by Andre Coelho | Aug 1, 2016 | Opinion
The following is a critical response to Brookings’ “Money for nothing: Why a universal basic income is a step too far,” by Isabel Sawhill.
Isabel Sawhill wrote a short essay about basic income, arguing that it may be a step too far. To me, what has been “too far” is precisely this present day Kafkaesque system of oppression, where poverty runs rampant (even in the so-called “rich” countries), levels of inequality are breaking records, all while societal and environmental stress reach all-time highs. Nonetheless, the article deserves a response because Sawhill manages to aggregate the most common criticisms/preconceptions regarding basic income: that we cannot afford it, that the wealthiest should not be “helped” and that without obligation people do not meaningfully contribute to society (a nuance on the trendy “people will just be lazy” argument).
So let us deconstruct each of these arguments.
“(…) logic is inescapable: either we have to spend additional trillions providing income grants to all Americans or we have to limit assistance to those who need it most.”
This logic is not inescapable. In fact, it is wrong. Financing a basic income does not just amount to thinking of an amount for the grant (say $1000 per month), multiplying it by the country’s population (319 million people) and then paying the bill (in this case, $319 billion per month, or $3.828 trillion per year). That is very bad math. A more sensible tax policy will transfer a part of the taxes collected from the relatively wealthier to those relatively poorer. Actually, the former will be net-payers of basic income, and the latter will be net-receivers of basic income. Depending on the taxation levels at a certain moment in time, this redistribution of income can even be done without any supplementary cost.
Another fallacy is this idea that a basic income could “limit assistance to those who need it most”. How would that even be possible, if the basic income is enough for basic human needs, and is universal and unconditional? Would it not then provide the assistance to those in need?1 It will, but only in a much better way than in the present system: it would do it without policing, without stigmatizing, without controlling and with much less bureaucracy. In fact, part of the money necessary to finance basic income will come from savings in conditional social assistance grants that have become obsolete, mainly because beneficiaries no longer meet their requirements (mostly means-tests). Furthermore, there are too many targeted social safety net policies in the US, which nevertheless fail to effectively eradicate poverty. In an analysis by Karl Widerquist, around 7 percent of workers live in poverty, as do 22 percent of children. The idea is that basic income can circumvent all of these conditional assistance programs, providing universal unconditional support, and reducing social assistance complexity, bureaucracy and cost.
“One option is to provide unconditional payments along the lines of a UBI, but to phase it out as income rises”
As long as one looks at basic income as an income redistribution scheme, this is just stating the obvious. As income rises, and taxes paid also rise, then on a net basis people will of course be paying for basic income, not receiving.
“Liberals fear that such unconditional assistance would be unpopular and would be an easy target for elimination in the face of budget pressures.”
Fear has never been a wise consultant, but, philosophy aside, there is no evidence that basic income would be unpopular in the US, even considering the precocious opposition from leading political figures. Plus, in the face of budgetary pressures, I do not see why basic income would be any more likely to be subject to cuts or to be targeted for elimination compared to other social security policies. Actually, as a wider policy than targeted programs, and one that would make some of these targeted programs obsolete, basic income would likely be more difficult to eliminate since more would be at stake (in comparison to just losing a tax benefit or food stamps eligibility).
“(…) poor and jobless are lacking more than just cash. They may be addicted to drugs or alcohol, suffer from mental health issues, have criminal records, or have difficulty functioning in a complex society. Money may be needed but money by itself does not cure such ills.”
Now let’s think a bit about this. What can bring on addiction or addictive behaviours? What can cause mental health issues? What can lead to criminal behaviour?
Firstly, we would like to encourage anyone reading this who is suffering from an addiction to reach out to someone and get assistance in whatever way you can. This could mean asking for help at a homeless shelter, going to recoverydelivered.com in Florida, or just reaching out to your family. Addiction is crippling and the fact it’s being used to counter an argument is despicable. Addictions may come into a person’s life for a multitude of reasons: past traumas, family issues, health problems, professional pressure…and poverty. Poverty has been extensively shown (ex.: A primer on Social Problems, Effects of Poverty) to be a generator of many social problems, including malnutrition, health issues, and distress. So it is obvious that poverty bears a feedback relation to trauma, family unrest, health and professional pressure, although it is not the only cause of social ills — rich people also share some of society’s problems.
