Basic Income: World’s Simplest Plan To End Poverty, Explained
Photo: A meeting on Brazil’s Bolsa Familia program in the state of Bahia. (Manu Dias/SECOM)
Note: There will never be enough jobs for people as technology continues to replace human functions. The guaranteed basic income is an approach guarantees that all individuals or families have an income sufficient to live on. Current technology could replace 47% of jobs and in three generations 70% of jobs will be replaced by computers. It is time to start to understand and demand a guaranteed basic income and redefine how the commons creates income that needs to be shared. This is a long-time idea that has been endorsed by libertarian economist Milton Friedman and conservative presidents like Richard Nixon. It was urged by Thomas Paine, a the revolutionary founder of the United States, he called it citizen’s dividend. The Rev. Dr. Martin Luther King, Jr. wrote in 1967 “I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” Because of advances in technology this is going to become an urgent issue in the very near future. It is time to put it on the political agenda.
Happy Basic Income Day! Sure, May 1st may be better known as International Workers’ Day, but some activists are trying to rebrand it. “Labor Day should not be about demanding ‘more jobs’ or higher wages,” the official Basic Income Day website explains. “Labor Day should be about struggling for the emancipation from unnecessary labor, unchosen labor, exploited labor.” And the way to get that emancipation, it argues, is through a basic income.
But wait — what is a “basic income” anyway? Here are the basics (get it?) of the idea, in eleven questions.
1) What is basic income?
“Basic income” is shorthand for a range of proposals that share the idea of giving everyone in a given polity a certain amount of money on a regular basis. A basic income comes with no categorical eligibility requirements; you don’t have to be blind or disabled or unemployed to get it. Everyone gets the same amount by virtue of being a human with material needs that money can help address.
There are a number of different names this idea has gone by over the years. “Universal basic income” and “basic income guarantee” are used frequently. “Guaranteed minimum income” and “negative income tax” are generally used to refer to versions of the plan that also impose a tax that gradually eats up the cash transfer, as a means of reducing the cost of the policy. “Demogrant” was popular in the ’70s, and “citizens’ dividend” and “social wage” get used from time to time.
2) Who supports basic income?
Surprising people! Arguably the biggest popularizer of the idea in the 20th century was libertarian economist Milton Friedman, who specifically favored a negative income tax as a replacement for much of the welfare state. Many left-of-center economists, like James Tobin and John Kenneth Galbraith, were also on board. More recently, Emmanuel Saez and Jonathan Gruber, two of the most influential left-leaning economists currently working, argued that an ideal tax system would feature a “large demogrant.”
Martin Luther King Jr. endorsed the idea in his book Where to Go From Here: Chaos or Community?, writing, “I am now convinced that the simplest approach will prove to be the most effective—the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” Activists and scholars Richard Cloward and Frances Fox Piven authored an influential article in The Nation in 1966 which called for a national movement of the poor with the intended goal of achieving a basic income. More academically, left philosophers and intellectuals like Erik Olin Wright, Peter Frase,Carole Pateman, Antonio Negri, and Michael Hardt and in particular Philippe Van Parijs have written in favor of the idea.
But the idea still retains appeal on the right for the same reasons Friedman embraced it. Libertarian economist and National Review/Reason contributor Veronique de Rugy spoke up for the idea on Fox News and received a favorable hearing. Charles Murray of The Bell Curve fame wrote a whole book laying out a specific plan for a negative income tax to replace the existing welfare state.
3) Has a basic income been implemented anywhere?
Not exactly, but a lot of countries have generous cash transfer programs of one variety or another. In the United States, Social Security is more or less an age-limited basic income program which ties benefits to wages to make itself look like a pension program. Supplemental Security Income is a guaranteed minimum income scheme for the aged, blind, and disabled. Food stamps are a guaranteed minimum income distributed through food rather than cash. The Earned Income Tax Credit functions much like a negative income tax with a work requirement.
