In the process of cowriting a book about the upcoming Unconditional Basic Income Trials, I’ve been trying to come up with a list of the claims that tend appear in the debate. Below are two lists: first a list of supporters’ claims and then one of opponents’ claims. I gave each claim a name to make it easier to talk about them, but these names do not reflect any standard definition. I tried to order the claims in each list from the relatively more important or more common to the relatively less important or less common.
To say that a claim appears on the supporters’ or opponents’ lists is not to say that all supporters or all opponents agree on it. In fact, some of the claims contradict each other, which is to be expected, because different people support or oppose UBI for diverse reason. They might have little in common but their support or opposition to one policy proposal.
Supporters have claimed:
The freedom claim: UBI gives people greater freedom by giving them more effective power over their own lives.
The poverty claim: UBI (usually in combination with other policies) can eliminate poverty.
The anti-exploitation claim: UBI reduces exploitation in employment by giving all workers the power to refuse exploitive working conditions.
The welfare claim: UBI raises the welfare of net-recipients (by eliminating destitution, reducing poverty, increasing incomes of people near poverty, reducing inequality, and other effects) and many net-contributors (by removing the fear of destitution, improving their bargaining position in the market, and so on). To the welfare claim we could add many supporting claims, that UBI is good for physical and mental health, that it decreases homeless and malnutrition, that it decreases infant mortality, and so on.
The increased-worker-income claim: UBI increases in the income of workers directly by acting as a wage subsidy for lower-income workers and indirectly by creating market conditions likely to increase wages.
The better-working-conditions claim: UBI improves working conditions for many workers both by giving them the flexibility to move more attractive sectors and by creating market conditions likely to give employers incentive to improve working conditions.
The affordability claim: UBI at the desired level is affordable. (Most UBI proposals call for one high enough to eliminate official poverty or to raise incomes to 150% of the officially poverty level. Some call for meeting basic needs or to enable social participation and to secure a life in dignity. Some simply call for the highest sustainable UBI regardless of what that might be.)
The economic equality claim: UBI increases economic equality both by direct redistribution to lower income people and by creating market conditions where workers can command higher wages and better working conditions. (The taxes used to support it can also be formulated to increase equality.)
The social equality claim: UBI increases social equality by reducing social isolation of people with very low incomes, by reducing the stigmatization of people who benefit from redistributive programs, by reducing housing segregation, and by other means.
The poverty-trap claim: UBI encourages people on benefits to reenter the labor force in greater numbers than a conditional system, by ensuring they are always better off earning more private income than earning less.
The anti-ghettoization claim: UBI reduces (both personal and social) costs linked to high concentrations of poverty both by reducing housing segregation and by significantly raising average incomes in those communities.
The cost-effectiveness claim: UBI is relatively more cost-effective than traditional, conditional welfare policies (in achieving goals such as increasing equality, raising welfare levels of recipients, and so on).
The reduced-capture claim: UBI’s benefits are less likely to be captured by others (such as employers, landlords, and bureaucrats) than conditional welfare state policies.
The bureaucracy claim: UBI reduces the overhead cost associated with income support.
The labor-productivity claim: UBI increases labor productivity both by encouraging employers to substitute skilled for unskilled workers and by improving workers’ ability to enhance their skills and search for higher-productivity jobs.
The productive non-labor claim: UBI allows people to do more unpaid work (such as care work and volunteering), some of which is more productive (or socially valuable) than many forms of paid labor.
The politically-enabled-proletarian claim: UBI—by freeing low-wage workers from long hours and low pay—makes them a greater force for progressive social change on all other issues.
The acceptable-labor-supply-effect claim(s): if UBI causes a reduction in labor supply, it will be within acceptable levels, and/or if UBI causes a greater-than-desirable labor-supply reduction, it can be at least partially counteracted by other policies to increase labor supply or the demand for higher-wage employees.
The macro-stimulus claim: UBI, in combination with the taxes that support it, helps improve economic growth and reduce unemployment by helping to stimulate and stabilize aggregate demand.
The “degrowth” claim: UBI helps economies move away from overconsumption and overexploitation of resources.
Greater respect for people in need: UBI and other universal programs treat everyone with respect while many conditional programs treat virtually all recipients as suspected cheats, even if they fit almost anyone’s definition of the most truly needy.
The increased-overall-redistribution claim: UBI results in greater overall redistribution to the poor, because universal policies foster greater feelings of solidarity and support once in place
Opponents have claimed:
The reciprocity claim: UBI allows people to share in the benefits of social production without contributing their labor.
The exploitation claim: a tax-financed UBI redistributes income from workers to people who do not work, thereby exploiting workers.
The harm-to-workers claim: the taxes needed to support UBI financially harm workers, all things considered.
The unacceptable-labor-supply-effect claim(s): UBI causes an unacceptably large reduction in labor supply that is not easily counteracted by other policies.
