03.29.2018 07:00 AM
Liberals and conservatives
alike love—and fear—the idea of giving free money to everyone. But we have to
try it anyway.
On December 15, 2017, the
United Nations Special Rapporteur on extreme poverty and human rights, Philip
Alston, issued a damning report on his visit to the United States. He
cited data from the Stanford Center on Inequality and Poverty, which reports that “in terms of labor markets, poverty,
safety net, wealth inequality, and economic mobility, the US comes in last of
the top 10 most well-off countries, and 18th amongst the top 21.” Alston wrote
that “the American Dream is rapidly becoming the American Illusion, as the US
now has the lowest rate of social mobility of any of the rich countries.” Just
a few days before, on December 11, The Boston Globe's Spotlight team ran a story showing that the median net worth of
nonimmigrant African American households in the Boston area is $8, in contrast
to the $247,500 net worth for white households in the Boston area.
Clearly income disparity is
ripping the nation apart, and none of the efforts or programs seeking to
address it seems to be working. I myself have been, for the past couple of
years, engaged in a broad discussion about the future of work with some
thoughtful tech leaders and representatives of the Catholic Church who have
similar concerns, and the notion of a universal basic income (UBI)
keeps coming up. Like many of my friends who fiddle with ideas about the future
of work, I’ve avoided actually having a firm opinion about UBI for years. Now I
have decided it’s time to get my head around it.
Touted as an elegant solution
to the problem of poverty in America and the impending decimation of jobs by
automation, UBI is a hot topic today in the “salons” hosted by tech and
hedge-fund billionaires. The idea
of UBI in fact is an old idea, older than me even: Either through
direct cash payments or some sort of negative income tax, we should support people in need—or
even everyone—to increase well-being and lift society overall.
Interestingly, this notion has
had broad support from conservatives like Milton Friedman and progressives such
as Martin Luther King Jr. On the other hand, UBI also has been criticized by
conservatives as well as liberals.
Conservative proponents of UBI
argue that it could shrink a huge array of costly social welfare services like
health care, food assistance, and unemployment support by providing a simple,
inexpensive way to let individuals, rather than the government, decide what to
spend the money on. Liberals see it as a way to redistribute wealth and empower
groups like stay-at-home parents, whose work doesn’t produce income—making them
ineligible for unemployment benefits. In addition, these UBI advocates see it
as a way to eliminate poverty.
Nevertheless, just as many
conservatives and liberals don’t like the concept. Conservatives against UBI
worry that it will decrease incentives to work and cost too much, racking up a
bill that those who do work will have to pay. Skeptical liberals worry that
employers will use it as an excuse to pay even lower wages. They also fear
politicians will offer it as a rationale to gut existing social programs and
unwind institutions that help those most in need. The result is that UBI is a
partisan issue that, paradoxically, has bipartisan support.
I was on a panel at a recent
conference when the moderator asked audience and panel members what they
thought of UBI. The overwhelming consensus of the 500 or so people in the room
appeared to be “we're skeptical, but should experiment.” UBI sounds like a good
or not-so-good idea to different constituents because we have so little
understanding of either how we would do it, or how people would react. None of
us really knows what we’re talking about when it comes to UBI, akin to being in
a drunken bar argument before there were smartphones and Wikipedia. But there
are a few basic principles and pieces of research that can help.
Universal Basic Income, In
Theory
Much of the resurgent interest
in UBI has come from Silicon Valley. Tech titans and the academics around them
are concerned that the robots and artificial intelligence they’ve built will rapidly
displace humans in the workforce, or at least push them into dead-end jobs.
Some researchers say robots will replace the low-paying jobs people don’t
want, while others maintain people will end up getting the worst jobs not worthy of robots. UBI may
play a role in which scenario comes to pass.
Last year, Elon Musk told the National Governors Association that job
disruption caused by technology was “the scariest problem to me,” admitting
that he had no easy solution. Musk and other entrepreneurs see UBI as way to
provide a cushion and a buffer to give humans time to retrain themselves to do
what robots can’t do. Some believe that it might even spawn a new wave of
entrepreneurs, giving those displaced workers a shot at the American Dream.
They may be getting ahead of
themselves. Luke Martinelli, a researcher at the University of Bath Institute
for Policy Research, has written that “an affordable UBI is inadequate, and
an adequate UBI is unaffordable.” I believe that is roughly true.
One of the biggest problems
with UBI is that a base sum that would allow people to refuse work and look for
something better (rather than just allowing employers to pay workers less) is
around $1000 per month, which would cost most countries somewhere between 5 percent to 35
percent of their GDP. That looks expensive compared with the cost to any
developed country of eradicating poverty, so the only way a nation could
support this kind of UBI would be to eliminate all funding for social programs.
That would be applauded by libertarians and some conservatives, but not by many
others.
Underpinning the Silicon
Valley argument for UBI is the belief in exponential growth powered by science
and technology, as described by Peter Diamandis in his book Abundance: The
Future is Better Than You Think. Diamandis contends that technological
progress, including gains in health, the power of computing, and the
development of machine intelligence, among other things, will lead to a kind of
technological transcendence that makes today’s society look like how we view the
Dark Ages. He argues that the human mind is unable to intuitively grasp this
idea, and so we constantly underestimate long-term effects. If you plot
progress out a few decades, Diamandis writes, we end up with unimaginable
abundance: “We will soon have the ability to meet and exceed the basic needs of
every man, woman, and child on the planet. Abundance for all is within our
grasp.” (Technologists often forget is that we actually already have enough
food to feed the world; the problem is that it’s just not properly
distributed.)
