Article: http://www.canberratimes.com.au/comment/scrap-welfare-and-pay-everyone-even-the-jobless-a-living-wage-20161208-gt6ob8.html

First R1, be gentle :p

R1:

It seems quite mad to suggest the government pay every adult Australian resident citizen $15,000 a year, no questions asked. That's until you look at the details, when the scheme starts to make a lot of sense.

For the purposes of this article, I'll use very rounded figures for ease of comprehension.

Paying $15,000 to every person between 18 and 65 would cost about $200 billion.

Paying a UBI of $15k seems far too high to not have disincentivization effects; in USD this is still about $11k.

To be more specific, the title of the article is "Scrap welfare and pay everyone, even the jobless, a living wage." The author describes, specifically, the implementation of an NIT. So, any criticism of NIT is applicable here.

The author then makes several points that support implementing an NIT, but those are all refuted by this source, which detailed an experiment with NIT that found that:

The first and most basic problem is that it is currently fiscally—and perhaps administratively—impossible to construct an NIT that simultaneously

1. provides an income guarantee as generous as the cash and in-kind benefits already available to many welfare recipients in the United States,
2. provides an ostensible incentive to work (a far greater concern when benefits are to be extended beyond the traditional welfare population dominated by female-headed families), and
3. restricts coverage to any manageable proportion of the population—the so-called "break-even" problem.

The article states that an NIT would solve all three of these problems:

1.

Our total federal welfare bill is about $140 billion. From that, all the unemployment benefits, family benefits and welfare services would be scrapped. Only the $40 billion in aged pensions and about $10 billion in disability allowances above $15,000 a year per person would remain.

2.

It would end the disincentives to work.

3.

The rest would be made up by rejigging the income-tax scales, with people on higher incomes paying more. In effect, after a certain level – say, $150,000 – people would be paying back their $15,000.

So, the author makes several claims that have already been proven impossible empirically.

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I also saw some bad econ in the comments. A user says:

It would end the disincentives to work.

Not true. It could lower it because it is not means-tested, but it wouldn't end it. UBI does create a reservation wage. There are always a certain number who will not get off the couch to work unless they are starving, and a UBI ensures they have the income to feed themselves, assuming they aren't too lazy to go to the store, or lift the food from their plate to their mouth.

I don't think this is a fair approach either. Consider a general labor leisure model with means-tested welfare built in. If the welfare was in the form of food stamps or housing vouchers, the recipients are forced to consume a certain amount of money and then lose that money as they gain income; sometimes, this causes a welfare trap along with the disincentivization of work. However, we cannot simply look at a person's welfare numbers and know if they are trapped or just don't want to work. Like, if we fixed the welfare trap, they still may not find work. But, they will not be worse off than they would before. And society would not be worse off.

The user assumes the welfare queens still exist in a UBI/NIT system as opposed to a means-tested welfare system. This is true, but getting rid of welfare traps at least solves at least one type of work disincentivization; the author of the article does mention smoothing out income receipts so this is a relevant point for this article. Essentially, the societal cost of UBI/NIT and means-tested welfare can be tweaked to be the same, but the societal benefit of NIT is always greater than or equal to welfare because it is less distortionary.

A good example of a distortion is marriage.

The research article Effects of Welfare Participation on Marriage finds that:

We infer that the negative association between welfare participation and subsequent marriage reflects temporary economic disincentives rather than an erosion of values.

And, the research article Do income maintenance programs break up marriages? A reevaluation of SIME-DIME finds that:

...an NIT program has no effect on marital stability that is of any practical or statistical significance.

So, overall, I do think a smaller UBI/NIT could still work. Especially since the Australian Social Services department is moving to far messier plans (original). But, the article I'm R1'ing is really bad at explaining what makes UBI/NIT better than certain welfare policies.