Universal Basic Income, Jobs and Politics - oecd.org · Barack Obama: given advances in arti cial intelligence, many jobs will disappear, and yet we will get wealthier. Universal

Universal Basic Income, Jobs and Politics

Marinescu

OECD, January 2018

Marinescu Universal Basic Income OECD, January 2018 1 / 4

Introduction

Universal basic income

Universal basic income (UBI): unconditional cash transfer to everyonein a geographic/political territory, on a regular/long-term basis

Renewed interest in UBI:

Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compactHillary Clinton considered Alaska-style UBI as a campaign proposalFrench presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposalExperiments in Finland & Canada (Ontario), & moreState bill in Hawaii to examine UBII was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction






Introduction




Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compact

Hillary Clinton considered Alaska-style UBI as a campaign proposalFrench presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposalExperiments in Finland & Canada (Ontario), & moreState bill in Hawaii to examine UBII was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction




Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compactHillary Clinton considered Alaska-style UBI as a campaign proposal

French presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposalExperiments in Finland & Canada (Ontario), & moreState bill in Hawaii to examine UBII was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction




Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compactHillary Clinton considered Alaska-style UBI as a campaign proposalFrench presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposal

Experiments in Finland & Canada (Ontario), & moreState bill in Hawaii to examine UBII was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction




Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compactHillary Clinton considered Alaska-style UBI as a campaign proposalFrench presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposalExperiments in Finland & Canada (Ontario), & more

State bill in Hawaii to examine UBII was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction




Barack Obama: given advances in artificial intelligence, many jobs willdisappear, and yet we will get wealthier. Universal basic income shouldbe considered as part of new social compactHillary Clinton considered Alaska-style UBI as a campaign proposalFrench presidential candidate Benoıt Hamon (mainstream left): UBIwas a key campaign proposalExperiments in Finland & Canada (Ontario), & moreState bill in Hawaii to examine UBI

I was invited to testify about UBI at the House of PennsylvaniaDemocratic Policy Committee on November 29 2017.


Introduction






Marinescu (2017): review of literature

Outline

1 Marinescu (2017): review of literature

2 Jones & Marinescu (2017): overview

3 Institutional context

4 Data and econometric specification

5 Employment and labor force participation

6 Part-time work and hours

7 Robustness & discussion

8 Marinescu and Shor, 2018: politics of UBI



Unconditional cash transfers and educational outcomes

Negative Income Tax Experiments in the US and Canada in the 1970s

Eastern Band of Cherokees in North Carolina, rural area. Casinoopened and started distributing the income to all tribal members in1997 (about 4000−6000 a year).

Educational outcomes improved

Largest effects among poorest children.
























Unconditional cash transfers, health, and crime

Canadian Mincome experiment shows positive effect on health.

Eastern Band of Cherokees casino payments:

Mental health improvedSubstance abuse declined.Crime decreased.












Mental health improved

Substance abuse declined.Crime decreased.






Mental health improvedSubstance abuse declined.

Crime decreased.









Unconditional cash transfers and the labor market

Pure income effect of unconditional cash transfers: 10% increase inunearned income reduces earned income by about 1%

Negative Income Tax Experiments in the US in the 1970s (e.g. Robins,1985; Price and Song 2016 for long-term effects)Lottery winners (Imbens et al.,2001; Cesarini et al., 2015)

In many cases, no income effect on labor supply is detected:

Most effects estimated from NIT insignificant, and overestimated dueto income misreporting and selective attrition (Ashenfelter and Plant,1990)Eastern Band of Cherokees (Akee et al., 2010)Developing countries experiments (Banerjee et al., 2015)





Negative Income Tax Experiments in the US in the 1970s (e.g. Robins,1985; Price and Song 2016 for long-term effects)

Lottery winners (Imbens et al.,2001; Cesarini et al., 2015)























Most effects estimated from NIT insignificant, and overestimated dueto income misreporting and selective attrition (Ashenfelter and Plant,1990)

Eastern Band of Cherokees (Akee et al., 2010)Developing countries experiments (Banerjee et al., 2015)







Most effects estimated from NIT insignificant, and overestimated dueto income misreporting and selective attrition (Ashenfelter and Plant,1990)Eastern Band of Cherokees (Akee et al., 2010)

Developing countries experiments (Banerjee et al., 2015)









Jones & Marinescu (2017): overview

Outline











Limitations of existing literature

Cash transfers are not universal within a territory: limited, if any,macro effects.

