Democrats and Republicans don’t see eye to eye very often, but they can safely agree on one point: welfare doesn’t work. Liberals are concerned that an ever-shrinking social safety net reaches fewer and fewer families in need. Republicans worry that welfare benefits create dependence. They are both right.
The primary cash assistance program in the United States, Temporary Assistance to Needy Families, served 68% of low-income families in 1996. Today, only 23% of poor families receive assistance. This change has been largely brought about by the imposition of five-year lifetime limits (states are allowed to set lower limits) and stricter eligibility criteria. Welfare caseload reductions have been solidly linked to the rise of deep poverty in America, family strain and increased foster care placements. 1.46 million US households (including 2.8 million children) now live on less than $2 per person, per day (the World Bank’s measurement of extreme poverty).
Meanwhile, welfare eligibility rules designed to encourage independence have achieved the opposite effect. For example, though many states impose strict work requirements, states which loosen these rules actually see recipients move to higher wage, higher benefit work, presumably because they have the breathing room to search for a good job rather than take the first one that comes along. Similarly, in states with strict limitations on recipient assets, poor families are less likely to own a car, making it nearly impossible to maintain employment in areas without public transportation. Even worse, someresearchers are discovering a “cliff effect” in which welfare recipients immediately lose all benefits (including child care assistance) after a small increase in income. As a result, many parents turn down promotional opportunities because they would be ultimately worse off financially. Any parent would make the same decision if it meant the ability to feed their children and afford quality childcare.
We must redesign this entire system. In the most prosperous nation in the world, it is ludicrous that children are growing up in the kind of deprivation we normally associate with developing countries. Simultaneously, we must ensure that no one is discouraged from growing their income or assets. One potential solution is a universal basic income, which would provide an annual benefit to every citizen. However, this idea comes with a hefty price tag and would either increase our national deficit or increase the marginal tax rate, both of which might be political non-starters. The simpler solution is a Negative Income Tax (NIT) which is potentially cheaper than our current poverty alleviation efforts. An NIT is a refundable tax credit which brings every household to the federal poverty level. The most effective way to do this is to decrease the credit slowly (for example, a $0.50 reduction for each $1.00 increase in earned income) so that there is never a penalty for hard work.
Researchers at the University of Michigan calculated what this might look like in practice. If a family had no income, their tax credit would be 100% of the poverty line ($20,780 for a family of three). If the family’s earned income increased to half the poverty line ($10,390), their tax credit would decrease to $15,585. The credit would phase out completely once the family’s income reached twice the poverty level ($41,560). This plan would cost roughly $219 billion per year and could be almost completely paid for by replacing most or all of our current poverty programs.
With this one simple policy, we can achieve many goals of both the left and right. Poverty would be eliminated overnight. Work disincentives would be removed. American bureaucracy would be significantly reduced. Families would be free to make financial decisions without government intrusion. And in the long run, we would save money. Childhood poverty alone costs the US $1.03 trillion (yes, trillion) per year. In the 21st century, eradicating poverty isn’t complicated. We’re just going about it in the worst possible way.
About the author:
Leah Hamilton, MSW, PhD is an Assistant Professor of Social Work at Appalachian State University. She received a BSW from Metropolitan State University of Denver, an MSW from the University of Denver and a PhD in Public Policy at the University of Arkansas. She served as a Foster Care Case Worker and trainer for five years in Denver, Colorado. Dr. Hamilton’s research interests include poverty, economic justice, and social policy.
This essay was originally published on Basic Income News in June 2014.
This book was recommended to me a a technology-based argument for the basic income guarantee (BIG), and it is, but its support is tentative and only for BIG in the form of the Negative Income Tax (NIT), not in the form of a Universal Basic Income (UBI).
The authors define the computer revolution that is currently underway as “the second machine age.” The industrial revolution was “the first machine age.” It brought machines that could apply power to do simple but profoundly important tasks, eventually replacing most human- and animal-powered industries with steam, electrical power, and so on. Machines of the first machine age could often do those tasks much better than humans or beasts of burden ever could. For example, the replacements for horses—automobiles, trains, and airplanes—can carry more people and more cargo father and faster than horses ever could.
