Universal Basic Income

 

 

By Jim Sullivan

The idea of a Universal Basic Income (UBI) came about primarily as a result of job losses caused by globalization and the automation of jobs through robotics.  In addition, we have the seemingly ever present and growing problems of homelessness and inequality in the United States.

Several countries and some states in the U.S. are studying or experimenting with UBI programs.  The form those programs take varies greatly.  This essay will deal only with the pros and cons of a UBI in general.

We start with the observation that UBI programs are seen as more acceptable in socialist countries than in capitalist systems. In the United States, for example, there is a strong tradition of self-sufficiency—if one wants income, one should work for it.It is notable, however, that Alaska has for some time had a virtual UBI program called a Permanent Fund Dividend in which every Alaskan citizen is given money annually.  Alaska can afford this program because it has large amounts of oil.  The amount of money given to Alaskans varies with the price of oil. 

In a democratic socialist country like Finland, however, the idea of a UBI is more acceptable.  For almost two years Finland has had a limited experimental UBI program which is scheduled to end at the close of 2018, as originally planned.  Finland will wait for the results of this experiment before deciding whether to continue and expand it.

More generally, the pros and cons of a UBI program can be summed up as follows:

On the pro side, a UBI would help eliminate inequality, a growing problem in many countries; in addition it would help reduce poverty, reduce falling birthrates (because it would help couples afford to have more children) and give people a decent standard of living.  This last benefit, a decent standard of living, depends on the UBI payment being high enough to provide a reasonable standard of living.  If the UBI payment were too low, it would have negligible effects on reducing poverty and inequality.

On the con side, a UBI program that provides a reasonable standard of living would be quite expensive.  Taxes on the upper one percent of our citizenry and on corporations would have to increase to fund it.  Some say a UBI would remove the incentive to work.  For example, in today’s homeless population, there are some individuals who simply are not interested in working, even if they have to live without a roof over their head and rely on handouts to avoid work.  But there are many individuals in the homeless population who would love to work if they could find a job.  A guaranteed minimum UBI would give them the time and resources to do that.

Another argument against UBI is that there are better alternatives.  For example, a negative income tax where people who earn below a specified amount receive supplemental income from the government instead of paying taxes would raise living standards for the poor.  Another option would be to apply an earned income tax credit, which provides a percentage tax credit for every dollar earned up to a maximum credit.

There are many questions about the desirability and affordability of a Universal Basic Income.  Many of those questions have not been answered and until they are, a UBI would be difficult to implement, especially in a country like the United States which is slow to give COLA increases or increase the minimum wage, even when the existing minimum wage is clearly shown to have decreased in real dollar terms due to the effect of inflation over time.

That said, Universal Basic Income most likely will happen even in the U.S. due to automation of jobs and globalization.  When it will happen is uncertain due to the U.S. tradition of self-reliance and the influence of money in politics, whereby corporations and the wealthy can make legal campaign contributions to politicians to influence their policy making.

  As inequality and homelessness in our country continue to grow, the arguments pro and con over a UBI may come down to a simple choice between a Universal Basic Income providing a reasonable minimum standard of living or severe social unrest.

Jim Sullivan is a Citizen Journalist and retired  businessman with graduate degrees in political science and business.  He lives in Ventura with his wife Juliette and two family cats.


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One Response to Universal Basic Income

  1. Tom December 25, 2018 at 2:38 pm

    Whether the minimum wage has kept pace with inflation depends on the reference year used for the calculation. The first minimum wage in California was in 1916 at $0.16 per hour. Accounting for inflation, today’s wage would be $3.88. In the U.S. the first minimum wage was $0.25 per hour in 1938 which is equivalent to $4.50 today.

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