quicktake

Universal Basic Income

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Should the government guarantee every citizen an annual stipend, no strings attached, no questions asked? That sounds like an idea that liberals would love. But what if the stipend took the place of the many programs that make up the safety net in most countries? That might appeal to conservatives but make liberals queasy. The idea is known as universal basic income, though in the U.S. it might be described as Social Security for all. Experiments are planned or underway in parts of Europe, Africa and North America. The results might also shift long-standing debates: How big should the safety net be, and what mix of incentives and protections would make it more effective?   

The Situation

Some of the biggest basic-income evangelists can be found in Silicon Valley, where technology billionaires like Mark Zuckerberg and Elon Musk see it as a solution to potentially large job losses — and consumer backlash — from driverless cars, robotics and other forms of automation. Y Combinator, a venture-capital company, is sponsoring its own experiment with 100 families in Oakland. Around the world, numerous other trials are in the works. Finland began an experiment in January 2017 involving 2,000 randomly selected people already receiving unemployment benefits. The Canadian province of Ontario began trials in three cities in the summer of 2017, while five Dutch municipalities approved plans for a variety of tests, such as allowing welfare recipients to earn income without losing benefits. Possibly the most rigorous study is by GiveDirectly, a New York-based nonprofit that is giving 6,000 Kenyans a guaranteed income for at least a decade. Not everyone is a fan. Swiss voters in 2016 soundly rejected a proposal for a basic income of about 2,500 Swiss francs ($2,460) per adult citizen each month. In the U.S., 2016 Democratic presidential nominee Hillary Clinton revealed in her book “What Happened” that she considered making a universal basic income a central piece of her economic plan but rejected it because of the cost. 

The Background

The idea of a government-guaranteed minimum income dates back centuries, with some saying a version originated with the humanist philosophers of the 16th century. British philosopher and Nobel laureate Bertrand Russell was one of the 20th century’s earliest advocates. A type of basic income was debated, and rejected, at the 1920 U.K. Labour Party conference. But it wasn’t until the 1960s that it became part of the mainstream political discussion, when U.S. President Richard Nixon proposed an income floor. The earned-income tax credit, a form of basic income, took its place, but only to supplement the earnings of the working poor. The tax credit had been first proposed in 1962 by conservative economist Milton Friedman. One of his aims was to end the “earnings cliff,” in which government aid disappears once income exceeds a cap. Such a limit discourages recipients from working. The tax credit is widely considered an effective anti-poverty program, but the earnings-cliff issue is more complicated than ever: The U.S. now has more than 80 low-income programs, each with its own earnings cap.

 

 

 

In 1968, Milton Friedman discussed his proposal for a negative income tax.

The Argument

In Switzerland, backers of the basic income plan said it would have ensured that all citizens had a decent existence and were able to participate in civic life. The government responded that it would have forced a tax increase and caused a shortage of skilled workers, sending jobs abroad. Elsewhere, some progressives have cast the idea as the ultimate expression of what a developed economy can achieve: a way to lessen poverty and inequality and ease the pain of job loss and economic stagnation. But in the U.S., many liberals see it as a distraction from more practical priorities, such as a $15 minimum wage and paid family leave. For conservatives, the attraction is smaller government. Dozens of social-welfare programs now costing U.S. taxpayers about $1 trillion a year could be folded into a basic-income program, they argue. The fear that people with a guaranteed basic income would become slackers may be unfounded. One economist who studied trials conducted in the 1970s in Canada reported the opposite: Recipients were healthier and finished high school at higher rates. Adults with full-time jobs worked the same number of hours with one exception: Women took off more time after having a baby.

The Reference Shelf

  • A Bloomberg View column analyzes the idea’s pros and cons.
  • “The Town With No Poverty,” by Evelyn Forget, is a landmark study analyzing Canada’s experiments with basic income in the 1970s.
  • The Basic Income Earth Network’s website provides history, background and FAQs.
  • Rutger Bregman, a Dutch writer, makes the argument in an op-ed and in a book: “Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-Hour Workweek.”
  • On Reddit, the “BasicIncome”community gathers articles and commentary from around the globe on the pros and cons of the idea.

    First published June 3, 2016

    To contact the writer of this QuickTake:
    Paula Dwyer in New York at pdwyer11@bloomberg.net

    To contact the editor responsible for this QuickTake:
    John O'Neil at joneil18@bloomberg.net

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