Will universal basic income ever become an American reality?

December 22, 2016 by Jason Kornwitz, Northeastern University

Finland is on the verge of launching a two-year experiment in which a randomly selected group of 2,000 unemployed people—from white-collar computer programmers to blue-collar construction workers—will receive a monthly stipend of $580 in lieu of their typical benefits.

Meanwhile, the Silicon Valley startup incubator Y Combinator is preparing to launch a pilot project in Oakland, California, in which 1,000 families will receive unconditional cash grants ranging from $1,000 to $2,000 per month.

Will these basic income projects stimulate job growth and boost the economy? Will they improve people's happiness and well-being? Will universal basic income ever become a reality for us here in the U.S.? We asked associate professor of economics Mindy Marks, an applied microeconomics expert with a particular focus on labor, health, and education.

First and foremost, what are the pluses and minuses of a basic income guarantee?

The main plus is in the name. A basic income guarantee ensures every man, woman, and child will have some money to cover basic needs regardless of characteristics or circumstances. An additional plus is that these unconditional cash transfers can be cheaper to administer than our current system, which entails a costly (both in time and dollars) eligibility process. The negative that economists are most focused on is if one is provided income, then the incentive to work falls. In labor economics this is referred to as the income effect. Empirical evidence supports the existence of an income effort but scholars debate its magnitude.

Another concern stems from paternalism. Currently the social safety net targets benefits to those individuals who are deemed "deserving." Examples of these groups include children, the poor, the disabled, and the elderly. Some states and programs further restrict eligibility to those looking for work or who pass a drug test. A fear is that non-deserving individuals would benefit from a basic income. A related concern is that people will spend their cash on items such as alcohol, drugs, and gambling, which is why many of our existing programs provided in-kind benefits as opposed to cash.

A recent McKinsey & Company report estimated that 45 percent of all U.S. jobs were at risk of computerization. In your view, is basic income part of the proper response to automation?

No. Automation is real phenomenon that does and will have a profound impact on the labor market. The process of automation creates winners and losers and likely contributes to the widening of . However, it is incorrect to say that automation leads to a net loss of jobs. Some jobs are indeed replaced by machines but the expanded production creates jobs in the new areas. In the early 1900s, around 35 percent of the labor force was employed as farmers. Due to early waves of mechanization, that share has fallen to around 2 percent of the labor force and yet one-third of the is not idle.

Providing every American $10,000 per year would cost the U.S. government approximately $3 trillion per year, roughly eight times what the country now spends on social service programs. And President-elect Donald Trump's labor secretary pick, Andy Puzder, is critical of simply raising the minimum wage to $15. With this in mind, do you think universal basic income could ever become an American reality, or is it too much of a political nonstarter?

We are unlikely to see a basic income in the U.S. First, as I mentioned earlier, it would be costly. In addition, there are the fears of abuse. One recent example comes from Washington state, which had a ballot initiative to impose a carbon tax that would have redistributed the revenues from the tax as lump sum payments to the state's citizens. Basically, this was a small programs to be funded with a tax on pollutants. This initiative failed.

There are, however, efforts at the federal and state level to expand the social safety network via increasing access to Medicaid and increasing the earned income tax program. The later is a program that provides wage subsidies to low-income workers. This program has received support from both sides of the aisle as a program that helps low-income individuals without discouraging work.

Explore further: Economists report surging income inequality in United States

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rderkis
1 / 5 (1) Dec 22, 2016
The end result of this after going thru a revolution in human society(and a lot of misery) will be a Utopia. Where absolutely no one works and all is provided free by automation(robots). They will mine the resources, while designing and building themselves.
We as humans will be free to peruse our passions where ever they lead us. Be it art, music etc.
I am not talking about AI, which could vary well destroy us but rather just really smart computers.
godenich
not rated yet Dec 22, 2016
In 2012, Jeff Sessions put welfare spending at $1tn[1] and if State funding is included, the figure is closer to $1.2tn. Roughly $430bn[2] is for Medicaid, leaving $730bn. These figures do not include SS/Medicare. There are roughly 45mn[3] living below the $12k poverty threshold. That comes out to $540bn plus tapering to bring adult citizens to the poverty level.

