Like Churchill’s description of democracy, maybe a UBI is a terrible idea, but better than the others.
INTRODUCTION
A few years ago, after reading a book with a catchy title, “Basic Income,” I became intrigued with the ’concept of a Universal Basic Income (UBI) program. Subsequently I organized a small group discussion that focused on the different impacts possible with a UBI, the sum of which could be a better society.
In that conversation, in grading two-dozen different topics as to the relevance of a UBI, we concluded that such a program could be connected to beneficial changes in everything from affordable housing to creative expression to entrepreneurial activity to improved healthcare to educational outcomes to income inequality to economic mobility.
Whether the design of current UBI experiments can be scaled sufficiently to move the societal needle overall is a separate issue that is nonetheless completely connected.
As always, in Montaigne’s words, is the game worth the candle?
DEFINITION
In a UBI program, every adult receives monthly either direct payment of a certain amount of money or a debit card entitling them to that money. There are no strings to its usage. The tax liability varies according to jurisdiction and the legislation behind the UBI.
(Note: in the United States, the UBI idea has been modified as a Guaranteed Income (GI) program. This update will use UBI and GI interchangeably as the reasoning process is basically the same.)
BACKDROP
There are about 40 million people living below the poverty line, although it is acknowledged that the definition of poverty is subject to analysis, particularly around in-kind and other welfare receipts.
More positively, let’s assume a UBI of $1,000 per month for every adult. To the lower end of the income scale, this would be a godsend. Would some of them use the money unwisely? Sure, like everybody. Interestingly, the admittedly small UBI experiments to date indicate that the funds are used in very prosaic ways, groceries and retail leading the way.
For middle class families with college age children who are too affluent for programs like FAFSA and too strapped to pay the exorbitant cost of college, the UBI would be welcome for sure. At the very upper end of the income spectrum, the UBI money would be irrelevant. Chump change as it were.
At present, roughly half the population has no net worth, i.e., assets minus debts are zero or worse. UBI would not remotely solve that comparison. There are multiple barriers involved, beginning with inadequate K-12 education and continuing through a long list of historical restrictions, many of them based on racist attitudes, on both home ownership and jobs.
BENEFITS
A UBI or GI is within a growing trend toward giving cash grants: reportedly seven million people in some 37 countries have been beneficiaries. In less developed countries, a reduced death rate for women and children has been one benefit. Improved school attendance, better nutrition, and enhanced use of health services have been noted. An advocate like the Jain Family Institute believes direct payment results include improved school grades, better high school graduation numbers, and increased income.
A study of poor mothers revealed that receiving cash directly has an indirect beneficial impact on brain activity of babies, a similar gain in fact to having a tutor in school.
As privatization has moved different government functions away from the public polls, only large companies and organizations have benefitted. A UBI would put more decision-making in the hands of individuals whose financial pictures are so tightly circumscribed that one could argue they have no true choices in their current situations.
There is a drug arrest every 25 seconds; half of the population has a family member or friend who is addicted. Hopefully there is an ongoing shift toward treating addiction as a health issue, not as a client list for profit-seeking prisons. The reasons for addiction are multiple; stress is one. The long-term use of antidepressants is associated with an increased risk of having a heart attack. About one in eight of those over twelve years of age took medication in the past month compared with one in twelve twenty years ago. How many ways can you spell stress! Enter a UBI benefit.
A UBI could lessen the issue of on-going stress among those with overly tight budgets. Those with discretionary money handle stress with drugs and alcohol, knowing their jobs are more or less assured. At the lower end of the scale, stress is exacerbated because the power relationship between a typical jobholder in a corporation and his or her boss is completely lopsided. A UBI would be helpful here.
Income, like education, facilitates choice. If all monies received by a person go for immediate needs like rent, food, and transportation, choice is virtually nonexistent, to the benefit of credit card companies or payday loan operators, both of whom charge extremely high interest rates.
Ah yes, some would take UBI money, buy surfboards and head to the beach. The beaches would become crowded and then have to charge for surfing privileges, which would mean the UBI money went for naught. Ridiculous scenario. Some might no longer carry the moniker of starving actor or actress or artist; they would live on the UBI. Okay reader, try living on $1,000 per month. Maybe the money instead would go for acting classes or sessions with successful artists. This is bad?
Since the 2021 expanded child credit reportedly lifted three million kids out of poverty, is it not a bit of a proof point for a well-constructed UBI?
