Friday, June 6, 2014

Would A Basic Income Guarantee (BIG) Increase Drug Addiction?

A recent op-ed by Philip Plinkington continues the Minsky/MMT tradition of finding lame excuses to reject a Basic Income Guarantee and instead peddle their beloved ELR/JG. 

Mind you, I respect Philip as an economist and agree with him on many economic issues.    I even agree with some of the things he says in his BIG op-ed.  This blog will merely question some of his unsubstantiated claims about the BIG and JG concepts.  

 "Imagine, for example, that a BIG office opened up in a drug-addled neighborhood. ..... Even though the monthly income is intended to free people to pursue their creative impulses, without added social support the money could end up funding drug habits instead. .... Many children who grow up in such an environment would also likely emulate their parents by simply collecting BIG payments and buying drugs with them. .... as is well known among labor economists, it is idleness and unemployment above all else that lead to problems such as drug addiction."
SAY WHAT ???   Phillip's welfare-drug-link claim is the sort of nonsense we would expect to hear from Rush Limbaugh, Glenn Beck, or  .....  Hyman Minsky.   Philip does not point the reader to any studies backing up his claims.

It is beyond the scope of this blog to definitively explain the causes of substance abuse -- that would take a book or three and there are probably already many books written on the subject.  But we will question Philip's unsubstantiated claim. 

Can Philip provide any evidence that transfer programs increase substance abuse?   Can Philip provide any evidence that improving the economic security of substance abusers harms their children?    

Well, we'll have to see what, if anything, Philip comes up with, but so far it's just an unsubstantiated claim.

Can I point to evidence that a Basic Income might actually REDUCE substance abuse or improve the lives of the children of BIG recipients ?

--  This article  suggests a correlation between the Gini coefficient and substance abuse (the Gini coefficient correlates to nearly everything wrong with society).   A BIG should reduce the Gini as has been proven by Brazil's Bolsa Familia.

--  This article suggests that Canada's Mincome program improved health outcomes:

"You don’t have to work in health very long to realize that many of the conditions you are treating are the consequence of poverty. People are sick because they are poor. .... hospitalization rates fell by 8.5% among subjects in the [Mincome] experiment relative to the controls. The reasons for that are reductions in “accidents and injuries” and reductions in hospitalization for mental health issues."
 The same article also suggests that Mincome enabled more children to finish school:
"One of my results is that high school (grade 12) completion rates increased during the study."
 -- This article suggests that Brazil's Bolsa Familia (a BIG of sorts) improved outcomes for the children of program recipients:
  • Infants are more likely to receive their vaccinations on schedule. This is true especially for the second and third doses of vaccines against diseases such as polio, diphtheria, pertussis, and tetanus, without which children cannot be considered properly protected.
  • School attendance by boys and girls rises by 4.4 percentage points. The largest gains have occurred in the historically disadvantaged northeast, where enrollments have risen by 11.7 percentage points
  • Children are more likely to progress from one grade to the next. This is especially true of girls aged 15 and 17—who are at greatest risk of dropping out. Bolsa Familia increases the likelihood that a 15-year-old girl will remain in school by 19 percentage points.
  • Pregnant women have 1.5 more pre-natal visits with a healthcare professional.
The Rumsfeld-Cheney BIG experiments suggested that a BIG helped children:
"In North Carolina, children in experimental families showed positive results on elementary school test scores. In New Jersey, data on test scores was not collected, but a positive effect on school continuation rates was found. In SIME-DIME there were positive effects on adult continuing education."
A study of the  Namibia BIG does not mention any increase in substance abuse.   Instead, poverty fell and economic activity increased.  Sorry, Philip.

Philip Asks What About Immigrants?

"if anyone could turn up at the BIG office every month to collect a check, there would be an enormous influx of immigrants into any country that set up the system."
That is a fair point and my personal response is quite simple -- I oppose unlimited immigration under any circumstances.

 I would also point out that the same issue arises with a Job Guarantee -- would the JG be open to illegal immigrants?   (I believe that there is zero political support for that in the U.S.)   If a JG were open to illegal immigrants, and if we had unlimited immigration (legal or otherwise) what is to prevent an enormous influx of immigrants attracted by a JG?

Philip Raises the Spectre of Inflation

"If enough people left their jobs and signed up for BIG, would the actual production of goods and services in the economy fall sufficiently to generate increased scarcity and thus inflation?"
To begin with, is our economy running at full capacity and with full employment?   No, not since WWII have we experienced anything resembling full employment.

Is there any evidence that everyone would quit their well paid, meaningful, rewarding jobs and sign up for a subsistance level BIG?    In other words, would people leave a $50,000 job for a $13,000 BIG?    Well, that has actually been studied to death  and we know the answer -- that the reduction in labor force participation caused by a BIG is small and benign:  

"Married women effectively used the guaranteed income to ‘buy” themselves longer maternity leaves. When they left the workforce to give birth, they stayed home longer. Secondly, adolescents and especially adolescent boys reduced the hours they worked because they took their first full-time job at a later age."
That quote is probably referring to Nixon's BIG experiment.