[1] CRS Report: Welfare Spending The Largest Item In The Federal Budget | Sessions | 2012
[2] 2015 ACTUARIAL REPORT ON THE FINANCIAL OUTLOOK FOR MEDICAID | HHS
[3] 45 Million Americans Still Stuck Below Poverty Line: Census | Huffington Post | 2014
rderkis
not rated yet Dec 22, 2016
This talks about the technology of automation.
During our lifetime, slow change up till now, and we did not much notice but we will soon not be able to NOT notice.
We probably did not experience much more than 32 times in our entire lifetime. I am 69. Technology will increases 32 times more than now, in the next 5 years. But in 10 years - 1,024 times the tech we have now. It will be increasing so fast at that time, we will not be able to keep up.
And at 20 years , when were 80 technology will be over 1,000,000 times what it is today. That is inconceivable to us.

Even with 32 times the technology we have today, you probably won't die of old age. Way before 20 years they will be able to turn our biological clocks back :-)
I would not mind my body feeling 17 years old again. But with a much sharper mind

I knew this sounds like science fiction but look at the facts.

http://theemergin...ment.pdf
Eikka
1 / 5 (1) Dec 30, 2016
The Finnish experiment will be inconclusive because they only took up people who were already unemployed. A proper test would have selected 2,000 people at random from the entire population.

Now, the test will show that some unemployed will become employed despite being handed free money every month, what it won't show is how many already employed people would quit their low paying jobs and start subsisting on the welfare.

We as humans will be free to peruse our passions where ever they lead us. Be it art, music etc.


Or just consuming more and more stuff to fight the boredom. Some will want to build castles and just blow stuff up.

The problem then is, that the world is never going to be rid of scarcity and there will always be limits to productive output whether its by man or by machine, so the real question is how to distribute the goods and on what basis?

Equal spread? First one to grab? Or perhaps you need to give something to get something - such as work
Eikka
5 / 5 (1) Dec 30, 2016
And at 20 years , when were 80 technology will be over 1,000,000 times what it is today. That is inconceivable to us.


it is inconcievable because its impossible - the Moore's law is dead. It was killed by diminishing returns, because with exponentially advancing technology you have to keep re-doubling your effort to keep it going. Every new step requires either twice as much money, or twice as much time because new discoveries become harder and harder to make.

At some point you reach physical limits of energy and material inputs, so even if you could make the new discovery, you can't afford it.
gkam
1 / 5 (4) Dec 30, 2016
"Every new step requires either twice as much money, or twice as much time because new discoveries become harder and harder to make."
-------------------------------------

Nope. And nobody said Moore's Law was a Natural law, it just appeared to be that way, from our advances in technology. When I worked for National Semiconductor, it was a new thought, but then (1972), the area was still the Santa Clara Valley to most folk.

I am astonished it has kept up with the advances so far.

But this thread regards a universal income. We will never get it because not all folk are rational, not all are wiling for others to have what THEY want. Many have to be "special", and show off their money, as if it were proof of some kind of character.

It is, to their dismay and detriment.
Eikka
3 / 5 (2) Dec 30, 2016
I am astonished it has kept up with the advances so far.


It hasn't.

People just keep changing the definition of "Moore's law" to make it appear to continue.

The original "law" was already revised by Moore once, and many people have "fiddled" with the idea of what Moore's law actually measures to the point that whenever it is mentioned nowadays just about anywhere, they always get it wrong.

It's just become a truism: you pick any bunch of measures by the fact that you can draw a straight line through them on a logarithmic graph, and then you draw the straight line, and there's your Moore's law. It doesn't matter that your measures are incomparable to the original version.

It's like a car mechanic who's tuning up a race car, and when he can't get the engine to run any better, he changes the speedo from miles to kilometers and claims he's getting a faster time from 0 to 60.

antialias_physorg
5 / 5 (2) Dec 30, 2016
It'll be really interesting to see how this pans out in Finland. Maybe we'll even see that this may work in some countries and not in others (those that have a unctioning society and a sense of responsibility of individuals for it vs. the 'me first' societies).

I hope it works, because it could reduce the stigma of people who are searching for a job and bring those who feel 'left behind' back into society.
On the other hand I am sure that there will be some abuse of this. It only waits to be seen whether this will be a sizeable or negligible number of cases.
gkam
1 / 5 (4) Dec 30, 2016
Eikka, if you knew instead of guessed, we would appreciate it more.

The "Law" was never put forth specifically, and originally postulated that performance would double every 18 months or so. Performance was not defined specifically, so everybody could define it for themselves. It was a rule-of-thumb, not a "law".
Eikka
5 / 5 (1) Dec 30, 2016
The "Law" was never put forth specifically, and originally postulated that performance would double every 18 months or so.


That's another one of those false versions of Moore's law.

The real law is about how many transistors one can make on the size of a chip that is the most economical to manufacture at the time. It's not about "performance", nor is it about the absolute number of transistors, clock speeds, power consumption or any other metric of merit tacked on afterwards.

