In this episode, Gene Tunny dives into a recent Universal Basic Income (UBI) experiment funded by Sam Altman, CEO of OpenAI. Gene explores the key findings of the randomised controlled trial and discusses whether the positive outcomes are enough to convince sceptics. Are UBI recipients more financially secure, or are there deeper concerns about its impact on labour force participation and long-term wealth? Get Gene’s balanced analysis of this major UBI trial and its broader implications.
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Timestamps for EP257
- Introduction (0:00)
- Defining Universal Basic Income (UBI) (4:21)
- Overview of the OpenAI UBI Experiment (8:09)
- Positive Findings from the OpenAI UBI Experiment (13:54)
- Concerns and Criticisms of the OpenAI UBI Experiment (21:55)
- Financial Impact of UBI on Household Net Worth (22:50)
- Gene Tunny’s Skepticism About UBI (34:17)
- Closing Remarks and Previous Episode Clips (37:57)
Takeaways
- Mixed Outcomes of UBI: The experiment showed some positive effects, such as increased financial flexibility and well-being, but also concerning results, such as a slight decrease in labour market participation.
- Spending Behavior: UBI recipients spent more on necessities like food and rent; interestingly, they were more likely to help others financially.
- Limited Educational and Employment Impact: Younger participants showed interest in further education, but there was no significant boost in human capital or labour productivity.
- Debate Over Financial Impact: UBI did not lead to clear improvements in recipients’ financial health. The study found increased debt in some cases, raising questions about UBI’s long-term benefits.
- AI and UBI: As technological advancements continue, UBI is seen by some as a solution to technological unemployment, though Gene and some experts remain sceptical about the scale of potential job loss.
Links relevant to the conversation
Bloomberg article “Sam Altman-Backed Group Completes Largest US Study on Basic Income”:
OpenResearch’s website:
https://www.openresearchlab.org
Pete Judo’s video on UBI experiment failing:
NBER working papers on the study
The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States:
https://www.nber.org/papers/w32719
The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States:
https://www.nber.org/papers/w32784
Two Computer Scientists Debunk A.I. Hype with Arvind Narayanan and Sayash Kapoor:
AI can do only 5pc of jobs, says MIT economist who fears crash:
Previous episodes:
https://economicsexplored.com/2022/02/13/ubi-universal-basic-income-w-ben-phillips-anu-ep126/
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Transcript: The Future of VC: Blockchain, Web3, and Emerging Markets w/ Qin En Looi, Partner, Saison Capital – EP256
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Ben Phillips 00:04
I guess looking at history, over the past 50 or 60 years, we’ve had some pretty incredible technological changes that arguably are larger than what we’re currently seeing. And you know, you have periods, of course, where you have some fire unemployment, but generally speaking, the economies have transitioned and people have transitioned. Perhaps there are strong arguments for, I guess, helping people restructure their lives, structural assistance packages for those in industries that disappeared.
Gene Tunny 00:38
Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode. Please check out the show notes for relevant information. Now on to the show. Hello and welcome to the show. I get asked a lot about the concept of universal basic income, ubi, and I’ve had some previous episodes on it. I had an advocate for UBI in episode 137 Michael Haynes and I had an academic expert, someone who’s done a lot of modeling of the welfare system and tax system, Ben Phillips, an associate professor at ANU. He’s somewhat skeptical about UBI, and I had that conversation with Ben in episode 126, so I’ll put links to those episodes in the show notes. So it’s, it’s a concept that I’ve, you know, I’ve talked to a lot of people about, I’ve been thinking about myself, and I think it’s time for an update, because I’ve seen a few reactions online to a new UBI experiment that was funded by Sam Altman from open AI, the chat GPT company, and the results of that came out a few months ago, so in July. And now this is a really fascinating study. It’s a large scale, randomized controlled trial, a large scale experiment. So they’re using the gold standard methodology, and it’s it’s for the US. So it’s arguably more relevant, more applicable to what a UBI could achieve in the United States or other advanced economies and some other studies that have been conducted in emerging economies, some people see the experiment as a success and as supportive of UBI, and others See it as a failure. Now what is the truth? That’s that’s what I’m trying to explore in this episode. So I’ve read the results of the study. I’ve read a couple of academic papers that have been produced using rigorous techniques. They’ve been published as NBR, so National Bureau of Economic Research working papers, so very high quality research papers, and we’ll go through the results of those in the episode. My view is that this study of the UBI experiment that’s been funded by Sam Altman, I don’t think this will get a UBI across the line. There are some positive results for UBI advocates, but I don’t think they’re enough to really convince the people who need convincing that this is a good idea. And there are