Hello and welcome back to the University of Michigan Teach- Out on basic income. I'm here with an international expert on cash transfer and basic Income experiments, Yannick Vanderborght, is a Professor of Political Science at Saint Louis University in Brussels. Yannick, thanks so much for joining us, we appreciate it. Thank you very much. I'm happy to be here. Great. Now, I would say in the long arc of research and conversation about basic income that we've really entered into a new time, at least here in the United States. And I wonder, if someone has studied this for a long time, would you agree? Is there something different about the conversation that's happening now, and if yes, how so? Yeah. I think, there is a lot of difference between now and what has happened perhaps in the last 20 years, and that's not only true in the US, actually, we also see that in Europe. When I started to work on basic income in the late 90s, early 2000s, we were mainly a community of academics, philosophers, economists, and political scientists like me, but it was, you could say mainly a discussion between intellectuals, between academics. Now, what has changed is that, we see a lot of activists who are involved in the discussion, trying to network. And I think, one big change in the last 20 years has been the rise of the Internet. Though people manage to connect with each other across the planet and including also across the United States. And so, I think that it has changed a lot the type of discussion. Now, what I also believe is that, there is something else. It's not only the global community of activists that has changed and it's really new and we see that in Europe, in the US, but I also think that interest in basic income has been changing, and that is probably due to several issues. The first one being, I think, you could call that the great transformation of the of the labor market. Increasingly, people are worried about automation, about the idea that many jobs will be lost due to technological change, and that's very much related to what I just mentioned, the rise of the internet. And that's not a surprise for me to see all these people from the Silicon Valley in the United States including Zuckerberg, but also people like Chris Hughes, plotting to defend the basic income. I think that they see of course, the connection between this idea of having an income guarantee. And on the other hand, the idea that jobs will be perhaps very different from what they are now, and that we need to rethink a way to guarantee economic security, and that is something totally new that was not at all present in the 2000s. Perhaps, also the problem of inequalities, that is of course not a new problem, but it's back on the agenda since the financial crisis of 2008. It's back on the agenda due to many factors, including academic works by people like Thomas Piketty, for instance, whose book was a best seller in the United States. And of course, advocates of basic income really believe that it's one of the ways and use to tackle these rise in inequalities. Yes. So, this is interesting. In the United States, we tend to be America-centric, I think, and assume that all the conversations are particular to us. But it sounds like, what you're saying is that, this is part of a global conversation, that this is happening everywhere at least in the Western industrialized world that people are worried about automation, and also a function of the world becoming smaller, that we can communicate with each other, we can sort of understand ideas, and understand the things that we see coming in the future and how they might impact us. Yeah, for sure. I mean, when the global network and basic income was founded in the 80s, it was in 86, it was first of all a European network, it became global in 2004. And in the early years of that network, people were sending newsletters by post, right? So, you could only reach like 200, 100 persons and most of them were in Europe, some of them when we're in US. And increasingly, when we started to send a newsletter by email, then to create a website, we managed to reach much more people in the industrialized world. Like you said, that is essentially, North America, normally the US, but also Canada, Western Europe, but also to some extent, Japan, South Korea, Australia, New Zealand. All these people started to connect to each other, and so now, we really have a global basic income compensation. That is only possible, thanks to these new technologies. I must also say that there has been an increasing interest in basic income, not only in the OECD countries you could say, but also in the South with experiments in Africa, for instance, also in Brazil. So, there has been a growing interest in non or less developed countries too, actually. So, let's talk about the research since that's where your work really rests, and I like to say that's sort of the theoretical premise for any sort of basic income cash transfer strategy is put simply, cash is king. Cash is the best way to help poor families, best ways to reduce inequality. So, tell us first a little bit about the theoretical case for why cash and maybe a better way to help people. And then, if you wouldn't mind just run us through some of the research upon which we've tested that hypothesis and whether or not it bears out. Yeah. It's a very interesting question, and I think it's central to the discussion. Why? Well, probably because many of us we still think that services, or if you want in-kind benefits might be better than cash. And why? And I think, we can have good reasons to think about that. We tend to want to protect people against bad decisions that they could take. That's especially true if we talk about poor people. Many of us, we think that poor people are going to make bad decisions about their future if we give them cash. That's the reason why we have developed many, many services, and that's also the case in the United States. So, for instance, there is a mixed program, which is the Food Stamps Programs, which is a way to give cash to poor people, but only in order to consume