If there’s one thing that many anti-poverty activists and free-market advocates agree on, it’s that our existing social safety net isn’t capable of dealing with the challenges presented by the evolution of the economy and of the very definition of work.
That may explain why an idea that dates as far back as Thomas Paine (in 1797) and has enthralled figures as diverse as Huey Long, Milton Friedman, Martin Luther King and Richard Nixon, is getting a very close look today. It’s known as universal basic income.
The basics of universal basic income are simple. A check goes to everyone, guaranteed — whether they’re employed or not. No strings attached. No means test. No bureaucrats examining your personal lifestyle or looking for hidden income. No politicians demanding that you seek out even a menial job or leave the children in the hands of caretakers before getting the money. No drug testing.
Poor people and the middle class know best how to spend their money. They just don’t have it.
“It’s unconditional cash,” says Natalie Foster, co-founder and co-chair of the Economic Security Project, a coalition of technologists, investors and economic activists planning to spend $10 million to investigate and support pilot programs in UBI.
The Bay Area is a hotbed of UBI thinking, in part due to the socially-active members of the tech elite. Under its president, Sam Altman, the technology incubator Y Combinator has launched a pilot program aiming to provide as many as 1,000 residents of Oakland with a guaranteed income so its effects on their work experience, education, child-raising and other lifestyle factors can be studied.
High-tech entrepreneurs see UBI as a relief valve for the economic changes that could result from their own innovations; Elon Musk, the founder of Tesla Motors and SpaceX, told CNBC interviewers last year, “I think that there’s a pretty good chance we end up with universal basic income or something like that due to automation.” Guaranteed income would give people “time to do other things and more complex things, more interesting things” with their lives, he said.
Other programs are further along. Finland this year launched a three-year test providing monthly checks worth 560 euros, or about $625, to 2,000 unemployed workers aged 25 to 58. They’ll give up their existing government benefits in return, but will still receive the checks if they get jobs. The Dutch city of Utrecht has started a two-year pilot plan awarding 250 residents the equivalent of about $1,100 a month. The Canadian province of Ontario is about to launch a project giving 4,000 randomly chosen residents in three cities the equivalent of $13,000 U.S. annually.
Starting slow seems to be important. In Switzerland, a referendum on a plan to guarantee every adult about $30,600 a year failed miserably last summer, 23%-77%.
The main challenge for UBI advocates is defining just what such a program would look like on a large scale. “UBI proposals tend not to be fully baked,” observed liberal economist Max Sawicky. That was in 2013. Some four years later, it’s still true. Some projects are operating under the radar, including the Oakland project, on which Y Combinator’s Altman declined to comment.
Indeed, one reason UBI attracts adherents across the ideological spectrum is that it can be so variously conceived. It’s a bit like the story of the blind men and the elephant, with every promoter visualizing the totality based on the features he or she considers most important.
Progressives tend to think in terms of using UBI to modernize the social safety net to accommodate the modern workplace, including “the growth of contingent work” such as driving for Uber or Lyft, says Foster. A universal guaranteed income “gives people the flexibility to deal with changes in the labor market.”
Of course, people on both sides also find plenty not to like. Sawicky expressed a common liberal concern that the universal basic income movement was a pipe dream that would distract from more achievable efforts to improve, not replace, existing programs. Conservatives blanch at the “moral hazard” of just handing out money, regardless of need.
To the extent there’s a consensus in the U.S., it’s that a guaranteed income program should provide at least $12,000 a year. The ideal program would be truly universal to remove the stigma attached to means-tested programs such as food stamps. Nor would the payments phase out with rising income to eliminate what conservatives decry as the “poverty trap” — when more income means the loss of benefits, they posit, recipients are encouraged to stay out of the labor pool.
UBI would force Americans to reconsider their assumptions about the behavior of people receiving no-strings-attached income. “We need a little paternalism,” says Michael Strain of the American Enterprise Institute, expressing a view of the poor as incorrigible slouches wanting a firm hand. “If we take money from John to give to Matthew, who would starve without it, then we owe it to John to make sure that his money is appropriately spent on Matthew’s food and shelter, not on Matthew’s alcohol and gambling.”
But experience with guaranteed income programs contradicts that view. Among them are Alaska’s Permanent Fund Dividend, which has distributed money from the state’s oil boom since 1982, a casino dividend paid to members of North Carolina’s Eastern Cherokee Band of Indians starting in 1997, and experiments in “negative income tax” in the U.S. and Canada in the 1970s, which provided low-income families with a guaranteed income via tax credits.
“The effects of unconditional cash transfers” included “a significant increase in … quality of life benefits,” Ioana Marinescu of the University of Chicago noted in a recent report. Those included improvements in “mental and physical health, education outcomes, parenting [and] reduced criminal activity.” Studies found either no impact or a slight decrease in labor participation, but some of that may have been due to recipients leaving workplace jobs to care for family members, including children, at home.
Those results show that “poor people and the middle class know best how to spend their money,” says Foster. “They just don’t have it.”
What’s driving interest in the U.S. is increasing disquiet about the dearth of ideas for stemming increasing wealth inequality in this land of plenty, along with disquiet about how automation could eliminate employment across the industrial sector.
“There’s a convergence of current anxiety about economic instability with an underlying fear of the future of work and jobs,” says Andrew Stern, the former president of the Service Employees International Union whose 2016 book “Raising the Floor” is a manifesto for a universal basic income. By some reckonings, these anxieties helped elect Donald Trump, whose inchoate promises of easy solutions to complicated problems appealed to voters feeling cast aside by globalization and technological change. Trump may not have had the answers, but he was at least articulating familiar questions.
“With the election,” says Rakeen Mabud of the Roosevelt Institute, “people started to realize that it’s time to stop thinking around the edges. There’s enough cash in the system to provide economic security for all, but it’s all going to the 1%.”
It’s still too early to say if the proponents of universal income can exploit the economic disruptions of today to disrupt conventional thinking about the social safety net. “It’s either a bubble or a movement,” Stern says. “The question is whether it sticks, and whether anyone has a better idea.”