some, there are some results you could perceive as negative or that really raise doubts about the whole idea of a UBI. So we’ll go through those. I’ll give my thoughts on what the results mean, and I’ll be interested in your thoughts too. So please let me know. You can contact me through email or via a voice message. So the information’s in the show notes that will allow you to do that. First, let’s recap what we mean by UBI Exactly. And there are various definitions of it, but essentially it comes down to a regular payment of some kind. So it’s a, say, $1,000 a month. Is provided to all adult citizens, and it’s unconditional. There’s no work requirements, or there’s no means testing. It’s not dependent on how much money you’re making already. You don’t have to there’s no eligibility requirements in terms of, well, it’s for people who are. Are unemployed, or they’re not earning enough money, or they’re a single parent, etc. It’s unconditional, and the idea is to provide a minimum level of income. It’s often described as a flaw to stand on, or a platform to to build your life on. The people who who advocate it do they see this as something that will help people well. It provides financial security, and it will allow people to pursue education, to pursue improving their health and fitness, their their well being. It will enable people to, essentially, you know, take some time out and try to find themselves that sort of thing. And it’s something that is seen as, uh, desirable, given that we know that there are these potentially massive technological changes happening we all know about AI that really surprised us a couple of years ago when chat GPT came out. I think that was a real shock to many of us, just how how good it, it is. I mean, obviously there are some some issues. You’ve got to be careful with what comes out of it. But really it was, it was rather extraordinary. And there are all sorts of forecasts of what AI could mean, and automation, what they could mean for the level of employment, the level of unemployment. There are concerns about massive technological unemployment. So unemployment related to new technology. Then there are also concerns about, well, what does this mean for inequality? And so what we see is some people arguing for UBI as a way to to correct those, those concerns. Now I’m I’m skeptical about some of those diagnoses, so I’m less convinced by that, but I can see the logic. I can see the rationale behind why some people are are arguing for for universal basic income. Another, another argument relates to just the nature of the welfare system and how the way we’ve set it up, where you have benefits being withdrawn as you earn more money, so you could lose part of your your pension or your your unemployment benefit. If you get a job, you’ll lose that, or you’ll lose food stamps, etc. Then that can create a disincentive to actually do better, to get a job, to work harder, and it can create a welfare trap. That’s one of the reasons why they make this. They think, well, let’s just have an unconditional benefit. There’s there’s no questions asked, and it’s just for a basic level of of support. And then if you want to make more than that, if you want to live better than that, provides, then you go out and you make the money to support yourself. Okay? So that’s, that’s essentially where these advocates of UBI are coming from. In my view, that’s what I’ve interpreted. If you’ve got a different view on UBI or what you think’s driving it, then, then let me know. Drop me a line. So let’s, let’s go on to this study in particular, and we’ll go through that. So this study, as I mentioned before, it was funded by Sam Altman, the CEO of open AI. It’s a large scale UBI experiment. It ran for three years, concluding in 2024 so this year, and it’s considered one of the most comprehensive Basic Income experiments so far, it involved 3000 participants across the US. So in Illinois and Texas, 1000 participants received monthly payments of $1,000 so that’s the treatment group, and then you had 2000 participants in a control group who received $50 monthly payments. And so they’re aged 21 to 40, and the duration was, was three years. So as I mentioned before, the open AI, they’ve published a variety of findings on their website, relating to employment and relating to what what people spent money on, education impacts health care and what it means for people’s well being or their their agency. Okay, I’ll put some links in the show notes to where those results are reported. A good summary is in a Bloomberg article that I found, and I’ll also put a link to that. And the way that they summarized it is as follows. They said that, like many of the other studies before. For it, this study has found that the recipients of the UBI, they spend more to meet their basic needs and to to assist others, and they don’t drop out of the workforce, but they work slightly fewer hours. The biggest thing that that advocates of UBI are taking out of this study, and this is this is Bloomberg summary, the researchers biggest takeaway is that cash provides flexibility, and the researchers in the for the project, they said that it can be used to address recipients specific needs. It’s responsive to changing demands and creates a possibility for increased agency. Bloomberg reports the researchers resist generalizations on the Find insane outcomes vary depending on recipients income starting out, their family structures and their priorities. So there are some benefits. So they talk