Bryan Caplan  

Do Middle-Class College Kids Already Have a UBI?

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In our Universal Basic Income debate, Will Wilkinson had one fun argument I didn't have time to answer.  His claim: Middle-class college kids (like stereotypical Students for Liberty attendees) already get a UBI from their parents.  Thanks to this UBI, Will argued, middle-class kids have the buffer they need to explore their interests and hone their skills - and the disincentive effects are barely noticeable.  Wouldn't it be great if everyone enjoyed the same privilege at taxpayer expense?

My reply: While middle-class parents do commonly provide ample financial support for their children, it's nothing like a UBI.  Instead, it's heavily means-tested: We'll keep supporting you as long as you pursue a responsible path.  "Either stay in school and get passing grades, or get a job and pay rent" is perhaps the typical deal.  Many parents add further micromanagement: To receive support, you need high grades, a realistic major, sobriety, and a suitable boyfriend.  Only a minority agree to let their children live as they please at their parents' expense.  When they do, the results seem pretty bleak.  I know of no systematic data on never-employed single 30-year-olds living in their parents' basements, but the anecdotal evidence is chilling.  Even parents who provide "unconditional" support ultimately tend to lose patience and angrily switch to old-school "sink-or-swim."  And who could blame them?

Will might decry this as "paternalism," but a subtler analysis is in order.  For starters, the heart of paternalism is treating adults like children.  But parents' obvious reply is, "We're treating our kids like children because they're acting like children."  Until you are self-supporting, demanding full autonomy is just chutzpah.  In any case, pure self-interest also urges us to impose conditions on our dependents' behavior.  "If you want to sleep on my couch, you'd better get to your job interview on time" need not be motivated by my desire to give you a "happy life full of hard work."  Maybe I just want my couch back.

To circle back to my broader theme, if people who love you have good reason to impose conditions on their voluntary assistance, people who've never even met you have overwhelming reason to impose conditions on their involuntary assistance.  And involuntary assistance is the heart of the welfare state. 




COMMENTS (11 to date)
Thomas writes:

Middle-class (and upper-class) kids whose parents subsidize college educations, and other goodies, most certainly do not get a UBI. A UBI is a forced transfer payment. A parental subsidy is voluntary, and usually not the result of parental guilt or emotional blackmail.

Hazel Meade writes:

It's a dilemma. The other solution is to make you're kids WANT to leave by being so annoying and oppressive to them through their teenage years that they can't wait to get out the door, though that can backfire in the form of a lack of telephone calls home once they leave the nest.

Jeff G. writes:

Another important differnce is that with support from your parents you know exactly where that money is coming from. And I would argue that most young adults don't want to overly burden their parents so they move quickly to be independent. With a UBI the burden is imperceptible.

AlanG writes:

One of Bryan's comments on parent's micromanagement, "....a suitable boyfriend" I suspect that this was a result of poor proofreading and should have been "...suitable boyfriend/girlfriend" but maybe I'm wrong.

to the main point, we told each of our two daughters that they could go to any college they wanted and major in any subject. No micromanaging at all other than to let them know we expected them to do the needed work. Both had merit scholarships to cover some of the cost and both graduated with full honors and are now working with special needs children.

In addressing the point Hazel made, both left home to go to school and other than periodic visits, neither sleeps in the bed they grew up in and they both stay in regular touch via the phone!

Donald Dale writes:

Silly claim. A UBI that only some people get might be a BI, but it's not U.

Niklas Blanchard writes:

Bryan sneaks a value judgement in here.

Beneficiaries of a middle class (NOT a measure of income, and I don't believe that Bryan intends it to be so) upbringing have a vaguely protestant hierarchy of values instilled upon them, to which parents of these children object, and then remove subsidy.

What he is sneaking in is the result of a middle class lifestyle.

It is plenty well-established that this type of lifestyle correlates highly with positive results in the well-being of offspring, is Bryan prepared to say (in pretty much exact coherence with the "Law of Second Best") that we should distort all markets in order to achieve this outcome?

I think that Bryan would object to a amplifying a parental guideline that a child never drive a car, lest they lose their parental subsidy, to a societal level...but what if it immediately doubled RGDP?!

A broadly Protestant lifestyle has a good measured success rate, for sure, but that's not a cosmological constant. What if next period; instead of working (physically) hard, refraining from drug use, young parenthood, and low education, simply staying inside as much as possible with all of the lights on and staring at a screen was a great guarantor of a median living. Do we have to change public policy? How quickly? Do we then own the children who were raised under the old regime a debt as a society?

