The Promise of a Universal Basic Income—and Its Limitations

The Promise of a Universal Basic Income—and Its Limitations

What Money Can Buy

The promise of a universal basic income—and its limitations.

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The idea that a country should provide its citizens with an infusion of cash on a regular basis has cropped up repeatedly over the course of history, starting with Tudor England, when Sir Thomas More argued in Utopia that every person should receive a guaranteed income, and later gaining traction in the United States, in policies proposed by everyone from Martin Luther King Jr. to Milton Friedman.

Since the 2008 financial crisis, the idea has resurfaced, once again backed by a diverse group of figures. Part of this renewed interest stems from the economy itself: Even as jobs have rebounded from the depths of the recession, wages have remained paltry and the terms of employment are often highly precarious. Part of the interest also stems from the worries that people have about the rise of automation and artificial intelligence and their fear that things will only get worse for the American worker. But no matter what motivates this renewed interest in a guaranteed basic income, it’s a policy that’s been championed by everyone from former Service Employees International Union president Andy Stern to Facebook co-founder Chris Hughes.

Stern, in his 2016 book Raising the Floor, argues that a universal basic income is the only way to ensure economic stability and a chance at the American dream. The UBI wouldn’t just cover gaps in household budgets; it would revolutionize society, responding to automation and allowing everyone to choose both how much they work and what kind of work they do, be it in a factory or in a studio, making art. For his part, Hughes shares Stern’s paranoia about the robots coming for everyone’s job; in his new book, Fair Shot, Hughes argues that regular cash payments from the government would give people security in an economy made increasingly precarious by the technology that has made him and others like him rich.

Annie Lowrey’s Give People Money presents many of the same arguments, although unlike Stern and Hughes, Lowrey is able to do so without hyperventilating about how technology is going to destroy our economy. Keeping a closer eye on the economic implications of a UBI, she also offers a better-reasoned and more engaging account of why the policy should be implemented in the United States. Still, like Stern and Hughes, she does fall into the trap of vastly overselling what a guaranteed income can accomplish. Realistically, while it may be able to address the problems of desperate poverty and a culture of overwork, it stands little chance of transforming the economy itself.

Why should we consider a universal basic income? The most straightforward answer is that it can achieve a dramatic reduction in poverty. As demonstrated in a variety of different economies, both developed and developing, a UBI provides a critical infusion of cash that allows families to assuage the ills of impoverishment.

To get a closer look at a UBI in action, Lowrey traveled to Kenya, where the theory is receiving its most robust experiment: GiveDirectly, a nonprofit that gathers money from donors, sends regular lump-sum payments to people living in some of the country’s villages. As GiveDirectly’s own research and that of others have found, the money doesn’t induce poor people to give up work; nor does it simply feed bad habits like drinking and smoking. Instead, people invest the income in themselves and their families. They can eat more. They can afford to take better care of their health. They and their children get more education.

But the most important consequence of giving cash, rather than stuff or services, is that it allows people to buy the specific things they lack. Lowrey describes seeing people’s houses in Kenya stuffed with Toms shoes that they didn’t need—each pair donated when someone buys a pair themselves—as well as soccer balls and nets that do little for a family that can’t buy enough food. “[C]ash is a proven aid intervention,” Lowrey notes, “whereas many of the goods and services provided by charities are not.” Plus it’s far cheaper and easier to disperse.

As a way to combat poverty, Lowrey contends that a UBI could work in the United States, too. It “could be a powerful tool to eliminate deprivation…. About 41 million Americans were living below the poverty line as of 2016,” she notes. “A $1,000-a-month grant would push many of them above it.”