about how, you know, people do end up spending more on their their basic needs. People were more likely to go to the dentist. That was seen as a, you know, a major, a major finding. Now, that’s, that’s something that’s important. I mean, as someone who’s had various dental issues through their life, I think, I think that is a good thing. There’s a bit of a bit of uncertainty about what it means for education and skills. It’s been reported that in the headline results, that recipients were significantly more likely to report plans for further education. So they’re planning to to undertake further education. Those 6% percentage points more likely, which was a 15% increase compared with the average control participants. So they’re they’re more interested in pursuing it. But then there’s one of the NBR studies that was of the data set it wrote in. This is in the abstract of this is a paper the employment effects of a guaranteed income experimental evidence from two US states. So this is NBR working paper, 32719, and this is by various researchers led by Elizabeth Rhodes, is the research director of the project, and the finding this is one thing I found interesting. We observe no significant effects on investments in human capital, though younger participants may pursue more formal education overall, Our results suggest a moderate labor supply effect that does not appear offset by other productive activities. Okay, right? So what they’ve found so younger participants may pursue more formal education. Okay, so they might be studying more, but they observe no significant effects on investments in human capital. So within the the timeframe of the study, they didn’t observe any significant increase in people graduating or obtaining particular qualifications, although they do note that younger people may pursue more formal education, this is the bit that I find potentially concerning or makes you question. Well, okay, well, is UBI really such a great idea? Because what these researchers have found in their analysis of the data coming out of this experiment is that the program resulted in a two percentage point decrease in labor market participation for participants, and a 1.3 to 1.4 hour per week reduction in labor hours. Okay, so it looks like, you know, some people did actually drop out of the workforce, although you could argue it’s not a huge number, and this is what I find. Is probably the most concerning, is that, essentially, people just took this what they did with those extra hours was engaged in leisure activity, so they watched Netflix, or maybe hopefully they went and did something more active, that they weren’t doing anything productive, so to speak. So they weren’t engaging in education activity. So I think that is potentially a bit of a concern with with the results of this experiment. Okay, we might just have another look at some of the more positive findings, because I don’t want to completely just be negative about this. Because. There could be some benefits from from UBI and particularly people having the money to be able to spend on necessities and increase in agency. So they seem to be the major positive findings that have, that have come out of this study, as I mentioned before, the key finding regarding spending cash is flexible and allows people to spend on their unique needs. So this is on open researchers page. Just go to their page on key findings spending, and what they find is that, in terms of the dollar amounts, the largest increases in spending in response to the cash transfers were on basic needs, food, rent and transportation. Now in proportional terms or in percentage terms, the largest increase so this is relative to the average spend of control participants, the largest increase was on financial support to others. So we’ll go over these results again. So so this is with this $1,000 extra a month, so recipients increase their spending by $310 well, this is the observed increase in spending. It looks like there’s some unaccounted for spending. That’s my impression from the studies. But they found that, based on this additional money, they spent $310 more a month, food, $67 rent, $52 and transportation, $50 more. So they they’re spending more. We’ll talk about the transport issue a bit spending category A bit later, because there’s a an interesting result there that does reinforce concerns over the UBI study. What they found this is the other finding that the greatest proportional increase in spending was in this category of supporting others, and that increased by an average of $22 a month. So that’s a 26% increase. And I mean that’s right, cash as open. Ai the open research, people say cash provides increased flexibility to support others. So, yeah, I guess that just shows. I mean, there are a lot of people in need, and we do try to look after our relatives where we can Okay, so that’s a summary of the findings regarding spending. And as you expect, you give people additional money, they’re going to spend some of that money. And so it’s probably a bit, probably no real surprise. You could take some comfort out of the fact that they are using it to spend on what, what are mostly essential items, and then they are helping out relatives or friends. They’re helping to support others. So, okay, maybe that’s not really that unexpected, but that’s seen as one of the great findings, or positive findings that people have. You know, they they did spend this additional money on what appear largely to be worthwhile things. So the other other