Monday, June 6, 2016

Swiss UBI Pummeled at the Polls + The Left's Piss Poor Answer to Brexit + Recession Looms

Yesterday the Swiss overwhelming rejected a proposal to create a universal basic income. Raphael Minder reports in "Guaranteed Income for All? Switzerland’s Voters Say No Thanks" that 
About 77 percent of voters rejected a plan to give a basic monthly income of 2,500 Swiss francs, or about $2,560, to each adult, and 625 francs for each child under 18, regardless of employment status, to fight poverty and social inequality and guarantee a “dignified” life to everyone.
Switzerland was the first country to vote on such a universal basic income plan, but other countries and cities either have been considering the idea or have started trial programs.
Winning less than 25% in a public vote is about as bad as it gets. The good news, as Minder goes on to note, is that other countries in Europe are considering a UBI:
Finland is set to introduce a pilot program for a random sample of about 10,000 adults who will each receive a monthly handout of 550 euros, about $625. The intent is to turn the two-year trial into a national plan if it proves successful.
In the Netherlands, Utrecht is leading a group of municipalities that are experimenting with similar pilot projects.
One pro-UBI "man on the street" in Geneva who Minder quotes gets it right, I think:
“We’re losing all our values, creating countries that no longer need workers but still need consumers, but how can we expect people to buy anything if they can’t earn a salary tomorrow?” asked Olivier Duchene, a musician and street entertainer.
While the Swiss UBI went down in flames, referendums in Europe have delivered some stunning victories recently, as Minder helpfully catalogs:
Referendums are gaining ground in other European countries that normally rely on a system of parliamentary democracy. 
Last year, Greece held a referendum on a bailout plan, and the Netherlands introduced a referendum law under which voters rejected a European Union agreement with Ukraine in April. Britain is set to vote in a referendum this month on whether to leave the European Union a year after Scotland voted to stay in the United Kingdom.
Other than the Scottish vote to stay part of the UK, all those votes were big wins. I have no sense of how the June 23 Brexit vote is going to go down. The reporting I have read in The London Review of Books has been nuanced to the point of turgidity. Case in point is Jan-Werner Muller's "Europe's Sullen Child."

The problem for the anti-Brexit left is it is arguing to stay in the European Union based on a romantic ideal that has proven fictitious:
In many ways the EU is already incoherent. For the time being, it is in a situation where failing policies are neither reversed nor properly fixed. With the Eurozone, governments created a single currency; with Schengen, they created one border. But nobody has been willing fully to accept what has to follow from these major forms of integration: namely, one fiscal policy, with at least some modest redistribution to address imbalances across the Eurozone; and a shared asylum and border policy. This would not in itself create a federal state, but it could be a step in that direction.
. . . Brexit would make Germany even more powerful, and Germany’s continued attempts to keep Europe British without Britain would create even more conflict and resentment. A UK that remained and co-operated selectively with Berlin might just make the EU more stable, better able to project power, and less toxic. Eventually, after what is likely to go down in history as a lost decade for Europe, the EU might even become an area of hope again.
So that's what the "stay" argument boils down to after all those column inches: If the UK stays, maybe Britons will make the EU more stable and eventually "an area of hope again." That's some awfully thin soup.

Why the idea of a UBI is so timely is that it looks like the West is headed toward another recession. The May jobs report was dire (Patricia Cohen and Binyamin Appelbaum, "Sharp Fall in U.S. Hiring Saps Chance of Fed Rate Increase in June"). Even Dem cheerleader-in-chief Paul Krugman thinks so ("A Pause That Distresses"). Only 38,000 jobs were created in the month, and the jobs numbers for March and April were revised downward. As Wolf Richter notes in "What Makes This Jobs Report So Truly Ugly":
This is what was “expected”: 
The Labor Department was expected to report, according to Wall Street economists, a “moderate” gain of 158,000 jobs in May, “moderate” given that the Verizon strike kept 35,000 workers off their jobs. The “whisper number” was around 200,000 jobs. 
And this is what we got:
The BLS reported that the economy had added 38,000 jobs, the lowest since September 2010. Furthermore, the April job gains of 160,000 were chopped down by 37,000 and the March job gains of 208,000 were chopped down by 22,000. Hence, with 59,000 jobs revised away, and with only 38,000 jobs “created” in May, the net total in today’s report was a net loss of 21,000 jobs. We haven’t seen that since the Financial Crisis. 
“Shockingly weak,” and “In one word, ‘Ouch’” is how MarketWatch put it so elegantly. 
It was ugly all around. A number of sectors, including manufacturing, shed jobs, and the labor participation rate dropped for the second month in a row, to 62.6%. Just about the only good number was the magic headline unemployment rate, which fell sharply, from 5% in April to 4.7%, the lowest since the Great Recession began, leaving some folks scratching their heads and searching for answers.
Richter sees the drop in temp hiring as the canary in the coal mine:
But here’s where the report really spread gloom:
The number of temporary jobs plunged by another 21,000. Temporary employment is a harbinger for future employment trends, on the way up and on the way down.
The temporary-help sector was a major – and much lamented – driver of jobs growth after the Financial Crisis. The sector began adding jobs in September 2009. It was an early sign that companies were starting to hire again but didn’t want to commit to more permanent jobs, even as the economy overall continued shedding jobs until February 2010.
From the low point in August 2009 at 1.75 million temporary jobs, the sector added 1.2 million jobs by December 2015, when it peaked at 2.94 million. But then it started shedding jobs. With May’s loss of 21,000 jobs, the sector is down 63,800 from December.
This also happened in 2007, when the temporary help sector started shedding jobs even as the overall economy was still adding jobs until right up to the official beginning of the Great Recession. And it happened in 2000, before the 2001 recession kicked it.
Staffing agencies are cutting back because companies no longer need that many workers. Total business sales in the US have been declining since mid-2014. Productivity has been crummy and getting worse. Earnings are down for the fourth quarter in a row. Companies see that demand for their products is faltering, so the expense-cutting has started. The first to go are the hapless temporary workers.
Some the reporting of the G-7 meeting in Japan a couple weeks back mentioned Abe's rebuffed call for a unified commitment to stimulus spending. Nothing much more was said about it. But I figured that something ominous must be in the formative stages. Can you imagine the impact of another recession when we have yet to dig our way out of the post-Lehman Long Recession?

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