They'll Pay You to Live in Switzerland!
Like the rest of the rich world, Switzerland is currently experiencing rising inequality, and rising prices for key items like real estate. And since Switzerland has a very vibrant referendum system, they're getting ready to vote on a proposal to give everyone a basic income of $2,800 a month. This would enable a married couple to earn $67,200 a year without working.
That minimum amounts to less than half of Switzerland's per-capita income of $80,000. But it's still a whole lot of money; the U.S. equivalent would be mailing every adult here a check for $2,000 a month. The economic effects, positive and negative, would probably be far-reaching, as Annie Lowrey reports in the New York Times:
The case from the right is one of expediency and efficacy. Let's say that Congress decided to provide a basic income through the tax code or by expanding the Social Security program. Such a system might work better and be fairer than the current patchwork of programs, including welfare, food stamps and housing vouchers. A single father with two jobs and two children would no longer have to worry about the hassle of visiting a bunch of offices to receive benefits ...
Even better, conservatives think, such a program could significantly reduce the size of our federal bureaucracy. It could take the place of welfare, food stamps, housing vouchers and hundreds of other programs, all at once: Hello, basic income; goodbye, H.U.D. Charles Murray of the conservative American Enterprise Institute has proposed a minimum income for just that reason -- feed the poor, and starve the beast.
It's less surprising that liberals would take a shine to the idea:
The left is more concerned with the power of a minimum or basic income as an anti-poverty and pro-mobility tool. There happens to be some hard evidence to bolster the policy's case. In the mid-1970s, the tiny Canadian town of Dauphin ( the "garden capital of Manitoba" ) acted as guinea pig for a grand experiment in social policy called "Mincome." For a short period of time, all the residents of the town received a guaranteed minimum income. About 1,000 poor families got monthly checks to supplement their earnings.
Evelyn Forget, a health economist at the University of Manitoba, has done some of the best research on the results. Some of her findings were obvious: Poverty disappeared. But others were more surprising: High-school completion rates went up; hospitalization rates went down. "If you have a social program like this, community values themselves start to change," Forget said.
I'm a big booster of the Earned Income Tax Credit, but I've been less sanguine about the effects of a basic income, which are likely to be at best uneven. Consider the cost of real estate, one of the sore points in Switzerland, where there isn't a whole lot of flat land to build on. In that, Switzerland is a bit like my own home city of Washington: it's a small area attracting a lot of new, more-affluent residents (wonks and lobbyists, in Washington's case; international finance types for Switzerland). Many of the poorer residents don't make enough to compete in the new bidding wars, and they don't like it one bit.
But suppose we gave everyone in Washington a check for $2500 a month. Would that make it easier for the old residents to get nicer apartments? Not really, because everyone would be getting that check. Poorer residents would have another $2500 to commit to the housing bidding war, but so would the wealthier residents. Unless the $2,500 actually created a larger supply of housing -- and that's as much a matter of planning regulations and building codes as of demand.
In other words, there's a difference between giving one person $2,500, which makes her unambiguously better off, and trying to get the same effect by giving every single taxpayer $2,500. Which is not to say that this scheme can't work, just that there are reasons to think that it might not solve the concernsthat motivated it.
It also seems to me unlikely that a basic income would replace welfare programs. The programs would creep back, because farmers like food stamps and health care providers like health care subsidies, and politicians in expensive urban areas do not want their loyal constituents forced into other counties where they can't vote for the politicians in expensive urban areas. When you view a basic income as an addition to the welfare state, rather than a replacement, it starts to seem quite expensive indeed. Especially if it encourages more people not to work.
On the other hand, you can tout potential economic benefits. People might be freed to take more economic risks, say on starting a new business. The poor might use the extra resources to invest in education. And a universal benefit might get rid of some of the perverse disincentives to work that are built into our current system.
Overall, I'd really like to see Switzerland pass this, if only so we can observe the effects.
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Megan McArdle at firstname.lastname@example.org