Addiction specialists, like Katarzyna Gajewska, are also not convinced that basic income can have an exacerbating effect on addictive behaviour, due to its multifaceted nature. It is just not the monetary facet that is affected, but there is also a need for emotional healing from addiction that is needed for the ones facing this problem. Meanwhile, no basic income trial test to date has found significant increases in the use of addictive substances due to unconditional cash transfers (Scott Santens, 2016). As for mental health issues, in fact, the Canadian “Mincome” experiment has found a correlation between basic income and reduced hospitalizations due to mental illness, as described in the relatively recent report by Evelyn Forget. And as for crime, hard data from the basic income pilot study in Namibia has shown a 42 percent decrease in the crime rate attributable to the distribution of an unconditional basic income for nine months.
Somehow Isabel resists the idea of a basic income on the grounds that it stems from a flawed assumption that money alone can cure society. But, looking at this evidence from the “cause” perspective, lack of money – that is poverty – is indeed at least partially causing these problems of addiction, mental illness and crime. And so money, although not a cure in itself, is bound to substantially reduce these social illnesses.
“A humane and wealthy society should provide the disadvantaged with adequate services and support. But there is nothing wrong with making assistance conditional on individuals fulfilling some obligation whether it is work, training, getting treatment, or living in a supportive but supervised environment.”
There is, actually, something wrong about a conditional social programs. Social Security in the US is very complex, particularly due to means-tested criteria. Plus, there is evidence that social security programs can lead to stigmatization (to which political and media discourse also contributes in an important way). Moreover, the worry that people will just stop working without a work obligation is unfounded – all basic income experiments to date have shown little to no work reduction on average. That’s despite the fact that most research tells us that people work too much (particularly in the US), and that is a bad thing generally. So a cut in average worked hours would actually be welcomed. And this is not even discussing the type of work performed (useful or not, meaningful or not, benefiting society or not). Every workplace should have health and safety precautions in place to prevent staff from overworking at all. In fact, this extends to so many health and safety measures such as fire exit signs and hazard precautions in general (look these up here for example). Although these are the obvious forms of health and safety in the workplace, sometimes people forget that overworking along with stress and mental health can also be a contributing factor to the ill health of employees within a business. Some do try to relax and find pleasure by watching adult videos (check these porn site reviews, for example) and other similar recreational activities. However, overworking still tends to be a cause for concern.
“In the end, the biggest problem with a universal basic income may not be its costs or its distributive implications, but the flawed assumption that money cures all ills.”
Indeed. Money is not everything. But too many people suffer the consequences of not having enough of it on a daily basis (around 24 million in the USA alone), which is totally unnecessary and utterly avoidable. And while not having enough money makes people stressed and desperate to find more of it just to meet their basic needs, they are not enjoying the non-monetary parts of life: quality time with family and friends, leisure, acquiring meaningful knowledge, participating in public/cultural life, volunteering and so on.
More information at:
Isabel Sawhill, 2016. “Money for nothing: why a basic income is a step too far“, Brookings, June 15th 2016
Steven E. Barkan, 2012. “A primer on social problems“, Creative Commons 3.0 licence, November 29th 2012
Tyler Prochazka, 2016. “Beyond temptation: scholar discusses addiction and basic income“, January 28th 2016
Claudia and Dirk Haarmann, 2015. “Relief through cash – impact assessment of the emergency cash grant in Namibia“, July 2015
Notes:
1 – That’s not to say that special needs would not be attended to, like disabilities or disease supplements. For those special needs, basic income just needs to be topped up with an extra amount which can satisfy them.
by Michael Lytton | Jul 26, 2016 | Opinion
The editorial below is a response to Pranab Bardhan’s “Could a Basic Income Help Poor Countries?”
Pranab Bardhan is a professor of economics at the University of California, Berkeley. Writing on the Project Syndicate website, he is skeptical about a universal basic income in rich countries, but asks if it isn’t both fiscally feasible and socially desirable in poor countries.
