This interview constitutes the second interview of the “The End of History” interview series. For an introduction to this interview series please see part I of the series.
How would you feel about receiving a monthly paycheck that covers all your living expenses without you having to do anything in return? I am talking about money for nothing: you won’t even have to play a guitar on MTV. Sounds pretty good right? At this point I expect you to become slightly suspicious, because you know that things that look too good to be true tend to be precisely that and should therefore be discarded. But don’t do that yet, because the idea of “free money for everyone”, better known as basic income, is to be taken serious. Not only has it been gaining a lot of appeal in the last years, but basic income actually starts to become influential in the political domain.
Although the idea of “free money” comes in many variants and under several different names – among others: basic income, social dividend, negative income tax and guaranteed minimal income – all of the variants revolve around the same principle: provide people with absolute financial security by giving them an unconditional monthly subsistence wage.
Throughout history basic income (BI) has known some remarkable supporters, varying from human rights activist Martin Luther King to neoclassical economist Milton Friedman. This reflects one of the most salient aspects of basic income; it appeals to people all over the political spectrum. Simultaneously, many people are concerned about the economic consequences of BI. Often raised questions include: What will happen to labor supply? And, how can we ever finance basic income? In order to shed light on these questions, we have a talk with basic income expert Sjir Hoeijmakers.
A pragmatic idealist
When Sjir graduated cum laude in econometrics two years ago, everyone expected him to start his career in a big financial firm. After all, isn’t that what all gifted econometricians do? However, Sjir, touched by the idea of basic income, decided to take a radically different step. Today, Sjir lives of a basic income, which has largely been funded by donations, and is deeply involved in the political process surrounding Dutch basic income experiments.
Aware of the fact that anything he says can affect the delicate political process in which he is involved, Sjir cleverly avoids making politically sensitive statements. That is, Sjir admits that he has personal preferences, but stresses that he is “not a lobbyist for basic income”. He rather prefers to argue that basic income comes in “so many promising variants and has so many potential advantages that we should at least investigate the possibility of implementing various aspects in our current social security system.” Sjir can hardly be caught on less sensible statements than this one and as the interview proceeds, his pragmatic approach to idealism becomes ever more evident.
When asked what motivates him, Sjir tells about how fortunate he was to have a kind of “mental basic income”. That is, because of his excellent academic results, he always knew that he could easily get a job once graduated. This financial security allowed him to ask himself “what do I want to do? Rather than what can I do?” Or, using Sjir’s words: “Precisely the fact that I could easily get a job, allowed me to choose not to do so, but to choose for something I really want. I believe that this freedom has made me a lot more productive and useful”. It is the hope that basic income offers a viable way of providing “other people with this same freedom” that drives Sjir.
The most common argument against basic income goes as follows; if all people get a basic income no one will have an incentive to work and many people will choose to stop working. This, of course, is disastrous for the economy, which would have to deal with low labor supply and high labor costs. When confronted with this critique, Sjir remarks: “the funny thing is that most people answer yes if you ask them whether they would continue working if they had a basic income. At the same time, most people think that others would stop working. This constitutes a weird difference between how people think about themselves and how they think about others. Furthermore, if you look at the available scientific evidence there is no reason to assume that people will stop working after a basic income is introduced. Most research actually indicates that people will start working better because they will be happier, healthier and more creative.”
Sjir recognizes that the famous Canadian Mincome experiment revealed that labor supply indeed diminished, be it by small percentages, after people received some form of guaranteed income. But he remarks that “it is questionable whether we should see this as a negative effect. The resulting drop in labor supply can be entirely explained by women spending more time taking care of their children and young adults finishing their education. So, is that a bad thing? Or does this reveal that the current system is deficient?”
Of course, there is something to say for that. But the positive effects Sjir mentions are often difficult to quantify, since they have no specific monetary value. When I suggest that this might be inductive for a deeper measuring problem Sjir affirms that “the quantitative indicators we use to assess policies are too simplistic because they mainly focus on direct monetary consequences. The question is not whether we could quantify – be it imperfectly – all the consequences of BI. When it comes to evaluating social security policies our current perspective is too narrow, since the focus is on questions like: how long does it take before people get back to work? Whereas questions like: are people productive at their new job? Are they occupying the place of someone else? And how healthy are they? are hardly ever asked.”
