Universal Basic Income: the path that unites ideologies

Many experts provide evidence of the failure of the current economic system, that is leading to the rising of inequality, shrinking the middle class, and widening the gap between rich and poor, and society faces an era of technological unemployment, as artificial intelligence will automate most work activities or full occupations. The universal basic income will be the path that unites ideologies in pursuit of a solution to guarantee social and economic security. Many economists, scholars, politicians, and entrepreneurs have joined the debate for proposals of UBI. Although they disagree on how to apply the UBI, they agree that giving a dividend for all individuals through a guaranteed income program is possible and efficient, and enforces the aggregate demand, accelerating the economy.

DEFINITION

Universal basic income (UBI) is an income paid to all individuals of community. The economist Phillippe Van Parijs defines the UBI as a transfer paid in cash on a regular basis by a political community. This transfer can be in the form of redistribution (taxation) or distribution (investment fund, a fund on public assets, or of money creation) to all members of society. The payment is given at the same level, on an individual basis, to each member of the community — rich and poor. The conditions for qualifying are irrespective of income, and without work requirement (1). Another propose of income deliberated by scholars is the Negative Income Tax, a “form of basic income delivered through the federal tax system that provides subsidies to persons or families whose income falls below a certain level” (2). The concept of NIT is similarly to the universal basic income; however, qualification for a negative income tax is conditioned to low-income people while a basic income is given regardless of income.

WHY A UNIVERSAL BASIC INCOME?

Martin Luther King emphasized that the “the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income” (3) and that it would promote social equality. Based in Van Parijs’ definition of basic income, Eduardo Suplicy, a Brazilian politician, and advocate of the UBI reflects that a UBI to every citizen regardless of income is more efficient and would eliminate bureaucratically, and prevent corruption from local government and agencies in the eligibility’s program. He states that a basic income would not enrich the richer, as they would contribute more to financing the program; also, giving for everyone would eliminate the stigma caused on the poor people when receiving a conditional benefit. Also, because payment is given regardless of income, it removes the aspect of the unemployment trap commonly associated with conventional conditional systems, people will not lose their benefits while increasing income. He disagrees with critics saying that UBI would make people lazy, he remarks that a UBI would be a supplement to real income, and that would always worth the effort of work because people want to improve their lives. According to his experience in working with people on social welfare programs, he concluded that it is necessary to comprehend that poverty needs are complex and beyond nourishment, thus, giving payment in cash gives more autonomy and dignity for the beneficiaries in arranging their lives. Moreover, a UBI gives bargaining power to people and free them from undesired and exploitative jobs (4). Furthermore, Guy Standing, co-founder of the Basic Income Earth Network [BIEN], alleges that the markets are developing globally, but inequalities and insecurities are increasing. He explains that consequently a new mass class structure is forming, called the “precariat: people who are being forced to accept a life of unstable labor without an occupational identity, relying on low, stagnant money wages, without rights” (5). He asserts that UBI is a solution because it provides tools for social justice; hence, it is a social dividend in sharing the wealth among people. Besides, UBI provides basic security, meaning that people would deal better with the stress of life, being more tolerant, altruistic, and productive in their activities. He believes that without basic security, the ordinary people in the precariat would fall into the discourse of a neo-fascist intolerance populism, which is rising in the world. Regarding the economic advantages, one of the outcomes of a UBI program is a changing in society’s concept of growth, as it will raise the resource of people spending time in working for the community, in a movement of slow time and slow food that is more ecologically sustainable and improves a community life. Along with Standing’s view, Andy Stern, former president of the SEIU, argues that the inequality has grown, rising the gap between richer and median household incomes. He also remarks that a significant portion of the unemployment rate gone down in the post-recession of 2008–09 is in fact due many people leaving the labor force because they are disabled or have given up of searching for a job and find a hard time in returning to the labor force. On top of that, a college education is not giving a return as investment. Tuitions are increasing in a large amount, and many graduates are unemployed or underemployment at low-wages; this is also a reality for many Americans working in low-wage jobs without benefits, an estimate of “almost eight million working Americans live below the poverty line despite collecting a steady paycheck” (6). Sterns believes that “technology is going to keep making the US economy more productive, efficient and competitive” (7). However, it will also increase inequality. He sees the universal basic income as a solution to rebuild the American Dream.

