Later this year, Stockton, a city in California with a 25% poverty rate, will conduct an unusual experiment: Roughly 100 of its citizens will receive $500 a month for 12-18 months, with no work requirements and no strings attached. Researchers likely will regularly assess the recipients’ health, childcare arrangements, education, and general well-being in order to measure how this kind of financial leg up affects quality of life. The grant, from the Economic Security Project, is a privately funded experiment in “universal basic income,” a policy idea crafted from the premise that every citizen should receive a regular stipend from the government to cover their basic needs.
Universal Basic Income Is Not a New Idea
“Perhaps the first person to talk about [a universal basic income] was Thomas Paine, the founding father of the United States, who talked about providing every citizen of the U.S. some cash amount every year in order to ensure that they were able to take care of basic needs,” says Jim Pugh, the co-founder of the Universal Income Project in San Francisco.
Since then, universal basic income has been floated and tested periodically over the years, most recently in the civil-rights era. “The most recent debate and mobilization was in the 1960s and ’70s, when it was actually a core part of the civil-rights push,” says Pugh. “Martin Luther King, Jr., stated that that he thought it made sense to abolish poverty directly through a guaranteed income.” The idea was embraced by people on both sides of the political aisle—as is it is to some extent now, but for wildly different reasons. (More on that in a minute.)
How UBI Works
There are a couple of ways a universal basic income can be implemented. One is a flat cash payment made to every citizen on a regular basis, say, monthly. Or there there is a negative income tax, first proposed by libertarian economist Milton Friedman in the early 1960's. A negative income tax works like this: A poverty line for an individual is set at, for example, $12,000 a year (close to what it is now). “So if you earn nothing, you get a poverty amount,” says Pugh, of $12,000. “And then as you earn, some of that money is effectively taxed away—the typical amount [we talk about] is 50 cents on the dollar. If you earn $10,000 [on top of your $12,000 basic income], $5,000 of your negative income tax goes away—but you’re still coming out $5,000 ahead.” Wealthy people who don’t need the payment don’t get it, and work is rewarded: People who work will always make more money than those who don’t.
This rather elegantly solves the problem of “welfare cliffs,” or the classic dilemma faced by people receiving assistance: Work and lose one’s benefits? Or not work and keep the small measure of security and continuity that welfare provides? Finland is currently in the middle of a two-year experiment of offering a monthly cash payment that doesn’t go away when people get jobs, as a way of encouraging work. “Their approach is to provide regular cash payments that are unconditional, so if you get a job you keep receiving those payments—they’re not actually taxed away. So their hope is that ... it actually encourages people who are currently out of work to get back into workforce,” says Pugh.
Under the Nixon Administration, the United States came close to enacting a negative income tax—it was passed by the House of Representatives and was supported by Richard Nixon, but didn’t pass the Senate. “After that the effort stopped,” says Pugh.
What the Research Tells Us
In the 1960's and 70s, four UBI experiments in the U.S. and one in Canada were conducted. Researchers looked at the effects a basic income had on participants, from health to education to workforce participation. “They found that there was some decrease in workforce participation—it was somewhere around 14%—but the vast majority of that was actually due to either one spouse—typically the woman at that point—staying home to take care of children for longer, or children who had entered the workforce to provide extra support for their family actually going back to school. So it was behavior that, from a long-term perspective, could actually lead to positive societal outcomes,” says Pugh.
The Canadian experiment in “mincome,” for minimum income, which ran for four years, showed similar results: Some people decreased their workforce participation, but it was generally the secondary and tertiary earners in a household who worked less—and the children spent more time in school.
The cash payments also yielded positive health benefits, Karl Widerquist, an associate professor at Georgetown University Qatar, told me, in discussing the Canadian study: “The number of low-birth-weight babies decreased. There was a decline in infant mortality. Students stayed in school for longer, which is like the holy grail for underprivileged children,” Widerquist says, citing the erratic efficacy of other piecemeal interventions like after-school programs for low-income students. He is blunt: “If students are not as poor, they do better.” There was an increase in homeownership. There were fewer psychiatric emergencies in the local hospital. These are all results, theoretically, that Americans would want to support.
So What’s the Problem?
Many Americans don’t like the social welfare programs we already have—note the push for “entitlements reform.” They’re uncomfortable with the idea of “free” cash handouts. They’re concerned that recipients would spend their allowance on drugs or frivolities (though the research on the four U.S. experiments showed only a modest increase in “frivolous” expenditures) or not work at all (again, not borne out by the research). It is, as Widerquist says, “a redistribution from the top half [of earners] to the lower half.”
