In October, I reported on the release of the largest research project ever on universal basic income (UBI). The study’s results were disappointing for advocates of the idea. In short, the research showed that many people who received the income reduced their hours working and increased leisure time. Furthermore, people didn’t use their leisure time in any of the productive activities advocates often claim (e.g., self-improvement, entrepreneurship, time with family).
In December, a National Bureau of Economic Research (NBER) study on UBI authored by economists Sidhya Balakrishnan, Sewin Chan, Sara Constantino, Johannes Haushofer, and Jonathan Morduch was released.
The study examined 2,097 households in Compton, California. They gave around one-third of the households a guaranteed monthly income of an average of $487 and examined how recipient households acted relative to the non-recipients.
Employment and Guaranteed Income
The most obvious impact of a guaranteed income is going to be on a recipient’s work decisions. Predictably, many people who received the guaranteed income reduced their working hours.
The researchers found that part-time workers (those who worked less than 20 hours per week) reduced their time working by 13 percent. Less time working means less money. How much less? The paper states:
The negative impacts on labor market participation translate into negative impacts on household income. While the average monthly cash transfer amount for the treatment group is $487… the net impact on total monthly household income over the past 30 days including the cash transfer was just $92 and not significantly different from zero.
This means that these part-time worker households who received a nearly $500 transfer ended up only being $100 richer overall, because they reduced their working hours. Furthermore, this $100 difference was not statistically significant, which means it’s unclear whether the transfer really leaves people with more income than before!
It should be noted that full-time employees did not significantly change their working habits. This fact also does not bode well for UBI advocates. Why?
Ask yourself, why would part-time employees work less, but full-time employees work the same amount? One explanation is that it is generally easier to pick up part-time work than it is to find a full-time job. As such, full-time workers were likely reluctant to leave behind their stable full-time jobs for a temporary guaranteed income. Additionally, an income of $500 per month is likely not enough to make up for the loss of a full-time job. So it’s unsurprising that this program didn’t affect the decisions of full-time employees.
However, if this program were a permanent government program, I would expect that some full-time employees would also leave their jobs or cut back hours. If you expect to get a guaranteed monthly stipend for two years, you aren’t going to quit your job, because you’re going to have to take on the cost of finding a new full-time job when it ends. However, if you’re going to get it forever, you’re more likely to do so.
Hellbound and Down 