“Free” Money: On the Promises and Pitfalls of Basic Income

The place is Dauphin, Manitoba. Every month, you mail in a household income report. Every month, the government mails back a check. With four people in the household and no income, you receive $19,500 (49 percent of Canadian median income in 1976); if you earned $39,000, you received $0. Every earned dollar reduces your check by fifty cents.

This system is what’s known as a “basic income guarantee” (BIG), and the Canadian government experimented with it in Manitoba in the 1970s. But what exactly is a basic income guarantee?

Fully understanding a basic income guarantee requires familiarity with several basic approaches to handling welfare.

  • Basic Income Guarantee (BIG): Everyone is guaranteed a minimum income. As someone’s outside income increases, the guaranteed income tapers off. Once income reaches a specific level, it stops altogether.
  • Universal Basic Income (UBI): Everyone is guaranteed a minimum income regardless of earnings. No exceptions.
  • Means-Tested Welfare (MTW): Everyone who fits certain categories (e.g. unemployment, an income below what is considered the poverty level, having a disability, etc.) receives some form of assistance.

The idea of a basic income has a long history but few real-world implementations. The vast majority of government programs today are means-tested welfare programs that are tied to income, with few basic income guarantee programs, and they are usually very limited in scope. In the United States, some of the most common of these programs include TANF (Temporary Assistance for Needy Families, aka “welfare”), CHIP (Children’s Health Insurance Program), and SNAP (Supplemental Nutritional Assistance Program, aka “food stamps”).   Essentially, no wide-scale universal basic income program exists.

Now the basic income debate has again come to the fore for three primary reasons.

First, robots are eating up human jobs. Researchers Carl Benedikt Frey and Michael A. Osborne of Oxford University report that 47 percent of US jobs will be automatable in the next two decades. The World Economic Forum estimates a net loss of 5.1 million jobs between 2015 and 2020. This isn’t necessarily a bad thing— automation can be good at tedious and dead-end jobs. But it seems that the march of technology will automate more old jobs than create new jobs. A basic income might be the only good way to ensure that everyone has money in a jobless or job-scarce future.

Second, money is tight and welfare is expensive. Proponents of basic income argue that, in an era of shrinking budgets and growing claimant lists, money must be used as efficiently as possible. Each welfare program requires the expense of administration via its own organization, its own employees, and its own distribution mechanism. A basic income, however, would streamline these separate program agencies.

Third, the poverty rate is high and income is increasingly unequally distributed. Proponents on the Left argue that basic income can be an effective way to redistribute from the rich to the poor, especially if that redistribution is based on progressive taxation plans. (Libertarians, too, have argued that a basic income is the least coercive form of redistribution.) If we are to monetarily support those whom the system has left behind and share the wealth of those whom the system has benefited, then a basic income may be the simplest way to do it.

In addition to staving off the issues of our time, there are several other possible benefits of a basic income.

First, broader programs might avoid stigmatization and budget cuts. In his journal article “‘More Normal Than Welfare’: The Mincome Experiment, Stigma, and Community Experience,” David Calnitsky argues that basic income programs avoid stigmatizing individuals who use welfare programs. By bringing everyone into the social safety net, a basic income defines these benefits as natural rights of citizenship and fosters a sense of community and social inclusion that makes the social safety net more resilient.

Second, having a basic income to “fall back on” could massively increase the bargaining power of workers, especially people working jobs that aren’t very desirable and don’t require a lot of training. Sociologist Erik Olin Wright states that with an independent form of income not tied to a job, low-income workers, who suffer from both low wages and miserable working conditions, will have more leeway to demand better wages and working conditions from their employers without fearing retribution or job (and thus income) loss

However, the idea of a basic income is not without its criticisms.

A truly universal basic income might redistribute wealth upward, because those who already have excess income would be paid along with those who need it or those would benefit more from the extra income.

A simple solution would be to limit the basic income to those who make less than a particular amount, but this would contradict the universality of the program as well as require administrative effort, which could reduce the savings from not evaluating recipients by how much they earn.

An undiscriminating basic income would also not ensure that those who may need additional financial assistance—such as individuals with disabilities or chronic illnesses—are identified. The Basic Income Earth Network provides three policy options to deal with this issue, none of which avoid adding qualifiers to a basic income system.

Basic incomes are also exorbitantly expensive for government. If we were to provide $11,800 per year (the federal poverty guideline for a one-person household, which is still well below a living wage) to the whole US population (which the Census estimates is 322,762,018 people), it would cost 3.83 trillion dollars—an amount just under the entire projected 2016 US budget of 3.9 trillion dollars.

Even if that $11,880 income was only provided to individuals with annual salaries and wages under $15,000, it would still cost 2.66 trillion dollars and reach 69.4 percent of the population—which is perhaps a grim reflection of the income inequality in the United States.

But a more feasible basic income is not out of reach. The US already spends about $700/month per person on social assistance programs. If such programs were defunded entirely, they would provide a yearly income of $8,400 for every person in the US. This is certainly not enough to live on, but it’s a start.

For all its flaws, a basic income holds great promise. It might resolve the robot-employment crisis, create hyperefficient welfare, and end poverty as we know it. Or it might enrich the wealthy, harm the disabled, and bankrupt us all. Unfortunately, no nation has implemented a true basic income on a national scale – enough to live on, for everyone. Until then, we truly cannot know. While the Manitoba experiment into the effects of a basic income provided some insight, such as revealing an increase in health and high school graduation rates, the program eventually lost funding, so we don’t know what else it might have demonstrated about the positives and negatives of a basic income.

I, for one, welcome our robot overlords – so long as they pay up.