Guaranteed Basic Income: a Future Policy to Reshape Human Services in the United States?

By Clem Bezold, Chairman and Senior Futurist, and Mary Carenbauer, Futurist

What is a Basic Income? And Why Have One?

The guaranteed basic income – also called the Universal Basic Income, the Negative Income Tax, the Citizen’s Income, and the Basic Income Guarantee – is a cash payment made to individuals, often unconditionally.

The concept of a basic income been proposed by conservatives and liberals in the U.S. for decades. For example, in the late 1960s Richard Nixon proposed the Negative Income Tax.

The reasons underlying support for basic income are multiple. Support by liberals and conservatives offer different rationales. Leading conservative Charles Murray supports basic income to help keep the United States competitive during labor market transformation to robotics and replace current welfare programs (1). Some support for basic income is based on both alleviating poverty while streamlining and cutting costs for welfare programs (2).

Basic income is presented as a way to make welfare programs more impactful, challenge ideas of safety nets, adapt to technological change and evolve the relationship between work, income, and identity (3).

In recent years, basic income has gained notable attention as a strategy to combat job loss to automation. As noted in a recent forecast in IAF’s newsletter from the Human Services 2035 Project, the projections for total job loss by roughly 2030 in the United States range from 47% (Frey and Osborne), 38% (Price Waterhouse Cooper), to 9% (OECD). And the OECD has recently raised its forecast from 9% to 14% of jobs that are at high risk of automation (4).

 

Has Basic Income Worked in Other Places?

Basic income projects have taken place across the world, with some pilots occurring at present – including in the United States.

Past experiments in Canada and Namibia both yielded reduction in poverty levels and other positive impacts. The Canadian province Manitoba piloted basic, minimum income – referred to as “mincome”— in the mid-1970s (5). Although the program was removed after a few years with a change in provincial government, it demonstrated higher rates of remaining in school, lower rates of hospitalization, and hardly a change in work rates. The amount of money recipients received was determined by need. More recently, the province of Ontario announced a basic income pilot in April 2017 and began payments to low-income couples or individuals. By August 2018, there were 4,000 people receiving payments when a change in provincial government was followed by their announcement that the pilot would not run its three-year term but would be stopped in April 2019 (6).

Finland piloted a two-year basic income program, running from 2018 and 2019, which aimed to cut red tape and reduce poverty and unemployment (7). It pays $690 to 2,000 Finns each month with no conditions. However, changing political sentiment led to a decision not to extent the pilot and create the full program and instead take a different welfare approach (8).

 

Examples of Basic Income in the United States

Basic income experiments and interest are growing in the United States.

Stockton, California is an economically challenged area that was hit hard with the housing recession and unable to recover. In an effort to boost the economy and support families, the city is piloting a basic income program and will provide participants $500 each month. The Stockton experiment aims to collect data on how the unconditional money can impact the economic, health and wellbeing aspects of low-income families (9).

Y Combinator, the private investment company that launched Airbnb, did a small pilot test giving a handful of people in Oakland, California between $1,000 and $2,000. A larger study with 3,000 people in two states is being planned (10).

Hawaii has become the first state to pass a bill in its State Legislature to study a universal basic income (UBI), bill HRC89. Hawaii has experienced job declines in their agricultural sector and the automation of service jobs. The bill sets up a working group to explore options for a state UBI, involving members from the State House and Senate, the director of human services, representatives from the Chamber of Commerce and the AFL-CIO, and the head of the University of Hawaii’s Economic Research Organization. This group will develop policy recommendations (11).

Established the 1970s, Alaska has managed the Alaska Permanent Fund Dividend which manages assets funded by royalties from oil reserves and provides financial compensation to all citizens who apply for it. As of 2016, the historical average amount that each recipient received annually was around $1,150 (12). The Alaska Permanent Fund is largely well-regarded and supported. There is some skepticism that basic income payments dissuade participation in employment. However, a 2018 study found that the Alaska Permanent Fund payments have “no impact” on employment and marginally increased part-time work (13).

 

How Would a Basic Income Work and Be Paid For?

While there are a range of payment levels proposed for the GBI, e.g., $10,000 yearly income plus $3,000 for health insurance (Charles Murray), or up to $32,000 yearly in Switzerland. The level used in Scenario 3 of Human Services 2035 is the $12,000 yearly for adult citizens and $4,000 per child proposed by Andrew Stern (14).

That is $12,000 and $4,000 in 2015 dollars; in Scenario 3, we assume that these figures would be adjusted for inflation. So, these would be higher when GBI payments begin in the 2020s, and they would grow with inflation after being established.

