Tuesday, July 9, 2019

Is a Universal Basic Income a good idea?

WSJ editorial arguing for an expansion of the Earned Income Tax Credit (EITC) rather than a Universal Basic Income (UBI). Rather than giving everyone $1,000 per month (this would cost so much in taxes that it would destroy jobs), a guaranteed-income program would offer transfers only to individuals whose monthly income falls below $1,000, thereby coming in at a mere fraction of a UBI’s cost.  By providing "insurance" (when your income falls) as well as "opportunity" (jobs), the EITC seems much better than the UBI.

In the US, the top policy goals should be universal health care, more generous unemployment benefits, better-designed retraining programs, and an expanded earned income tax credit (EITC). The EITC already functions like a guaranteed basic income for low-wage workers, costs far less than a UBI, and directly encourages work. On the business side, reducing the indirect costs and payroll taxes that employers pay for hiring workers would spur job creation, also at a pittance of the cost of a UBI.

Note that economists always evaluate policies like the Universal Basic Income relative to its next best alternative. If the alternative is better, we say that the opportunity cost of the UBI is bigger than its benefits.

No comments:

Post a Comment