In 2021, the maximum income tax credit per child was lifted from $2,000 to $3,600, payable in cash regardless of the filers tax situation. Many Republicans are in favor of these types of tax credits; the opposition is insistent on everybody working even though some recipients cannot from a health standpoint. Note there is a continuing, somewhat unspoken premise, i.e. that people do not want to work, when the opposite is continually proven to be the case. This does not contradict the desire by all people for respect regardless of their spot in the job pecking order.
Big organizations, whether they be the AMA or NEA or IBEW, are fundamentally about job protection for their members. Overall, in 1950, 10% of employees were in occupations that required licenses; now it is 25%. And reciprocity among states is uneven. While a UBI would not create a level playing field, it would make it more economically feasible for individuals to pay the dues needed to enter certain occupations.
What will be the impact of AI? It is possible that those initially in control of its usage will win economically, as always, while job losses will affect those with limited choice. For certain, this is not clear; many white collar jobs may disappear. Low-paid service jobs will remain – these need a UBI.
THE BIGGER PICTURE
Conceptually, a UBI is about figuring out what kind of society we want. That is the overriding question, more substantive and important than the specific monetary details. Yes, a UBI would be hugely expensive, net of cost savings from a reformed and smaller existing welfare system. (So are many other government programs, more than a few of which seem of questionable merit.) Debates will be inevitable on which current entitlements would wither away with a UBI.
When the richest five men in the world double their net worth in four years, nobody worries about the inflationary impact of all those incremental billions. At the same time, there is a valid question about the inflation which could be brought about by a UBI, simply because of its universality. One might ask whether that concern should be greater than the protracted role of the Federal Reserve in pumping money into the system in the everlasting chase for a higher quantitative GDP?
Theorists on both sides of the political spectrum recognize the value of bolstering families, which includes greater aid, e.g., a UBI. Rebuilding families can be synonymous with rebuilding communities.
Amitai Etzioni, recently deceased, advocated a Society built on Community; he labeled himself a “Communitarian.” Because he regarded the family as a moral anchor, he advocated extended child care and parental leave benefits, plus flexible working hours and tougher divorce laws. He was in favor of a national service requirement for young people and wider participation in jury duty and the military. A UBI fits in nicely with this view of how society should function.
The economist Herman Daly challenged the idea of GDP growth being the end-all. For one, its calculation ignores associated costs. If the problems caused by carbon-based energy had been confronted when Daly was prescient in his thoughts, our current climate control dilemma would be slightly less daunting. A UBI speaks to quality of life more so than quantity.
Milton Friedman, famously quoted as saying that the mission of a company is to make money period, used as part of his reasoning that CEOs are no more competent outside of their company than the average person. He noted that if profits come to be considered immoral, then control defaults to the centralized power of government. A UBI is pro-individual, from the janitor to the CEO. It keeps government at a suitable distance from daily decision-making.
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The year 2023 saw major unionization victories. The number of strikers was reportedly nearly quadruple that of 2022 and almost eight times that of 2021 for the same period. Even healthcare was involved: in October, 75,000 nurses and doctors struck Kaiser Permanente and won not only a 21% wage increase over four years but “improvements in training, professional development and staffing.”
Irritation over the discrepancy between rich corporate profits and resistance to paying a living wage has meant that young people without any prior philosophical allegiance to the concept of unions recognized the logic of coordinated action. And relatively new union leaders were more strategic in their approach.
The hypothetical size of a UBI in theory could have a dampening effect on the trend toward more unionization. Note that the latter is coming from a very low starting point compared with historical levels when the focus was manufacturing jobs, the majority of which have gone elsewhere.
However, both a UBI and unionization are aimed at the same target: unfair differentials in compensation at the vast majority of large organizations. Perhaps they would be complementary pieces of a program.
Some countries have either formal or informal restrictions on the ratio of CEO compensation to the lowest income level in the company. The prevailing American attitude seems to be that the CEO’s out-sized compensation was earned entirely through hard work and personal merit; i.e., the people below the CEO office had nothing to do with the CEO’s success.
EXPERIMENTS
Going through the details of each experiment would require a separate, lengthy document. There are no two alike and political considerations mean that forward visibility on the programs is not high. Website information is either incomplete or rather dated. It is clear that the organizers of UBI programs are more focused on daily implementation than on winning plaudits from prospective major donors.
In 2024, there are three dozen cities in the USA with on-going UBI experiments. Full disclosure: the aggregate money involved is less than Apple brings in every day, but still, it’s a start. Maybe it becomes an initial entry on the road where the signs says, “a viable, evidence-based program that puts a slight dent in gross income inequality is … good.”
