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Universal Basic Income: Would It Work?
The idea of a UBI — Universal Basic Income — is gaining traction among liberals. No surprise there. To my knowledge, it’s not gaining traction among conservatives. Also no surprise. But, strangely, the most interesting proposals for a UBI are coming from libertarians. Now that is a surprise. There even seems to be a developing liberal-libertarian alliance around this.
Granted, the UBI is impossible to justify according to pure libertarian principles. But if your libertarianism is of a more practical kind, the UBI is worth a look. If you know that Charles Murray is the strongest proponent and Milton Friedman the author of the prototype we’re considering, you are almost obligated to take a look. And if you accept Murray’s calculations that even a sizable UBI would actually reduce debt if it replaced our 223 transfer programs, conservatives, too, should consider joining this movement.
There are many versions out there right now. Murray’s, to me, is the most interesting and well thought out. In a nutshell, all US citizens 21 years and older would get $13,000 a year, of which $3,000 would be set aside for health insurance. The rest would be sent electronically to a specially established bank account set up for the purpose. The UBI would be phased out — clawed back, as Murray phrases it — until it disappears for those with incomes above $70,000 a year.
As many here probably know, Charles Murray is extremely interested in the importance of civil society. Within the preceding innocuous nutshell version of his UBI lie multiple incentives for building such a society. For starters, obviously, the requirement of citizenship means there are no welfare incentives for people to immigrate. The incremental clawback means people don’t cut back on hours or avoid work in order to preserve their welfare benefits. But the most important incentive, in my opinion, derives from the special bank account. Whereas welfare, as it stands, incentivizes broken families and children having children, the UBI would strongly incentivize the opposite.
How, you ask? Consider this. A baby is not eligible for a UBI and is, therefore, a drain on the income stream rather than a facilitator of welfare derived income. That’s an important incentive for the mom to have no baby unless she really wants one unless she is able to care for it, and unless she has a partner to help raise it. Even better, with DNA testing, it’s possible to determine paternity beyond a doubt. Any deadbeat or runaway dad will lose a portion of his guaranteed income stream to be paid to the mother for the subsequent 21 years, deducted straight from his UBI. After several out-of-wedlock kids, his UBI would be gone. I literally had to catch my breath as I considered the likely outcomes. Has anyone ever devised a stronger incentive against reckless procreation among young virile males than that! In one fell swoop, the fifty-year government subsidization of broken families would come to a screeching halt as reckless youth strove to preserve their automatic income base. And if the baby is produced anyway, both parents have a strong financial incentive to choose to stay together and figure out a way to make their union work.
Personally, that’s good enough for me. I’m convinced. I’m onboard. Reducing both government debt and our greatest social problem is all I need. But there is much more.
The UBI won’t exactly end the bureaucratic state, but it will radically shrink it. 223 bureaucracies, many of them massive in size, will close up shop. A lifestyle of red tape and standing in lines will come to an end for countless millions. Gaming the system will no longer be a life skill exemplified or taught by parents to their children in countless communities across the nation. Entitlement will no longer be imbued into children throughout their formative years.
Murray is deeply interested in the importance of productive work. How will the UBI affect that? For starters, let’s assume there is no minimum wage since the UBI itself supplies the minimum. With no wage restrictions — and with no concern by workers for balancing hours and salaries with the requirements of various welfare programs — there is little distortion of the labor market and less incentive for employers to replace people with robots. You might fear that income for no work could decrease the incentive to find work. Maybe, to some degree and for some people. On the other hand, though the UBI gives everyone a large step up, it doesn’t lift them out of poverty. If you want a decent life, you still have to work. Even low incomes for low skill work, if supplemented by a UBI, should give the worker enough to live a decent life, the kind that gives enough satisfaction to help grow pride in work, and possibly even the initiative to pursue something better.
Cooperation further expands the possibilities. A married couple starts out with $20,000 a year (in addition to health insurance) and other permutations besides marriage are possible. Youth, as they are wont to do nowadays, might stay with their parents for, say, an extra five or ten years, increasing the total family income further; or they might use that time at home to save seed money for some venture. Those so inclined — as many are — might share a house with three or four others in order to pursue art or writing or music or surfing or whatever, working as need be, until (as will likely happen for many) they choose to settle into a more stable lifestyle. At a minimum, the UBI should greatly reduce homelessness and begging. To the extent that petty crime is born of desperation, that should also decline.
Will a guaranteed income flow lead to alcoholism and increased drug use? Hard to say until the experiment is made, but it could easily lead to less. Murray gets into some of the reasons for why it might lead to a decrease in substance abuse.