Generally, cash transfers are temporary: e.g. NIT experiments lasted3 to 5 years.

Eastern Band of Cherokees natural experiment is a permanent cashflow, though only mid-term effects are known.















Alaska Permanent Fund

Alaska Permanent Fund created by amendment to state constitutionin 1976: at least 25% of all mineral lease rentals, royalties, royaltysale proceeds, federal mineral revenue sharing payments and bonusesreceived by the State

Alaska Permanent Fund dividend payments started on June 14 1982:dividend ranges in size depending on the performance of the fund,from $331 ($755 2015 USD) in 1984 to $2,072 in 2015.

Key advantages compared to experiments in prior studies:

Universal and unconditional: for all Alaskan residents, if resided inAlaska during past year.Permanent: ongoing, around for more than 30 years.





















Universal and unconditional: for all Alaskan residents, if resided inAlaska during past year.

Permanent: ongoing, around for more than 30 years.










Main results

Synthetic control panel using CPS data 1977-2014: selects matchedcontrols for Alaska based on pre-intervention data

Dividend payments have a very small positive (0.001) but insignificanteffect on employment to population

Dividend payments increase part-time employment as a share of thepopulation by 1.8 p.p., up from 10% in pre-period

Dividend payments have a negative (-0.62) but insignificant effect onhours worked last week among the employed

Suggestive evidence that impact differs across tradable andnon-tradable sectors: non-tradable sector has more positive impacts,consistent with dividend increasing consumption and labor demand

Informative about the long-run macro effects of a UBI



Main results









Main results









Main results









Main results









Main results








Institutional context

Outline












1970s: Alaska experienced large uptick in revenue from oil extractionon state-owned land

$900 million sale of an oil lease in 1969 was mostly spent down by thestate in the subsequent years

Alaska Permanent Fund created in 1976 to diversify income stream,constrain government spending, and share revenue with futuregenerations

The Alaska personal income tax was also abolished in 1980

Dividend disbursement started June 14 1982

Hsieh (2003) and Kueng (2015) have used the dividend payment totest permanent income hypothesis















































Data and econometric specification

Outline











Data

Alaska only available as separate state in basic CPS since 1977

IPUMS CPS 1977-2014 for employment to population, active laborforce participation, and part-time work

NBER CPS MORG 1979-2015 for hours worked last week among theemployed

Yearly data, July to June since first dividend payment was on June 141982. E.g. 1979 is July 1979 to June 1980

Data is collapsed by year and state, using weights



Data








Data








Data








Data








Econometric challenges

One treatment unit: Alaska

How do we choose control states?

How do we assess signficance?

Choose controls with a data driven method: synthetic control (e.g.Abadie and Gardeazabal, 2003; Abadie, Diamond, and Hainmueller,2010)

We also adopt a permutation method to assess significance (ADH2010): i.e. compare our results to all possible estimates when varyingthe treated state and the date of treatment.



































Synthetic control panel: the implementation for thepre-period match

We match on the pre-period averages of:

Outcome variable in the pre-period (Kaul et al., 2016)Gender2 education categories3 age categories5 industry categories





Outcome variable in the pre-period (Kaul et al., 2016)

Gender2 education categories3 age categories5 industry categories





Outcome variable in the pre-period (Kaul et al., 2016)Gender

2 education categories3 age categories5 industry categories





Outcome variable in the pre-period (Kaul et al., 2016)Gender2 education categories

3 age categories5 industry categories





Outcome variable in the pre-period (Kaul et al., 2016)Gender2 education categories3 age categories

5 industry categories





Outcome variable in the pre-period (Kaul et al., 2016)Gender2 education categories3 age categories5 industry categories



Synthetic control panel: pre-period fit

The estimates are more credible if we can find a good set of controlstates for Alaska.

