Subsidized Wages: An Idea That Competes With UBI

Edmund Phelps, an economist at Columbia and a Nobelist - for what it's worth - has challenged Philippe Van Parijs's idea of the Universal Basic Income (UBI) with a government-subsidy "to firms for each low-wage person they employ without regard to parental or marital status." Phelps calls the UBI a "demogrant" and has his reasons, which I find  quite compelling but not totally convincing, why a universal employment subsidy is a similar but better idea than a UBI.

As I see it, Phelps's main problem with the UBI is moral, and his subsidy encourages self-support (vs. dependency), integration (vs. marginalization), and personal growth (vs. disengagement).

From my personal stance, I think all of these reasons are quite weak. No one wants to be dependent. (Well, almost no one?) I am ALREADY "marginalized," simply because of my freaky bookish disposition; I follow Timothy Leary's admonition to "find the Others." They are not at the job site, I'll tell you that! And "personal growth"? That's laughable! Here I agree with Aristotle, Plato, and every great thinker who isn't tainted with Western Protestant work ethic ideas, or even christianity: we grow when we're NOT at work. That's what "leisure" was always FOR...until the Advertising Age came along.

Yea, verily, I disagree with Phelps because I think his stronger cases are elsewhere. He actually thinks that work - even crappy jobs, apparently, even if subsidized - are good for the soul. He thinks his self-support is based on people earning their own way (italics in his original), which sounds fine on the face of it, but it's still government subsidized work, isn't it? And any job we take - even if we barely make rent on it and need the help of a soup kitchen - is "earning our own way." It's just a horrible job, is all. Phelps seems far too Protestant Work Ethic here, for my temperament.

Worse: Phelps make his case by saying that people who take crappy jobs under the UBI would be rankled knowing there were Malibu surfers collecting the UBI and doing nothing. Which seems like a bad argument, because the workers at the crappy job are getting the UBI too: the surfers doing no morally uplifting work and not "earning their own way" will not be making as much as the workers.

Phelps also makes bold claims based on what seems like very vague data about how much tax, how much time, how many years, accumulated deficits, workers' desire to work, mobility, etc, in favor of his scheme over the UBI, but after reading people like Nassim Nicholas Taleb, I have learned to be extremely skeptical of economists when they make these sorts of claims.

[Hey economists: Many of us are "on" to you; when you say IF we made changes to B, C and D, then X, Q and Z would result: you guys have proven to be almost complete losers there. You are miserable at predicting! You were trained to bracket out all sorts of Real World data. I wanna say it's not your fault, but lately I'm quite ready to assign blame. Suffice: most of you have been trained into incapacity. There are very good reasons why you're specializing in "the dismal science," and this is a big reason: the world is not as neat as your equations. And when are you gonna "get real"?]

What interests me about Phelps's subsidized wage idea is something that bothers me to admit: He says that the UBI idea has much support in Western Europe because of quasi-religious ideas about community and the national sense. "Most of Western Europe, particularly the Continent, has already gone a long way toward providing universal - that is, unconditional - benefits to its citizens (and in most cases other residents): subsidized housing, free medical care and free education services, among other services."

(How horrific these things - housing, medical and educational - are to most Unistatians! Even though none of the Western European countries are purely socialist - they are mixed economies - to most [brainwashed] Unsitatians, to have these very things subsidized by the State - which we don't have, is Evil, and Communist. As I said in an earlier post, Unistatians are not born stupid, they must be made that way. And the Ruling Class has done a spectacular job in this regard.)

Digging deeper: the institution of a UBI to only Unistatians would seem vastly unfair to documented citizens, as there is an enormous number of undocumented workers in the US. Further, the US has all kinds of social and religious sects that want nothing to do with the government: should they get the UBI too? It is here that Phelps draws upon John Rawls to bolster his argument. Rawls aside, Phelps plays on a more-than-populist rhetoric here, and when I do a "reality check," as much as it pains me to admit, it makes sense to subsidize wages...if only to gradually ease in the UBI. (This last idea is more mine than Professor Phelps's.) Here's Phelps along these lines:

"The other sticking point is that the demogrant idea seems in an important respect to go against the grain of the traditional American conception of a liberal republic. This conception, I will argue, would cause many Americans to hesitate to embrace a universal basic income while being willing, at least in principle,  to contemplate low-wage employment subsidies."

                                          John Rawls, heavyweight American social philosopher,
                                        whose A Theory of Justice has been gigantically influential.

I wish this didn't describe the American mind, but I think it does. It seems in some way more "realistic" than the UBI, although Phelps's lines about how much work is good for people - especially sociability at work, with co-workers - is almost abhorrent to me. If you, dear reader, have a job and you look forward to seeing your colleagues at work, I consider you lucky. I know myself: I am very much better off choosing my friends outside of work. I have at times enjoyed some comradeship at work, but it's not my idea of how friends ought to meet. This attitude toward low-wage workers (especially women) in Phelps seems paternalistic and a touch Ivory Towerish. In all this I get a whiff of an offshoot of American exceptionalism, which seems to me a thought-pattern that has become quite toxic within the Unistatian body politic.

By far the most interesting point Phelps makes is the source of redistribution: it is the "social surplus," which he says Nobelist Paul Samuelson made much ado in his most-popular textbook of the last half of the 20th century. This idea came earlier, in L.T. Hobhouse's 1922 book The Elements of Social Justice.  (Phelps tries to link this Unistatianist idea to Thomas Jefferson, and even, embarrassingly, to Calvin Coolidge's "The business of America is business.") Phelps also links the "social surplus" idea to the very interesting (to me) minarchist intellectual Robert Nozick. Phelps writes, "It is implicit, I think, that the social surplus is a flow of income that can be legitimately redistributed, since the way a free market would distribute it is morally arbitrary and a free market is an impossibility in any case." Phelps footnotes this remark with this: "Some argue that this flow is the largest that can legitimately be redistributed. Aspects of the matter are taken up in Robert Nozick, Anarchy, State, Utopia."

Because I am not an economist and am autodidactic in things economic, I intend to study this "social surplus" much more closely, as it seems isomorphic to some late 19th and early 20th century ideas about social wealth that have appealed to me...But if you have some clarifying remarks about social surplus or anything else here, feel free to buzz us all in the comment box below!

Phelps's piece was found on pp. 51-59 of What's Wrong With A Free Lunch?, but I found it's also online here.

Once again I feel compelled to apologize for going on too long. I'll try to make it more pithy next time, but thanks for reading anyway. You're real swell, ya know that?