The self-destruction claim: UBI increases self-destructive behavior in recipients.
The meaninglessness claim: UBI makes it possible for people to live lives that they will eventually find meaningless because paid labor is a central source life meaning.
The capture claim: many of the benefits of UBI will go to someone other than the recipients, perhaps because employers reduce wages, because landlords increase rents in low-income areas, because bureaucrats create overhead costs, etc.
The inflation claim: UBI causes inflation that is not easily counteracted by other policies.
The migration claim: UBI encourages immigration and/or migration into areas with UBI.
The unaffordability claim: UBI at the proposed level is prohibitively expensive.
The negative, relative cost-effectiveness claim: UBI is more expensive than other programs that can achieve similar goals.
The gender-role reinforcement claim: UBI helps maintain traditional gender roles by making it easier for women to remain out of the paid labor force while performing unpaid care work and other traditional women’s roles.
The macro-deterrent claim: UBI decreases economic growth by enabling reduced labor market participation and increasing costs.
The shut-door claim: UBI creates political pressure to restrict immigration and migration.
The bought-off-proletarian claim: UBI—by providing a minimal level of contentment for workers—reduces their effectiveness as a force to challenge the deeper inequalities and other social inequities in society.
The consumerism claim: UBI leads to even more environmental destruction because of increased consumption.
The decreased-overall-redistribution claim: UBI is (politically and/or economically) feasible only at such a low level and only accompanied by so many other social programs that it will leave low-income people worse off than traditional, conditional social policies.
The strategy-to-cut-redistribution claim: factions in government will use UBI as an excuse to cut other programs, then cut in a strategy that will lead to much less overall redistribution.
I compiled this list from general knowledge accumulated over years of reading about the UBI debate. It is bound to be incomplete. Many more claims (of various levels of relevance, certainty, and testability) are undoubtedly circulating in the academic and nonacademic literature on UBI. But I hope it captures a significant range of what is being said. This list is enough to demonstrate the difficulty of designing a trial and communicating its results in a way that successfully raises the level of debate over these claims. Some are things that can’t be tested. Some are things that can only be tested indirectly, partially, or inconclusively. Few if any of these claims can be directed tested with any accuracy in a trial.
I’m interested to know how comprehensive people think it is. Did I include all the relevant claims you can think of? Did I overblow any claims that don’t deserve to be on the list?
A stock image used to evoke a mental connect with the word “experiment”
The crowdfunding campaign for “The Mincome Experiment” can be found here.
The Mincome Experiment is a documentary that is as much a story about basic income as it is about human socioeconomic evolution throughout the years. Vincent Santiago, the director for the documentary, first heard that University of Manitoba professor Dr. Evelyn Forget was looking for volunteers to digitize the results of the 1970s Mincome experiment. While Santiago did not consider himself an experienced social activist, he was nevertheless keen to study possible measures to prevent government excesses that he believed could lead to growing social inequality and injustices. Santiago was convinced that basic income and open government were foundations that could help prevent social inequality and injustice.
The Mincome experiment and the concept of basic income caught Santiago’s imagination, and he took a passionate interest in seeking out more information. He finally talked to Dr. Forget on April 2014. Another opportunity arose soon after to interview then-Conservative Senator Hugh Segal, a very vocal and strong basic income advocate in Canada. Vincent Santiago read about and researched basic income and talked to economists and others. In the process, he discovered several interesting side stories not widely known, even within Canada.
Santiago wanted to make the Mincome experiment into a documentary. He soon realized there was so much story to be told. He looked into the various forms of basic income and decided the film should be told as an engaging narrative about human socioeconomic evolution. Intertwined into the historical and visionary backdrop is the concept of basic income and its role. Of the film, Santiago said:
While the Mincome experiment is very much the central theme of the documentary, the documentary also looks into other basic income experiments and the various forms and possible implementation. I’ve started calculating the various ways to pay for it and how to implement them.
The promotional trailer created for the crowdfunding campaign asks various questions typically uttered by people who are cynical or against basic income. That is because Santiago did not want to make a film only for those already familiar with basic income. He wanted to create an entertaining and fun documentary that also draws in the skeptics by presenting facts, without shying away from common ridicule and prevailing concerns.
Another project that occupies Santiago’s time is creating a low-cost, no commission fee platform for crowdfunding, curating, and showcasing creative works. With this platform, which first went into development in 2012, Santiago is now launching the crowdfunding campaign for his documentary. The Mincome Experiment project is still a long way from reaching the stated fundraising goal, but the team remains confident the amount can be reached. Efficient use of the funds would allow the project to include more engaging footage and animation for the documentary, ensuring that it will capture and convince audiences worldwide.
The crowdfunding runs until June 15, 2017 and can be found here.
