A Living Wage
Universal Basic Income: When “the Market” Fails Us
by Stoney Bird
Stoney Bird worked for many years on the in-house legal staff of major corporations. With David Maas he recently gave a course in Western’s Academy of Lifelong Learning entitled “Democracy in the United States: Promise and Reality.” There will likely be a follow-on in the fall.
This is the twelfth in a continuing series of articles that began with the January, 2014 issue. The series addresses the impediments to democracy and well-being in American society.
“If funds are to be used to help the poor, would they not be used more effectively by being given in cash …?”
– Milton Friedman,
Nobel Prize winner, 19621
The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”
– Martin Luther King, Jr.,
Nobel Prize winner, 19672
In the 1960s and 70s, Americans on all sides of the political spectrum actively considered a universal basic income (UBI). You can see a partial list of those supporting it on the right in Modern Supporters of a Universal Basic Income.3
After the oil shock of the 70s, together with Nixon’s preoccupations over Watergate, the idea lost momentum, and we haven’t heard about it since. Perhaps we should have.
The advent of the Industrial Revolution and the job system gave birth to the claim that the market system would provide, barring only those who didn’t work hard enough. From the workers’ perspective, the job system meant they had lost the profit from their work (what Marx called the alienation of the proletariat), and their lives and livelihoods depended utterly on the whims of their employers. They had become commodities.4
For a time, the union movement filled the gap, together with programs like unemployment insurance, but in the course of time, thinkers on all sides of the spectrum came to realize that the job system was unsatisfactory even when tempered by these palliatives.
From a humanitarian point of view, it created untold suffering through no fault of many of the workers concerned. From a religious point of view, it meant that we were ignoring Christ’s injunction concerning “the least of these.”5 From an economic point of view, it meant that there was little purchasing power in the broad mass of people so that the economy was not as vibrant as it might have been.6
Economists Friedman and Murray believed a UBI would obviate the need for expensive welfare bureaucracies and conform to their libertarian philosophical principle that individuals know better than government how to conduct their lives and what to spend money on.
From a sociological point of view, the UBI would reduce crime, and this on two grounds:
1. there would be no need to rob if basic needs were largely taken care of, and
2. people would have the sense that others cared about their fates and would be less alienated in a psychological sense.
For decades, the prevailing solution to all sorts of social problems has been locking people up — a huge percentage of people in jail are there for nonviolent drug possessions. We are finally realizing how costly and destructive social control through the violence of the criminal justice system is.7
Looking at things from the perspective of humanity’s relationship with nature, there is no reason why people shouldn’t share at least to some extent equally in nature’s bounty. As a practical manner, everyone is dependent on everyone else anyway — from billionaires to hoboes — and so expressing this interdependence in money just makes sense.
In other words, there was something in the idea of a Universal Basic Income to appeal to pretty much everyone.
Over the last 30 years, globalization and the policies pursued by governments have created a whole new and growing class that political scientist Guy Standing calls “the precariat.” This class is “relegated to bits-and-pieces living, in and out of casual flexible jobs, unable to build an occupational identity or career.” You can see a description of the rest in The New Class Structure (above right).8
There isn’t space in this article to go into the overall implications of an ever-growing class whose lives are built on insecure foundations. In any event, the job system isn’t doing its job of providing everyone with work at a living wage. In our own Bellingham, a quarter of people are living in poverty and the number is rising (see the above right chart).9
Not only is the job system not performing now, but things are likely to get worse. A study reported in Forbes Magazine by researchers at Citi and Oxford University concludes that 47 percent of existing jobs are likely to be lost to automation in a few years. This means the collapse not only of those jobs, but possibly of the job system as we’ve known it. One of the study’s authors said, “I would see technology, to some extent, eliminating the job.”10
How Would UBI Work?
Each proponent of a UBI has proposed it in a slightly different way, but the common idea is that it would apply to everyone, there would not be a means test or other qualifications requiring an administering bureaucracy and it would take care of core needs.
Milton Friedman, among others, suggested a UBI could take the form of a negative income tax. The attraction for him was that many existing social support systems, e.g. welfare, unemployment insurance, public housing and food stamps together with their supporting bureaucracies, could be dispensed with.11 Others have proposed monthly payments like Social Security.12
Can We Afford a UBI?
Let’s suppose a UBI in which every adult resident in the U.S. receives $10,000 per year paid out through the Social Security system. With 234 million people over 18 in the U.S. (per the 2010 census), the annual bill would total $2.34 trillion.