FUTURE OF EMPLOYMENT

A concern among professionals regards the future of employment in advance of technology. A study from University of Oxford on technological unemployment, forecast, “around 47 percent of total US employment is in the high-risk category” (8) of being automated in the next 20 years. Another research by the McKinsey Institute estimated that “49 percent of the activities that people are paid to do in the global economy has the potential to be automated… While less than 5 percent of occupations can be fully automated, about 60 percent have at least 30 percent of activities that can technically be automated” (9). Predicting the scenario of technological unemployment, economists and executives are debating the basic income as part of a solution to mitigate the impact of jobs automation in the global economy. The economist and Professor Robert Reich claim that technology has positive impacts in marginal cost, big data and artificial intelligence, but is causing the displacement of jobs, leaving as a consequence a “widening inequality of income, wealth and political power” (10). He remarks that the labor participation rate in the US is low, and the median household income adjusted for inflation is below what it was in the year of 2000. He explains that because of technology changes in the jobs, there will be a large supply of people moving into the personal service sector, but the demand of job offers will be limited, thus, dropping the wages. Reich also affirms that the U.S economy faces two problems. The first is an aggregate demand problem, as “70% of economy activity is driven by consumer spending”, and because the middle class is shrinking with low wages jobs or unemployment, they will not be able to afford to consume. The second problem is political instability, which leads to economic insecurity, with people having no predictability on their earnings while they have to pay their expenses. Reich believes that American economy has an abundance and needs to address how to distribute it and that a guaranteed income is a measurement that is worthwhile discussing. Another advocate of this idea, Yanis Varoufakis, former Greek Minister of Finance, emphasizes that the artificial intelligence will have a massive displacement effect never seen in capitalism history, causing more job destruction than creation. He emphasizes that this will “reinforce the deflationary process (…) because it will eliminate a significant measure of aggregate demand” (11), increasing the level of inequality and disparity between savings and investments. Thus, it will force the price of money and the interest rate below the current levels. Varoufakis address the universal basic income as a macroeconomic solution for “stabilizing the financial markets investment overall aggregate demand”, also he emphasizes that a UBI would provide freedom for people and will allow creating new work to replace the ones being displaced by technology. Mark Zuckerberg, CEO of Facebook, joined this idea, and see a change in the meaning of work, as he emphasized, “We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful” (12). Like Zuckerberg, tech executives and entrepreneurs are also endorsing the concept of the UBI as a solution to the automation unemployment. Some even, are taking action in experiments on basic income, as eBay founder Pierre Omidyar, who donated money to the GiveDirectly, an experiment of basic income in East Africa; and Sam Altman, president of Y Combinator, which has launched a basic income experiment in Oakland, California (13). The view of a universal basic income as a solution to the increasing inequality and changing in employment due technology has been shared by economists and scholars from different ideologies and is becoming popular among entrepreneurs. They agree that actions need to be taking to mitigate its effects and to develop economy securing the aggregate demand.

RISK OF INFLATION

Stern comments that many critics believe that UBI will be inflationary because companies would need to increase benefits for low-wage jobs, and a basic income would provide extra cash for people, therefore, raising demand and the prices of goods and services. He points out Wenger’s view on this questioning, “UBI’s impact will, in fact, be deflationary. (…) The money for a basic income would be existing money already circulating through the economic system” (14). The journalist Elle Brown also believes that a UBI can be achieved without increasing inflation. She supports her argument with the concept of quantitative easing, where money flows into the economy. Brown remarks that the money would return to the government through fiscal revenues, and explains that it is possible because of the velocity of money, “the number of times a dollar is traded in a year, from farmer to grocer to landlord, etc.” (15). Besides, she concludes that consumers create demand for goods and services. Therefore in the face of unemployment due automation of job, a UBI could supply their spending, thus flowing the money through the economy.

THE UNITED STATES EXPERIENCES

The United States President Nixon tried to introduce a type of guaranteed annual income program in 1970, but the Senate did not approve the proposition. Since then, others tentative of implementations were discussed. In Capitalism and Freedom, Milton Friedman defended a substitution to the existing social welfare, through a guaranteed income applied in the form of full negative income tax. In an interview, he stated his point of view that the basic income is a way to introduce a negative income tax and perceived that both with appropriate taxation would result in the same net transfer results (16). Opposed to Friedman’s, Tobin’s demogrant proposal defended a negative income tax that would not replace the existing social welfare system, but make it a more efficient tool to combat poverty (17). Alaska is an example of a dividend program that shares the state’s wealth between its citizens, through a form of a partial UBI. The Alaska Dividend Fund is financed from a 25% share of mineral royalties collected by the state government (18). A 2017 survey on Alaskan voters found that they endorse the permanence and universality of the Permanent Fund Dividend. Most of the interviewed agreed that the PFD is a significant financial help and that people use their payments productively. Also, most of the interviewers prefer pay state income taxes than using PFD to cover for government services, and only 1% believe that the PFD would make them work less (19). However, the problem with a fund based on a majority of deposits from royalties is that a natural reserve is subject to a decline in production and revenues. Even so, Alaska is still a model that is being pursued by programs along the U.S. and the world.