All we know about the possible implications of basic income has been derived from experiments. Of course, these experiments only give us imperfect information for they cannot match with the complexity of the real world. One of the biggest deficiencies of these experiments can be found in their temporary nature. That is, experiments have a limited duration, whereas an unconditional basic income would be permanent. One can expect the subjects of experiments to anticipate the end of the experiment and change their behavior accordingly. By an intuitive form of reasoning one could argue that the negative effects on labor supply would be bigger, were the subjects granted a permanent basic income. For this reason Sjir stresses “that it is very important that the experiments have a long duration. For if the duration is too short, you do not test the effect of financial security but the effect of a break in financial insecurity.”
Another point of critique lies in the local nature of the experiments. For practical reasons, the biggest experiments so far have provided at most a couple of thousand people with a temporary basic income. On this scale, little can be said about the macroeconomic consequences of basic income. Some argue that BI undermines the very economy upon which its financing depends and fear that its introduction would cause massive inflationary spirals. Sjir believes that we have to admit that “the economy always is an experiment. An experiment that can fail, think for instance of the economic crisis.” He continues that “the biggest risk is doing nothing. The labor market is rapidly changing and we have big unemployment problems. If we do nothing to tackle these problems we are in fact also doing an experiment.” Concurrently, Sjir wants to clear up a popular misconception: “people often think about the introduction of basic income as a discrete step; from one day to another everyone suddenly receives a basic income, and then we just wait and see what happens. In reality, however, you would gradually introduce different elements of basic income as to see which aspects of it improve the current system and which do not.”
Basic income related experiments in the Netherlands
Since Sjir is directly involved in the basic income related experiments in the Netherlands, he is the perfect guy to give us an update about the progress of these experiments. When asked to do so he tells us that “there are currently nineteen municipalities which have shown official interest in conducting an experiment including elements of a basic income. Four of those – Utrecht, Wageningen, Tilburg and Groningen – are discussing the possibility to start experiments with secretary of state Jetta Klijnsma, who recently said to expect that the first experiments could start on the 1st of January 2017.” Since the municipalities are dependent on central government approval, the bottle neck of the political process lies in The Hague. Sjir fears that “the experiments become a political plaything nationally, even though in the municipalities they have arisen from across the political spectrum.” During a vote in parliament last year, all parties except for Geert Wilder’s PVV and Prime Minister Rutte’s VVD voted in favor of allowing for various kinds of experiments.
Noticeably, the proposed experiments are not true unconditional basic income experiments, because only people who are currently dependent on social security allowances (bijstand) are eligible for participating in the experiment. Nevertheless, Sjir sees great value in these experiments for they “introduce two important elements of basic income. First of all, the allowances in the experiment will be unconditional in the sense that the subjects will no longer have to meet a long list of criteria in order to receive their allowance and, second, the experiment will make an end to the poverty trap, since the subjects of the experiment will not lose their full allowance if they decide to start working.”
Getting rid of capitalism’s whip
Without a doubt, the introduction of BI would put in motion an unimaginable process of cultural and economic change. Perhaps the most profound change consists of getting rid of the symbolic whip of capitalism: the threat of being unemployed and, as a consequence, poor. When I share this thought with Sjir he adds that “you could actually see the whip of the free market as a market disturbance, because it forces people to take a job as fast as possible. In that sense, you could argue that basic income would liberate the labor market by creating a labor market in which people no longer rush to occupy any open position but carefully allocate themselves to a position in which they are more productive. Moreover, this would result in a fairer labor market in which salaries are not artificially low due to the fact that people are forced to take a job.”
Basic income would also change our perception of work. To illustrate this, Sjir takes us to a birthday party: “Nowadays, if someone walks up to you at a birthday party and asks you what you do, the most important thing is that you do something. If you don’t have a job you feel ashamed and you would reply that you are ‘between jobs’. Maybe, if people had a basic income they would ask instead: why did you chose to do precisely that? In this context, people might actually start to feel responsible for what they do.” After all, basic income would give people the freedom to choose whatever they want.
So, when can we expect to receive a basic income?
Many may discard basic income as an implausible utopia. But Sjir optimistically sees how the international discussion gains momentum due to new basic income experiments in Canada and vivid political discussions about BI in New Zealand, England, France and the United States. In fact, if the majority of Swiss voters says ‘yes’ to basic income in June’s referendum, Swiss would be the first country to have an unconditional basic income.
When I ask Sjir whether BI will ever be reality, he assures me that “basic income is not a utopia in the sense that it is implausible. People should know that basic income could actually happen. The end of slavery and equal rights for LBGT’s were once utopias as well, so why couldn’t we have a basic income? In ten to twenty years we might as well have one.”