It’s not exactly a small number, but it is a number we could manage. Anti-poverty activist Allan Sheahan has made some calculations of what coming up with $2.34 trillion would entail.13
In 2010 there were $461 billion in federal safety net programs including unemployment insurance, Sheahan figured. These would be made redundant by a UBI. Hundreds of billions in state and local safety net program dollars would also be unnecessary.
In the same year, there were $1.24 trillion in what the IRS delicately calls “tax expenditures” — what you and I would call loopholes. There were 173 of these “tax expenditures.” From the 1940s to the 1960s, the tax rate in the highest income tax bracket was 91 percent. Since the administration of George H. W. Bush it has wavered between 35 percent and 40 percent. The capital gains rate is now down to 15 percent, when in the past it has been as high as 40 percent. Clearly there is some room for maneuver in the tax system.
The U.S. defense budget is as big as the next 29 countries’ combined. People across the political spectrum are beginning to call for its reduction.
These are just some of the possibilities. Overall, Sheahan has calculated that without undue cost to general well-being we could come up with $3.6 trillion to cover the $2.34 trillion that a possible UBI would cost.
Does a UBI Work?
There are places in the world where a UBI has been adopted, and more are considering it — including Switzerland, a country not known as a hotbed of irresponsible ideas. The voters there will decide next year.14
In the Eastern Cherokee reservation in the mountains of North Carolina, since the 1990s, the profits of the tribe’s casino have been divided equally among every person in the tribe, including children. In recent years, this has meant a payment of $10,000 per person.
CNN journalist John Sutter reported that “the poorest kids who received the payments were one grade year ahead in school, compared with those who didn’t, when researchers checked in with them at age 21. Kids who were lifted out of poverty by the payments saw behavioral problems decrease 40 percent. For the poorest families, the payments reduced by 22 percent the odds that children would commit minor crimes by their late teenage years.”15
These results conform to what University of Chicago sociologists estimate the consequences of childhood poverty to be in general. Childhood poverty costs the economy $500 billion per year (4 percent of GDP), because it
1. reduces productivity and economic output by an amount equal to 1.3 percent of GDP,
2. raises the costs of crime by 1.3 percent of GDP, and
3. raises health expenditures and reduces the value of health by 1.2 percent of GDP.”16
One concern many have expressed is that a UBI would weaken the work ethic. There are two points to make here. One is that a less obsessive work ethic might actually be a good thing. Lest we forget, paid “work” is not the purpose of life. Despite continuing increases in productivity, American workers now work longer hours than almost any others in the industrial world.17 So, setting up a UBI in the U.S. might help to restore work-life balance.
The other is that, as poverty statistics and the report from Citi and Oxford University show, the market economy by itself is unlikely to supply the jobs that would keep everyone employed with an adequate wage. In such an economy, simply having a “good work ethic” won’t matter.
Maybe it’s time to consider a UBI.
Modern Supporters of a Universal Basic Income
• Richard Nixon, President of the U.S. (R)
• George McGovern, Senator from South Dakota and Presidential candidate (D)
• Daniel Patrick Moynihan, Senator from New York (D)
• Mike Gravel, Senator from Alaska (R)
• Huey Long, Governor of Louisiana and U.S. Senator (D)
• Milton Friedman, James Tobin, Paul Samuelson, Herbert Simon, Friedrich Hayek, James Meade, Robert Solow, all winners of the Nobel Prize in Economics, together with 1,200 other economists, including John Kenneth Galbraith
• Charles Murray, political scientist with the American Enterprise Institute
• Martin Luther King, Jr.
• Green Party of the United States
The New Class Structure
At the top, according to Standing, are
“a tiny, disgustingly rich plutocracy straddling the globe as multi-billionaires. Doing their bidding is a salariat of smug high-income earners with employment security, alongside a growing group of proficians hawking their skills, threatened only by their frenetic lifestyles. Below them is a shrinking proletariat, bewildered by their weakness after decades of being the pride of industrial labourism … .
“Many [members of the proletariat] are joining the bulging precariat beneath them, which hovers just above a dehumanized lumpen-precariat. The precariat itself consists of millions of people relegated to bits-and-pieces living, in and out of casual flexible jobs, unable to build an occupational identity or career. It is not an underclass, because it is wanted by the global market system. But it is unlike anything in the past. Part comes from old working-class communities, part from migrants and minorities, and part from the educated, who do not see themselves in the old class categories.