There are other beneficial outcomes that can reasonably be predicted from a UBI, but one is, to Murray, especially important. For over two hundred years, as capitalism has wiped out jobs in the process of creative destruction, Luddites have been predicting mass unemployment. For over two hundred years, they have been wrong. But now, for the first time, they may be right. Take one example. Driving in one form or another employs more people in the US than any other field. Within a decade or two, 95% of drivers may be out of work. Is the new economy going to find 50 million new jobs for them? It’s hard to imagine that it will. Granted, the “hard to imagine” explanation has been trotted out for 200 years. But, again, this time it might be right. Especially when you consider that most new jobs will likely require a fairly high level of intelligence. Jordan Peterson tells us that 20 percent (I think he said) of the population has an IQ below 85, and that precludes them from doing any but the simplest of jobs – jobs which are being done more and more by robots. Even the cognitive elite – to use one of Murray’s terms – are likely to find much of their work taken over by computers. The job of a travel agent, for example, which was a highly skilled job requiring a great deal of experience, knowledge, and analytical ability, has almost been extinguished over the last few years. So, the UBI may soon be necessary to prevent mass joblessness and mass homelessness.
The UBI is already affordable, or at least more affordable than what we have. According to Murray’s calculations, we passed the tipping point on affordability in 2009. In other words, since 2009 his UBI is cheaper than our current system. Also, the cost of the UBI will not increase along with projected increases in unemployment since the UBI is already universal.
Places in Canada and Europe have started experimenting with some version of the UBI. Switzerland recently voted against the experiment, but that’s hardly an indictment since the Swiss, of all people, hardly have the need, nor are they infected with the social problems the UBI is intended to solve. Surprisingly, the longest-running experiment with a UBI is happening right here in the US. Many years ago, good ole libertarian Alaska decided against giving its oil income to the government and instead divides it equally among all its residents. And, in what may be one of the great what-ifs or if-onlys of history, the American government, back in 1970, took up Milton Friedman’s idea. First, the Nixon administration conducted real-life experiments around the country with a number of families receiving benefits to see how that would affect work habits and lifestyle. With the results excellent, a UBI sailed through the House of Representatives twice, only to fail in the more liberal Senate, which wanted a higher base, a base it thought it could get it after the next election. That didn’t happen. Instead, we went all in on the ad hoc, hodgepodge welfare programs that have led to our current 233 transfer programs, along with massive debt and destruction of the family.
Check out In Our Hands: A Plan to Replace the Welfare State by Charles Murray, published last year. It’s an updated version of his earlier proposal from 2006.
I haven’t actually read it, I’ve only listened to him (and others) talk about the idea on YouTube while cooking. Reviews and summaries of In Our Hands would be much appreciated!
Published in Domestic Policy
For the most part, all the objections raised so far are valid, I think. Still, I like the UBI. As Sowell says, there are no solutions in economics, only trade offs. If we require that the UBI be a solution, well, it won’t be, and it’s easy to point out why. But if we consider it in terms of trade offs, it may be the way to go. Anyway, let me address some of the objections.
First, a trade off of our current welfare system is wide scale destruction of the family. I don’t need to quote Jason’s evocative depiction of what that means for the Ricochetti to understand how dangerous and heart-rending that has been.
Second, it’s cheaper. The trade off for our current system is debt slavery for our children and grandchildren. The trade off with a UBI would still be debt for them to pay off, but a diminishing debt. I truly hope Mike and Thomas’s sanguine and frankly Keynesian hope that debt doesn’t really matter any more is true, since it looks like we’re stuck with it. But I can’t believe it – or even believe that it doesn’t matter just so long (forlorn hope!) that we can have excellent economic policies now and forever.
Third, wide scale work avoidance incentivized by our current system compared to much weaker incentives with a UBI. The few experiments there are (including Nixon’s) confirm the weaker incentives with a UBI. See Zafar’s listing of other significant experiments in #59.
Fourth, the trade off of massive bureaucracies versus a single minimalist bureaucracy.
Fifth, increasing homelessness, begging and petty crime vs. the likelihood of diminishing levels of all three.
Sixth. What if Luddites are finally right? What if work, beyond the most basic, is on the verge of becoming intellectually beyond the capacity of tens of millions of people?
Seventh, not mentioned before, but isn’t it preferable for people to choose for themselves how to spend their welfare? Rather than having government grow adult dependency in accordance with ideas and policies of do-gooding academics and bureaucrats for how recipients should conduct their lives?
