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Alaska's Universal Basic Income Doesn't Increase Unemployment (businessinsider.com)
With Alaska's gubernatorial election coming up, Business Insider brings up a report from earlier this year which finds that the Alaska Permanent Fund Dividend -- the only large-scale universal basic income program in the U.S. -- doesn't increase unemployment like many feared. An anonymous reader shares the report: The vast majority of Alaska's roughly 740,000 citizens support the dividend, which gives virtually every citizen an annual check of about $1,000 to $2,000 (that's $4,000 to $8,000 for a family of four), and both political parties in the state are in favor. Alaskans' feelings about this universal cash transfer are supported by the findings of a working paper published in February that was written by University of Chicago Harris School of Public Policy professor Damon Jones and University of Pennsylvania School of Public Policy and Practice professor Ioana Marinescu -- the annual dividend does not realize fears that such a program would lead people to quit their jobs, lowering employment.
An additional $8,000 for a family is certainly not going to replace a livable income, but, as Jones and Marinescu noted in their paper, studies around a cash assistance experiment in the 1970s, lottery winnings, and a permanent fund dividend for the Eastern Band of Cherokee Indians reduced earned income, and critics of any universal basic income programs have pointed to such findings as proof that anything on a larger scale would be a disaster. But Jones and Marinescu found instead that the larger scale of the program is what allows it to work, and not dissuade people out of the work force. More specifically, Jones and Marinescu determined that part-time employment increased by 17% only in the non-tradable sector (jobs whose output isn't traded internationally), and that overall employment wasn't affected because more spending money results in more demand, and thus more jobs.
An additional $8,000 for a family is certainly not going to replace a livable income, but, as Jones and Marinescu noted in their paper, studies around a cash assistance experiment in the 1970s, lottery winnings, and a permanent fund dividend for the Eastern Band of Cherokee Indians reduced earned income, and critics of any universal basic income programs have pointed to such findings as proof that anything on a larger scale would be a disaster. But Jones and Marinescu found instead that the larger scale of the program is what allows it to work, and not dissuade people out of the work force. More specifically, Jones and Marinescu determined that part-time employment increased by 17% only in the non-tradable sector (jobs whose output isn't traded internationally), and that overall employment wasn't affected because more spending money results in more demand, and thus more jobs.
Alaska has some of if not the biggest oil reserves in the U.S., and makes money from selling oil to the lower 48 states. Instead of the state keeping those proceeds, it distributes it to Alaskan citizens. That makes it different from a UBI because the money comes from actual productivity. Something of value which belonged to each Alaskan citizen was sold, and they are receiving payment for it. Productive transactions like this are positive-sum (both the buyer and seller benefit), and are what make the economy work.
That makes it different from a UBI where there's no additional productivity. In a UBI, you're just redistributing money among the population - taking from the more productive citizens via taxes, and distributing it to other citizens. That makes it zero-sum (one person wins, another person loses). It can have a positive influence if the people receiving the money were underpaid (what Ford stumbled upon when he paid his workers more) or causes people not to create other costs on society (e.g. not resorting to crime). Or it can have a negative influence if it leads people to decrease their average productivity because they'll get money regardless of whether they work.
Venezuela is the perfect example of the difference between the two. When their oil exports were strong, it generated enough productivity (revenue from outside the country) to support their cushy socialist programs. But when the price of oil fell and that source of productivity dried up, they should've cut back the programs to match their decreased revenue. Instead, they tried to maintain the programs at the previous level. That doesn't work because unlike money, productivity is conserved - everything that's consumed has to be produced. If you try to create the illusion that production and consumption are not equal, the economy usually responds by altering the value of your currency to make the valuations of the two equal.
That's what's driving the tremendous inflation they're experiencing. Basically the country is creating $100 in productivity, but promising its citizens $500 in handouts to consume stuff. When you do that, the currency devalues (suffers inflation) so that it now costs $500 to buy what used to cost $100, thereby keeping production and consumption equal.