EXPERTS PROPOSITIONS

Various proposals of UBI have been discussing or implementing in the world, and in the United States. Concerning the value of UBI payments and its affordability, there is no consensus among scholars. Some argue that the value should be below the minimum income, others discuss that it should be a substantial amount enough to the living stipend of society. Another discussion is how to fund the program, and whether UBI should be a substitute or a supplement to current government welfare programs. In the series of articles, The Economic Case for a Universal Basic Income, the economist and educator Ed Dolan, remarks that the ideal amount of UBI is not precise because of the variable in the guidelines of poverty threshold that make it a debatable definition. Instead, he suggested that the focus should be on how to fund the UBI. According to his assumptions, the proposed funding UBI would come from three sources: eliminating existing welfare programs, middle-class tax expenditures, and the personal exemption, and giving social security beneficiaries the choice of keeping their social security benefits or substituting for a UBI income. Dolan estimates that these funds combined could afford a UBI grant of $4,452 per person, or 17,800 for a family of four (20). Andy Stern, former SEIU president and author of the book Raising the Floor, proposes a UBI for seniors receiving less than $1,000/month in Social Security payment, and to every adult aged 18 to 64 years old. The amount suggested is $12,000 per year for individuals and the amount of $24,000 for a two-parent family. According to Stern, his plan would cost between $1.75 trillion and $2.5 trillion per year in government spending. He analyzed some possibilities for funding the plan: End part or all of the 126 of the existing welfare programs that cost the Federal government $700 billion, and state government $300 billion a year. Adjust long-term retirement policy for future generations; create a new healthcare system; redirect government spending and tax expenditures, and increase revenue from new sources (21). A study from the Roosevelt Institute examines three versions of an unconditional cash transfer, and they conclude that these transfers would accelerate U.S economy if increased federal debt financed them. The large cash program, with transfers of $1,000 a month for all adults, would increase the economy by 12.56% over eight years. According to the Institute, such impact in the economy is enforced by the aggregate demand, and that a wide reason for the low aggregate demand is a low income (22). A graph chart developed by The Economist simulated how much of a basic income a government could pay uniformly to each citizen by transferring its non-health payments. The calculations based on tax revenue as a percentage of GDP gives an estimated total amount of $6,300 per person in the United States (23). These studies, along with others, are trying to define an ideal value of UBI. Also, besides the fact that the scholars differ in whether the UBI program would add up to or eliminate part or all of the current welfare system, they all agree that a certain reform in the current welfare and taxation system is inevitable and necessary to guarantee a more efficient economic and policy administration.

“Basic income is going to be a necessary part of any attempt to stabilize society and to civilize it” (Yanis Varoufakis)

In conclusion, the universal basic income along with improved public policies will provide the support to guarantee social and economic security, as inequality is rising and society faces a scenario of technological unemployment. Experts from diverse ideologies agree with the positive economic impact of a minimum guaranteed income, as a form of sharing the wealth of a community among its citizens, and as a tool for incentivizing better productivity and protect the environment and the vulnerable. Furthermore, a basic income freedoms people from undesirable and exploitative figures of authorities and jobs, giving them autonomy to control of their lives. Finally, the discussion on a universal basic income is “a profound moral reform that belongs in the same league as the abolition of slavery or the introduction of universal suffrage” (24). Technology is essential for human productive, and society will need to take advantage of its favorable aspect and rethink the future and the concept of work to develop itself along with technology and achieve full humanity capacity through new skills and more social equality.

Works Cited

(1) Van Parijs, Philippe. “Basic Income: A Simple and Powerful Idea for the Twenty-First Century.”, Issue 1 ed., vol. 32, Politics & Society , 2014, pp. 4–14, www.ssc.wisc.edu/~wright/929-utopias-2013/Real Utopia Readings/RedesigningDistrCh1. Web

(2) Stern, Andy, and Kravitz, Lee. Raising the Floor, 1st ed., PublicAffairs, 2016, pp. 174. Print

(3) King, Martin L. “MLK Advocates for a Guaranteed Income at Stanford (1967).” Performance by Martin Luther King, YouTube, 1967, www.youtube.com/watch?v=uXjm87NuU9s. Web

(4) Suplicy, Eduardo Matarazzo. Renda de cidadania: a saída é pela porta, 7th edition, São Paulo, Cortez, 2013, pp.139–142. Print.