Machines of the second machine age have gone beyond the application of power; they are also replacing some human brainwork. Calculators have been around so long that few people are aware they replaced a form of human labor, called “computers.” In the early 20th century, “computers” were people who did computations. It was skilled brainwork, far beyond the capabilities of the up-and-coming technologies of the day, such as the internal combustion engine. Computers (as we define the term today) have almost entirely replaced that form of human labor, and their ability to substitute for human labor only continues to increase—especially when combined with robotics.
The computational powers of computers are so strong can already beat the best chess masters and “Jeopardy” champions. Self-driving cars, which have turned driving into a complex computational task, will not only relieve us all of the task of driving to work, they have the potential to put every professional driver out of business. Perhaps computers, then, will someday learn not just to calculate, but also to think and evaluate. If so, might they eventually replace the need for all human labor?
Erik Brynjolfsson
Perhaps, but Erik Brynjolfsson and Andrew McAfee, the authors of the Second Machine Age, do not base their arguments on any such scenario. The possibility of a truly thinking computer is out there, but no one knows how to make a computer think, and no one knows when or how that might happen.
So, the authors focus on the improvements in computers that we can see and envision right now: machines that can augment and aid human thought with computational ability increasing at the current exponential rate. As long as computers are calculating but not truly thinking, humans will have an important role in production. For example, although computers can beat an unaided chess master, they cannot beat a reasonably skilled human chess player aided by computer. This is the focus of the book: computers and robotics taking over routinized tasks (both physical and mental), while humans still the deep thinking with access to aid from more and more computer power.
This change will be enough to radically transform the labor market and eliminate many (if not most) of the jobs that currently exist. At the enormous rate of increase in computing power, one does not have to envision a self-aware, sentient machine to see that the effects on the economy will be profound. According to the authors, “in the next 24 months, the planet will add more computer power than it did in all previous history; over the next 24 years, the increase will likely be over a thousand-fold.”
The book’s analysis of those changes is very much based on mainstream economic theory. In the books analysis, increases in unemployment and decreases in wages are attributed almost entirely to a decline in demand for labor thanks to the introduction of labor-replacing technology. Political economy considerations, in which powerful people and corporations manipulate the rules of the economy to keep wages low and employment precarious, are not addressed. When the authors consider shifting taxes from payroll to pollution, they don’t consider that powerful corporations have been using their power over the political process very effectively to block any such changes.
Andrew McAfee
Yet, the book demonstrates that even with purely mainstream economic tools, the need to do something is obvious. We have to address the effects of the computer revolution on the labor market. The second machine age creates an enormous opportunity for everyone to become free from drudgery, to focus their time on the goals that they care most about. But it also creates a great danger in which all the benefits of second machine age will go to the people and corporations who own the machines, while the vast majority of people around the world who depend on the labor market to make their living will find themselves fighting for fewer jobs with lower and lower wages.
The technology-replacement argument for BIG has been a major strand in BIG literature at least since the Robert Theobald began writing about the “triple revolution” in the early 1960s.[*] So, approaching this book as I did, I was on the lookout through a large chuck of the book, waiting for BIG to come up. I was very surprised to see the entire “Policy Recommendations” chapter go by without a mention of BIG.
The authors finally addressed BIG in the penultimate chapter entitled, “long-term recommendations.” In the audio version of the book, the authors spend about 20 minutes (out of the 9-hour audiobook) talking about BIG. They recount some of the history of the guaranteed income movement in the United States with sympathy, and write, “Will we need to revive the idea of a basic income in the decades to come? Maybe, but it’s not our first choice.” They opt instead for an NIT, writing “We support turning the Earned Income Tax Credit into a full-fledged Negative Income Tax by making it larger and making it universal.”
Their discussion of why they prefer the NIT to UBI is perhaps the weakest part of the book. They favor work. They want to maintain the wage-labor economy, because, taking inspiration from Voltaire, they argue that work saves people from three great evils: boredom, vice, and need. I am skeptical about this claim. I view it as an employers’ slogan to justify a subservient workforce, but my skepticism about this argument is not why I find the book’s argument for the NIT over UBI to be the weakest part of the book. The reason is that the argument from work-incentives gives no reason to prefer the NIT to UBI. The authors view the NIT as a “work subsidy,” but it is no more a work subsidy than UBI.