Lowrey’s argument about poverty is persuasive. By giving every family in the United States $250 a month for each of its children, we would reduce child poverty by about 40 percent and effectively wipe out the most extreme cases. By giving every American about $3,000 a month, we would cut the official poverty rate in half and provide a higher standard of living for all—even for those who are not impoverished. In a review of the existing research on universal cash dispersals in developed countries—the Alaska Permanent Fund Dividend, for example, which gives every Alaskan resident a cut of the state’s oil profits—economist Ioana Marinescu found that universal basic incomes help people improve their nutrition, education, and health.

Lowrey argues that a UBI could even change how we view poverty and the poor themselves. She recounts visiting Maine, where she interviewed people who were unable to jump through the hoops to receive the government aid they so desperately needed. “We judge, marginalize, and shame the poor for their poverty—to the point that we make them provide urine samples, and want to force them to volunteer for health benefits,” she notes. “As such, we tolerate levels of poverty that are grotesque and entirely unique among developed nations.” But giving everyone, including the poor, unconditional cash could mean seeing poor people “as deserving for no other reason than their poverty—something that is not and has never been part of this country’s social contract.”

For Lowrey, an American UBI would then be about economic justice: It is a dividend from the government that gives each citizen a cut of the prosperity that we all help to generate. A universal basic income would represent a commitment to the idea that we all contribute to society and that, in one of the richest countries on earth, none of us should go without some means of subsistence. “UBI would be sharing the public wealth,” Lowrey argues, before pressing the point:

all Americans “make” and “take” over their lives, and no business or individual is truly self-made, no matter how hardworking and innovative…. It would acknowledge our interdependence as well as our independence.

As a way to slash poverty and more fairly distribute our country’s wealth, a universal basic income could prove a powerful tool. But the problem with Lowrey’s argument, as well as Hughes’s and Stern’s, is that they see it as a solution for many other of today’s economic problems. Hughes and Stern, for example, prescribe giving people cash because they believe it will also address the issue of automation in an era in which new forms of technology continue to replace human labor.

Lowrey is skeptical of this idea. “[D]espite the creation of AI and the concern about the future of human labor, the arguments for implementing a UBI to ward off technological unemployment felt hyperbolic—or at least premature—to me,” she writes. Nonetheless, she contends that a UBI could solve other economic problems. It could fill in the income holes for those who work at jobs with erratic hours (Uber drivers, for example, or retail workers), and it could also help prevent more people from being tossed into abject poverty by the sudden loss of their jobs during a recession. It could serve other purposes as well—as an initial investment in someone’s new business, or to pay for a move to a place with better work opportunities, or to enable a person to go back to school and get better credentials.

According to Lowrey, a UBI could also address one of the central problems in today’s precarious labor market: By allowing workers to walk away from a job, it could give them considerable leverage over their employers and provide them with more say in shaping the terms of their employment. A UBI, she argues, would

ameliorate the catastrophic loss of worker power…. With a basic income, workers could refuse to take a job with low pay. With a basic income, workers could demand better benefits. With a basic income, companies would have to compete to win workers over.

Here Lowrey encounters the same challenges as Hughes and Stern: None of the amounts being proposed by UBI supporters come close to giving workers the power to walk away from an exploitative job. Lowrey’s version of the UBI would consist of $1,000 a month for every citizen of the country, potentially paid for by a potpourri of policy options. (Hughes promotes an even stingier one: just $500 a month for a limited slice of the populace.) But $1,000 a month is clearly too little to live on in a society in which other necessities—rent, car payments, doctor’s visits—are not also provided by the state. Twelve thousand dollars a year wouldn’t lift even a single person without kids above the federal poverty level—an official number that doesn’t accurately measure what it takes to get by in this country. And that’s for a single person without children. If checks are only sent to adults, a single parent of two children, as Daniel Hemel has pointed out, would have to work at least 32 hours a week on top of a $1,000-per-month UBI just to clear the poverty line. A median two-parent, two-child family needs nearly $40,000 more a year above the poverty line to really make ends meet.

