedcapitalism.com/2015/01/the-failure-of-a-past-basic-incom... Failure of a Past Basic Income Guarantee[/url]

By Yves Smith

(Excerpts)

The idea of a basic income guarantee is very popular with readers, more so that the notion of a job guarantee. Yet as we have mentioned in passing, [b]this very sort of program was put in place on a large-scale basis in the past[/b]. Initially, it was very popular. However, in the long run it [b]proved to be destructive to the recipients[/b] while tremendously beneficial to employers, who used the income support to further [b]lower wages[/b], thus increasing costs to the state and further reducing incentives to work. And when the system was dismantled, it was [b]arguably the working poor, as opposed to the ones who had quit working altogether, who were hurt the most[/b].

[...]

[b]The experiment was the Speenhamland system[/b], which was implemented in England 1795 and dismantled in 1834, was intended to make sure that country laborers had enough income to live. It was intended as an emergency measure to help the poor when grain prices had risen sharply due to meager harvests.

[...]

Not surprisingly, the Speenhamland system existed in its strongest and most durable embodiment in areas where the threat of violence by the impoverished was real. But another reason it lasted as long as it did despite the costs it imposed on local landlords was it [b]kept the poor in place with their wages fixed at a bare subsistence level[/b]. Rural property owners wanted to keep workers from decamping to towns and cities in search of better paid employment. A smaller pool of local laborers would lead to higher wage levels.

Karl Polanyi explains how a well-indended program over time proved damaging to the very group it was intended to help. And it is critical to keep in mind that Polanyi is acutely aware of how treating labor and land as commodities is at odds with the needs of society.

[...]

[b]The backlash against the Speenhamland system, which came via the Poor Law Reform of 1834, was the establishment of workhouses designed to force the poor to work.[/b]

[...]

[b]I’m at a loss to understand reader objection to the idea of a job guarantee. It would either price many McJobs out of existence[/b] or convert them back to their old form, of being part-time positions for young people still in school. It would [b]similarly increase compensation for important jobs[/b] like home health care workers that now pay rock-bottom wages. It would make it [b]harder for retailers to continue their abusive practice of requiring workers to be on call[/b]. And there is no dearth of meaningful work that needs to done: providing universal day care, better elder and hospice care; replanting forests; building wildlife tunnels; maintaining and improving parks; repairing and upgrading infrastructure with an eye to energy efficiency. These are all ways of increasing national output in a manner which can also improve the environment. If we had more enlightened leadership, a Marshall Plan to retool the economy to reduce energy consumption and convert more sources to cleaner ones would be a high-priority target for Job Guarantee workers.

People need a sense of purpose and social engagement. Employment provides that.

[...]

When unions provided an wage anchor for factory labor, the US had less income disparity and more class mobility. [b]Under Speenhamland, income disparity widened and real wages fell.[/b] Low end service jobs are the modern analogy to former blue collar work. Even with greater automation, many of those jobs will remain. [b]The alternative of job choice with a job guarantee will force wages higher and improve working conditions. It would provide pressure on employers as labor unions once did. And it will add a bit more to individual freedom by giving them more employment options.[/b]

A jobs guarantee and a basic income guarantee are not either/or propositions, contrary to the claims of many readers. [b]Job guarantee proponents see it as an addition to, not a substitute for, other social safety nets[/b], such as unemployment insurance and Social Security. For instance, Joe Firestone has argued for a basic income guarantee in addition to a job guarantee, with the income level for the basic income guarantee set at 2/3 the rate of a full time job under the job guarantee.

Jacob Richter

[url=http://www.nakedcapitalism.com/2015/01/the-failure-of-a-past-basic-incom... Failure of a Past Basic Income Guarantee[/url]

By Yves Smith

(Excerpts)

The idea of a basic income guarantee is very popular with readers, more so that the notion of a job guarantee. Yet as we have mentioned in passing, [b]this very sort of program was put in place on a large-scale basis in the past[/b]. Initially, it was very popular. However, in the long run it [b]proved to be destructive to the recipients[/b] while tremendously beneficial to employers, who used the income support to further [b]lower wages[/b], thus increasing costs to the state and further reducing incentives to work. And when the system was dismantled, it was [b]arguably the working poor, as opposed to the ones who had quit working altogether, who were hurt the most[/b].

[...]

[b]The experiment was the Speenhamland system[/b], which was implemented in England 1795 and dismantled in 1834, was intended to make sure that country laborers had enough income to live. It was intended as an emergency measure to help the poor when grain prices had risen sharply due to meager harvests.

[...]

Not surprisingly, the Speenhamland system existed in its strongest and most durable embodiment in areas where the threat of violence by the impoverished was real. But another reason it lasted as long as it did despite the costs it imposed on local landlords was it [b]kept the poor in place with their wages fixed at a bare subsistence level[/b]. Rural property owners wanted to keep workers from decamping to towns and cities in search of better paid employment. A smaller pool of local laborers would lead to higher wage levels.

Karl Polanyi explains how a well-indended program over time proved damaging to the very group it was intended to help. And it is critical to keep in mind that Polanyi is acutely aware of how treating labor and land as commodities is at odds with the needs of society.

[...]

[b]The backlash against the Speenhamland system, which came via the Poor Law Reform of 1834, was the establishment of workhouses designed to force the poor to work.[/b]

[...]

[b]I’m at a loss to understand reader objection to the idea of a job guarantee. It would either price many McJobs out of existence[/b] or convert them back to their old form, of being part-time positions for young people still in school. It would [b]similarly increase compensation for important jobs[/b] like home health care workers that now pay rock-bottom wages. It would make it [b]harder for retailers to continue their abusive practice of requiring workers to be on call[/b]. And there is no dearth of meaningful work that needs to done: providing universal day care, better elder and hospice care; replanting forests; building wildlife tunnels; maintaining and improving parks; repairing and upgrading infrastructure with an eye to energy efficiency. These are all ways of increasing national output in a manner which can also improve the environment. If we had more enlightened leadership, a Marshall Plan to retool the economy to reduce energy consumption and convert more sources to cleaner ones would be a high-priority target for Job Guarantee workers.

People need a sense of purpose and social engagement. Employment provides that.

[...]

When unions provided an wage anchor for factory labor, the US had less income disparity and more class mobility. [b]Under Speenhamland, income disparity widened and real wages fell.[/b] Low end service jobs are the modern analogy to former blue collar work. Even with greater automation, many of those jobs will remain. [b]The alternative of job choice with a job guarantee will force wages higher and improve working conditions. It would provide pressure on employers as labor unions once did. And it will add a bit more to individual freedom by giving them more employment options.[/b]

A jobs guarantee and a basic income guarantee are not either/or propositions, contrary to the claims of many readers. [b]Job guarantee proponents see it as an addition to, not a substitute for, other social safety nets[/b], such as unemployment insurance and Social Security. For instance, Joe Firestone has argued for a basic income guarantee in addition to a job guarantee, with the income level for the basic income guarantee set at 2/3 the rate of a full time job under the job guarantee.