New Zealand (again) is considering a guaranteed minimum income (GMI) as are Finland and several Dutch cities. Closer to deciding, Switzerland has scheduled a yes/no vote on June 5th for a monthly 2500 franc check that every adult resident would receive. And perhaps even sooner, Ontario will select one community where everyone gets a GMI check.
Where are we going? To the incentives created by GMI programs.
GMI Pros and Cons
In 2010, the New Zealand government sponsored an analysis of a GMI proposal. Replacing other forms of assistance with a $300 weekly payment to all individuals aged 16 and over and more to families with children, the program would have been universal and unconditional.
Their Working Paper did a pretty good job of summarizing the equity and tax considerations for all GMI initiatives:
Rather amazingly, both the left and the right have applauded a GMI. Advocates on the left see a potent anti-poverty weapon if the payments are high enough and the right smiles because of less government. Meanwhile both sides like the added respect the system gives to low earners because no one tallies how they spend the money.
Our Bottom Line: Incentives
The permutations are unlimited. Each proposal involves a different amount and recipient qualifications that range from all adult citizens to only jobless individuals. Some replace all safety net programs and others use the GMI as an additional support. Some hope the incentives will make low wage jobs attractive but others see a work disincentive. In addition, some households could receive less if all previously received benefits are removed, But if other programs remain, the expense could be prohibitive.
I suspect we should worry about the guaranteed minimum income (GMI) because it takes us into unknown incentive territory. The one result we can predict is unintended consequences.
