We are frequently told that poverty in the United States is such an intractable and complex problem that any serious attempt at eradicating it requires a diverse array of approaches and reforms.
But what if that’s not true? Universal basic income (UBI), which has gone by various names at different times and places, is one of the most straightforward policy proposals to eliminate poverty: the government unconditionally gives everyone enough money so that their basic needs are met.
Despite recent misleading headlines, Finland is not about to begin cutting checks to every single one of its citizens anytime soon. However, the Finns are investigating how they might try out a basic income, adding to a list of other experiments with the concept over the past 50 or so years in places all over the world, including Brazil, the Netherlands, and rural North Carolina.
Could UBI ever be implemented on a national scale here in the United States?
Bipartisan support—really
On its face, the idea seems ludicrous given America’s vaunted culture of “self-reliance.” But the truth is the idea has historically enjoyed support from politicians and other advocates, on both sides of the political spectrum.
For liberals and the left, UBI is seen as having the potential to reduce inequality and completely eliminate poverty. It has been supported by everyone from Martin Luther King, Jr. to 1972 presidential candidate George McGovern.
UBI also appeals to some conservatives, such as famed libertarian economists Milton Friedman and Friederich Hayek, because of its potential to shrink government and do away with the minimum wage. Richard Nixon, during his first year as president, proposed a so-called negative income tax—a variant on UBI—where a family of four would get, say, a $10,000 refundable credit, which is then taxed away as their income increases and they no longer need the assistance.
Not that expensive
Considering that nearly all levels of government in the United States are struggling to balance budgets, is UBI even fiscally feasible?
In 2014, almost 15 percent of Americans, or 47 million people, lived in poverty. According to some calculations, these citizens are $175 billion below the poverty line. While not insubstantial, that number, according to The Atlantic, “is equivalent to 1.08 percent of the country’s GDP, one-quarter of the country’s $700 billion military budget, and exactly what we spend on Social Security disability benefits.”
UBI, theoretically, would cost much less to administer than many of our current overly bureaucratic and inefficient social welfare programs. Rather than having separate state and federal agencies handle SNAP (food stamps), Section 8 housing vouchers, and Medicaid, all those programs could be consolidated into a single agency, dispersing a monthly cash benefit that could then be used to pay for food, housing, and healthcare.
It’s possible the savings wouldn’t stop there. A UBI pilot program in a Namibian village of 1,000 people led to “a 42 percent drop in crime.” Granted, a Namibian village isn’t exactly Times Square. Still, if you believe poverty is a root cause of crime (and certainly, not everybody believes that), law enforcement and court expenses might decrease as well.
But will people still work?
Perhaps the most common criticism of UBI is that, like traditional welfare programs, it will create a disincentive to work. Society will become less productive, and growth will stagnate due to lower employment.
But the stereotype of the lazy freeloader doesn’t hold up under scrutiny. For one, surveys and studies frequently confirm that having a job is tied to most people’s self-esteem and self-worth. Would people really be so willing to give that up, simply because their most basic needs were already being met?
And unlike traditional welfare programs that reduce benefits as an individual’s income rises (effectively causing a poverty trap where the marginal tax rate is 100 percent), most UBI plans keep the rate of increase positive at all incomes. Large-scale UBI studies in Seattle and Denver have found that very few people stopped working, while some people reduced their hours slightly. Considering how overworked America is, this isn’t such a bad thing.
Of course, knowing that they have money to fall back on, some people—such as students who need to concentrate on school and single parents who need to care for their children—might choose unemployment over working low-wage jobs. However, just because activities such as learning and parenting are not traditionally included in the productivity metrics of most economists doesn’t negate their broader value.
If it is indeed true that most people will not stop working—and granted, more studies need to be conducted—UBI could have other profound macroeconomic effects. Always having a source of income to fall back on would give low-wage workers more bargaining power with employers, who would likely have to improve wages, working conditions, and benefits in order to convince workers to stay in the labor market.
But there is more to flourishing as a society. For example, we’ve agreed upon the value of Social Security to enable citizens the possibility to retire after a lifetime of work. UBI would give individuals the resources to leave bad jobs and the flexibility to decide to spend time on family care, education, or volunteer work—all of which would accrue to our collective benefit.
The views and opinions expressed here are those of the author and do not necessarily represent those of Avvo.