food products. And so, it's cash, but attached to some conditions. Though, basically, I would say that you have two options and I don't think they are incompatible, but you can combine them. When you go for services or in-kind benefits, the idea is that you will protect people against bad decisions that they could take, that you want to develop some form of paternalism. Will help them to take the right decisions because you want to make sure that they will consume or use some services. I think that's the good thing to do especially in terms of healthcare and education and the most developed welfare states they provide everyone with access to decent health care and decent education. From that perspective, I think that there is still a lot of work to be done in the United States. As you all know, many people in the US do not have access to the decent healthcare even if the situation has improved recently. So, it's not because I'm a basic income advocate that I would say, "Well, we should get rid of healthcare, we should get rid of public education, and give just cash to people." I don't think so. We need decent healthcare, we need decent education. However, this must be combined with cash benefits. Why? I think the key reason and that's also what is shown by studies not only in ethics but also in economics because cash in a capitalist society gives freedom. Without a minimum form of cash security, of cash benefits, you don't really enjoy freedom in our societies. In order to be free to make some choices about what you're going to consume, about what you're going to buy not only for yourself, but also for your children. Without that cash, you're not really free. So we live in free societies if you want but I would say that you're only formally free and not really free if you lack some access to cash. So, that's the reason why you should always have a combination and that's not easy to know what is the right combination but you should always have a combination between services provided if possible by public authorities and cash transfers. Now, what is the evidence? Well, that's a big question but we know from past experiments that when contrary to what we often think, when you give them cash, poor people can perfectly know what is useful to them, why, what they should invest in, how they should use that cash. For instance, just take one example, in Canada in the '70s, there was this now famous basic income experiments, it was called MinCome, and one of the aspects of the experiment was to pay for basic income to all residents of a small city, small town in Manitoba. Dauphin, the city of Dauphin. What has been shown is that this cash that was given to individuals, has been used among other things by young people to study longer. So, they stayed longer in school. So it helped families to cover the opportunity cost of studying. So it's not that these people started to use the cash to buy alcohol or to go to the casino. No, they used the cash to do something that was really important to them, that is studying, improving their human capital. So, give the freedom to people to use the cash as they wish, and we have good reasons to think that they will make the best use of it. So, tell us a little bit about the different forms that a basic income might take in the United States and across the world. What are people playing around with and maybe delve a little bit into negative income tax versus universal basic income, you mentioned a little bit conditional versus unconditional and what does those all look like? Yeah. We can actually think of many different forms of a basic income and I must say, I am not a fetishist in the sense that some people I think rightly might believe that's going now. Let's say tomorrow, for a full basic income of $1,000 for every one every month is not feasible. So, we have to think about transition steps, more modest steps perhaps but more feasible steps perhaps. But that's why I think it's interesting to look at the different ways we can implement the basic income. So, you have, of course, the full basic income, the core idea is to have a basic income which is enough to live on and which would be paid to every individual totally unconditional and totally universal that is to everyone really in a country like the US, rich and poor alike. Now, what does that mean without any conditions that would mean that contrary to the current systems, you don't have to be available on the labor market, you are not forced to work, you're not forced to search for a job, you can do whatever you want. Now, that's probably the most controversial part of the basic income. That's the reason why some people say, "Well, we might go into that direction but not too far." That's for instance a proposal that has been made by Anthony Atkinson, a British economist who died recently. Atkinson was in favor of what he called the participation income. So, we should have a key which is less conditional than what we have now, the social assistance of public assistance of welfare if you wanted in the United States. Let's move away from the the very strict conditionality of public assistance, and go not that far as the basic income advocates would like to go, just a step further in the direction of what he calls a participation income. That would be a basic income which would be paid to people who are doing something socially useful. That is for instance caring for children or caring for dependent relatives, or people who are studying. So, students would enjoy the benefit of the participation, people who are actively searching for a job. So, it will be not fully unconditional but certainly less conditional steam of economic security. That's one option. Another option is, of course, not to look at the unconditionality but look at universality. You could actually also say it's perhaps to some extent observe to give this money to everyone. Bill Gates does not need the basic income. So, let's go for a negative income tax. That is you only pay the income guarantee, the people below a certain income threshold. You have the full benefits if you have zero