Former Chief Economist of the World Bank: “Time has come to consider some form of basic income” in the US

Indian economist Kaushik Basu, former Senior Vice-President and Chief Economist of the World Bank, has written an article for Project Syndicate in which he recommends that the United States consider “some form of basic income” as a partial solution to the economic insecurity of the working classes.

Basu broaches the idea of basic income, in addition to recommending progressive taxation and investments in education, in the context of suggesting alternatives to protectionist trade policies. While he does not expand on the type of basic income he has in mind, he refers to the program being tested in Finland (in which means-tested unemployment benefits have been replaced by an unconditional cash transfer) and the scheme discussed in India’s Economic Survey (a “quasi-universal” basic income which might be rolled out gradually, beginning with more vulnerable groups).

An effective solution to the problems facing American workers must recognize where those problems’ roots lie. Every time a new technology enables a company to use less labor, there is a shift from the total wage bill to profits. What workers need, however, is more wages. If they aren’t coming from employers, they should come from elsewhere.

Indeed, the time has come to consider some form of basic income and profit-sharing. Finland has experimented with this. In the emerging world, India, in its most recent economic survey, has outlined a full scheme.

In the same vein, the tax system should be made much more progressive; as it stands, there are far too many loopholes for the ultra-wealthy in the US. Investment in new forms of education that enable workers to take on more creative tasks, which cannot be completed by robots, will also be vital.

Shortly before the release of his Project Syndicate article, Basu was reported as saying in a Tweet that “The Universal Basic Income scheme [in India] should give a cut off income & ask ones above it to voluntarily forego it.” Indeed, the Economic Survey’s author, Chief Economic Advisor Arvind Subramanian, suggested encouraging voluntary exclusion of the wealthy from receipt of the basic income (see pg. 191).

It is unclear whether the “form of basic income” Basu mentions is also one he implicitly envisions as restricted to those below a certain income level. It is clear, however, that he supports the idea of divorcing wages from employment–at least as an important option to investigate.

Read more:

Kaushik Basu, “America’s Dangerous Neo-Protectionism,” Project Syndicate, February 13, 2017.

Reviewed by Cameron McLeod

Photo CC BY-NC-ND 2.0 World Bank Photo Collection