universal basic income

Is The Universal Basic Income The Answer To Poverty?

Ever wonder what it would be like if someone just gave you $10,000? It turns out the U.S. government has too.

The concept of a universal basic income has has been lauded by some throughout history as the answer to poverty, social mobility, and economic prosperity. But what exactly is it?

What is the universal basic income?

Essentially, the universal basic income (also called guaranteed income or just basic income) is exactly what it sounds like: a guaranteed sum of money provided by the government to its citizens.

If you’re thinking that such a concept sounds an awful lot like social security or an earned income tax credit, you’d be mostly correct.

What separates the concept of universal basic income from other forms of government assistance is–well–its universality.

A universal basic income, by definition, is provided to all people under a governing system regardless of predeterminations like age, disability status, or any other social or economic factors.

Though the idea of a wholesale subsidization of people’s salaries may sound like somewhat of an outlandish idea, the concept (under slightly different names) has been supported by a number of influential minds and politicians throughout history, including: Martin Luther King Jr., Richard NixonRonald Reagan, Jimmy Carter, and Milton Friedman.

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quote from Martin Luther King Jr. in his book, Where To Go From Here?

What is the idea behind it?

The thesis behind instituting a universal basic income is a simple one: in order to lift people out of poverty, all one has to do is simply provide them enough money.

In effect, a universal basic income is meant to apply a basic living standard to all people–a type of rolling economic safety net much like welfare, though without the qualifications.[contextly_auto_sidebar id=”D8QCGxZTp2Z30DoDA2IDRpZoETsC6RXp”]

While there are a number of proposed ways of instituting this type of subsidy, they all essentially center around three major intended benefits:

  • Greater income equality and social mobility
  • Greater bargaining power for workers through having a guaranteed safety net
  • Reducing the administrative cost of issuing unemployment by simplifying the system

Can the universal basic income really work?

So, is it feasible? The answer to that question, it turns out, isn’t really much of an answer at all, but rather, an ongoing debate.

A form of universal basic income has in fact been implemented in the U.S., and to hotly contested results. It was called the negative income tax.

In the 1970s a national study was conducted in New Jersey, Pennsylvania, Iowa, North Carolina, Seattle, Denver, and Gary, Indiana, where about 7,500 different people were given government grants of varying amounts.

The results? From the study researchers concluded that the negative income tax had two concerning effects on those receiving benefits:

  • Reducing the number of hours they worked by two to four weeks yearly
  • Reducing the amount they earned yearly

These outcomes have been used by opponents of the negative income tax to dispel the validity of a universal basic income, warning that such subsidization will inevitably lead to a deflated labor force and lower productivity.

Case closed, right? Wrong. According to skeptics of the 1970s studies like Brookings’ Gary Burtless, the methodology used to determine the efficacy of the negative income tax carried with it some fatal flaws.

In a response, Burtless contends that information in Gary, Indiana, and Seattle/Denver–since it was self-reported–actually skews the overall impact on the labor force significantly.

In his response Burtless shows that when relying on government data, as opposed to the somewhat questionable self-reported data used to analyze the results, the negative effect on Indiana’s labor force disappeared completely and Seattle and Denver were reduced significantly.

Additionally, others have contended that just because people worked less, doesn’t necessarily mean the impact was negative. For example, more people received an education, and others remained unemployed longer in order to find a job that was right for them.

Today, economists and experts continue to debate the benefits of the universal basic income–a concept which still garners a significant number of followers every year.

The takeaway

UBI

Though a federally issued minimum income is likely lightyears away (seeing as today’s congress can’t seem to agree on anything) academics and economists still continue to study its potential benefits and pitfalls.

In a recent paper published in the Social Science Research Network, researchers concluded that though a universal basic income would significantly cut down on the administrative costs pertaining to the current welfare system, unemployment benefits are still far and away the best method of providing welfare.

As for that tantalizing dollop of government money? If you’re looking to run a universal basic income experiment of you own, Alaska currently has the closest thing to it–called The Alaska Permanent Fund. Switzerland is also considering providing universal basic income and will be putting it to a vote soon.

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