What Happens When Every Citizen Receives a Universal Basic Income

Later this year, Stockton, a city in California with a poverty rate of 25%, will conduct an unusual experiment: its approximately 100 residents will receive $ 500 a month for 12-18 months with no job requirements and no strings attached. Researchers are likely to regularly assess recipients’ health, childcare conditions, education, and general well-being to measure how such financial support affects quality of life. The Economic Security Project Grant is a privately funded “universal basic income” experiment, a political idea based on the premise that every citizen should receive a regular scholarship from the government to cover their basic needs.

A universal basic income is not a new idea

“Perhaps the first to talk about [universal basic income] was Thomas Payne, the founding father of the United States, who talked about giving every US citizen some amount of cash every year to ensure that they can receive basic needs care.” says Jim Pugh, co-founder of the Universal Income Project in San Francisco.

Since then, universal basic income has been introduced and reviewed periodically over the years, most recently in the civil rights era. “The most recent debate and mobilization took place in the 1960s and 1970s, when they were actually a major part of the civil rights movement,” says Pugh. “Martin Luther King Jr. said he thought it makes sense to eliminate poverty directly through guaranteed income.” The idea was supported by people on both sides of the political aisle – as, to some extent, now, but for completely different reasons. (More on that in a minute.)

How UBI works

There are several ways to realize your universal basic income. One is a fixed cash payment to each citizen on a regular basis, say monthly. Or is there a negative income tax first proposed by the libertarian economist Milton Friedman in the early 1960s. A negative income tax works as follows: the poverty line for a person is set, for example, at $ 12,000 per year (which is close to the current level). “So if you don’t make anything, you get the amount of poverty,” says Pugh, $ 12,000. “And then when you make money, some of that money is actually taxed – the typical amount [we’re talking about] is 50 cents on the dollar. If you make $ 10,000 [on top of your $ 12,000 base income], the $ 5,000 in negative income tax disappears, but you still get $ 5,000 up front. ” Wealthy people who don’t need pay don’t get paid, and work is rewarded: people who work will always make more money than those who don’t.

This is a pretty elegant solution to the “rock of wealth” problem or the classic dilemma faced by people receiving assistance: to work and lose benefits? Or not work and maintain the little security and continuity that welfare provides? Finland is currently in the middle of a two-year experiment to offer a monthly cash payment that does not go to waste when people get employed as a way to reward work. “Their approach is to provide regular, unconditional cash payments, so if you take a job, you continue to receive these payments – they are not actually taxed. So they hope that … it really encourages people who are not currently working to return to the workforce, ”says Pugh.

Under the Nixon administration, the United States came close to imposing a negative income tax — it passed the House of Representatives and backed by Richard Nixon, but did not pass through the Senate. “After that, the effort stopped,” says Pugh.

What research tells us

In the 1960s and 70s, there were four UBI experiments in the United States and one in Canada . The researchers examined the effects of basic income on participants, from health to education and labor force participation. “They found that there was some decline in labor force participation – it was somewhere around 14% – but the vast majority of this was actually due to the fact that one of the spouses – usually a woman at the time – stayed at home to take care of children for longer, or children who have started working to provide additional support for their families actually returning to school. So it was this behavior that could actually lead to positive social outcomes in the long run, ”says Pugh.

The Canadian mincome experiment for the minimum income, which lasted four years, showed similar results: some people reduced their employment in the labor force, but as a rule, middle and upper-level households worked less, and children spent more time in school. …

Cash transfers also brought health benefits, Karl Wiederkvist, associate professor at Georgetown University in Qatar, told me when discussing the Canadian study: “The number of low birth weight babies has decreased. There has been a decrease in infant mortality. Students stay in school longer, which is the holy grail for low-income children, ”says Wiederkvist, citing the inconsistent effectiveness of other scattered activities such as extra-curricular programs for low-income students. He is blunt: “If the students are not so poor, they learn better.” Home ownership has increased. There were fewer mental health emergencies at the local hospital. In theory, these are all results that the Americans would like to support.

So what’s the problem?

Many Americans don’t like the welfare programs we already have – take a look at the “welfare reform”. They don’t like the idea of ​​”free” handouts. They worry that recipients will spend their allowance on drugs or frivolity (although studies of four US experiments showed only modest increases in “frivolous” spending) or not work at all (again, this is not supported by research). This is, says Wiederkvist, “a redistribution from the top half [of the recipients] to the bottom half.”