 The Namibia BIG actually resulted in an increase in economic activity:
"The rate of those engaged in income-generating activities (above the age of 15) increased from 44% to 55% .....  particularly through starting their own small business ...... The BIG contributed to the creation of a local market by increasing households' buying power.   This finding contradicts critics' claims that the BIG would lead to laziness and dependency."

Philip Claims The Argentina Jefe Was A Success

Well, success is in the eyes of the beholder, but the Jefe was discontinued, in part due to massive fraud.   Similar to the New Deal WPA, the Jefe was offered only to heads of households,  yet one source claims that only 43% of Jefe's were actually heads of households   (If it had been up to me, I would have eliminated the head-of-household requirement, but the point is that the head-of-household requirement was a reflection of the country's values, and that is their right).    About 25% of Jefe's took the pay without actually performing any work, effectively turning the Jefe into a BIG rather than a work program.    The Jefe only reduced poverty 1.4% and Gini 4.7%.    

Perhaps the Jefe's problems were a matter of flawed execution rather than a flawed concept.   However, make-work programs in other countries, like Britain's Workfare and America's "Georgia Works" and "CalWorks" have also been  troubled and of questionable value.   One of the arguments for a BIG rather than for a work program is that a BIG is much simpler to execute than a work program.

Philip Claims The JG Would Be Voluntary

"The JG does not seek to replace existing welfare institutions. ..... The JG is decentralized and voluntary."

Well, perhaps Philip's vision for a JG would truly be voluntary and perhaps Philip also envisions a truly reliable safety net in addition to a JG, but at least some JG proponents advocate a "coercive" JG.   Certainly the workfare programs in the US, the UK, and most recently in Australia are "coercive."      As for the safety net, there isn't much of a safety net in the US, with only about 12% - 25% of the unemployed (depending on your source) currently receiving unemployment insurance.    So the reality for many would be "participate in the JG or else face starvation and homelessness."   

Philip Claims The JG Would Be Local And/Or Privatized

"The government then invites charities and nonprofits to sign on to the program."

Again, perhaps this is Philip's personal vision for the JG,  but some JG proponents favor a nationally administered job program.     In America, state and local governments have a history of being corrupt, backwards, bigoted, etc..      Nationally administered safety net programs like Social Security and Medicare have a far better track record than locally administered safety net programs like TANF, unemployment insurance, food stamps, and most recently O-Care.   And don't even get me started on privatization !

Must We Choose Between A BIG and A Job Program ?

Philip concludes:
"A BIG is achievable today, and if it were implemented it would increase employment and alleviate much human suffering, but it would not target social problems in as focused a way as the JG program would."

But must we choose between a BIG and a JG?   Why not combine the two with a Job-Or-Income-Guarantee (JIG) ?    Let the people who are dying to do make-work join the JG, and let the people who would rather get on with their lives draw a BIG.  

Another false dichotomy is limiting the JG to a minimum wage "transition job."   Why not create permanent or at least long term jobs?   Why not create jobs that offer different pay scales for different positions, as the New Deal WPA did?     Why not create job openings by reducing the work week and lowering the retirement age?    Why not stop exporting our middle class jobs to foreign countries?    And so forth.   There is more than one way to address the unemployment problem --  I resent having my choice limited to the uninspiring minimum wage JG.  

Update #1: on using safety net money to buy drugs and alcohol

This blog does not intend to discuss substance abuse at length, but the obvious (to me) solution to using safety net money to purchase drugs or alcohol is to decriminalize drugs, treat substance abuse as a medical problem rather than as a criminal problem, and make the drugs available by prescription for free or at nominal cost, similar to how Portugal does it.   Then there would be no incentive to use BIG money to purchase drugs.   The number of addicts in Portugal has been halved since it decriminalized drugs.   

Update #2:  Philip responds by denying that he said what he said

Let's recall what Philip's op-ed actually said:
"Imagine, for example, that a BIG office opened up in a drug-addled neighborhood. ..... Even though the monthly income is intended to free people to pursue their creative impulses, without added social support the money could end up funding drug habits instead. .... Many children who grow up in such an environment would also likely emulate their parents by simply collecting BIG payments and buying drugs with them. .... as is well known among labor economists, it is idleness and unemployment above all else that lead to problems such as drug addiction."

Update #3:   Philip responds that he sorta meant something sorta different.

I'm not going to endlessly debate semantics and intentions.   The gist of Philip's op-ed echoed the Minsky theme that an ELR/JG has better social outcomes than a BIG.    Until such time as JG proponents can back up their claims with hard data, their claims are merely a value judgment.   As I have pointed out previously, studies of the American, Canadian, Brazilian, and Namibian BIGs have demonstrated positive social outcomes.   As I have asked previously, why must we choose one or the other?    Why can't we have both a Basic Income Guarantee and job creation programs?