The Paradox of Universal Basic Income


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 adamning report on his visit to the United States. He cited data from the Stanford Center on Inequality and Poverty, whichreports 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 teamran 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 auniversal 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 ofnegative 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 Associationthat 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 countriessomewhere 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.

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