Exactly how an American UBI would be funded is a pretty complex tax question. “The cost of UBI, [if implemented] on a poverty level, would be about 2.95% of GDP,” says Widerquist. “We would make up some cost savings on other social services, but we would incur additional costs trying to fit it in with 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 decrease those rates without also increasing costs.”
It would likely take a few years of a nationwide experiment, Widerquist says, to know if the UBI would save more, in the long run, than it costs (as, for example, early childhood education programs or vaccine programs do). Research does indicate that “for each dollar spent on reducing childhood poverty, the country would save at least $7 with respect to the economic costs of poverty,” writes Dr. Mark. R. Rank for the New York Times. Widerquist argues that “even if it is more expensive, it’s money well spent.”
If you’re interested in the nitty-gritty of the tax question, economist Richard Pereira lays out his proposals in Financing Basic Income: Addressing the Cost Objection. (In his introduction he asks “Can we not find a way to reorient this wasteful system so that resources are better channeled to ensure universal income security?”)
Supporters and Detractors on Both Sides of the Aisle
A guaranteed income has some traction on the right and the left. The conservative case for UBI, articulated by Noah J. Gordon, writing for the Atlantic, argues that a cash payment to each citizen should replace our current patchwork system of social-welfare programs. Liberals want a UBI to augment what we already have. There are some social programs—Medicaid or disability, for example—that couldn’t be adequately replaced by a modest cash allowance. (A child with a severe disability, for example, requires therapies that cost a lot more than $12,000 a year.) Pugh argues that at the least, any health-related program should remain intact due to the possibility of astronomical expenses.
The right and the left do agree on one thing, however: The current safety net is inefficient. Conservatives think that the benefits are too easy to get and the system is vulnerable to moochers; liberals think too many people who need help don’t get it. People at home caring for relatives, for example, or people trying to start businesses—behavior that, again, Americans theoretically want to promote—aren’t eligible for a lot of welfare programs due to work requirements and so suffer long-term financial consequences for their care work. Those people would be covered, at least somewhat, by a universal basic income.
Why Now?
The current renewed interest in implementing a universal basic income is due to a couple of different factors. One, job security, over the last few decades, has been increasingly hard to come by—automation has meant that jobs are scarcer and can mean “job deserts” in places like southwest Missouri. “The decline of labor [also] plays a large part, in that in the past you often could count on a multi-decade career with the same company that provided you with good job security and benefits. Now more and more people are working in the contingent workforce where they don’t have job stability and have no benefits,” says Pugh.
Tech entrepreneurs are leading the current push for universal basic income, perhaps because they can envision a future where robots do all the jobs, or perhaps because they think, as Andy Stern, the former head of the SEIU and the author of Raising the Floor, does, that it’s the best way to avoid a 1789-style revolution. No matter what, though, how to address worsening income inequality and the fact that many Americans are still struggling post Great Recession is something that will likely continue to be raised in coming election cycles. One basic income proponent, Andrew Yang, has already thrown his hat in the ring as a presidential contender in 2020, running on a proposal that all citizens 18-64 get $12,000 a year from the government, no strings attached.
Interestingly, the closest thing to a UBI the U.S. has now is Alaska’s Permanent Fund, which provides every Alaskan with a yearly check drawn from a state-managed corporation. Even more interesting: Former Alaska governor Sarah Palin weighed in on Stockton’s experiment with a predictably derisive tweet; the mayor of Stockton, Michael Tubbs, quickly clapped back.
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Tubbs has noted that he doesn’t consider the money to be a hand-out so much as a hand-up. No matter what, it’s clear that something has to be done about the fact that millions of Americans can’t meet their basic needs: 13.1 million American households are “food insecure.” One in six kids are hungry. The problems are by now well-documented: Either jobs simply don’t exist in a given region or the jobs don’t pay enough to live on—Tubbs points out that some of his constituents are working 12-hour days and still can’t make ends meet. A 2017 Pew Research report showed that very poor people are getting even poorer: “The share of the U.S. poor population in severe poverty—defined by the Census Bureau as those with family or individual incomes below half of their poverty threshold—reached its highest point in at least 20 years.”
In the face of this—an economy that can’t provide for a large number of its citizens—creative, innovative solutions are likely going to be on the table in the coming decade. In the meantime, keep your eye on Stockton.