“Those in the precariat have lives dominated by insecurity and uncertainty, debt and humiliation. In addition, they are becoming denizens rather citizens, losing a whole range of cultural, civil, social, political and economic rights built up over generations. The precariat is the first class in history which is expected to endure labour and life at a lower level than the schooling which it typically acquires.”
• Basic Income Earth Network, www.bien.org.
• Friedman, Milton, “Capitalism and Freedom,” University of Chicago Press, 2002, originally published 1962.
• Pofeldt, Elaine, “How to Beat Job-Destroying Robots,” Forbes Magazine, February 18, 2015, http://www.forbes.com/sites/elainepofeldt/2015/02/18/how-to-beat-job-destroying-robots.
• Polanyi, Karl, “The Great Transformation: The Political and Economic Origins Of Our Time,” 1944.
• Sheahan, Allan, “Basic Income Guarantee: Your Right to Economic Security,” Palgrave MacMillan, 2012.
• Standing, Guy, “Introduction to Chris Dunkley, The Precariat,” Oberon Books, 2013.
• Sutter, John D., “The Argument for a Basic Income,” CNN, March 9, 2015, http://www.cnn.com/2015/03/01/opinion/sutter-basic-income/index.html viewed April 1, 2015.
• U.S. Basic Income Guarantee Network , http://www.usbig.net.
1. Friedman (2002), p. 178.
2. From Martin Luther King’s “Where Do We Go From Here: Chaos or Community,” 1967, quoted in the Sutter article cited in Resources above.
3. Source: http://en.wikipedia.org/wiki/Basic_income viewed March 30m 2015.
4. For a more complete discussion of the job system, see my “The Job System: Subjection Depends on the Consent of the Subjects” in the December, 2014 issue of Whatcom Watch. www.whatcomwatch.org. See also Polanyi’s great work cited in Resources above describing how the industrial and capitalist revolution brought about the commoditization of work, land and money.
5. Bible, New Testament, Matthew 25:40.
6. Among thinkers who understood this part of the puzzle, we can number Henry Ford and Marriner Eccles, chair of the Federal Reserve from 1934 to 1951.
7. In Whatcom County about 60 percent ($45 million) of the county’s General Fund is devoted to arresting and prosecuting people and locking them up. In Bellingham, the corresponding figure is 35 percent ($25 million). Whatcom County Executive’s 2015-16 Budget, Volume 1, General Information, Summaries, Appendix, http://www.whatcomcounty.us/ArchiveCenter/ViewFile/Item/302 and Volume 2, Department Budgets, http://www.whatcomcounty.us/ArchiveCenter/ViewFile/Item/291 and City of Bellingham, 2015-16 Adopted Biennial Budget, http://www.cob.org/documents/finance/budget/2015-16-adopted-biennial-budget.pdf all viewed March 31, 2015.
8. Standing, 2013, cited in Resources above, p. 22.
9. Source: U.S. Census Bureau, American Community Survey, 2005-2013, http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_05_EST_S1701&prodType=table etc.
10. See Pofeldt article cited in Resources above.
11 Friedman, See Endnote 1
12. Sheahan describes many of these plans. Sheahan, cited in Resources above, passim, There is also a good article in Wikipedia. http://en.wikipedia.org/wiki/Basic_income.
13. Sheahan, cited in Resources above, ch. 13 and App. A.
14. Closer to home, the Alaska Permanent Fund Dividend is paid to every adult resident and is funded out of the state’s oil revenues. It has ranged as high as $2,069 (the 2008 payment).
15. See the Sutter article cited in Resources.
16. Holzer, Harry J., Diane Whitmore Schanzenbach, Greg J. Duncan, and Jens Ludwig, The economic costs of childhood poverty in the United States, Journal of Children and Poverty, Vol. 14, No. 1, March 2008, 41-61.
17. According to The Economist, working hours in the U.S. were longer in 2012 than in all the 24 other OECD countries except Greece, Hungary, Israel, and Turkey. The Economist, Working Hours: Get a Life, Sep 24th 2013, http://www.economist.com/blogs/freeexchange/2013/09/working-hours viewed March 31, 2015.
18. According to The Economist, working hours in the U.S. were longer in 2012 than in all the 24 other OECD countries except Greece, Hungary, Israel, and Turkey. The Economist, Working Hours: Get a Life, Sep 24th 2013, http://www.economist.com/blogs/freeexchange/2013/09/working-hours viewed March 31, 2015.