Work makes Fritos

Clinton_prwora(Update: The Sandwichman delivers.) I’ve gone around on the Universal Basic Income (‘UBI’) more times than I care to remember, but Vox’s Dylan Matthews brings something news to the table, pointing to the contemporary Democrats’ default anti-poverty policy: get people into a job, any job. Translated that means work supports for jobs with very low pay and scant prospects for upward mobility.

The genesis of this policy was the so-called Personal Responsibility and Work Opportunity Reconciliation Act of 1996, also known as “welfare reform.” This bill destroyed the Aid to Families with Dependent Children (AFDC) program by transforming it into a block grant. It was signed by Bill Clinton and supported by many Democrats, including liberal Democrats. Consequently, the Democratic Party is invested in the program and its logical implications, about which more below.

The block grant under the name “Temporary Assistance for Needy Families” is a fixed payment to state governments to finance welfare programs of their own design, subject to some limited Federal regulations. The chief innovation of states was to require of beneficiaries work or work-related activities. In return cash assistance and other support, especially subsidies for child care, might be available.

From 1996 to 2000, most of the evidence on TANF, with one important exception, showed up positive. Poverty decreased, employment and wages increased. The problem for evaluation is that this same period happened to be one of the best in U.S. history, in terms of labor market advance. In addition, the minimum wage (in 1996 and 1997) and the Earned Income Tax Credit (in 1993) increased. This makes it hard to isolate any beneficial effects of TANF.

Unfortunately, the positive signs for those in the bottom income quintile (20%) of the population have crumbled since 2000. Truth is, they weren’t that positive to begin with. The impact on work in “leavers” studies (where TANF recipients were tracked after graduating from the program) tended to show work effects in the high teens. Think about that for a second. You’re working, say, one week a month. You increase work (assuming you have the option) by the top of the range, 20%. Instead of working five days a month, you work six days. Twelve extra days a year. Nor does work necessarily mean higher income, since increased earnings offset benefits, and work expenses reduce net income.

The other ominous, early sign was income decline for the poorest single mothers’ families, documented by the saintly Wendell Primus and colleagues. (Primus actually resigned from his post with the Clinton Administration after the welfare was signed. How often do you see that.)

Since 1996, participation in TANF among those eligible fell from 80-something percent to forty-something. In the grand scheme of what we like to call the U.S. safety net, it is now a minor program. There are now fewer than five million persons receiving benefits (not necessarily cash benefits). In 2013, nearly 46 million persons were below the official poverty line. About the same number get what used to be called food stamps.

At the time I hoped that the reform might cast a different light on welfare recipients. Instead of being bums, they would be workers. But enrollment in TANF has dropped off the table. Meanwhile, Barack Obama is slurred as “the Food Stamp president.” So the meanness has not dissipated, it has just been redirected.

Well-intentioned supporters of the reform could have hoped that wages would continue to grow and draw more people into the labor market, to the benefit of all. But employment and wage growth since 2000 have been lackluster. We have yet to return to the employment-population ratios of 2000, including for ‘prime-age’ workers. Although there are some recent, positive signs, job prospects still look bleak for those with no skills and little education. Work-conditioned benefits are helpful, but we should aspire to greater heights.

All this is a lengthy prelude to Matthews’ post. His remedy for a future of lousy jobs is the UBI. The basic reasoning is solid — an unconditional cash grant provides support for labor market abstention. You’re not as much at the mercy of employers. And of course if you can’t work you really need the money. The chief benefit of the ‘exit’ option is the implied upward pressure on wages. So far, so good.

But Matthews’ thrust is actually more radical than that. He is throwing shade on the moral obligation and axiomatic economic imperative of work itself, in particular employed work. You working for somebody else. You in thrall to Capital: what used to be called ‘wage labor.’

chillinThere are alternatives to low-pay employment. There is production in cooperatives, or in worker-owned and managed firms. These are real things. There is self-employment. There is working less — workers of the world, relax! This entails reduction in hours of the working day, through the institution of shorter work weeks or work-sharing. These are also real things. My comrade, the legendary Sandwichman, will have more to say in this vein, among others. He is an expert on less work, in theory and in practice.