Most other developed countries, including the UK, France, and Germany, have similar income support systems with eligibility requirements of varying strictness. In the developing world and in particular Latin America, conditional cash transfer (CCT) schemes — wherein low-income families are given cash benefits with no use restrictions provided they fulfill certain conditions, like sending kids to school or getting vaccinated — have become popular over the past decade or so. The most famous program is Brazil’s Bolsa Familia, but Mexico, Colombia, and plenty of other countries have similar programs, with meta-analyses showing the programs have significant positive effects on health and education outcomes. New York City even tried out a CCT, with evaluator MDRC finding positive results.
Formal basic income plans have been tried in small experiments. A whole series of experiments in various US cities testing out negative income tax plans were conducted in the 1970s, as was a much more ambitious trial in Manitoba, Canada. The results of the experiments are controversial, but included a modest reduction in hours worked as well as improvements in health outcomes and, naturally, an increase in incomes. A much more recent trial in Namibia also reported positive outcomes.
4) Wouldn’t this destroy the economy?
A common concern with basic income proposals is the worry that they’d destroy incentives to work. If people no longer need to work to afford an apartment and food and other life necessities, then it stands to reason that the incentive one has to get a job — or to work a given number of hours on a job — would be reduced. Even if one doesn’t want to live on whatever the given basic income is, they might go from working full-time to working part-time, making up the difference with the benefit. This is concerning to people both because most Americans have a strong belief that people ought to work for a living, and because reduced work effort means reduced production — in other words, an economic slowdown.
As noted above, a real basic income has never been implemented across a whole country, which makes macroeconomic effects hard to predict. But we do have some experimental evidence on the question of work effort, drawn from the negative income tax experiments in the US and Canada in the 1970s. Those studies found that work effort declined when a negative income tax was imposed, as predicted, but that the effect was quite small. Moreover, most of the reduction in work effort appeared to come from people taking longer stints of unemployment. That can be a bad thing, but it can also mean that people aren’t settling for second-best jobs and holding out for ones that are better fits for them. That’d actually be good, economically. Additionally, the work effect reduction for young people appeared to come entirely from increased school attendance— also a desirable outcome.
Another factor is underreporting. Negative income taxes provide an incentive for beneficiaries to underreport their incomes so as to get a bigger benefit — and that’s exactly what happened in the US negative income tax experiments. For the experiment in Gary, Indiana, when participants’ reported incomes were cross-referenced with official government data on their earnings, the reduction in work effort went away entirely.
So it’s reasonable to think there might be a reduction in work effort if a basic income were imposed. But the scale is likely to be modest, and the form that reduction in work effort takes could very well be good for the economy in the long run.
5) Could a basic income ever happen in the United States?
At the moment, probably not, given that Congress won’t pass basically anything at all. But the odds in, say, the next hundred years aren’t necessarily zero. For one thing, in the 1970s basic income proposals were popular among both political parties. Richard Nixon pushed a negative income tax through the House, and Jimmy Carter made a less successful but real attempt at passing one himself. In 1972, George McGovern challenged Nixon for reelection not by attacking his income support policies but by proposing a more generous basic income.
More to the point, most countries, as noted above, have income support schemes that are at least somewhat similar to a basic income, and when the idea is framed in more familiar terms it ceases to seem so radical. Case in point: the FairTax plan, which would replace all federal income, payroll, gift, and estate taxes with a 30 percent sales tax, includes a household refund of taxes paid on spending up to the poverty level. Households would receive that refund regardless of their work status, making it a pure (albeit quite small) basic income. Last Congress, FairTax was endorsed by 76 membersof the House and 9 members of the Senate — all Republicans. They probably wouldn’t think of themselves as basic income supporters, but in a way, they are.
6) I believe it’s customary to provide a music break.
Indeed it is. Probably the only plausible break here is Dire Straits’ “Money for Nothing,” whose video featured then-revolutionary, now-hilarious CGI animation:
7) Will a basic income save us from the robot uprising?
Many analysts believe that improvements in artificial intelligence and robotics will decrease the demand for human labor going forward. Whether or not that’ll happen is disputed, with skeptics noting that centuries of technological improvement have thus far failed to permanently reduce employment levels. But if this time is different, and automation leaves a huge chunk of working-age adults unemployed, a basic income would prevent mass suffering among those left out. It would essentially mean “taxing the owners of the robots to support the people who are put out of work by them,” as John Aziz put it in The Week.