dollar of income, and then it's phased out until some threshold above which you start to pay taxes. So, that's the idea of the negative income tax below the threshold you receive the grant. Above it, you pay a positive income tax. That's the idea of the negative income tax which has been proposed by people like Milton Friedman in the United States. The only problem I see with the negative income tax, well, that's the main problem I see with the negative income tax, is the fact that it's not paid exactly like a basic income. Yes, a basic income is paid to everyone including Bill Gates. But Bill Gates at the end of the year, he has to pay taxes, not only to finance his own basic income but to finance the basic income of many others. Now, a negative income tax is only paid exposed. Once the tax forms have been processed, once we have checked that you are below the threshold and not above it. That might generate some problems because some people need the money urgently and that's why basic income is better from that perspective. Now, let me just take one last example. You could also think of basic income for age categories. That's pretty interesting I think because it's pretty straightforward. You cannot really have some administrative discretion or arbitrariness with age categories, you cannot change your age, and one of the good examples of that is a child benefit, a child allowance. That's a basic income for children. Obviously, it's paid to the parents. Many, many European countries have that now, universal, unconditional, childhood allowances for our children mainly below age 18. Well, you could think of such an option in the case of the United States. The US is one one the few developed countries without any child benefits, and the US also has a very high child poverty rates. So, I think if the basic income discussion could inspire a reform in the direction of a child benefit in US, it would be a great, great step forward. So, just for the record as the author of a recent child allowance paper, I would say, I did not pay you to promote the child allowance there. Okay. I didn't know that. Of course, you probably been thinking about child allowance as a child benefits much longer than I have. Tell us a little bit about the current studies in the United States, we have some in Canada. What do we hope to gain? What knowledge is there still to find then and how will these studies push us forward? Yeah, that's interesting because these studies, they also contribute solve these experiments. If you want also, they contribute quite a lot to attract media attention, to attract the public attention on basic income. That's perhaps also something that is totally new, at least compared to the discussion in late 90s or 2000s. For instance, Europe, but even I think in the US, there has been a lot of discussion about the experiment in Finland that has attracted even the attention of the papers like The New York Times. I think it also helps to explain why basic income is now back on the agenda. What can we expect from these studies? I think that we need to be very cautious about that. We can probably learn a few things about how people behave when they get a cash guarantee for instance, as I mentioned earlier, are they going to use that to study longer? Or to launch their own business? Or to reduce their working time and stay a bit longer with their children? That's very interesting. However, we need to be cautious because typically when you do such experiments like it will be the case in Canada, like is the case in Finland's now. You have a sample say a treatment group, in Finland it's at this moment 2,000 persons, a treatment group who receives a basic income. 2,000 persons across Finland, I don't remember exactly how much in Ontario in Canada, but that would probably be very similar to that. They received a basic income and we want to see what happens with them. That's fine, however, we have to know that first the experiments will end, and it will end soon, in the case of Finland it's only two years, though it's very different from a real basic income that is guaranteed if you want for a very long time perhaps for your entire life. If I receive a small basic income for two years I might think well, I will save that money because I know that it will end, I'm not going to leave my job, I'm not going to launch a new business because the timespan is too short. But that's the first problem, perhaps the contrary might happen, perhaps I will say" Well, it's now or never. I know I have this basic income, I know it will end, no, it's now that I have to quit my job." But it's very different from a real basic income. The second issue, and that's even more important I think we have to be cautious because we cannot test the impact of the basic income guarantee in such experiments, we cannot test the impact on net contributors, that is those people who will have to pay perhaps higher taxes in order to fund a new system. That's simply because these experiments are financed by research agencies, by governmental agencies, but not by taxpayers or at least not directly. That's also a problem because we perfectly know that if we implement a full basic income or at least a high basic income in a country like in the US, or in my country, Belgium, we know that we might have to adjust the tax system, that some people, you remember I mentioned Bill Gates. Some people will see their taxes going up and perhaps these people will also tend to say, well, if my taxes go up I will reduce my working time, I will work less. So, it's difficult I think with such experiments to test the impact on the whole, if you want the go global or national labor market. What will happen with not only with people who receive the basic income, but also what will happen on the behavior of net contributors? Though, we have of course to look at these experiments, to watch at how people behave etc, but still we have to remain cautious about how we can extrapolate the results to a real basic income that would be implemented at national level. Now, that puts us in a bit of an empirical Catch-22 