Pilots are being run using leftover COVID money, $500 or so per person. Conceptually there could be a connection to the temporary child tax credit, which was $250-300 per child per month. An estimated
1.5 million parents (3% of total employment) said they would stop working if that credit was permanent. Looking at the total picture, society could easily be better off with more mothers able to be with their children instead of paying for expensive childcare.
The most widely publicized, in part because it was one of the first, UBI experiments was in Stockton, California in 2019. It provided $500 on a debit card on the 15th of each month; median household income was $46,000. Mayor Tubbs, who began the program, is no longer in that position; instead, he is Special Advisor to California Governor Newsom for Economic Mobility and Opportunity. Tubbs is the founder of the country’s Mayors for Guaranteed Income.
With the federal childcare monies ending, some states are taking up the slack. Colorado is providing $1,200 per year for children under six in households earning less than $35,000. Chicago has recently joined the long list of cities experimenting with a UBI; it encompasses 5,000 participants who will receive $500 a month for one year. Alaska’s Permanent Fund, essentially an oil revenue based UBI, provides money directly to virtually all its residents.
The Newark Movement for Economic Equity experiment with guaranteed income included 400 residents, who received $6,000 for each of two years. Residents were below 200% of the poverty line, over 18 and negatively affected by COVID. The vast majority were black single women. Overall average household income was less than $9,000. Two-thirds of the money received was spent at retail and grocery stores.
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The Kenya Giving Directly program had an initial design that entailed having it run from 2017 until 2030. Involving 21,000 people, those from two-twelve years of age were to receive $0.75/day; others would get a lump sum. The organization behind this effort has expanded into multiple countries, including the USA with a GI program. Overall it has raised more than $700 million to reach 1.5 million people.
More recently, the current war between Israel and Hamas has brought forth the suggestion of a UBI for Palestinians in Gaza. Raja Khalidi, Director General of the Palestine Economic Policy Research Institute stated that $200/month would cost $5 billion to the point of economic recovery, when it would sunset.
COMMENTARY
Thinking about a UBI brings to mind the persistent question: hypocrisy or fundamental change?
At the micro level, the multibillionaire founder of Starbucks, Howard Schultz, offers tuition reimbursement for staff meeting certain criteria. He simultaneously fights any attempt at unionization. He wants total control of his “beneficence.” A UBI alters the control equation somewhat.
If Schultz wanted to help more people instantly, given the apparently addictive nature of his product, he could reduce the price of his coffee. Stunningly, he might actually lose customers as the allure of paying more would be diminished and people would realize a cup of coffee from the place around the corner from Starbucks is just as good. Schultz simply adds a lot of sweeteners, ultimately leading its customers to provide good business for fitness locations.
Taylor, Mick, and Madonna could cut their ticket prices, instead of raking in huge revenues and then making charitable donations. Ah, the loss of control again, democracy run amuck if the masses had money in their pockets instead of it being concentrated in a very few.
Put differently, fabulously wealthy people pick and choose their policy passions: Bezos re homelessness (while he fights unionization), Arnold: drug prices and education; Bloomberg: smoking, sugar, gun control. Perhaps individuals with UBI supplements would like a bit of purchasing independence, in this case to be used for their policy passions.
Newsflash: New York City’s big philanthropists have discovered that their billions cannot solve the city’s multiple problems. Perhaps they might recognize their essentially top-down approach could be beneficially flipped from a power and control standpoint, i.e., a UBI. Nah, who gives up power!
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Society is being torn apart. Leaving aside the multiple reasons, what are some of the choices of the super-wealthy:
Live totally separate lives – already do
Write periodic big checks for issues of their choosing — already do (some rethinking happening)
Resist any changes to the tax code – already do
Ignore societal problems only addressed in part through higher taxes and loophole closings
Maintain a disbelief that the masses will rise up in violent protest
Philosophically hide behind the historical failures of many government programs
Park their excess money somewhere else, e.g., Swiss bank accounts (or places more exotic)
Promote the erstwhile American Dream in the face of its declining applicability
The Affordable Care Act was funded with a 20% capital gains tax plus a 3.8% levy on investment income. The top income tax rate of 37% remains far below levels of the past.
What would the upper 5% prefer: higher taxes on every form of income, closed loopholes (carried interest, appreciation without taxation on one’s demise), or a UBI?
Maybe the right politically could come to view UBI as philosophically aligned with individualism and an alternative to big government getting into their pocketbooks in a direct and painful way.
Perhaps an equally intriguing question is whether the left politically would prefer a series of new government programs (always its favorite “fix”) or a UBI?