It’s also possible that capital will realize a basic income is in its interests if technological unemployment leaves too weak of a consumer base for them to which to sell their products. Former Secretary of Labor and liberal commentator Robert Reich has called a basic income “almost inevitable” on these grounds: “as productivity increases, technological change provides us with great benefits but requires fewer and fewer people to actually do the work…who’s going to be the customer?”
Not all analysts who believe that technological unemployment is coming endorse a basic income as remedy. MIT economists Erik Brynjolfsson and Andrew McAfee, in their bookThe Second Machine Age, argue that while a basic income would replace the lost income resulting from mass unemployment, it wouldn’t replace the lost “self-worth, community, engagement, healthy values, structure, and dignity.” They instead promote expanded education and wage subsidies to enable humans to successfully “race against” the machines (Brynjolfsson clarifies that he’s by no means opposed to a basic income, and merely thinks wage subsidies like the Earned Income Tax Credit are better). James Hughes, a basic income advocate, counters that it’s unlikely humans will match the speed at which machine capabilities are expanding, making the quest to maintain a role for human labor of the current scale futile.
8) What’s the liberal/leftist case for basic income?
The basic left-of-center case for a basic income is that a sufficiently large one eliminates poverty. Poverty is bad, the left has traditionally been very invested in fighting it, and basic income represents an elegant way of eliminating it. Basic income also reduces inequality, which leftists and liberals tend to find desirable for a number of reasons, not least that, generally speaking, poor people get more use out of an extra dollar than rich people lose by foregoing a dollar, and thus redistribution can be expected to increase overall well-being.
But there are more intricate arguments as well. Philippe Van Parijs, in his book Real Freedom for Alland other writings, argues that a basic income is necessary as a matter of freedom. To be truly free, Van Parijs argues, people have to have “access to the means that people need for doing what they might want to do.” Providing a basic income for everyone provides those means. Pete Frase, an editor at Jacobin and influential leftist writer on economics, makes a similar argument. A basic income, he argues, “directly addresses one of the most fundamental objectionable things about capitalism, namely the fact that it makes almost everyone dependent on performing wage labor in order to survive.”
The freedom argument rests, to some degree, on a critique of our culture’s overwhelming emphasis on the importance of work. Frase notes that 84 years ago, John Maynard Keynes was predicting that within a hundred years, the world would be rich enough that the “economic problem” would be solved, and the world would enter an “age of leisure” where far more of our lives were devoted to activities outside of work. We have so far failed to create that world, but a basic income would enable it by granting all people the ability to drop out of the working world, or to dramatically cut back their hours. If you think of leisure as an active good, and unpleasant work as a societal ill, that’s a great case for a basic income.
Finally, some philosophers, most notably Carole Pateman, have made an explicitly feminist case for a basic income. Pateman notes that most welfare states were designed with an understanding that women would get benefits based on their husbands’ contributions and status, rather than their own. This kept women economically dependent on men and supported a model of marriage that allowed men to free-ride off the domestic labor of women. Things have changed somewhat, but women still work at lower rates than men and earn less. A basic income, Pateman writes, “would, for the first time, provide women with life-long (modest) economic independence and security, a major reason why it is central to democratization.”
9) What’s the conservative/libertarian case for basic income?
The laissez-faire case for basic income is premised in some measure on a critique of the existing welfare state, and a claim that redirecting the same money into a basic income would result in better outcomes.
For one thing, it would likely require less bureaucracy to implement than many existing welfare programs. “The biggest advantage of a [negative income tax] is that it requires the smallest possible bureaucracy to implement,” Guy Sorman, a right-leaning French philosopher, wrote in City Journal. “No longer would the federal and state governments maintain the sprawling multiple agencies necessary to distribute food stamps, public housing, Medicaid, cash welfare, and a myriad of community development programs. Nor would they need to pay the salaries and enormous future pensions of the public employees who run all these programs.”
The fact that a basic income takes away the decision of what to spend money on from the government is also enticing to libertarians. “Benefits are often given in-kind rather than in cash precisely because the state doesn’t trust welfare recipients to make what it regards as wise choices about how to spend their money,” University of San Diego’s Matt Zwolinski writes. A basic income, Zwolinski continues, would change that.