significant findings that the open research people talk about is, well, they refer to a lot of it seems this is a bit of anecdotal evidence, but there are a lot of quotes in here about how people feel more in control of their destiny. So one recipient, Kendra, said it best, I feel more in control of my destiny because of not only the additional income, but the consistency of the income, it allowed me to plan, to forecast a dream, to achieve things that I thought I wouldn’t be able to achieve because I couldn’t see beyond them financially. And again, this is, this is one of the main, you know, this is one of the arguments in favor of UBI, that it does provide people with this flexibility. They can they can take risks, they can do something entrepreneurial. And one of the interpretations of of these findings is that UBI does help people do that. So there’s a there’s an increased ability to set and to achieve goals. There’s a finding about how it it helps facilitate people to move, to move neighborhoods, an 11% increase in the ability to to move. I. Okay, so moving that can be part of making a fresh start that can improve your your opportunities, your ability to get a higher paying job. So that’s potentially a positive finding, okay, so the that 11% so that was that’s an increase in the propensity to move relative to control participants. So if you go to the the actual page on open research, it said that recipients were 4.4 percentage points more likely to move neighborhoods and 11% increase compared to the average among control. Participants and recipients were four percentage points more likely to move housing units, a 9% increase relative to control participants, right? Okay, I’m not sure what the baseline rate of moving is there, but I’ll put a link in the show notes if you want to check that out. I suppose it makes sense that you get a bit more money. It does provide that flexibility to move maybe, and you know, there certainly could be benefits for doing that, particularly if it allows you to get a better job, move closer to family, or to move to a better school district, that sort of thing. Okay, we’ll take a short break here for a word from our sponsor.
Female speaker 21:33
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Gene Tunny 22:03
Now, back to the show. Okay, so there’s some of the findings of this new study, this open research study of UBI and certainly there are some, there are some positive findings, people are more likely to spend on they’re spending more on what you could say are necessities. They’re helping relatives. They’re more likely to go to the dentist. They feel more agency. These are all positive things. Now, on the other hand, we see that they have reduced their their working hours, and what we find is that the impact on their financial situation is not what may be expected. And this comes out of the second NBR research paper that you can find on via their website. There’s a paper that has some really intriguing results, and it’s the impact of unconditional cash transfers on consumption and household balance sheets, experimental evidence from two US states. So that’s NBR working paper. 32,784 it’s just incredible how many working papers they produce. I think when I first started looking at NBR working papers at university, they’ll probably up to number. I mean, it would have been several 1000 by then. I’m not sure if it had reached five figures. I’ll have to, I’ll have to put that in the shadows. But, yeah, it’s just amazing how much research comes out of that. So that’s the elite Economic Research Group in in the US. That’s, I think it’s attached to Harvard. It’s attached to one of those Ivy League universities. It’s they, they’re responsible for a lot of good research, and a lot of it goes on to be published in the top journals like American Economic Review, quarterly, Journal of Economics, etc. So all that is to say that this is a really high you’d expect. This is a really high quality study, and they’ve they’ve used really good statistical techniques to try to work out what’s going on to to determine causality, what, what’s what’s really been the impact of of this experiment, or what’s the UBI Well, they’ve used an experimental design which does help you infer something about causality. They’ve said it’s by Alexander Bartik, Elizabeth Rhodes, David Brockman, Patricia Kraus, Sarah Miller and Eva vervelt, so I’ll put a link in the show notes. Looks like a great study, and this is, this is the study that has prompted some critics of UBI or, well, some scare. Dix, I suppose. Or some people who look at the data, they’re they’re empirical people. They’ve raised big questions about UBI after this study. And there’s a great video by Pete judo. He does a lot of good work on academic malpractice. He’s got some great videos out there that are worth watching. And he’s released a video UBI failed, and everyone is pretending it didn’t, so that is definitely worth watching. And it’s that video I saw that, and then that made me think, well, I should have a closer look at what these these findings are and and just see if that is, if that is the case that the UBI experiment has failed, I’ll just go over what Pete Judo has, what his main points are and, well, what he’s taken out of it is that, okay, look, one of the main things that is advanced as a benefit is that people who get UBI are 10% more likely to go to the dentist. And he’s saying, well, they seem to highlight that because there’s not really a lot of other great findings in