Last, and not least, there is the wages agenda. You will seldom hear a Democratic big-shot suggesting less work. The labor movement, for understandable reasons, is fixated on maximizing employment and wages. I call it ‘productionism,’ even though I love me some labor unions and wage growth. Of course people need jobs because they need income. The question is whether an exclusive focus on any-damn-job and wages is good strategy. There is a lot wrong with Econ 101 supply-and-demand, but there should be little doubt that constricting labor supply to employers will force them to offer better wages and accept lower profits.

Let’s desacralize work. Dignity of work, my fanny. Work that is truly voluntary would be nice. Work that is compelled as an alternative to destitution does not comport with any reasonable concept of dignity. It’s like the dignity of kicking back to Tony Soprano.

Where does the UBI come in? The principle of providing an alternative to employment is sound. A universal program, however, is too diffuse. More than half the country doesn’t need a UBI. Giving them one requires taxing it all back, which is a lot of money — trillions — sloshing back and forth, the proverbial putting out and taking in the same laundry. Lots of opportunities for slips between the cup and lip, at both ends. It looks stupid.

The challenge is focusing income guarantees where they are most needed, in a politically feasible way. As soon as the word ‘need’ comes in, we have to drop the ‘U’ in UBI and take up the negative income tax framework–you are guaranteed a certain amount of money, and as your other income grows, your benefit is phased out.

So who should get an NIT? For starters, I’d suggest two groups:

1. Families with dependent children. The first but not the only source of finance for this would be a re-Federalization of TANF, and the return of the ‘UP’ component (unemployed parent). Call it a family allowance. The second source is the current ‘Supplemental Nutrition Assistance Program,’ formerly known as Food Stamps. SNAP is an NIT.

Food stamps was politically sustained historically by support from agricultural interests, support that may now be a dead letter thanks to, you know, newly insane congress persons from rural districts. The ‘food’ requirement may have become a political anachronism. Democrats’ historic support for TANF renders SNAP vulnerable to the same reform.

ladyhippie2.  Unlucky geezers. The financial meltdown ate a lot of folks’ retirement nest eggs or bilked them out of their houses. This was not bad luck; it was a crime. Institute a financial transactions tax and provide an additional retirement floor (more Social Security). Send the bill to those who threw the party, as somebody used to say.

This pairing could be politically effective, uniting constituencies that are otherwise not necessarily in sync on social policy, to say the least.

Income should indeed be guaranteed and universal. I’d say the first job is getting it to where it is most lacking.



Work makes Fritos — 7 Comments

  1. “[A UBI means]trillions — sloshing back and forth, the proverbial putting out and taking in the same laundry. Lots of opportunities for slips between the cup and lip, at both ends. It looks stupid.”

    I don’t see this problem in the real world. Send everybody X dollars, and run a progressive income tax administered by the IRS as we’re supposed to do now seems a lot less susceptible to “slips” than individual programs where decisions have to be made on each household’s eligibility. Where are all the “slips” in Social Security which works on the universal principle? I don’t see them.

    There are other problems that will get worse if most people’s incomes rise. There are insufficient alternatives to many goods (higher education, telecommunications access, and the like), so that we would need to deal with the pricing power of oligarchies, but that’s true no matter how you provide income support.

    • What nihil obstet said.

      The absolute simplest program is to run progressive income tax (pretty much what we have now), and cut every man, woman, and child in this country an identical-sized “basic income” check.

      Doesn’t solve all problems (health care, for example, where we need some sort of National Health Service, or private monopolies extracting large fees like the cable companies), but it does solve most of our problems.

  2. Another approach is “Topping Up,” which was used in a Canadian experiment in the 70’s. This provided a supplement for those whose incomes were below a specified level. Sure, there is a problem with people earning more and losing an equivalent benefit, but there are ways around that. See

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