Pre-period fit can be assessed by the root-mean-squared error(RMSE) for pre-intervention outcomes.

We focus the discussion on outcomes where the RMSE is below the15th percentile, i.e. for which Alaska is matched better than 85% ofother states in the pre-period: employment to population, andpart-time employment to population.














Employment and labor force participation

Outline











Table: State Weights for Synthetic Alaska: Employment

State Weight

Utah 0.428Wyoming 0.342Washington 0.092Nevada 0.079Montana 0.034Minnesota 0.025



Table: Pre-Treatment Covariate Balance: Employment

Covariates Treated Synthetic

Employed 0.639 0.639Age 16-19 0.108 0.102Age 20-24 0.154 0.137Age 25-64 0.691 0.636Female 0.503 0.509Agriculture, mining, etc. 0.361 0.361Manufacturing 0.097 0.126Transportation, communication, etc. 0.035 0.069Finance, real estate, etc. 0.191 0.187Entertainment, professional services, etc. 0.078 0.090Grade 11 or less 0.229 0.239Grade 12 0.396 0.386



Figure: Employment: Synthetic Control

.62

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1977 1986 1996 2005 2014Year

Alaska Synthetic Alaska



Figure: Employment: Placebo Experiment

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Em

ploy

men

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1977 1986 1996 2005 2014Year

Alaska Placebo States/Years



Table: Synthetic Control Estimates, Average Difference 1982-2014

(1) (2)

Employment Labor ForceRate Participation

α0 0.001 0.012

p-value 0.942 0.335

95% CI [-0.031,0.032] [-0.021,0.042]

Number of placebos 1,836 1,836

Pre-Period RMSE 0.0053 0.0125RMSE Percentile 0.095 0.568

Short-run results


Part-time work and hours

Outline











Table: State Weights for Synthetic Alaska: Part-Time Workers

State Weight

Nevada 0.729Wyoming 0.160Louisiana 0.060Maryland 0.033District of Columbia 0.019



Table: Pre-Treatment Covariate Balance: Part-Time Workers

Covariates Treated Synthetic

Part-Time Workers 0.103 0.104Age 16-19 0.108 0.096Age 20-24 0.154 0.127Age 25-64 0.691 0.677Female 0.503 0.503Agriculture, mining, etc. 0.361 0.337Manufacturing 0.097 0.106Transportation, communication, etc. 0.035 0.035Finance, real estate, etc. 0.191 0.185Entertainment, professional services, etc. 0.078 0.161Grade 11 or less 0.229 0.265Grade 12 0.396 0.406



Figure: Part-Time Workers: Synthetic Control

.09

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1.1

2.1

3.1

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1977 1986 1996 2005 2014Year





(1) (2)

Part-Time Hours WorkedRate Last Week

α0 0.018 -0.617

p-value 0.025 0.156

95% CI [0.004,0.032] [-1.577,0.324]

Number of placebos 1,836 1,734

Pre-Period RMSE 0.0027 0.3613RMSE Percentile 0.105 0.279

Short-run results


Robustness & discussion

Outline











Longer pre-period using Census data

Figure: Employment: Synthetic Control, 1960-2014.5

5.6

.65

.7Em

ploy

men

t Rat

e

1960 1970 1977 1986 1996 2005 2014Year




Longer pre-period using Census data


(1) (2) (3)

Employment Rate

Earliest Year 1977 1970 1960

α0 0.001 0.027 0.030

p-value 0.980 0.098 0.078

95% CI [-0.062,0.064] [-0.023,0.077] [-0.004,0.064]