Eikka, if you knew instead of guessed, we would appreciate it more.


You don't need to guess anything, because the "law" has not applied for decades since the metrics were changed arbitrarily from Moore's original definition. In a stricter sense, the law stopped applying back when Moore himself changed the time period.

After that, people started to ignore that it was a mere observation, and started treating it as a prediction and a prophecy that must hold true.
Eikka
5 / 5 (2) Dec 30, 2016
The "Law" was never put forth specifically,


https://en.wikipe...#History
The complexity for minimum component costs has increased at a rate of roughly a factor of two per year. Certainly over the short term this rate can be expected to continue, if not to increase. Over the longer term, the rate of increase is a bit more uncertain, although there is no reason to believe it will not remain nearly constant for at least 10 years.


That is: the number of components (transistors) on a chip manufactured to the cheapest price appears to double every year. Moore later revised the observation to doubling every two years, and in fact predicted that the rate would start to slow down after 1980, which it did.

Moore never said 18 months. - that was an Intel employee who said the performance of the chips they made would double every 18 months - and that isn't Moore's law, and it didn't hold for long either.
TheGhostofOtto1923
4 / 5 (4) Dec 30, 2016
Moore never said 18 months. - that was an Intel employee who said the performance of the chips they made would double every 18 months - and that isn't Moore's law, and it didn't hold for long either
Perhaps if george had stuck it out at National Semiconductor for 18 months he could have understood this.
MR166
not rated yet Dec 30, 2016
As automation displaces workers government's income will diminish and the cost of social programs will increase. At that point the robots will have to be taxed just as an equivalent human worker would be. As much as it irks me to admit it, these new funds will have to be distributed by the government to it's citizens. I suppose that the devil will be in the details. Will someone who has a job get an equal amount of this new funding or will it be reserved for the unemployed only?
Eikka
not rated yet Jan 01, 2017
Due to early waves of mechanization, that share has fallen to around 2 percent of the labor force and yet one-third of the labor force is not idle.


It's worse than idle - you'd actually wish they were just idle.

With the services economy people found out that other people can't keep track of what all the money is being spent on, so they started doing non-productive make-work: bureaucracy, rent-seeking, crony capitalism and generally working as middle men wherever possible.

The class of people who used to grow food by hand are now transformed into dog-hair-stylists and feng-shui experts, baristas, stock brokers, singers, dancers, the people who send you spam email and try to get you to eat out four times a week... in general those who only consume, and derive their income from the fact that they make YOU consume more.

They're taking their cut from the flow of resources from the producers to the consumers, increasing the prices by 100 fold in the middle.
Eikka
not rated yet Jan 01, 2017
As automation displaces workers government's income will diminish


Why would it diminish? The owning class is paying 80-90% of the actual sum of taxes anyhow, because the poor who are displaced by automation effectively don't pay tax, or are paying a negative tax already thanks to already existing systems of income redistribution.

As the wage earning manual laborers are displaced, the upper classes income increases and the government will find itself with more money since the incomes shift up to higher tax brackets. The government would rather have someone making $120k a year earn the money than someone making $20k a year, because the latter has a smaller income tax percentage.

Eikka
5 / 5 (1) Jan 01, 2017
In fact it's in the government interest that the poor should become poorer and the rich become richer, because they are the middle men sitting between the flow of money from the rich to the poor and get to divert it wherever they please.

By playing Robin Hood they justify their own incomes, so why should they do anything to actually remedy the situation? The worse the world becomes, the more it needs these "saints" - the hero and the villain are the same.

Whenever there's a plague, the priesthood prospers. In the same way, the power of the political class grows out of social conflict, because without the need to manage and control people there wouldn't be a need for the government. If the society and the economy was working fine as it was, why pay taxes and elect representatives?
gkam
1 / 5 (4) Jan 01, 2017
"In fact it's in the government interest that the poor should become poorer and the rich become richer, because they are the middle men sitting between the flow of money from the rich to the poor."
---------------------------------

You inhabit a strange world.
Eikka
not rated yet Jan 01, 2017
You inhabit a strange world.


It's only logical.

You have to ask the question, who benefits from high income disparity. The rich people of course, but the more subtle answer is: the people in the government.

The class of people who employ themselves in public offices, who sell themselves to the public as the people whose job it is to make things right again, would lose their jobs if they actually did so. The worse the income disparity, the more demand there is for politicians to fix it, and the more the people are willing to pay for this "service".

UBI is one of the symptoms. Without UBI the owning class would have to pay the poor anyways or they'd lose customers and soon find themselves without income. Who you gonna sell to if you have all the money?