the study, or nothing. That means that the experiment shows that UBI as a is a total winner, and he notes that the coverage doesn’t mention the fact that people who receive the UBI ultimately they end up with a reported $1,000 lower net worth compared to the control group you think. You hang on, what’s going on there. That’s a bit of a surprising finding. And this comes out of that, that paper, that NBR, paper I was just talking about before, about the balance sheet impacts of UBI. So let’s, let’s have a look at what that study that that $1,000 negative impact that he was talking about, that that is in the paper. They do report that, but they do know that there’s a lot of uncertainty about the magnitude of those impacts, and their conclusion is that this is how they write it. This is very, very academic. I guess they’re being careful about what they conclude and how strong you know, based on the data, how confident are we in these results? And they write that we find noisily estimated, modest positive effects on asset values driven by financial assets. Okay, so people save some of the the UBI that they get. They have higher they have higher cash balances, although they’re saving them temporarily, I suppose, or they’ve just got more money in their bank account on average, but these gains are offset by higher debt, resulting in a near zero effect on net worth. Okay? So based on their analysis of the data, they they can’t see any real impact, or any significant impact on on net worth. What what you see is that there’s some additional financial assets, higher bank balances, but then they’ve taken on some additional debt, okay? And so what happens is that there’s really no impact on on net worth, and they conclude these results suggest that large temporary transfers increase short term consumption and improve financial health, but may not cause persistent improvements in the financial position of young, low income households. Okay, so that’s the that’s the group that this study was focusing on. So it doesn’t really provide much of a longer term benefit the results in this study. That’s what Pete Judo was referring to in his video, and he concluded, well, this study shows that they’re they’re actually worse off. What’s going on there? I’ll put a link in the show notes, as I said to this paper, and I’ll just highlight some of the key parts of it so you can see where the results are coming from with that Pete Judo has has referred to what he’s what he’s referring to. There’s a there’s a passage on starting in. On page three. So combined these treatment effects on asset and debt indicate that the transfer decreased household household net worth by about $1,000 the net worth estimates are noisy, but we can rule out rises in net worth of more than $5,700 including real estate and mortgages, or $3,000 excluding real estate and mortgages. Okay, so what they’re saying there is, there’s because of the just the fact that of random variation in people, there’s statistical noise, sampling error, so to speak. You have to be careful interpreting these numbers. That’s essentially what they’re they’re they’re saying there, and they do put a footnote to that statement about the the transfer decrease in household net worth by about 1000 were they right? It’s important to note our sample consists of low income households, many of whom had little in the way of savings or assets. At baseline, median net worth was essentially zero. Median savings were was less than $1,000 and only 61% of participants had at least $100 in savings. Okay, it’s hard to know what to make of that. I suppose they’re saying, Well, we’re talking about people who didn’t have much to begin with. Perhaps they’re using that as a way to justify why they may have taken on more debt. I mean, what we find is that they use this extra money to help them borrow money to buy a car, to buy a vehicle. So I’ll go to that part of the paper in a moment. Whatever they’re trying to say there. Essentially the main point is that, okay, that if you crunch the numbers, it looks like it does reduce household net worth by $1,000 but we’re not really sure what that means. And if that’s a general finding that UBI actually makes people poorer over the the long run, who knows? I mean, I I think they’re probably right to be, to be a bit cautious of making that conclusion. So I think their their general conclusion that we can’t really find any impact on household net worth, that’s probably a reasonable conclusion. And the other point is, I mean, maybe $1,000 worse off. Okay, well, is that such a is that such a big deal? I mean, is that significantly they’re saying, well, that’s not really significantly different from from zero. $1,000 isn’t what it once was. So I can, I can see why they may have reached that conclusion. What I did find interesting. I found that the fact that what the UBI enables people to do is it must improve, or it makes them more likely to want to get a car loan, they feel more likely to be able to to service a car loan. And we find that this is a finding on page 31 of the paper total auto debt rose by about 17% 17% of the control mean, and monthly minimum payments on auto loans rose by 16.5% of the control means. So maybe they went out, they they got a new car, they sold their old car, bought a new one, and they they financed that. So they got some additional auto debt, and that’s offset the gain from the higher cash balances to and they’ve had practically no change in in net worth, or possibly even a negative net