Technology, globalization, and a rapidly changing economic landscape are leaving behind many workers and feeding the flames of populism worldwide. Could the solution to mitigating this economic displacement be to just give everyone money?
That’s the idea being pushed by advocates of Universal Basic Income (UBI) in recent books like Give People Money by Annie Lowrey and organizations like The Economic Security Project. A Universal Basic Income is a cash-benefit given to everyone — no strings attached — designed to alleviate financial burdens of the modern economy. The idea is simple, provocative, and slowly creeping into mainstream policy debates.
The biggest obstacle in successfully enacting a UBI is how high-income countries view work and the social safety net.
Across high-income countries, especially in the United States, our work is a part of our individual and national identity. Everyone’s answer to the question “what do you do?” defines how we see ourselves. The earliest European settlers in America were Puritans and Quakers who believed idleness to be a sin. Upon visiting the United States during the 19th century, French historian Alexis de Tocqueville observed a unique industriousness and honor surrounding work in America. Sociologist Max Weber’s concept of the “Protestant work ethic” additionally projected an ethos of societal value being equated with toil that is deeply embedded in our national fabric. When American politicians of any stripe talk about the struggles of a constituency, the group almost always has a modifier of “working.” In contrast to Europeans, Americans significantly believe that the poor can improve their lot with the right amount of effort.
Too often, what it means to “work” is narrowly defined as “market labor for wages” and is increasingly out of sync with the needs and dynamics of modern society. For example, as our population ages more people will spend their time taking care of parents and volunteering at senior centers, earning no wage but surely providing value to society. Eternal chores like housework and parenthood are also essential to existing but are not typically thought of as “work.”
Simon Kuznets, the economist behind measuring economic growth in terms of Gross Domestic Product (GDP), always admitted the shortcomings of using GDP to measure the value of an entire economy specifically because it ignored household work. By focusing on GDP as an indicator of economic health, and therefore societal health, there continues to be a stigma against non-market labor. Child-rearing, elderly familial care, and household chores are ignored by these national statistics, implicitly valueless without an obvious market price. Those who give their time to community organizations or creative endeavors with insufficient market value are not given compensation that can be reflected on tax returns.
The existing safety nets across high-income countries are almost all based around the old-fashioned definition of work as labor that is valued by the market. Social security in the United States is close to a universal transfer system, but getting benefits requires working at least 40 quarters — 10 years — before retirement age. Taking care of kids at home for 30 years does not count. One must be earning a wage in the traditional labor market to qualify for social security benefits. Unemployment insurance, too, is only for people who were working for wages but find themselves suddenly without a paycheck because of layoffs.
The modern American safety net is ostensibly designed to be means-tested. This theoretically allows governments to target those most in need. Yet the ethos of rugged individualism and pulling one’s self up by one’s bootstraps underlies the American welfare system and requires burdensome proof of qualification to the point of shutting too many people out entirely. The architecture of the modern American welfare state has its beginnings in the New Deal, where cultural attitudes more common in the 1930s subtly linger today. Means-testing allows governments to be discretionary and, consciously or subconsciously, these allocations end up being racially skewed. Through various hoops and clauses, the Social Security Act passed in 1935 with enough initial conditions that it excluded two-thirds of black workers in the South from receiving benefits. Of the 3,000 loans guaranteed in Mississippi in 1947 by the Veteran Administration, only two went to black mortgage recipients.
The very myth of welfare queens and those who leech off the state have deep racial undertones. Programs designated to help low-income families and disproportionately used by blacks — though used more by whites in absolute terms — are labeled “welfare.” But government assistance embedded in the tax code that is overwhelmingly used by white families — like the mortgage interest deduction — is rarely thought of as a handout. Many of these beneficiaries, of course, do not see themselves as being recipients of a government handout.
Government assistance comes in a combination of state- and federally-funded programs. But the discretion left to certain states can explain a lot of the difference. Racial heterogeneity itself may be to blame for a lack of willingness to provide assistance to people of color. A seminal paper by Alberto Alesina et al found that “Within the United States, race is the single most important predictor of support for welfare. America’s troubled race relations are clearly a major reason for the absence of an American welfare state.” A state like Vermont (which is 95 percent white) covers 78 percent of its impoverished families, while in Louisiana (which is 32 percent black) only four percent of impoverished families are covered.
Despite the welfare queen caricature, every part of the American safety net is based around means-testing and/or age requirements and are almost never in perpetuity. There is no such thing as a general “welfare check” that anyone can just go to a government building and pick up. Programs like TANF — Temporary Assistance for Needy Families — give financial assistance to families that demonstrate need according to different states’ requirements. SNAP — Supplemental Nutritional Assistance Program, best known as “food stamps” — provides low-income households with vouchers that can be exchanged for certain categories of food. Even unemployment benefits are subject to their own conditions and have an explicit sunset date. These obstacles, whatever their intentions, are so prohibitive that it’s hard to defend perpetual poverty as the inevitable result of people just “falling through the cracks.” In 2015, just five percent of children living in poverty in Wyoming were covered by TANF.