How exactly the American UBI will be financed is a difficult tax issue. “The cost of UBI, [if realized] at the poverty level, will be around 2.95% of GDP,” says Wiederkvist. “We would save a little on other social services, but incur additional costs trying to adapt them to our existing tax system. If this system were simply added to our existing tax system, some net beneficiaries would face very high tax rates, even if they had a low overall tax burden. It is impossible to reduce these rates without increasing costs. ”

Wiederkvist said it will likely take several years of nationwide experimentation to see if UBI can save more than it is worth in the long term (like early childhood education or vaccination programs). Research does show that ” for every dollar spent on child poverty reduction , the country will save at least $ 7 in economic costs of poverty,” writes Dr. Mark. R. Rank for the New York Times . Wiederkvist argues that “even if it is more expensive, it is money well spent.”

If you are interested in the details of the tax issue, economist Richard Pereira outlines his suggestions in Funding Basic Income: Solving the Cost Objection Problem . (In his introduction, he asks, “Can’t we find a way to reorient this wasteful system so that resources are better channeled to ensure global income security?”

Supporters and opponents on both sides of the aisle

Guaranteed income has some support on both the right and left. The conservative UBI case, formulated by Noah J. Gordon, writing for the Atlantic , is that cash payments to every citizen should replace our current patchwork welfare system. Liberals want UBI to increase what we already have. There are some social programs – like Medicaid or disability – that cannot be adequately replaced with a modest cash benefit. (For example, a child with a severe disability requires treatment that costs much more than $ 12,000 a year.) Pugh argues that at least any health-related program should remain unchanged because of the astronomical costs involved.

However, the right and the left agree on one thing: the current security system is ineffective. Conservatives believe that the benefits are too easy to obtain, and the system is vulnerable to bums; liberals think that too many people who need help are not getting it. People at home caring for relatives, for example, or people trying to start a business – a behavior that, again, in theory, Americans want to promote – are not eligible for many social security programs due to job requirements and therefore suffer from long-term financial consequences. for their caregiving work . These people will be provided, at least in part, with a universal basic income.

Why now?

The renewed interest in the implementation of a universal basic income is driven by several different factors. First, job security has become increasingly difficult to provide over the past few decades – automation means fewer jobs and that could mean “giving up work” in places like southwest Missouri . “The downturn in the workforce [also] plays a big role in the fact that in the past you could often count on many years of careers in the same company that provided you with a reliable job and benefits. More and more people are now working in a contingent workforce where they lack job security and benefits, ”says Pugh.

Tech entrepreneurs are spearheading the current push towards universal basic income, perhaps because they can envision a future in which robots will do all the work, or perhaps because they think like Andy Stern, the former head of SEIU and author of Raising the Floor. , does what is the best way to avoid the 1789-style revolution . Yet, no matter what, how to deal with worsening income inequality and the fact that many Americans are still struggling after the Great Recession is something that is likely to continue to rise in the coming electoral cycles. One proponent of basic income, Andrew Yang, has already run for president in 2020 with a proposal that all citizens 18-64 receive $ 12,000 a year from the government without strings attached.

Interestingly, the closest thing to UBI in the US is now the Alaska Permanent Fund , which provides every Alaskan with an annual check issued by a government corporation. Even more interesting: Former Alaska Governor Sarah Palin spoke out about Stockton’s experiment with a predictably derisive tweet; Stockton Mayor Michael Tubbs quickly clapped back.

Tubbs noted that he considers money not so much a giveaway as a giveaway. Regardless, it is clear that something needs to be done about the fact that millions of Americans cannot meet their basic needs: 13.1 million American families are “food insecure.” Every sixth child is hungry . By now, the problems are well documented: either jobs simply don’t exist in the region, or jobs aren’t enough to live on – Tubbs points out that some of his voters work 12 hours a day and still can. ” t make ends meet. A 2017 Pew Research report found the very poor are getting poorer: “The proportion of the poor in the United States living in extreme poverty – defined by the Census Bureau as people with a household or individual income below half of their poverty line – has reached its highest level. in at least 20 years. “

In the face of this – an economy that cannot support a large number of its citizens – creative, innovative solutions are likely to be offered in the next decade. Until then, watch out for Stockton.