you might say, where we can't really know what would happen if we implemented something like this on a national scale. Even from what you're saying we won't really know what will happen unless we implemented on a national scale for quite a long period of time. But that makes someone like me a little bit nervous because I hate to jump into something that I really can't know what the societal impacts are going to be. Yeah. I'm like you, I also hate that, and I think that's one of the issues, one of the problems of people like me who work on basic income is that we would like to anticipate what is going to happen. Now, we can look at the Alaska system, a dividend in Alaska, but it's a very small basic income but it seems to work quite well in the sense that people, from what I know, people use it for instance to save money in order to fund the studies of their kids and things like that. But my take on this is that it shows that we cannot expect too much from these experiments, and what we should go for is rather the implementation of what I call a partial basic income, that is a small basic income. Of course, if we start tomorrow to implement the basic income of $1,000 in a country like the United States, the impact on the labor market will be huge. We cannot anticipate, perhaps we will end up in a nightmare scenario where people will stop working altogether or reduce their working time and we will lack the money that is needed to fund the system. Perhaps, we will not end up in the nightmare scenario, but we don't know. That's the reason why I believe that we should go for gradual steps. A partial basic income that is for instance a very small one, perhaps it's only $200 or $300 and see what happens. Perhaps that's the reason why we should go for child allowance before going for a basic income for everyone. Actually, that's also how we constructed our welfare systems, and even the most generous ones in countries like Germany or Sweden. In the late 19th century when Bismarck started the first social insurance in Germany. It was actually a very low level. It was not of course in any way comparable to what they have now in Germany, but it was the starting point of something that developed throughout the 20th century. That's perhaps the way we should think about that. We should not be desperate by the fact that we cannot anticipate the consequences, but it should force us to be somehow cautious, and I think add rather some gradual steps towards the ultimate goal which should be to provide real economic security to everywhere. Yeah. Last question, I was speaking at an event last week and mentioned to the person at my table that we were doing this Teach Out on basic income here at the University of Michigan and she said, "Oh well, didn't Finland just decide to do that and terminated because it wasn't working." So tell us a little bit about, what really has happened in Finland and what the implications does that have for the conversation? Yeah, the Finland experiments I think is crucial for the conversation because it has attracted a lot of media attention, and the media keep following these experiments. So, if you want to some extent if it fails many people including many political actors who are against the basic income will argue by saying, "Look, the Finnish have tried it, it failed and it shows that a basic income is not feasible." For reasons I just mentioned, I think you cannot draw any such conclusions from an experiment. Now what has happened, I think is that from the very start of the experiment, the researchers and I know some of them, the researchers wanted to have something quite ambitious. They wanted to have a really a representative sample of the whole Finnish population. This is not what the government has accepted to do, the government asked them only to look at the behavior of long-term unemployed people. So there is already a bias in the sample, it's not a representative sample of the whole Finnish population, you only have 2,000 long term unemployed. That's a very specific subset of the Finnish population. It doesn't allow you to look at how the general or the general public in Finland would behave if there was a true basic income. Also, the government said that the research would only last for two years, and perhaps there might be some extra time later on after the two years. But from the very beginning it was clear with the researchers that the experiment would end at the end of 2018. Now, what has happened recently is that the Finnish government has said, "It will end in 2018 but, we will not give extra time to do research.". I see, so they didn't Exactly. -terminate it, they just said we're not going to extend it beyond what we had originally committed to. They did not terminate it before I was done, they just said, "We're not going to extend it." Got it. What will happen is after these two years the researcher will start to make interviews with the recipients to see what it has this happens with them etc. What's interesting is that they did not interview them during the experiments in order not to change their or not to influence behavior. That's very of course, that's what you have to do. However, what happened is that many journalists went to interview these people in the sample, and that has of course probably, I think it has influenced the behavior of the recipients. They knew that they were part of an experiment, they knew that these experiments was attracting a lot of attention. Though I think it will also probably influence the results. Anyway, at the end of 2018 the researchers will start with their investigation of the effects, this study will be published anyway. So, they did not really terminate the experiment, but they did say, "Actually we are not going to extend it." Super helpful. Yannick, this has been so enlightening and I so appreciate you taking the time to speak with us. Thank you very much, thank you. All right, and thank you for joining us for this segment in the University of Michigan Basic Income Teach Out, I look forward to being with you for further segments and in the discussion chats.