Stern argues that the costs of a GBI would be roughly $3 trillion yearly. An income of $12,000 for every adult would cost between $1.75-$2.5 trillion in federal funds each year. The $4,000 for each person under 18 would add another $296 billion. Stern’s book considers several ways to pay for the GBI. Below is a list of options for funding GBI from Stern and other proponents:

  • End all or many of the current 126 welfare programs, which cost $700 billion in federal government funds and $300 billion in state government funds.
    • E.g., eliminate food stamps (save $76 billion), housing assistance ($49 billion), and Earned Income Tax Credit ($82 billion).
  • Adjust long-term retirement policy for future generations, without changing Social Security for those who have already been contributing to the system.
  • Redirect some government spending and taxation.
    • Raise revenue by eliminating all or some of the federal government’s $1.2 trillion in tax expenditures; do away with reductions such as investment expenses, preferential treatment of capital gains, foreign taxes, charitable contributions, mortgage interest, and accelerated depreciation.
    • Look at trimming expenditure on the federal budget, such as reducing military budget (currently $600 billion), farm subsidies ($20 billion), or subsidies to oil and gas companies ($30+ billion).
  • Increase revenue from new sources.
    • Tax robots or software that displaces workers.
    • Consider a value added tax (VAT) of 5 to 10% on the consumption of goods and services, with all revenue funding basic income.
    • Implement a Financial Transaction Tax (FTT) (also known as the “Robin Hood Tax” and “Tobin Tax”), a tax on financial transactions such as a federal tax on stock sales.
    • Consider a “wealth tax”, a levy on the total value of personal assets, including housing and real estate, cash, bank deposits, money funds, stocks, etc.
    • A Carbon Tax, which at a rate of $15/ton of CO2 would bring $80 billion in annual revenue or about $250 per U.S. resident.
    • A “common goods tax” such as the one placed on oil produced in Alaska to fund the Alaska Permanent Fund.

 

References

(1) Murray, C. (2016, June 3. A Guaranteed Income For Every American. Retrieved from: https://www.wsj.com/articles/a-guaranteed-income-for-every-american-1464969586

(2) Gordon, N. (2014, August 6). The Conservative Case for a Guaranteed Basic Income. Retrieved from https://www.theatlantic.com/politics/archive/2014/08/why-arent-reformicons-pushing-a-guaranteed-basic-income/375600

(3) Flowers, A. (2016, April 25). What Would Happen If We Just Gave People Money? Retrieved from http://fivethirtyeight.com/features/universal-basic-income

(4) Vincent, J. AI and robots will destroy fewer jobs than previously feared, says new OECD report, Retrieved from https://www.theverge.com/2018/4/3/17192002/ai-job-loss-predictions-forecasts-automation-oecd-report

(5) Surowiecki, J. (2016). Money For All. The New Yorker. Retrieved from https://www.newyorker.com/magazine/2016/06/20/why-dont-we-have-universal-basic-income; and Lum, Z. (2014). A Canadian City Once Eliminated Poverty And Nearly Everyone Forgot. The Huffington Post. Retrieved from https://www.huffingtonpost.ca/2014/12/23/mincome-in-dauphin-manitoba_n_6335682.html

(6) Ontario Basic Income Pilot, Retrieved from https://www.ontario.ca/page/ontario-basic-income-pilot and Ontario’s new Conservative government to end basic income experiment, Retrieved from https://www.theguardian.com/world/2018/aug/01/ontarios-new-conservative-government-to-end-basic-income-experiment

(7) Henley, J. (2017). Finland trials basic income for unemployed. Retrieved from https://www.theguardian.com/world/2017/jan/03/finland-trials-basic-income-for-unemployed

(8) Donnelly, G (2018). Finland’s Basic Income Experiment Will End in 2019. Fortune, April 19, 2018. Retrieved from http://fortune.com/2018/04/19/finland-universal-basic-income-experiment-ending

(9) Langone A. (2018, April). Why This 27-year-old Mayor is Giving His City’s Poorest Residents $500 a Month- No Strings Attached. Retrieved from http://time.com/money/5243564/why-this-27-year-old-mayor-is-giving-his-citys-poorest-residents-500-a-month-no-strings-attached

(10) Weller, C. (2017, September 21). One of the biggest VCs in Silicon Valley is launching an experiment that will give 3,000 people free money until 2022. Business Insider. Retrieved from http://www.businessinsider.com/y-combinator-basic-income-test-2017-9

(11) Matthews, D. (2017, June 15). Hawaii is considering creating a universal basic income. Retrieved from https://www.vox.com/policy-and-politics/2017/6/15/15806870/hawaii-universal-basic-income

(12) McFarland, K. (2016). Alaska, US: Amount of 2016 Permanent Fund Dividend to be $1022. Retrieved from https://basicincome.org/news/2016/09/alaska-us-amount-2016-permanent-fund-dividend-1022

(13) Damon, J. & Marinescu, I. E. (2018, February 5). The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund. Available at SSRN: https://ssrn.com/abstract=3118343 or http://dx.doi.org/10.2139/ssrn.3118343

(14) Stern, A. & Kravitz, L. (2016). Raising The Floor: How A Universal Basic Income Can Renew Our Economy And Rebuild The American Dream. 1st ed. New York: Public Affairs. Print.


This post is part of a series on forecast areas with potential disruptive developments (positive and negative) shaping the futures of human needs and human services over the years to 2035. The final scenarios and main report will be released in the upcoming months here. And previously we wrote on job loss to automation and new jobs that automation will create, the growing values of equity and inclusion in the US, housing options shaping human progress and human services, and abundance advances.