Bryan may be right that a middle class lifestyle is the proposed hope of a UBI, but he is resting his case on the assumption of a correlation of outcomes that, while pretty well established, but not universal law.

Peter Gerdes writes:

The overwhelming reason that parents have to impose these conditions on you is to enable you to secure an enjoyable source of future earnings (A LARGELY POSITIONAL GOOD). A permanent UBI has no such concern. I think there is a substantial benefit to ability of people to choose to simply receive UBI, avoid the psychological burden of potential economic failure and allow projects/lifestyles that would otherwise be impossible.

In contrast I think we've pretty clearly passed the point of exceedingly diminishing returns to utility from overall economic production. Positional goods still matter a great deal but I just don't think we lose much overall utility if we dropped everyone's real wages back to what they were 30-40 years ago. I think a shift towards positional goods is only bound to accelerate as IP becomes a larger and larger piece of the economy.

So, yup, if I'm wrong and there is still a large return to societal economic growth (while there remains significant middle class contributions to that growth) then a UBI may be inappropriate.

Brandon Berg writes:

But parents' obvious reply is, "We're treating our kids like children because they're acting like children." Until you are self-supporting, demanding full autonomy is just chutzpah.

Right. This is my objection to the treat them like responsible adults and give them cash with no strings attached" approach to welfare. The "treat them like adults" ship has already sailed when you're giving them an allowance.

mariorossi writes:

I don't quite understand why you think this is a great point. Of course parents imposes some conditions and try to enourage you to get better: do they actually chuck you out of the house? I would still argue that parents provide significant support even when they don't actually let you live rent free in their house. How many grandparents provide free childcare and loads of other in-kind benefits? I have never heard a grandparent say: you now earn 50k a year, you should now pay me to pick you the kids from school or take them to the doctor.

Sometimes they do, but it's usually related to almost criminal activity.

The entire arguement about UBI is simply about marginal tax rates. UBI proponents simply state that benefit reduction is a form of taxation and should be treated as such. This seems pretty reasonable to me (it's similar to the arguement that regulation is a form of taxation and the tax exemptions are a form of taxation).

In a previous post you made the arguement that it's acceptable to impose extremely high marginal rates on poor/low productivity people as the contribute little to the economy anyway.

I find that statement objectionable: why is trapping someone in poverty through massive marignal tax rates acceptable? You could argue that we should just remove welfare and marginal tax rates would go down. As long as you don't care about absolute poverty, I think that's a feasable strategy, but just assuming private charity would be enough to solve such issue is a risk I don't want to take. We have 10,000 years of history of human privation: I don't think there is evidence the current high productivity would solve the issue, but I am doubtful...

Given that, we need to find a reasonable marginal tax rate profile. I think the tax system is currently unfair towards the poor. While they obviously have negative average tax rates, they very often face much higher marginal tax rates than richer people. But people are blinded by average tax rates rather than marignal tax rates which is what really matter. I just think that's misguided...

Hazel Meade writes:

@mariorossi

Maybe a good compromise would be to reduce the restrictions on benefits as income rises, so the marginal tax rate is offset somewhat by reductions in hassles. i.e. as you demonstrate greater responsibility and get more money from work, we'll stop restricting what you can spend the money on, stop making you check in with social workers and fill out forms, stop making you do drug tests, etc.

In other words, the more benefits you get the more rules you have to adhere to. The less benefits you receive the more freedom you have.

mariorossi writes:

@hazel meade

I actually agree with Bryan on this to be honest. I don't think it's feasable to have a fully unconditional welfare system. I think an elderly or disabled person should receive additional resources from the community to help them survive, as some sort of annuity.

I also have a suspicion that negative tax rates would be a better system than unconditional grants. But that would be an empirical issue we'd have to investigate.

As far as hassle reduction, I can see the point, but how much is it worth? I don't think it would be worth a lot to be entirely honest maybe a few points of marginal tax. Maybe that suggests you could accept 5%-10% higher marginal tax rates until your average rate is positive? In another post I think Bryan was argueing for like 33%. That seems extremely steep to me....

I am not sure about effective tax rates in the US, but in the UK effective tax rates for people earning half the median wage is close to 100%. That just doesn't work...

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