N 51 51 51

Pre-Period RMSE 0.0053 0.0098 0.0109Percentile 0.275 0.627 0.608



Heterogeneity by gender

Table: Synthetic Control Estimates, Average Difference 1982-2014, by Gender

(1) (2) (3) (4)

Male Female

Employment Part-Time Employment Part-TimeRate Rate Rate Rate

α0 0.029 0.008 -0.019 0.022

p-value 0.091 0.200 0.231 0.034

95% CI [-0.008,0.066] [-0.004,0.019] [-0.055,0.016] [0.003,0.042]

Number of placebos 1,836 1,836 1,836 1,836

Pre-Period RMSE 0.0237 0.0033 0.0263 0.0041RMSE Percentile 0.839 0.090 0.876 0.126

Employment fig. by gender Part-time fig. by gender



Discussion

Overall Labor market impact of a long-term UBI-like transfer inAlaska:

employment: zero or moderately positivepart-time: increase (intensive margin reduction)

General equilibrium effects may offset negative impact of dividend onindividual labor supply, e.g. higher spending leads to a a labordemand effect, as shown in the case of unemployment insurancebenefits (Di Maggio and Kermani, 2017).

Multiplier needed to offset a negative micro effect on employment iswithin the range estimated by literature (Ramey, 2011,Chodorow-Reich, 2017)

Labor demand effect should be bigger in non-tradables: expect biggeremployment effect, and smaller part-time effect.

We find evidence consistent with this prediction, which bolsters theevidence for a labor demand effect induced by UBI at the macro level.



Discussion


employment: zero or moderately positive

part-time: increase (intensive margin reduction)







Discussion









Discussion









Discussion









Discussion









Discussion









Heterogeneity by tradability

Table: Synthetic Control Estimates, Average Difference 1982-2014, by tradability

(1) (2) (3) (4)

Tradable Non-Tradable

Employment Part-Time Employment Part-TimeRate Rate Rate Rate

α0 -0.047 0.019 0.005 0.000

p-value 0.020 0.098 0.569 1.000

95% CI [-0.074,-0.026] [-0.007,0.046] [-0.016,0.027] [-0.061,0.038]

Number of placebos 51 51 51 51




Jones & Marinescu (2017): conclusion

Existing literature on unconditional cash transfers: not universal,short-run.

UBI-like cash transfer in Alaska: unconditional, universal, long-run,captures macro effects.

The macro effect of Alaska PFD on labor supply is less negative thanthe micro effect of an unconditional cash transfer

Dividend payments had a very small positive (0.001) but insignificanteffect on employment to population

Dividend payments increase part-time employment as a share of thepopulation by 1.8 p.p. (up from 10%).

Growing policy interest in UBI: Alaskan long-run experienceinformative about likely labor market impacts.

Future work: impact of UBI on prices in Alaska.






























































Marinescu and Shor, 2018: politics of UBI

Outline











The politics of universal basic income

UBI for the left: addressing poverty while side-stepping poor politicalsupport for means-tested welfare like Medicaid.

UBI for the right: more individual choice and freedom, & moreefficient delivery of services. UBI side-steps low trust in institutions.

Potential for bi-partisan support but:

Progressives fear that UBI will lead to gutting other programsConservatives fear that UBI will be layered on top of the currentwelfare system, leading to increases in taxes & public spending





















Progressives fear that UBI will lead to gutting other programs

Conservatives fear that UBI will be layered on top of the currentwelfare system, leading to increases in taxes & public spending










A universal basic income at the state level

Gridlock at the national level: UBI unlikely to pass.

Carbon fee & rebate (or tax & dividend), at the state level: e.g.Washington DC campaign: Put a Price on it!

Carbon fee: make polluters pay and protect our children’s future.Conservative & liberal economists agree this is a great idea.