worth, and that’s the finding that Pete judo’s picked up on. Okay, I guess the thing to conclude from that is that UBI doesn’t improve your financial circumstances over the long run, or this at least over the three year period that they they studied, and again, the group that they’re looking at, or they’re considering, is young, low income households in the United States. So again, I’ll leave it to you to check out. You can check out some of these findings. I’ll put some links in the show notes. See what you think. Make up your own mind, it looks like those studies are very rigorous, and results that do to me. I mean, they they do raise questions about whether UBI makes sense as a policy. I don’t see results, that would make me think, Wow, that’s amazing. Let’s roll this out across the population. And if you, if you’re a regular listen to this show, if you listen to my previous episodes on UBI, you’d know that I’m pretty skeptical about UBI. It would be hugely expensive. Of I also think it’s unnecessary. I don’t believe in the forecast of mass technological employment. I think that the market will adjust. And as economists, we’ve got great faith in in the price mechanism. We’ve got great faith in in markets, uh, eventually clearing, and we have great faith in the the ingenuity and entrepreneurial activity of people. So I’m rather skeptical about this forecast of mass technological employment. And one thing I’ve noticed is that there’s, there is a growing skepticism about just how significant or how transformational some of the recent AI developments have been. I’ll put some links in the show notes, some some videos that I’ve seen lately from there was some computer scientists. I think one of them was from MIT. So top computer scientists debunk AI hype, and they talk about AI snake oil. So they think that some of the benefits of, particularly the large language models, are oversold. And there’s also this has been widely reported. Daron simoglu, who’s professor of economics at MIT, really top economist, and he’s come out and said, Look, AI can only do 5% of jobs. I mean, that seems, yeah, that seems probably fair enough for me to consider it’s limited in the number of jobs that can take over. The more likely scenario is it will increasingly use AI as a co pilot so it’s helping us become more productive. And I mean, as this is one of the reasons economists, probably most economists, probably don’t worry too much about this forecast of mass technological unemployment. I mean, what’s going to happen is that if we are increasingly using AI as a co pilot, and then that’s helping reduce the cost of delivery. That means we can do things a lot quicker. That means various professionals, lawyers, accountants, can can provide their analysis and advice much quicker. Then it becomes cheaper, and then there’s more demand for it from from consumers or from from business for business to business transactions. That’s one of the reasons I would be skeptical about all of these doom and gloom forecasts.
37:36
Check out
Gene Tunny 37:37
those videos. They’re great. Provide you with with much more with it, well, like provide a bit of comfort. Of course, the future is inherently challenging to predict, so who knows? I mean, chat GPT was a bit of a revelation, so who knows what? What else is, what other technological developments will come up? But that’s not, that’s not the base case, in my view, that will have mass Technological Unemployment, right? So what I want to do to finish off the the episode is, I’ll, I want to put some, want to play some clips from previous episodes I’ve had on UBI, well, the previous one with Ben Phillips, I think Ben really summarized this the high cost of UBI and why. It doesn’t seem to make sense, given where we are now, the type of tax and welfare system that we have at the moment, it’s hard to see how we can actually transition to to UBI and may not actually be be sensible. And then there’s also another clip I’ve got, which is the second clip that I’ll play on this issue of technological unemployment. I think we’re essentially we, I mean, Ben, sort of, you know, make some some good points about how we’ve had sort of concerns about mass technological unemployment before, and they really haven’t. It really hasn’t occurred. So to end the episode, I’ll play those clips so you can, you can check out those clips to sample what’s in that. That UBI episode with Ben, and if you want to listen to that, please go the full episode, then please go back and have a listen. I’ll, I’ll put a link in the show notes. I think Ben is one of the people who has really analyzed what a UBI would mean in practice. And I think that’s that’s the sort of thing that if you are going to advance a UBI, you should think you should do the analysis. You should crunch the numbers on what it means, what it’ll cost, what it means for other welfare programs. So yeah, how do you make sure that you don’t have all these people who end up worse off if you just get rid of the existing welfare system and replace it with the UBI I think that’s a that’s a significant thing to think about, all right? Okay, so thanks for listening to my update on UBI. As more studies come out, I’ll, I’ll talk about those. I’ll also try to go back to some previous studies and compare what this study has found with some of those others that could be useful. But for now, I’ll, I’ll play these clips from the previous episode with Ben, so you can get a sense of of what’s in that episode. Okay, thanks for listening.