Comparing applicability of a Universal Basic Income (UBI) between advanced and low-or middle-income countries, Bardhan argues that there is a better fit where “the poverty threshold is low and existing social safety nets are both threadbare and expensive to administer.” His response to his own question is still cautious. “In India,” he says, “the answer could be yes.”
Unfortunately, his argument is muddled. He correctly diagnoses the administrative chaos that is India, and identifies sources of funding for a UBI in subsidies and tax exemptions that could be ended. At the same time, he warns that existing key social welfare programs cannot all be eliminated, nor should the government get out of the business of public education, health care, preschool nutrition or employment guarantees in public works. In effect, a UBI would supplement existing programs and thereby loses its rationale as a reducer of bureaucracy.
Bardhan also paints a contradictory picture of the results, describing it as both a “reasonable basic income”, yet “severely limited,” which is why other social welfare programs can’t be discontinued. And ignoring the ample evidence to the contrary from cash transfer experiments in India, he says there is “no way to ensure that individuals would allocate enough of it to achieve socially desirable education, health or nutrition levels.”
Apparently agreeing with “prominent advanced-country economists” who warn that a UBI is “blatantly unaffordable,” Bardhan uses the United States as an example. He writes that an annual payment of $10,000 per adult would “exhaust almost all federal tax revenue, under the current system,”, and suggests that this sort of arithmetic explains the failure of the Swiss UBI referendum last month.
Invoking the specter of affordability to end debate on UBI is reminiscent of earlier and now discredited arguments that it is too expensive to do anything about climate change, which is tantamount to saying our world is short of wealth, so “Say goodnight, Gracie.”
The Global Commission on Economy and Climate makes the evidence-based argument that climate-smart cities can spur economic growth and a better quality of life—at the same time as cutting carbon pollution. Recent research (from economists, no less) has found that investing in compact, connected, and efficient cities will substantially reduce greenhouse gas emissions and generate global energy savings with a current value of US $17 trillion by 2050 (Gouldson et al., 2015).
To these savings can be added reduced pollution impacts and costs. In 2013, the World Bank conducted its first-ever economic assessment of environmental degradation in India and reported the amount to be 5.7% of the country’s GDP (World Bank, 2013). And in another first-of-its-kind study conducted in 2015, the Organisation for Economic Co-operation and Development (OECD) found that air pollution-related illnesses and mortalities cost $1.7 trillion annually in OECD countries, $1.4 trillion in China, and $0.5 trillion in India (WHO Regional Office for Europe, OECD, 2015).
And then there is inequality. The global inequality crisis is reaching new depths, with the richest 1% now having more wealth than the rest of the world combined. The wealth of the richest 62 people on the planet rose by 45% in the five years since 2010 to $1.76 trillion, while the wealth of the bottom half fell by just over a trillion dollars in the same period—a drop of 38% (Oxfam et al., 2016). Meanwhile the tiny elite at the top is using its power and privilege to manipulate the economic system to further concentrate returns to capital.
Paying taxes is not high on the agenda of the absurdly wealthy, and the use of tax havens and other tax-dodging practices afflicts countries of all income levels, even the poorest. It is estimated that tax dodging by multinational corporations costs developing countries some $100 billion annually, and a global network of tax havens enables the richest individuals globally to hide $7.6 trillion. As taxes go unpaid due to widespread avoidance (with political approval and support), government budgets shrink and vital public services and social programs are diminished. Levying higher taxes on less wealthy segments of society just hurts the poor and makes inequality worse.
Despite Professor Bardhan’s quick dismissal, the United States would seem to be a good test case for UBI. For a number of reasons, the country has been characterized as an outlier among developed nations. It is one of the richest in the world, but among wealthy nations it has the highest income inequality. It has high private but low public social spending, with vast differences within the country as a result of states’ rights under federalism. Public expenditures have tended to shift toward the disabled and elderly, and away from those with the lowest incomes—consistent with a widespread belief that people are poor because of laziness or lack of incentive. Tony Judt’s rejoinder is, “Anyone who thinks that the poor like living on a pittance should try it.”