Revenue from carbon fee rebated to the people in the form of cash:this can pay for a small universal basic income.

Carbon fee & rebate redistributive: higher income people receive thesame rebate as lower income people, but they bear a higher carbontax burden.



































Marinescu & Shor: work in progress 1/2

Opinion survey expected to go live this winter.

Survey will assess the support for a carbon tax and dividend at thestate and legislative district level

Will draw on 2016 referendum results in Washington state to calibrateour survey to actual climate policy initiatives
















What we will learn about from our survey:

Which states and which electoral districts are more supportive of acarbon tax and dividend?Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?What drives support and opposition for a carbon tax and dividend anda universal basic income?Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.How well does support for redistribution predict support for UBI /carbon fee?

We can predict results of new state-level carbon fee & rebateinitiatives.

These lessons will be useful for policy actors like the Citizen’s ClimateLobby.




What we will learn about from our survey:Which states and which electoral districts are more supportive of acarbon tax and dividend?

Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?What drives support and opposition for a carbon tax and dividend anda universal basic income?Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.How well does support for redistribution predict support for UBI /carbon fee?






What we will learn about from our survey:Which states and which electoral districts are more supportive of acarbon tax and dividend?Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?

What drives support and opposition for a carbon tax and dividend anda universal basic income?Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.How well does support for redistribution predict support for UBI /carbon fee?






What we will learn about from our survey:Which states and which electoral districts are more supportive of acarbon tax and dividend?Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?What drives support and opposition for a carbon tax and dividend anda universal basic income?

Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.How well does support for redistribution predict support for UBI /carbon fee?






What we will learn about from our survey:Which states and which electoral districts are more supportive of acarbon tax and dividend?Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?What drives support and opposition for a carbon tax and dividend anda universal basic income?Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.

How well does support for redistribution predict support for UBI /carbon fee?






What we will learn about from our survey:Which states and which electoral districts are more supportive of acarbon tax and dividend?Does pointing out that the carbon tax and dividend provides auniversal basic income increase or decrease support for the policy?What drives support and opposition for a carbon tax and dividend anda universal basic income?Which ideology embraces UBI? Will measure the ideology of eachrespondent on a scale developed by Boris Shor to measure the ideologyof legislators.How well does support for redistribution predict support for UBI /carbon fee?
















Conclusion

Conclusion

UBI has no effect on employment at the macro level (Jones &Marinescu, 2017).

UBI has positive effects on health & education (Marinescu, 2017).

Carbon fee & rebate is a promising policy to implement UBI at thestate level.

Ongoing work with Boris Shor on political support for UBI & carbonfee and dividend at the state & electoral district level.

This work should inform the national debate & state policy initiatives:Hawaii, Pennsylvania, DC, Washington state, etc.

More broadly, informative about UBI in developed countries: Canada(Ontario), Finland, UK (Scotland), etc.


Conclusion

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Conclusion

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Conclusion

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Conclusion

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Conclusion

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Appendix

Figure: Employment by Gender: Synthetic Control and Placebo Experiments

Back


Appendix


(1) (2) (3) (4)

Employment Part-Time Labor Force Hours WorkedRate Rate Participation Last Week

α0 0.026 0.003 0.021 0.523

p-value 0.106 0.669 0.092 0.196

95% CI [-0.009,0.060] [-0.011,0.017] [-0.007,0.048] [-0.408,1.436]

Number of placebos 357 357 357 255


Employment Part-Time


Appendix

Table: State Weights for Synthetic Alaska, Common Weights

State Weight

Employment Rate and Part-Time Rate (Common Weights)

Nevada 0.392Wyoming 0.324West Virginia 0.125Washington 0.099District of Columbia 0.060

Back


Appendix

Figure: Part-Time Workers by Gender: Synthetic Control and PlaceboExperiments

Back


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Universal Basic Income, Jobs and Politics - oecd.org · Barack Obama: given advances in arti cial intelligence, many jobs will disappear, and yet we will get wealthier. Universal