Eighth, the UBI is politically impossible. Actually, I agree with this objection. I don’t actually believe saving the American experiment is possible. But on the hope I’m wrong, I see the UBI as an inspiring way forward – and inspiration incentivized by impending doom is probably our only chance of getting radical change. Impending doom we already have. Inspiration for more than conservatives only is still the missing ingredient. Simply saying, “slash Soc Sec, Medicare, and everything else!” would seem to be a program for electoral disaster.
I just want to point out that a UBI of $13,000 a year is about what we spend on each student per year in our public schools. It’s not really that much when seen in that light.
When I was a public school volunteer, I saw many kids whose ability to concentrate in school was seriously diminished by worry about family problems such as homelessness or worry about not having the same resources the middle class kids had to work with–even just a ride home if they wanted to stay after school.
I used to think, “I’m a mother with three children. If I and my children were homeless, would I spend money on education before I spent it on a decent apartment? No. I would not.”
In a sense, we are using our charitable dollars on education, and many poor families can’t take advantage of it because the stress they are living under is so great. Frankly, we throwing those dollars away because it is not what they need on the Maslow hierarchy.
It is a different perspective in which to evaluate the merits of the UBI.
Public education was the first welfare program. James McPherson pointed out in his textbook Ordeal by Fire that public schools had existed since the colonies were founded, but they weren’t very good. The wealthy educated their children privately. When the Industrial Revolution gained traction, it drove migration to the factory jobs in the cities. In the 1840s and 1850s, fathers and mothers were both working. McPherson described the city street scene that Horace Mann was seeing in Boston as children running around completely unsupervised, not even bothering to go to school. At the same time, Karl Marx was seeing the same scene in London. While Horace Mann became the first secretary of education in Massachusetts for the purpose of improving our public schools, Karl Marx was working on the Communist Manifesto, published first in German in 1848.
What to do about the poor has been a problem in the civilized world forever. The United Stated embraced public schools as a way to “uplift the masses.” But when I was volunteering in schools, I didn’t see a commitment among the public school teachers to helping the poorer children, especially in our middle and high schools. I think our public schools need to realize that much of what they do is charitable in its purpose: to help students avoid indentured servitude, slavery, prison, or communism.
Looking at education that way would change the way we dealt with the students. We would realize that they needed us, and we would work harder at establishing a good relationship and maintaining it with careful communication. We would see our goal as selling the benefits of living and working in our society and abiding by our laws. We would use the relationship to create friendship between the students and our society.
The $13,000 UBI is reasonable in that context.
The first laughable part is thinking you can buy a health insurance policy for $3,000/year.
Remember, the UBI is not intended to be a comprehensive solution to the problem of surviving in the world. It’s supposed to be an economically feasible way to provide a base. You build from the base through your own efforts.
Hi Matty – I think UBI might be a really good thing too.
Here’s some talk about that in Oz:
It sound scary, but basically it would sort of replace the tax free threshhold. The increased tax rate (after $21K) compensates for the extra $21K (Australian) everybody gets in their bank account. Amirite?
But because I am contrary:
It sort of reduces the incentive to remain a single parent, but it doesn’t increase the incentive to put up with someone else in your life.
It miiight reduce incentives for having a child out of wedlock: but I am really not convinced that the carrot, rather than lack of stick, is what drives the unwed mother thing. If it’s unlinked from number of children one has it will certainly reduce carrot.
100%. Though I think it may be inflationary?
100%
How?
Debatable. Sometimes people make awful decisions – and hence on welfare?
It would. I don’t see how UBI and universally totally privatising everything at the same time would even be good, leave aside possible.
Thanks Zafar for the perspective from Oz! Another indication that this may, knock on wood, be an idea whose time has come, or is at least approaching.
To answer your How? question to Point Five, I’m assuming that a fairly large segment of homelessness, begging, and petty crime derive from financial desperation, and that the UBI would reduce the level of financial desperation rather significantly for many or most financially desperate people.
It’s an interesting question, but I’m not convinced this will happen any time soon. A lot of jobs are moving and will move into the service sector, and while these jobs could potentially be automated, I think until we get to the point of producing androids that are nearly indistinguishable from people, most prefer a human touch.
For instance: nannies and day care. Robots would have to get pretty sophisticated before parents will trust them to look after their children.
Elder care: with a graying population, there’s an explosion of jobs helping the elderly who want to live in their own homes and can afford to hire people to look after them.
Cooks and chefs: as fewer people cook at home (or even know how) there’s huge demand for cooking services. I suppose this could be automated, but it’s still a ways off AFAIK.