Written by the team behind “The Mincome Experiment.”
I just completed some simple, “back-of-the-envelope” estimates the net cost of a UBI set at about the official poverty line: $12,000 per adult and $6,000 per child with a 50% “marginal tax rate.” They are in a paper entitled, “the Cost of Basic Income: Back-of-the-Envelope Calculations.” It’s currently under peer-review at an academic journal and available in un-reviewed form on my website.
Here are some of its most important findings:
The net cost—the real cost—of a roughly poverty-level UBI is $539 billion per year, less than 16% of its often-mentioned but not-very-meaningful gross cost ($4.15 trillion), less than 25% of the cost of current U.S. entitlement spending, less than 15% of overall federal spending, and about 2.95% of Gross Domestic Product (GDP)
This $539 billion UBI would drop the official poverty rate from 13.5% to 0%, lifting 43.1 million people (including about 14.5 million children) out of poverty.
This UBI will be a net financial benefit to most families with incomes up to $55,000, making it an effective wage subsidy (or tax cut) for tens of millions of working families.
The average net beneficiary of this UBI is a family of about two people making about $27,000 per year. The family’s net benefit from the UBI would be nearly $9,000 raising their income to almost $36,000.
Lowering the marginal tax rate to 35% would spread the benefits of the UBI program to more of the middle class while increasing the cost to $901 billion.
The cost of a UBI of $20,000 per adult and $10,000 per child is $1.816 trillion per year, less than 85% of total entitlement spending, less than 45% of total federal spending, and less than 10% of GDP.
-Karl Widerquist, Begun in New Orleans, completed at Cru Coffee House, Beaufort, North Carolina, May 21, 2017
The publisher of a paper I wrote in 2015 has now given me the right to share the published version of my own article without charge. (That is, without them charging me for sharing my own work with you.)
Thomas Piketty’s recent book, Capital in the Twenty-First Century, provides a great deal of empirical support for the observation that the rate of return on capital (r) is greater than the growth rate of the economy as a whole (g); i.e. “r > g”. From this observation, Piketty derives two important insights: entrepreneurs eventually become rentiers, and except during unusual circumstances, inequality tends to rise over time. This paper views Piketty’s observation against the institutional setting that has prevailed over the period of his study and makes two additional observations. First, whether Piketty’s two insights follow from his observation depends not simply on whether r is greater than g, but on whether the difference between the two is greater than the consumption of the capital-owning group. The relative size of capitalists’ consumption and capital income is not obvious, and therefore, more evidence is needed to confirm the connection between Piketty’s observation and his insights. Second, the statement r has been greater than g is more accurate than simply r is greater than g. Whether r continues to exceed g depends crucially on the political and institutional environment in question. Economists tend to view one specific institutional setting, a version of laissez faire, as natural. But there is no natural set of property institutions, and those that have prevailed over the two centuries of Piketty’s observations are extremely favorable to capital owners. Awareness of the flexibility of potential property institutions raises many ethical questions and makes many tools available to address inequality – one of the most obvious being the taxation of rent on capital distributed as a basic income
Joe Huston, the CFO of GiveDirectly, speaks with the UBI Podcast about the largest basic income trial in history.
The trial is in its earliest stage and will expand later, giving entire communities a basic income in Kenya.
A 12-year basic income will be provided to 40 villages, 80 villages will receive basic income for 2 years. A lump-sum payment will be given to 80 villages. There will be 100 villages that will act as control groups.
One interesting takeaway is that Huston said they are already seeing some “spillover benefits.”
“I expect there will be spillover benefits. We kicked off in one pilot village, and already the surrounding villages have mentioned people are buying more services and goods,” Huston said.
When discussing pilot programs, the environmental impact of basic income is often overlooked. Huston said that GiveDirectly does not take a position on this, but he said developed countries should take the lead on the environment.
“My personal view is for these environmental goals you’d want to solve through other means, international treaties or the developed world stepping up, verses trying to slow down development of very very poor areas,” he said.
As the research begins to come out about basic income, Huston said he hopes it can inform the debate about how to best form the social safety net.
“I think evidence from the UBI study showing those who are just poor but receive money and put that toward investment that have big life-changing effects, I think that could change how social protection is done in those countries,” Huston said.
Previously, even after cash-transfer pilots end, Huston said that they continue to see positive effects.
“GiveDirectly’s first study measured effects up to a year after payments stopped…and you still saw pretty strong effects on earnings, assets, food security, reduction in stress levels,” Huston said.
Stress was measured through looking at cortisol levels, which saw significant declines after cash-transfers were administered, Huston said.
Once the 12-year study ends, Huston said he expects they will continue to follow up with these villages to see if there are permanent effects of basic income on these areas.
“We have the potential to end extreme poverty globally, many countries have the potential to end whatever they consider their national poverty line. And that potential…is extraordinarily exciting. It is a huge opportunity for our generation,” Huston said.