(5) Standing, Guy “Why Everyone Should Have a Basic Income”, TEDxKlagenfurt, YouTube, 24 Feb. 2017, www.youtube.com/watch?v=NNHAgXy5dxQ. Web

(6) Stern, Andy, and Kravitz, Lee. Raising the Floor, 1st ed., PublicAffairs, 2016, pp. 36. Print

(7) Stern, Andy, and Kravitz, Lee. Raising the Floor, 1st ed., PublicAffairs, 2016, pp. 169. Print

(8) Frey, Carl Benedikt; and Osborne, Michael A. “The future of employment: how susceptible are jobs to computerisation?” Oxford Martin School, University of Oxford, 17 Sept. 2013, pp.44 www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf. Web.

(9) McKinsey Global Institute. “A Future That Works: Automation, Employment, and Productivity”, McKinsey & Company, Jan. 2017, https://www.mckinsey.com/~/media/McKinsey/Global%20Themes/Digital%20Disruption/Harnessing%20automation%20for%20a%20future%20that%20works/MGI-A-future-that-works-Executive-summary.ashx.

(10) Reich, Robert. “Technological Change and the Inevitability of Unconditional Basic Income.” Future of Work, Gottlieb Duttweiler Institute, NEOPOLIS, 7 May 2016, https://www.youtube.com/watch?v=YFhismScVq4. Web

(11) Varoufakis, Yanis. “Basic Income Is a Necessity.” Future of Work, Gottlieb Duttweiler Institute, NEOPOLIS, 7 May 2016, www.youtube.com/watch?v=BvgdtF3y0Ss. Web

(12) Harvard. “Mark Zuckerberg’s Commencement Address at Harvard.” Harvard Gazette, 25 May 2017, news.harvard.edu/gazette/story/2017/05/mark-zuckerbergs-speech-as-written-for-harvards-class-of-2017/. Web

(14) Stern, Andy, and Kravitz, Lee. Raising the Floor, 1st ed., PublicAffairs, 2016, pp. 208. Print

(13) Weller, Chris. “Richard Branson Just Endorsed Basic Income .” Business Insider, Business Insider, 21 Aug. 2017, www.businessinsider.com/entrepreneurs-endorsing-universal-basic-income-2017-3/#stewart-butterfield-1. Web

(15) Brown, Ellen. “How to Fund a Universal Basic Income Without Increasing Taxes or Inflation.”The Web of Debt Blog, Ellen Brown, 3 Oct. 2017, ellenbrown.com/2017/10/03/how-to-fund-a-universal-basic-income-without-increasing-taxes-or-inflation/. Web

(16) BIEN. “The Suplicy-Friedman exchange.” Basic Income, BIEN, May 2000, www.basicincome.org/bien/pdf/NewsFlash3.pdf, pp. 8–11. Web

(17) BIEN. “History of Basic Income.” Basic Income, BIEN, basicincome.org/basic-income/history/. Web

(18) APFC. “A Pioneering Investment Model.” Alaska Permanent Fund Corporation, apfc.org/who we-are/a-pioneering-investment-model/. Web

(19) Harstad Strategic Research. “Executive Summary of Findings from a Survey of Alaska Voters on the PFD.” Scribd, 22 June 2017, pt.scribd.com/document/352375988/ESP-Alaska-PFD-Phone-Survey-Executive-Summary-Spring-2017. Web

(20) Dolan, Ed. “Could We Afford a Universal Basic Income?” Econ Blog, EconoMonitor, 13 Jan. 2014, archive.economonitor.com/dolanecon/2014/01/13/could-we-afford-a-universal-basic-income/. Web

(21) Stern, Andy, and Kravitz, Lee. Raising the Floor, 1st ed., PublicAffairs, 2016, pp. 201–202. Print

(22) Nikiforos, Michaelis; Steinbaum, Marshall and Gennaro Zezza. “Modeling the Macroeconomic Effects of a Universal Basic Income” Roosevelt Institute, Aug. 2017, pp.3. http://rooseveltinstitute.org/wp-content/uploads/2017/08/Modeling-the-Macroeconomic-Effects-of-a-Universal-Basic-Income.pdf. Web

(23) The Economist. “Universal Basic Income in the OECD.” The Data Team, The Economist Newspaper, 3 June 2016, www.economist.com/blogs/graphicdetail/2016/06/daily-chart-1. Web

(24) Van Parijs, Philippe. Arguing for Basic Income: Ethical Foundations for a Radical Reform, London: Verso, 1992, pp.7. Print.