Security guards, doormen, etc: again you can have robots and security cameras, but sometimes a human being can detect social cues and make judgement calls that A.I. will take a while to match. A doorman at a fancy apartment complex can decide who to let in vs. who looks suspicious.
Barbers and hairstylists: are people ready to let machines cut their hair? Actually I think that would be kinda’ cool, especially if I could get my hair cut at home while I watch TV, but I suspect I’m an outlier on that one…
Jason? Did I say Jason? Make that Joseph. Joseph says,
”The current system incentivizes young women to have kids so they can go on welfare, and further incentivizes them to not marry the baby daddy lest his income (if he has any) reduce her monthly checks. This is a big part of what’s driving up the rates of out-of-wedlock births, fatherless children, and all the social pathologies that result from it, as Charles Murray has been documenting for decades.
If we could fix that problem alone, I’d be happy, even if we face a new epidemic of able-bodied young men who’d rather spend their days surfing than working. At least they’re adults choosing to waste their own lives.”
Joseph, #67 is convincing. I certainly hope you are right.
I have always been intrigued by the negative income tax idea, but I always thought its power was more rhetorical than practical. I like NIT more than UBI. Creating a bank account supervised by the government for every American implies a vast surveillance state far more extensive than the one we have now. Why do I think that? Because the kind of surveillance state we have now is covert and controversial. The system described by some libertarians is an overt and accepted part of everyday life. Without it, how does the state prevent fraud?
When you talk to some libertarians these days, they gush with pride at their legal accomplishments over the last decade. Generally, they say same sex marriage and gun rights are what they are most proud of. But some will admit that they blew it on privacy.
Here’s my progress report on a few other issues of concern to libertarians:
religious liberty (1st amendment): lost ground, but possibly fixable
education reform: not great; arguably some progress
federal debt: total failure
Verbing weirds language.
I see the rise of the administrative state as one of the greatest threats we face, and since UBI would help reduce the number of bureaucrats and agencies involved in the process of doling out money, I think it should be considered. Obviously the ideal is that no one gets someone else’s money doled out to them, but it’s equally obvious that most Americans support helping people in need. The issue is in deciding who is in need, and so the proliferation of all the bureaucrats trying to determine need. UBI gets rid of that part and actually makes it more rational, in my opinion.
It’s a little like something the company I work for did a few years ago. They had the policy of giving so many hours for personal leave and so many hour for sick leave. But, what do you do when an employee is on sick leave but is spotted at the mall? It could trigger a disciplinary action. Instead, they combined the pots of leave (the total was actually somewhat less than the two separately) called it “personal leave” for you to spend as you see fit (sickness or pleasure). I see similar parallels with UBI.
I doubt the Luddites will ever be right, given that human wants are infinite and human creativity not that far behind*. I can sorta see the robots saying, “Goddddamnit, aren’t you people ever satisfied? Well, just do it your damn self!”
But one advantage of a UBI I haven’t seen mentioned is that it should put a floor under wages. There’s an old argument, with some validity, that labor is disadvantaged in a free contract system because an employer can usually outlast you setting wages if you live paycheck to paycheck. Combined with good roads and U-Hauls, it should make the labor market more competitive.
*clever math joke. If you know even the first thing about Georg Cantor, you’re ROFL.
Again, I’m against the UBI, but maybe daily (~$30) microtransactions into their accounts would make it less bad? I mean, that would be perfect for someone’s daily heroin habit, but still, you can’t claim that you’re responsible for letting someone starve if they get another $30 tomorrow.
That might not be a good assumption. It’s certainly true for some people who are temporarily homeless, but for long term homelessness the issues are more likely to be mental illness and/or addiction.
Some other points –
In theory I see the appeal of a UBI to replace other forms of government assistance. I’m less confident that the incentives will work out as planned. The opportunity for the law of unintended consequences to come into play can’t be understated.
It removes the incentive for unplanned children, but in doing so what impact will it have for childbirth rates overall? Currently we’re only seeing 1.77 children born for each woman in the country. (The replacement rate is 2.1.) Anything that lowers that even further is… not a good idea.
As much as I respect Charles Murray (which is quite a bit), other economists have looked at his proposals and disagree that the math works out to make the plan affordable. If he’s right, it’s cheaper. If they’re right, it’s way more expensive. I’d like to see some good studies on the economic effects before we go further.
OTOH if a married woman is thinking “I’d like to have kids someday, but I don’t want to juggle work and child care, and I can’t quit my job now because we need both incomes” wouldn’t the extra $13,000 be an incentive to go ahead and have a child now?