Basic Income as a Lobster Trap

A fun little story from a doctor friend comes from when he would make trips to the deep North for extra money. On one occasion they got a distress call from an Inuit woman who cried over the radio that her baby was going blind.

They jumped in a helicopter and raced out to her small village at a cost in the tens of thousands. The doc jumped off the plane and rushed to where the baby was, took one look, and calmly let the mother know that her baby had conjunctivitis — pink eye — and that it would clear up on its own.

Canada does not have a federal healthcare system. Instead, healthcare is a provincial responsibility, within the strictures of a set of national principals. Provinces must provide healthcare which meets highly egalitarian standards of universality and comprehensibility. Similar standards of care and access are expected to be achieved throughout the country, and to the extent that the fiscal burden of each province differs,  federal health transfers — a per-capita based bloc grant — help to equalize health budgets.

As Sam Wilson points out, this kind of entitlement can lead to extremely tilted forms of implicit subsidization, as quantity-quality are in theory held constant, leaving only cost to vary. Of course theory does not exactly match reality. In the rural north of Canada, hospitals are more dispersed and offer fewer services and less qualified practitioners. Still, even these hospitals represent a far greater economic cost compared to ones based in more populated regions.

A significant part of the variation in cost comes from the healthy sums required to induce doctors and specialists to do northern tours of duty. For instance, Ontario offers a grant of up to $117,000 over four years to family physicians willing to work in under-serviced rural communities. These kind of subsidies don’t just risk locking workers in unproductive locations — often that’s their overt aim.

Yet despite this caveat I still by and large agree with Sam that a Basic Income risks locking people into unproductive locations. One example to consider comes from my home province of Nova Scotia, where seasonal workers in the fishery have for years been pilot tests of a guaranteed basic income.

Think of it as like a lobster trap. Lobsters enter the trap through the “kitchen,” enticed by the bait. Ultimately they exit into the “parlor” and the lobster is trapped. Likewise, fisherman settled in rural Nova Scotia enticed by the bait of a profitable catch. But in the winter, when fishing goes out of season, crew claim Employment Insurance and maintain their standard of living, given the dearth of “suitable work”.  Over the years this and similar dynamics have helped stall the population transition to urban centers and contribute to a glut in lobster.

A basic income would have a similar effect. In many industries workers  make a windfall for a season, like in fishing, but then face a choice for the remaining seasons. A basic income, all else equal, will allow workers to coast during the off season in unproductive if picturesque settlements. A better policy should be able to address the ‘living wage’/’living income’ concern without sacrificing production or discouraging labour mobility.

peggys-cove-828

I spent the last year working for a rural development agency whose mandate was to “raise incomes and productivity”. In my region the big anxiety was out-migration, with some rural areas losing 5% of their prime-age working population every year. I wrote a brief pointing out that, if higher incomes and productivity was the goal, perhaps a plane ticket was indeed the lowest cost solution.

Needless to say, that didn’t go over well. Yet it proves the point that both cash and non-cash subsidies often end up favoring the welfare of abstract geographic divisions over their actual inhabitants, much less the “net social benefit”. This should not be a surprising result. It is in many ways the modus operandi of the nation state.

7 thoughts on “Basic Income as a Lobster Trap

  1. James Rice

    Interesting comparison! I think that the one thing you are failing to take into account is that there is likely still going to be economic benefit during these “downtimes” for various industries, on the whole. What I mean by that is that there will be some measure of personal improvement by a portion of these workers that is not really possible for many in our current setup.

    The downtime can be filled with practicing one’s trade, learning, spending time with/raising family, and other activities that are not as easily measured in terms of direct dollar amounts, but are incredibly important for the overall stability, progress, and economic growth of our society.

    Additionally, you are not taking into account people who have a desire to spend their time working even when they don’t “have” to. Some portion of workers would certainly still fill their downtime with a different sort of employment, and we would also open opportunities for voluntary work that helps their local communities out, another thing that is difficult to directly measure.

    Of course, there will be some who are lazy and just sit about, but when you look at the majority of the people you know, how many of them have (or wish they had the time for) an interesting hobby that could be used to positively contribute to humanity, or an interest in things like teaching and other socially-focused fields, but “the pay isn’t good enough”? I believe that on the whole, a basic income would improve the situation across the board without the issue you mentioned really being as big of a problem as you would think.

  2. Also underproduction isn’t as big a problem as you seem to think, although you acknowledge a glut of lobster. Thing is, there’s a glut in most things.

  3. If you are tempted away from employment by a small basic income, your productivity probably wasn’t too high to begin with, and hence the losses to society by your dropping out of the labor supply are small. Also, with increasing automation, a basic income seems to me to become quite critical in maintaining societal stability.

    1. In the real life fishing communities fed by seasonal unemployment insurance, the cost is quite high. The argument you made is based on an the idea that if people are more productive in place x then on the margin they will move. But this ignores the average persons high resistance to moving. I don’t know if estimates exist of the total cost of home bias, but I suspect its large since large proportion of people never move more than a few hours from their place of birth.

      I think about the issue of automation too but I’m not as pessimistic as some. I see a basic income as appropriate for the old or destitute aka people who have no real employment prospects. Maybe no one will employment prospects at some point in the future. But that’s still super speculative. Automation is capital intensive so it also predicts increasing premia on ubran density. If unconditional BI really does subsidize rural life as I argue, the social cost of this will only increase over time.

      1. I think the model is:
        Urban productivity > Rural productivity
        BI encourages rural living because of low cost of living
        You can never overcome the fixed costs of moving once you’re stuck

        A BI can be less of a lobster trap because of smoother phasing out (less tax cliffs). But I see your point about lifestyle stickiness.

  4. gaurarader

    Aren’t you assuming that maximizing productivity is a necessary goal? In a developing economy that might be an important goal but I don’t see that as an important goal in the developed world.

    1. There may be other goals that require other sorts of policies. When it comes to questions of public policy like the welfare system its usually considered important to avoid creating poverty traps and other sorts of distortions through incentive effects. This isn’t about productivity as much as its about human welfare. However, getting more for less is how the world becomes wealthier.

      In the example I discuss the two big distortions are a. Breaking the market that incents labor to its highest value location. And b. All the unseen opportunity costs of delayed urbanization. My lobster example is set in Nova Scotia which has among the lowest urban rural ratios in Canada (60:40 vs 80:20 for the national average).

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