Charles Murray argues for a basic income by arguing it makes individuals responsible for their own flourishing, rather than requiring the government to make spending decisions on their behalf. “A persuasive critique of the current system is that the people who make up the underclass have no reason to think they can be anything else,” he writes. “The GI says just one thing to people who have never had reason to believe it before: ‘Your future is in your hands.’ And it is the truth.”
Ed Dolan notes that, for conservatives and libertarians who care about preserving work incentives, a basic income actually has advantages over welfare programs that phase out with income and implicitly impose high effective marginal tax rates on beneficiaries. Giving everyone a cash grant doesn’t do that.
10) What’s the liberal/leftist case against basic income?
The left case against basic income boils down to a question of what to prioritize: basic income, which is basically unprecedented at a national scale, or expansion of the traditional safety net through things like universal child care, generous work leave policies, free college, and the whatnot, which is a policy program that Nordic social democracies have actually adopted, and which, at least from certain perspectives, works.
American University’s Barbara Bergmann is probably the most prominent exponent of this viewpoint. Bergmann notes that there are certain benefits that liberals think everyone should have access to, such as education, health care, childcare, housing, and the like. A government cannot afford to finance both these and a basic income, she concludes, and financing the benefits directly is preferable to giving people money to buy them individually.
Suppose someone gets a basic income, fails to buy health insurance, gets very sick, and doesn’t have enough money to pay for life-saving treatment. You’d still need a universal health care system to save their life — and a basic income leaves less money to fund such a system. “The fully developed welfare state deserves priority over Basic Income because it accomplishes what Basic Income does not: it guarantees that certain specific human needs will be met,” Bergmann concludes.
Proponents of a “job guarantee” — a government program to ensure that anyone who wants employment can get it, usually through the public or nonprofit sector — often criticize basic income as politically unrealistic and inflationary. University of Missouri – Kansas City’s Randall Wray asserts that it would “add just about two or three zeros to all prices and wages in the US—at least within a reasonably narrow margin of error” (for the record, the idea that fiscal policy rather than monetary policy determines inflation represents a small minority in economics).
Some on the left, while not necessarily opposing a basic income, dispute the arguments offered for it by conservatives and libertarians. Contrary to the common idea among free-marketers that there are a plethora of wasteful welfare programs, the Roosevelt Institute’s Mike Konczal argues that in the existing welfare state, “there are relatively few programs and they are run at a decent administrative cost.” “Dissatisfaction with the current system feeds a dream of wiping the slate clean, but motivations for a clean slate vary drastically,” Max Sawicky writes. “Some on the right would like to replace existing programs because they disapprove of what those programs do, not because they fail to erase poverty.”
11) What’s the conservative/libertarian case against basic income?
A basic income is a massive redistributive government program. Conservatives and libertarians generally don’t like massive redistributive government programs. It’s like their whole thing.
Anarcho-capitalist and University of Colorado philosopher Michael Huemer made the most full-throated version of this argument in response to Zwolinski. “Suppose I decided to provide a basic income for my neighborhood. I don’t have enough justly acquired money to do this, so I extract the needed funds from my neighbors by threatening them with kidnaping and long-term imprisonment if they fail to hand over the funds I require,” he muses. “Sometimes a neighbor evades my efforts, usually by lying to me about his income. I kidnap these neighbors and hold them prisoner in small cells for years at a time.” That’d be immoral. So why wouldn’t the version where the government does the threatening?
The other, more mainstream argument is that basic income programs destroy work incentives rather than improving them (as other libertarians, like Dolan above, argue). This, the argument goes, not only hurts individuals’ well-being and that of their community. Jim Manzi cites the experiments in the 1970s to support his contention that a basic income would reduce work effort.
The Kauffman Foundation’s Brink Lindsey takes Manzi’s conclusion and takes the logical next step, arguing that reducing work effort is necessarily a bad thing, pointing out that (involuntary) unemployment hurts well-being, both mentally and physically. “For most people, joblessness means not only a lack of income, but also lack of status, lack of identity, and lack of direction,” he concludes. “It is the path, not to nonpecuniary forms of fulfillment, but to anomie and despair.”