The current precariousness of work, therefore, would remain, since even with a basic income most Americans would still have to do a considerable amount of work and would be forced to accept the employment terms on offer. Few, if any, could walk away from a fast‑food job that refused to pay above minimum wage or offer humane scheduling and benefits if the fallback were a mere $1,000 a month. The possibility fades even more quickly for those with children and those who are the sole earners in their households. Without another source of income, a single mother couldn’t actually choose to focus on raising her children on $1,000 a month, let alone making art or starting a business or caring for her parents in their old age. A UBI might help to address questions of basic subsistence, but it’s the power to say no to crummy jobs that could truly transform the economy—and there, a universal basic income falls dramatically short.

Another policy solution that many contrast with the universal basic income might actually give workers such power: a federal jobs guarantee, or a program that would employ any willing person in a variety of societally necessary tasks in exchange for a decent living with decent benefits. If a good job were always on offer through the government, losing a job thanks to a recession or an unfair boss wouldn’t mean catastrophe. Workers wouldn’t have to put up with low pay and poor treatment; they could go get a public job instead. And for their part, private-sector employers would soon learn that they had to raise their standards to compete with good government jobs.

This is an idea that Stern, Hughes, and Lowrey all consider briefly and then dismiss. Despite his labor credentials, Stern worries about the complexity of such a program and the “huge government bureaucracy” it would require, to say nothing of the costs, whereas Hughes simply doesn’t trust the government to carry it out. “The arguments for a federal job guarantee require faith in government’s ability to connect people to jobs they want and need,” he writes. “It falls squarely in the tradition of government telling poor and middle-class people what to do with their lives.”

Likewise, Lowrey somewhat glibly dismisses the idea because it “might be a nightmare to run.” But a jobs guarantee is hardly any more utopian than a universal basic income. Part of the allure of the latter is how simple it would be for the government to just cut everyone a check. But that simplicity sacrifices larger benefits. Yes, a jobs guarantee would require far more bureaucracy and government involvement, and it could very well cost more. But in exchange, it would give Americans a lot more power over their working lives than a universal basic income would: a real choice between what’s on offer in the private sector and in the public-employment office, between the wages available at Walmart and a decently paying government job. Those who easily find themselves in careers with good benefits wouldn’t need to avail themselves of a federal jobs guarantee. But those stuck in minimum-wage work over which they have little control—or who can’t get even that thanks to barriers like felony records, racism, and disabilities—would have the luxury of options.

Of course, there are some things that a jobs guarantee can’t do. It wouldn’t value unpaid labor or question the American obsession with a job as proof of a person’s worth. Indeed, what sets the UBI apart is that it gives someone money without requiring that she leap into another job. A UBI can also help value the unpaid work that women disproportionately shoulder at home, serving as “a powerful rejection of the notion that people who toil without pay do not contribute,” Lowrey writes. She also argues that it can help attack racial income and wealth gaps by “ensuring that the minority would get what the majority got.” (This last claim is a bit more dubious: Since a UBI is distributed equally to everyone, it’s hard to see how it could minimize racial gaps in income and wealth.)

Yet despite the arguments over which policy—a universal basic income or a jobs guarantee—is better, the best approach would likely be to consider that American society needs a UBI (to eliminate extreme poverty and decouple a person’s worth from her work) and a jobs guarantee (to ensure that when she does work, it’s for decent pay and good benefits). Other policies could raise the quality of life for people in this country still further: for example, programs that make education, housing, health care, child care, and other life necessities—which often come with an exorbitant price tag—available to all.

A UBI may be moving from the realm of fringe utopian discourse to actual policy-making. Experiments in various types of universal cash benefits have appeared in Scotland, Finland, and the Netherlands; in Oakland and Stockton, California; and in Ontario, Canada. Hillary Clinton even considered campaigning on the promise of one. But a universal basic income isn’t a panacea for all of our social ills so much as one solution that must be coupled with others. It could be a powerful answer to some of our most intractable problems, but it won’t fix everything.

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