But with the UBI, or any other income redistribution scheme, the political class steps in between and acts as the redistributor, and pockets some of the money to themselves, saying it wouldn't happen otherwise.
gkam
Jan 01, 2017
This comment has been removed by a moderator.
Eikka
not rated yet Jan 01, 2017
The irony is that using robots to do the work and then paying the unemployed people UBI so they could afford the products is more expensive and wasteful than simply having people do the work for the money - because of the added expense of the bureaucracy and the cost of the robots.

And work is a great moderator for human apetite. UBI has the problem of turning income into a political matter, so people can effectively vote themselves more money, which they will.

gkam
1 / 5 (4) Jan 01, 2017
"And work is a great moderator for human apetite."
----------------------------

A strange view. I see work as self-expression, as self-actualization.
Eikka
not rated yet Jan 01, 2017
A strange view. I see work as self-expression, as self-actualization.


Why is it strange? When your income depends on your work output, you avoid the problem with people getting too greedy, or at least they have to provide something of equal value in return.

UBI breaks this, so people who do very little get to spend the same amount of resources as people who do a lot. That in itself is not an issue, but it will become an issue later on when the people become wise and stop since they can get away with less.

It's an "idiocracy" type effect: the people who work hard to "self-actualize" or simply out of a sense of duty become marginalized by the emergence of a culture that assumes the society owes you a living. The historical precedence is in the fall of Rome where the society was using "robots" (slaves) for work and paying the non-working citizens a sort of UBI (free food and entertainment) so they'd support the politicians. That didn't end too well.

gkam
Jan 01, 2017
This comment has been removed by a moderator.
Eikka
not rated yet Jan 01, 2017
Do not assume we all have the same character.


If I were to assume that people were all nice and responsible enough to not abuse the UBI or their position as a public servant, I would be making exactly that error.

And even if the people were good, the system can make good people do bad things. For example as I pointed out above, the system of progressive taxation puts an incentive on politicians to increase income disparity.

The way it does so doesn't need to be immediately obvious - it's just what ends up happening when government officals weigh the merits of different proposals: the ones that end up with more tax collected are preferred to those which would help the poor, because the government needs the money first to pay their existing commitments and deficits. That means they prefer proposals which direct money to the rich, to businesses and corporations and high-income individuals who pay lots of tax.
gkam
1 / 5 (4) Jan 01, 2017
No, we are diverse. It is not between good and bad character, but personal characteristics - whether life is viewed more as a competition or a celebration of civilization.
Eikka
not rated yet Jan 01, 2017
More to the point, we don't have a fixed character.

When you put people in a different system, the system changes the people just as much as the people change the system. Imagine yourself having been born and raised in a culture where everyone gets $500 every month automatically, no questions asked. Would you be grateful, or would you complain that it's not enough and the society should give you more?

Then observe people who are already living in such a culture - trust fund kids, yuppies, people from gated communities etc. These are fundamentally the same people as you, but the context is different - that's you under different circumstances even though it feels like you'd never do that.

The idea that people have fixed characters is the racist argument that Jews are like this or Blacks are like that - that's the social darwinist view. It's curious how even the people who consider themselves progressive liberals often secretly believe so without even realizing it.
Eikka
not rated yet Jan 01, 2017
In terms of character, the worst of all are the people who honestly believe in goodness, because they become experts at denying their own true selfish motivations, and so become capable of ignoring them and committing the truly outrageous crimes and atrocities in the name of the common good, or religious righteousness, or justice, or saving the planet or whatever you have.

When you scratch the surface, you often find some very simple reason like, "I would really like for everyone to give me $500 a month for nothing, but I can't just demand that for myself because nobody would take me seriously, so I have to demand it for everybody and argue its for social justice".

As long as we're being honest about such motivations, we can have a meanigful discussion. Otherwise it becomes very difficult.
Eikka
not rated yet Jan 01, 2017
I hope it works


Some of the effects are already readily visible, or deducible from other similiar systems of social aid.

For example, Finland already has a "UBI" when it comes to housing. Anyone deemed "low income" can apply for the government to pay their rent. This excludes students whose student aid includes a separate portion for housing expenses, and pensioners who have their own similiar aid.

As a consequence, nearly everyone who can't afford to own a home is on one of the three programs. The lowest of the three is the student aid which pays 80% of the rent up to 252 euros. For the tenants that means nearly everyone can afford up to €315 a month with the government paying 80 cents to the euro. That then has become the de-facto minimum price for any apartment of any size anywhere in the country - even for the smallest 100 square foot suicide booth.

Moral of the story: giving everyone free money, that money just becomes the new zero.

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