“Then the question is, ‘why wouldn’t we test this?'”
The cost of a Universal Basic Income (UBI) is often greatly exaggerated, because people are tempted to think the cost of UBI is the size of the grant multiplied by the size of the population. You can call that the “gross cost” of UBI, but it’s a gross overestimate of the real cost of UBI. It fact, it’s not a cost in any meaningful sense, because UBI is a “tax rebate” or “a refundable tax credit.” That is, UBI is a negative tax. People seldom call UBI a negative tax because that would invite confusion with a similar policy formally named “The Negative Income Tax.”
But in the more important generic sense, UBI is–and must be understood as–a negative tax. When you pay the government, that’s a tax. When the government pays you (without you having sold something to the government), that’s a negative tax. It doesn’t cost you anything for the government to give and take a dollar from you at the same time. If you want to know someone’s total tax burden, you need to subtract the negative taxes they receive from the positive taxes they pay.
Far more than any other policy, UBI involves the government taking money in taxes and giving it back to the very same people as a UBI.
A calculation of real redistributive cost of UBI requires subtracting all of that taking-and-giving-back to focus on the net increase in taxes on contributors (or net cuts in other spending) that will be necessary to support the net benefit to net recipients. The redistributive burden is the only real budgetary cost of UBI.
UBI’s net cost issue requires a careful explanation because the issue is almost unique to UBI, extremely important, and sometimes difficult to grasp. The issue occurs because UBI is both universal and in cash. Because it is universal, everyone receives it, even net taxpayers. Because it is in cash, people receive the same thing that they pay. Because it is both universal and in cash, people receive the same thing at the same time that they pay for it.
Most transfer payments go to people who are not at the time also paying taxes to support it. For example, almost no one both pays for and receives Unemployment Insurance, the Earned Income Tax Credit, Temporary Assistance for Needy Families, disability insurance, Medicaid, and so at the same time. The vast majority of people pay for Social Security at one time and receive it at another time. The net issue so important to UBI is negligible or nonexistent for all these policies.
About half of U.S. transfer payments are healthcare related and many of these do involve the same people both paying for and receiving benefits at the same time, but they pay in cash and receive back in something very different: health care. We need to know the cost of converting the cash into that healthcare. So the gross cost of healthcare spending is relevant, although we might be interested in its net redistributive effect as well.
UBI is fundamentally different from all of these policies because for the vast majority of people it works like a tax rebate. You pay taxes in cash and receive back cash at the same time. Suppose you buy something for $100, but you instantaneously receive back a rebate of $50. You do not have to budget for that $100. You have to budget for $50. That $50 is the only real cost to you of this policy. If we want to know the budgetary cost of UBI, we have to net out the enormous extent to which it functions as a rebate. Unlike healthcare spending, the gross cost has no budgetary effects at all. There is a limit to how much healthcare the government can provide you even if you are paying all the taxes for it. You only have so much purchasing power. Only so much of it can be converted into healthcare. But there is no limit to how much cash the government can give you as long as it taxes it right back. The government could give every single American $10 billion in cash without increasing prices—as long as it taxes back that $10 billion as soon as it pays it out. We need to get rid of any attention to this meaningless gross cost and focus on the one cost of UBI that matters: its net cost.
Here are some of the many examples of people mistreating the gross cost of UBI as if it were a real cost:
Derek Anderson, “The Real Cost of Universal Basic Income,” Medium, Dec 28, 2016. This one is especially misleading because it looks at the “cost” of redistributing existing entitlements, most targeted at low-income people, and redirecting it into a universal benefit, most of which will not go to low-income people. Doing that combines the replacement of targeted programs both with a very small UBI and with a large tax cut for people with high incomes, as if there were no way other to introduce UBI.
A google search will produce more articles making this error than I can count.
I recently made some simple estimates of the real cost of UBI in an paper entitled, “the Cost of Basic Income: Back-of-the-Envelope Calculations.” It’s currently under peer-review at an academic journal and available in un-reviewed form on my website. I found that a UBI large enough to eliminate poverty costs on $539 billion per year–less than 16% of its often-mentioned but not-very-meaningful gross cost ($3.415 trillion), less than 25% of the cost of current U.S. entitlement spending, less than 15% of overall federal spending, and about 2.95% of Gross Domestic Product (GDP).
-Cru Coffee House, Beaufort, North Carolina, May 23, 2017
Most transfer payments go to people who are not at the time also paying taxes to support it. For example, almost no one both pays for and receives Unemployment Insurance, the Earned Income Tax Credit, Temporary Assistance for Needy Families, disability insurance, Medicaid, and so at the same time. The vast majority of people pay for Social Security at one time and receive it at another time. The net issue so important to UBI is negligible or nonexistent for all these policies.