Many tech billionaires think
they can have their cake and eat it too, that they are so rich and smart the
trickle-down theory can lift the poor out of poverty without anyone or anything
suffering. And why shouldn’t they think so? Their companies and their wealth
have grown exponentially, and it doesn’t appear as though there is any end in
sight, as Marc Andreessen prophetically predicted in his famous essay, “Why Software is Eating the World.” Most of
Silicon Valley’s leaders gained their wealth in an exponentially growing market
without having to engage in the aggressive tactics that marked the creation of
wealth in the past. They feel their businesses inherently “do good,” and that,
I believe, allows them to feel more charitable, broadly speaking.
Universal Basic Income, In
Practice
If the technologists are
correct and automation is going to substantially increase US GDP, then who
better to figure out what to do about the associated problems than the
technologists themselves—or so their thinking goes. Tech leaders are
underwriting experiments and financing research on UBI to prepare for a future
that will allow them and their companies to continue in ascendance while
keeping society stable. (Various localities and organizations already have
experimented with forms of UBI over the years. In some cases, they have
produced evidence that people receiving UBI do in fact continue to work, and that UBI gives people the
ability to quit lousy jobs and look for better ones, or complete or go back to
school.) Sam Altman, president of Y Combinator, has a project to give people
free money and see what happens to them over time, for instance.
Altman's experiment,
prosaically named the Basic Income Project, will involve 3,000 people in two
states over five years. Some 1,000 of them will be given $1,000 a month, and
the rest will get just $50 a month and serve as a sort of control group. It should
reveal some important information about how people will behave when given free
money, providing an evidence-based way to think about UBI—we don’t have much of
that evidence now. Among the questions hopefully to be answered: Will people
use the cushion of free money to look for better work? Will they go back to
school for retraining? Will neurological development of children improve? Will
crime rates go down?
As with many ideas with
diverse support at high levels, the particulars of execution can make or break
UBI in practice. Take the recent, much heralded UBI experiment in Finland. A
Finnish welfare agency, Kela, and a group of researchers proposed paying
between 550 and 700 euros a month to both workers and nonworkers around that
country. Finland’s conservative government then began tweaking the proposal,
most importantly eliminating the part of the plan that paid people who had
jobs, and only providing UBI for those receiving unemployment benefits instead.
It had no interest in whether UBI would allow people to look for better jobs or
to train themselves for the jobs of the future. The government declared that the “primary goal of the
basic income experiment is related to promoting employment.” And so what
started as a credible experiment in empowering labor and liberal values became
a conservative program to get more people to go back to crappy jobs—and a great
warning about the impact that politics can have on efforts to test or deploy
UBI. (We must wait until 2019 to see the full extent of the outcome.)
Chris Hughes, a cofounder of
Facebook and not-quite-billionaire, is the person I found with a plan for UBI
that’s halfway between Silicon Valley’s techno-utopian vision and the vision
held by the liberal East Coast types that I mostly hang out with these days.
His new book Fair Shot:
Rethinking Inequality and How We Earn outlines his views on UBI, but
here’s my brief version of what Hughes is thinking: He believes we can do UBI
now. He says we can “provide every single American stability through cash” by
providing a monthly $500 supplement to lower-middle income taxpayers through
the Earned Income Tax Credit, or EITC. He would expand EITC to
include child care, elder care, and education as types of work that would be
eligible for EITC. (Currently if the jobs are unpaid jobs, they are not
eligible.) Hughes contends that this would cut poverty in America by half.
According to his numbers, right now the EITC costs the US $70 billion a year,
and his UBI proposal would tack on an additional $290 billion. Citing
research by Emmanuel Saez and Gabriel Zucman showing that less than 1 percent
of Americans control as much wealth as 90 percent of Americans, Hughes' plan to
pay for that expansion involves increasing the income tax for the top 1
percent, or people earning more than $250,000 a year, to 50 percent from 35
percent, and treating capital gains as income—moving long-term capital gains
from 20 percent to 50 percent, hitting the wealthiest the hardest.
He’s putting his money where
his mouth is too, underwriting a project that will give $500 a month to
residents of Stockton, California.
Will UBI save America? Our
Congress and president just passed a tax law that reduces taxes on the
country’s wealthiest, but I still think Hughes' proposal is reasonable in part
because EITC is a pretty popular program. My fear is that the current political
climate and our ability to discuss things rationally are severely impaired, and
that's without factoring in the usual challenges of turning rational ideas into
law. In the meantime, it’s great that Silicon Valley billionaires have
recognized the potential negative impact of their businesses and are looking at
and funding experiments to provide better evidence-based understanding of UBI,
even if evidence appears to have less and less currency in today’s world.
Am I optimistic? No. Should we
get cracking on trying everything we can, and is UBI a decent shot on goal? Yes
and yes.
The Future of Work
An Indian tribe with a
profitable casino gave
its members sizeable cash payments—and illustrated the potential outcomes
of universal basic income.
The federal government can
future-proof the economy. Meet the New
New Deal.
But don't worry too much:
Despite worries that automation will take all of our jobs, the
evidence disagrees.
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