Tying government assistance to incentives is not totally outlandish. There are instances where government benefits can be counter-productively generous to the point of disincentivizing work. But basing government assistance on conditionalities comes from a distorted view that poverty is usually a choice caused by bad decisions. If only we could give people better incentives, they’d be able to escape poverty. This idea is the impetus behind work requirements for government assistance and drug-testing beneficiaries. But requiring work for those who can’t find it is more likely to exclude those in need than provide a spark for the lazy. Imposing drug tests in exchange for food stamps isn’t going to snap a drug abuser out of his/her addiction and back onto a career trajectory. Women and racial minorities, who are discriminated against in the labor market, have even more difficulty finding employment and therefore accessing government assistance. And what about the people who cannot work because of disabilities, or whose time needs to be spent taking care of elderly parents or young children?
There is no settled UBI policy in the political discourse but all proposals share the same foundation. A UBI is Universal: every citizen takes part, regardless of need or age. Universality ensures that the program does not develop resentment effects and does not disincentivize work by disappearing when a recipient goes above a certain income threshold. There is no paperwork needed to prove you’re unemployed or too poor. Universality ensures it runs smoothly; experience shows programs targeted towards the poor like Medicaid operate far less efficiently than near-universal programs like Social Security and Medicare. A UBI is Basic: it is meant to be a cushion against times of financial duress and supplement other income to liberate people who do nonwage labor or want a cushion alongside entrepreneurial endeavors. A UBI is income: it is not a voucher that you can exchange only for eligible food items. It is not payment assistance for housing. Every recipient spends in the way he or she deems is best. A UBI takes the discretion away from the government and gives it to every individual, decreasing the bias of the existing system and eliminating the prohibitive bureaucratic nightmares that prevent more extensive coverage.
It’s difficult to know exactly how a massive redefinition of our national safety net would look, but there’s encouraging evidence already found within the United States.
The Alaska Permanent Fund gives up to $2,000 dollars a year to each Alaskan citizen, essentially as a dividend of oil revenues. The program lifts three percent of the state’s population out of poverty every year. A striking takeaway from the state’s project is how much the universality gives a sense of togetherness that other government transfer schemes do not. Alaskans feel like they are all a part of their state’s success, and no one resents a fellow citizen getting the check. A UBI in America could instill a sense that every citizen is a part of the country’s success, regardless of his or her income.
Internationally, Iran enacted a UBI scheme in 2010 by replacing previous food and energy subsidies with cash transfers. Data from the Economic Research Forum found that the policy change reduced poverty and inequality while preventing a feared mass exodus from the labor market.
These instances point to positive results for cash transfers and, perhaps most importantly, debunk the idea that it will incentivize people to stop working. Evidence throughout studies from low- and high-income countries consistently suggest most people who leave the labor market do so for beneficial reasons like furthering education or taking care of family members. The strong connection between working and self-worth remains even when we’re given money.
Evidence from high-income and low-income countries also disproves one of the most common points of skepticism about UBI: the concern that people will squander their allotment on indulgent consumption. Inevitably some money will go towards less-essential items, but it’s clear that what most of those in poverty need is a financial boost, not a realignment and paternalistic dictation of their economic decision-making.
A UBI is no panacea for the woes of the modern displaced worker. A cash transfer will not alleviate the pains of rust belt workers unable to fill the meaningful void left by lost employment. Instead, UBI should be seen as a cushion for the massive economic disruptions from the digital revolution, disruptions that we have previously only seen during the agricultural and industrial revolutions.
The prospect of a UBI is not as farfetched as it seems. Hillary Clinton was close to adding a basic income policy into her 2016 Presidential platform but ultimately “decided it was exciting but not realistic.” Democratic candidates for 2020, like Kamala Harris and Chris Murphy, have expressed openness to the idea. The success of state-by-state marijuana decriminalization proves that smaller state-based UBI experiments could eventually lead to a more convincing national campaign.
People from across the political spectrum can find something to like in UBI, albeit with differences in its enactment. For economic conservatives, the attractiveness of the UBI would be its ability to replace much of the clunky bureaucratic features of the American welfare state. For economic liberals, UBI would not replace the existing welfare state but instead complement it. These are not trivial details to work out: It means that UBI could range from adding nothing to the Federal budget to adding $3 trillion. But before a greater UBI context is considered, the essential task is to convince the public that unconditional cash transfers for every citizen are feasible and beneficial. Redefining society’s view of what “work” is and what it means to contribute to society is no easy feat. Yet we are beginning to be engulfed by the seismic winds of societal and economic change from a globalized digital age. We need a paradigmatic shift in how we view these things in order to ensure a broad-based peaceful prosperity for the future.