There is bipartisan aversion to taxes, especially among the rich — it is difficult to imagine how much worse income inequality might be had the United States spent even less on reducing poverty. Progressive taxation that would redistribute wealth from the rich to the poor is political anathema, and taxation is increasingly regressive—the poor pay higher effective tax rates than the rich. Enforcing tax avoidance and tax evasion is correspondingly weak.
It is one of the richest nations in the world, and yet among the 35 wealthiest countries it has the second highest child poverty rate (Adamson, UNICEF, and Innocenti Research Centre, 2012). More than one in five children is food insecure, and nearly one-third of U.S. children are in a household where neither parent holds full-time, year-round employment. The cost of child poverty in economic and educational outcomes has been recently estimated to be half a trillion dollars a year, or the equivalent of nearly 4 percent of the Gross Domestic Product (Coley, J. and Baker, 2013).
Reducing child poverty seems sufficient in itself to justify a UBI experiment. Not only would public social assistance costs fall, but families with more income are better able to purchase nutritious meals and better housing, and support child development with higher quality family relationships and parental interactions. Some observers warn that current poverty levels combined with the growing wealth gap threaten to destabilize the US democracy and curtail the social and economic mobility of children for generations to come (Coley, J. and Baker, 2013).
Professor Bardhan would also have found money for UBI just by crossing the Berkeley campus. His colleagues at the Institute for Research on Labor and Employment (IRLE) published a research brief in 2015, titled The High Public Cost of Low Wages: Poverty-Level Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families.
Over the past three decades the share of income going to labor has been declining in most countries around the world, while the capital share has been rising. Unemployment is part of the problem. The International Labour Organization (ILO) estimates that over 201 million people were unemployed around the world in 2014, an increase of over 31 million since the start of the global financial crisis. The ILO reports that this trend is common in all regions of the world, despite an overall trend of improved educational attainment. At the same time, wages are not keeping up with the productivity of workers. In the US between 1973 and 2014, net productivity grew by 72.2 percent, yet inflation-adjusted hourly pay for the median worker rose by just 8.7 percent. (Oxfam et al., 2016).
As the authors of the IRLE research brief point out, when jobs don’t pay enough workers turn to public assistance to meet their basic needs. These programs provide vital support to millions of working families in the United States whose employers pay less than a living wage. The researchers found that between 2009 and 2011, more than half of the combined state and federal spending on public assistance went to working families—a total of $152.8 billion per year. “Overall, higher wages and employer provided health care would lower both state and federal public assistance costs, and allow all levels of government to better target how their tax dollars are used” (Jacobs, Perry, and MacGillvary, 2015).
Next stop for UBI, the United States.
Sources:
Adamson, Peter, UNICEF, and Innocenti Research Centre. 2012. Measuring Child Poverty New League Tables of Child Poverty in the World’s Rich Countries. Florence, Italy: UNICEF Innocenti Research Centre.
Coley, J., Richard, and Bruce Baker. 2013. Poverty and Education: Finding the Way Forward. Princeton, NJ: Educational Testing Service, Center for Research on Human Capital and Education.
Gouldson, A. P., S. Colenbrander, A. Sudmant, N. Godfrey, J. Millward-Hopkins, W. Fang, and X. Zhao. 2015. “Accelerating Low Carbon Development in the World’s Cities.”
Jacobs, Ken, Ian Perry, and Jenifer MacGillvary. 2015. “The High Public Cost of Low Wages: Poverty-Level Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families.” Institute for Research on Labor and Employment, UC Berkeley Center for Labor Research and Education.
Oxfam, Deborah Hardoon, Sophia Ayele, and Ricardo Fuentes Nieva. 2016. An Economy for the 1%: How Privilege and Power in the Economy Drive Extreme Inequality and How This Can Be Stopped. Briefing Paper 210. Oxford, UK: Oxfam GB for Oxfam International.
WHO Regional Office for Europe, OECD. 2015. “Economic Cost of the Health Impact Air Pollution in Europe: Clean Air, Health and Wealth.” WHO Regional Office for Europe, Copenhagen.
World Bank. 2013. “India-Diagnostic Assessment of Select Environmental Challenges: An Analysis of Physical and Monetary Losses of Environmental Health and Natural Resources.” World Bank.