The NIT and the UBI are both BIGs, by that, I mean they both guarantee a certain level below which no one’s income will fall—call this the “grant level.” Both allow people to live without working. UBI does this by giving the grant to everyone whether they work or not, but taxing them on their private income. NIT does this by giving the full grant only to those who make no private income and taking a little of it back as they make private income. In standard economic theory, the “take-back rate” of the NIT is equivalent to the “tax-rate” of the UBI, and so either one can be called “marginal tax rate.”
Applying standard mainstream economic theory (which is used throughout the book), the variables that affect people’s labor market behavior are the grant level and marginal tax rate. The higher the grant level and the higher the marginal tax rate, the lower the incentive to work whether the BIG is an NIT or a UBI. You can have an NIT or a UBI with high or low marginal tax rates and grant levels, and you can have a UBI or an NIT that have the same grant level and marginal tax rate. It is for this reason that Milton Friedman, the economist and champion of the NIT, gave for drawing equivalence between the two programs:
INTERVIEWER: “How do you evaluate the proposition of a basic or citizen´s income compared to the alternative of a negative income tax?”
FRIEDMAN: “A basic or citizen’s income is not an alternative to a negative income tax. It is simply another way to introduce a negative income tax”.
-Eduardo Suplicy, USBIG NewsFlash interview, June 2000, https://www.usbig.net/newsletters/june.html
If the book’s arguments for work incentives are sound, I seen an argument for a modest BIG with a low marginal tax rate, but I see no argument one way or another why the BIG should be under the NIT or the UBI model.
Whatever one thinks about the issue of NIT versus UBI, the book presents an extremely sophisticated and powerful argument for moving in the direction of BIG. Therefore, it is a book that anyone interested in any form of BIG should examine closely.
-Karl Widerquist, Cru Coffee House, Beaufort, North Carolina, June 2, 2014, revised June 14, 2014
The India Network for Basic Income recently released two new YouTube videos aiming to highlight issues around universal basic income (UBI). The first, which lasts slightly over one minute, addresses the payment of UBI to women, and makes the argument that, as women frequently do unpaid work such as childcare or housekeeping, providing them with a regular income does not count as giving them “free money”, but rather as recognising the work they already do. The second video, which is somewhat longer at over six minutes, deals with a research project on UBI which took place from 2011 to 2013, and with a recent follow-up to this which aimed to look at the long-term effects of the original experiment.
The India Network for Basic Income is the Indian affiliate of the Basic Income Earth Network (BIEN).
Sadly, 33,000 Toys ‘R’ Us employees are about to be let go. They’ll pack that family vacation picture from their office wall in a brown cardboard box, take a toy or two for keepsakes, and, begrudgingly, go home. They will be joining a growing list of hundreds of thousands of people who are losing their jobs, not because they need to improve their performance or their work ethic, but simply because they are no longer needed.
More and more products are being manufactured using robots, which is more cost-effective for companies, as well as cheaper for consumers, who can order online with a swipe of a finger. Toys ‘R’ Us is only one example of the virtual-technological tsunami that is washing over the business world. It appears in the form giant corporations such as Amazon, Alibaba, Google and their trade partners, trampling every area of commerce possible: retail, banking, clothing, food, advertising and more. This wave doesn’t stop at the private sector; it’s washing away the public sector as well. For instance, Warren Buffet, Jeff Bezos and Jamie Dimon are already on a joint venture to reinvent healthcare.
While it may seem like a silent revolution, these changes promise a socio-economic earthquake the likes of which humanity has never seen before. The virtual-technological future is gradually taking over the very foundations of the global economy and businesses are having to adjust to the change. From small things like providing virtual collaboration training for their employees to implementing more efficient computing operations, technology is changing every industry.
It is becoming normal to talk about robots replacing human labor, but we still have not yet acknowledged the magnitude of this change. Many politicians, economists, and analysts are seeing this as another industrial revolution that comes with labor pains, giving birth to a whole slew of new professions, and are predicting that a newly booming economy will emerge as a result. The use of machinery is always needed in manufacturing circles, that is why universal mills, CNC machines, lathe machines, etc. are constantly evolving to assist in as many areas as possible, hopefully not to entirely take over jobs just yet. Machines play a huge part in this industry, no matter how they are used, so it is important for them to function as a unit and provide what is needed of them. When they have to be moved, fixed, or changed, the use of equipment like Custom Skates as well as other supplies, are needed to keep everything efficiently moving along.
