Wednesday, January 29, 2014

Guaranteed Annual Income Update

Last month I wrote a blog post about the concept of a guaranteed annual income (GAI). There is a referendum on the ballot in Switzerland this spring that, if enacted, would mean every Swiss citizen would receive about $2800 a month.
The idea of guaranteeing a basic minimum income to all citizens was studied in the United States and Canada in the 1960s and 70s, with favorable results, but then in the 1980s the Reagan era brought a conservative turn away from social programs and all of that was forgotten.
However, the New York Times recently reported that the Cherokee Indians of North Carolina are showing that a GAI is not only an effective anti-poverty measure, but creates such positive results that it is cost-effective in the long-run.
In 1996 the Eastern Band of the Cherokee Indians opened a casino, and elected to distribute some of the profits equally to all the tribe’s members. Jane Costello, an epidemiologist at Duke University Medical School,
had already been following 1,420 rural children in the area, a quarter of whom were Cherokee, for four years. That gave her a solid baseline measure. Roughly one-fifth of the rural non-Indians in her study lived in poverty, compared with more than half of the Cherokee. By 2001, when casino profits amounted to $6,000 per person yearly, the number of Cherokee living below the poverty line had declined by half. 
The poorest children tended to have the greatest risk of psychiatric disorders, including emotional and behavioral problems. But just four years after the supplements began, Professor Costello observed marked improvements among those who moved out of poverty. The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor. Already well-off Cherokee children, on the other hand, showed no improvement. The supplements seemed to benefit the poorest children most dramatically.
As the years passed Dr. Costello continued the study and found:
Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved. And by 2006, when the supplements had grown to about $9,000 yearly per member, Professor Costello could make another observation: The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood.
Dr. Costello argues that a major factor in the improvements she measured was the reduction in parental stress due to an assured basic income. Other studies have also shown this, including the GAI experiments I mentioned earlier.
A nonprofit organization called The Families and Work Institute conducted a study in the 1990s called “Ask the Children.” One of the questions was, "If you were granted one wish, and you only have one wish that could change the way your mother’s or your father’s work affects your life, what would that wish be?" The largest response was, “I wish my parents were less stressed and tired.”
The surprising finding from the Cherokee experiment is that society can actually save money with GAI (continuing from the New York Times article):
Randall Akee, an economist at the University of California, Los Angeles, and a collaborator of Professor Costello’s, argues that the supplements actually save money in the long run. He calculates that 5 to 10 years after age 19, the savings incurred by the Cherokee income supplements surpass the initial costs — the payments to parents while the children were minors. That’s a conservative estimate, he says, based on reduced criminality, a reduced need for psychiatric care and savings gained from not repeating grades. (The full analysis is not yet published.)
This cost-benefit analysis is why some conservatives are in favor of a GAI. The most well known advocate was Milton Friedman who championed the idea in Capitalism and Freedom (1962). Today, Charles Murray, of the conservative American Enterprise Institute, argues that a lot of government bureaucracy can be eliminated with a minimum income—food stamps, aid to dependent children, disability, unemployment, social security, etc. (Book In Our Hands: A Plan to Replace the Welfare State).
I think the guaranteed minimum income is an idea whose time has (almost) come.

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