Ben Phillips 40:31
Yeah, so the current system gene, just to put in perspective, so we, we currently pay out about a little over $100 billion per year in welfare payments to adults. There’s another sort of 20 or so million to in family payments that which is effectively for the cost of children. So you put that to one side, if you also about $100 billion so the most expensive welfare system under a UBI, say, under the green scheme, would be somewhere around about $500 billion per year. So you’re looking at an additional $400 billion per year. Keep in mind, Gene, the current, current federal tax, tax receipts is about 500 billion. So you go from 500 billion to 900 billion, that’s an unbelievable amount of money. And as you probably remember well, Gene, we had a big argument, big fight, about carbon pricing, and say, 2012 that was over about a $5 billion tax. Now, regardless of what you thought of the carbon price, we’re having a big argument over 5 billion. How would we go with an additional 400 billion? Having said that, of course, you don’t have to have a full blown measure, the full blown universal basic income, but even the more sort of the cheaper versions say the like, the affluence tested model that we’ve we’ve modeled was more like a bare minimum of $100 billion per year. So you still looking at having to sort of double the welfare system in Australia and knock on from that is to increase taxes by, you know, 20 30% across the country. So I think I’m in the current environment, that’s very unlikely to ever happen, but it’s still it’s an interesting idea to think about, I guess so hibi, I
Gene Tunny 42:04
mean, it certainly would be a nice thing to have just thinking about it. I mean, and one of the advantages that’s put all the pros, or the the the arguments in favor of it is that would allow us to to be able to choose our lifestyle. And I mean, we could take a few months off and divide it to yoga or to improving our wellness, that sort of thing, or writing a book. So look, there are. I can see the the attraction of it. It’s just the fiscal cost of it and implementation. We’ve already got this welfare system in Australia, at least that seems to do a reasonable job at at not too high a cost. But I can see the attraction. What about this? There’s this vision of the future where, with AI on automation, we have massive job losses, even among white collar professionals. Now, I mean, you know, we’re economists, so we’re probably great believers in the market adjusting and eventually people finding new jobs in this in the services sector. But do you have any thoughts on that? Ben, I mean, how, how big a risk is AI and automation? And I mean, to what extent that, does that improve the argument for a UBI, if that’s the case, that we could see these mass job losses in the future?
Ben Phillips 43:37
Yeah, look, I would probably a bit like yourself gene, bitter by my economics background, and I guess looking at history, over the past 50 or 60 years, we’ve had some pretty incredible technological changes that arguably are larger than what we’re currently seeing. And you know, you have periods, of course, where you have some high unemployment, but generally speaking, the economies have transitioned and people have transitioned. Perhaps there are strong arguments for, I guess, helping people restructure their lives, structural assistance packages for those in industries that disappear and that there is the argument, as you say, that basic income advocates that have have a UBI for that potential outcome in the future, but I’m skeptical of it. Gene that said I’m not, I’m not a futurist, so I don’t really know what what the future holds in that area. I could be wrong, but I’m a little skeptical, just given that we’ve had very large technological change in over the last, you know, century, and people still remain in jobs. Yes, there are issues, you know, for certain people in certain industries, but that’s sort of part of the part of the ebb and flow of the economy,
Gene Tunny 44:47
righto, thanks for listening to this episode of economics explored if you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economicsexplored. Dot. Com or a voicemail via SpeakPipe, you can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you, then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.
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Credits
Thanks to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts and other podcasting platforms.