Surely, this is an encouraging view, but it is based on a limited understanding of new technologies being developed at an exponential speed. Even today, we could automate 45% of the activities people are paid to perform in the U.S. with existing technologies.
It’s not about the advanced machinery that replaces our hands and feet at work. It’s about the artificial intelligence being developed to gradually replace human intelligence. AI will think creatively, produce, analyze, develop, program, and work many times more efficiently than the most gifted employee, all the while being many times cheaper and easy to operate.
Artificial intelligence can learn and self-upgrade much faster than a person’s ability to retrain, and will eventually replace human labor everywhere: scientists, doctors, programmers, designers, financial experts, human resource managers. Only a fraction of the workforce will be required to operate and calibrate the various smart machines and advanced software.
Let’s Revolutionize Society – Without the Pitchforks
If you can fathom the future of technology, you can immediately spot the upcoming social crisis. Masses will go into indefinite unemployment, and modern economics will have no answers for them. Current economic models can hardly deal with a 15% unemployment rate. What’s going to happen when we hit 30%, 40% and 50% unemployment? That is unaccounted for in current economics.
If we settle for positive thinking, hoping this upheaval will somehow result in a new booming economy, we run the risk of a mass unemployment crisis. If masses of people have no hope of providing for their basic necessities, they will not sit calmly at home. Without hope, people could default to violence, extremism and support of radical leaders who will offer economic safety in order to come to power, as we have seen in the past.
Alternatively, if we plan in advance, we can revolutionize society – without a revolution. The sooner we acknowledge the inevitable redesign of our socio-economic infrastructure, in a way that jobs will no longer exist in the same sense as before, we will come to grips with the necessity to provide for the basic needs of all members of society.
Whether we do it through some form of Universal Basic Income, or any other technical mechanism, we must understand that a change of social values is the core issue at hand: Every country’s leadership must acknowledge that looking out for the basic needs of every citizen-food, shelter, clothing, education and health-is their top priority.
But what will people give back to society? If only few man-hours will be necessary to maintain the machines, what will human beings do? They will be busy “being human,” which means developing themselves, their families, their societies and all that makes us human rather than robots.
The Real Driver of Technology Is Human Evolution
The so-called “technological revolution” is not accidental, and it’s not actually technological. It’s an evolutionary revolution. Its purpose is the evolution of human society. It will help us step out of the endless rat race, fueled by a material obsession that doesn’t actually make us happy; a chase around the clock that has created a society of little cogs in giant corporations, accumulating stress and rust, while losing touch with one another and ourselves.
Instead of investing our collective energy into working like machines, we could be engaging in the only work that makes humans different from machines. In a society freed from the cyclical chase for material acquisition, we would invest a large portion of our time on a daily basis, investigating, exercising, and developing the sense of the natural human connection that binds us together. One method to realize our potential as human beings at the workplace is to engage in a variety of activities that are not directly related to work. Let’s say you’re at an event hosted by Uniqueworld destination management companies or something similar, and you get a glimpse of how employers function outside of the office. This could give you an outlook on what all you can do as an employer that might benefit your company.
When masses of people are doing this regularly-as their new job-a new society will undoubtedly emerge. Its product will be the positive social energy required to preserve societal balance. It will be a society whose members’ daily work is to maintain the sense of unity and solidarity that prevent violence and extremism, allowing human beings to live together in productive peace.
This work can be done in unlimited creative ways, where people can apply their passion and desire, as long as they contribute to a warm social climate. But it has to start from fundamental training and education on the science of human connection, learning how positive social connections make us healthier, happier and better at everything we do.
Surely, all of the above sounds foreign in a world where we have been trained by advertisers to chase things we don’t need in order to impress people we can’t connect with. But when material needs are taken care of, human nature demands a deeper, more meaningful type of satisfaction. It’s no coincidence that happiness studies show time after time that healthy social relations are the number one predictor of human flourishing.
Our evolutionary social development pushes us to utilize our wiring for human connection, to distill it through constant work on our relationships, and evolve to a new social reality. Rather than competing with robots for an old school job, let’s make our job the only function that no robot will ever replace, and find the kind of happiness that money will never buy.
Michael Laitman is a Professor of Ontology, a PhD in Philosophy and Kabbalah, an MSc in Medical Bio-Cybernetics, and was the prime disciple of Kabbalist, Rav Baruch Shalom Ashlag (the RABASH). He has written over 40 books, which have been translated into dozens of languages.
As income inequality continues to soar in the US and around the world, progressives are in a heated debate as to what the most effective policy may be to address growing precariousness.
My recent article reflected a left-leaning criticism from Philip Harvey of Universal Basic Income (UBI) as unaffordable from a political standpoint, and counterproductive in advancing politically feasible solutions such as a job guarantee.
There has been much research done on the subject of basic income’s cost. Karl Widerquist has become a prominent voice on this subject, arguing that the net cost is the true cost that should be considered.
In reaction to my interview with Harvey, Widerquist said the arguments about UBI’s cost were misleading, and in reality UBI is far more inexpensive than simplistic calculations let on.
“If the government gives a dollar and takes a dollar from the same people at the same time, it doesn’t cost anyone anything. According to my analysis, UBI can eliminate poverty by putting $539 billion in the pockets of low-income people after they’d paid their taxes and received their UBI. The only meaningful cost of that UBI is higher-income people have to make do with $539 billion less in their pockets after they’ve paid their taxes and received their UBI,” Widerquist said.
In “Financing Basic Income: Addressing the Cost Objection,” a book edited by Richard Pereira, also argues that the actual cost of basic income is largely overstated. Pereira told me that basic income can create a surplus to lower taxation burdens elsewhere.
“The demogrant is similar, with a seemingly much larger cost upfront. I say ‘seemingly’ because as some major studies that I reference explain, the demogrant can be “calibrated” to achieve the same result/cost as the NIT,” Pereira said.
The book persuasively addresses the critics that say UBI is too expensive. Other savings noted by Pereira’s book, such as those from reduced crime and improved health due to UBI, are important in the calculation of basic income’s net surplus. However, these topics deserve a separate consideration.
One area basic income advocates need to emphasize more is this clawback of basic income. As basic income pushes up an individual’s income, it subjects a person to paying back a portion of their UBI under the current income tax system, as Pereira’s book notes. Moreover, many individuals relieved from poverty due to UBI will no longer qualify for other welfare benefits.
As such, the actual long-term tax rates needed in a world with UBI is probably substantially lower than what the gross cost would suggest, because the government will start receiving a portion of everyone’s basic income back to use for the following year’s UBI.
A benefit of the Negative Income Tax (NIT) is that the gross cost and net cost are the same, because they immediately clawback the NIT credit in one’s taxes. This tax is politically superior to UBI’s indirect clawback through other taxes. However, a monthly UBI paid upfront to all in the same amount is still desirable to NIT because it ensures that everyone receives the funds, especially in the event an individual experiences a financial emergency and does not have the time or ability to apply for assistance.
Basic income advocates can learn from the payback scheme in the Affordable Care Act and combine the UBI proposal with a phase-out in the Negative Income Tax (NIT).
A helpful analogue is the ACA’s clawback of insurance subsidies. An individual can receive healthcare subsidies based on the previous year’s income tax, but pay back some or all of the subsidy through their income tax if they make more the following year. This lowers the amount that the government has to tax for the following year to pay for new subsidies.
The basic income could be paid upfront in the same amount to each individual on a monthly basis. However, the clawback from high-income earners should be more explicit, with a NIT type phase-out based on annual income taxes for high earners.
Perhaps 50 cents could be paid back on each dollar earned above $50,000. The rest of the clawback (and net funding for low-income basic incomes) can occur in indirect ways, such as through carbon taxes or financial transaction taxes.
Having high-income earners pay back their UBI through the income tax means that other taxes will not have to be raised as significantly. It may be helpful in the political realm to with this built in clawback because it is easier to understand.
At the end of the day, a UBI is likely the most effective way to end global precariousness. It’s time to get down to the specifics of how we make a UBI above the poverty line politically possible.
“There is no benefit to working people to being under the constant threat of poverty, homelessness, and destitution, if they have refuse or find themselves unable to take orders given to them by more privileged people. We need to build an economy based on positive incentives, not threats. A generous UBI can do that. A job guarantee cannot,” Widerquist said.
