Last week we spoke about the future of work when automation wipes out 47% of American jobs. That episode begs the questions, will universal basic income be part of our future? Will free money be the answer to our problem?
When the robots steal our jobs, we will have to have money coming in from somewhere to house and feed ourselves. One way to do that is through universal basic income. Today we look at the pros and cons of universal basic income and see how free money will effect out future.
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What is Universal Basic Income?
While deciding how to implement and pay for UBI can get complicated, defining it is simple:
” The government would pay every adult citizen a salary, regardless of wealth, employment income or if they worked at all. Doing so, the theory goes, might solve a host of endemic economic problems, from poverty to chronic joblessness, that is only likely to worsen in the coming century.”
The free money is not intended to make people rich, merely to meet basic needs and bring all citizens above the poverty line. The amount usually quoted to do that in the US is $1,000 per month.
UBI is nothing new, not even in the US. Alaska has a UBI program and has for decades. Alaskan residents receive about $2,000 per year, and the money comes from oil revenue.
Vote With Your Dollars
We all know what it means to vote with your dollar. But what does it have to do with UBI? The vote is not an accurate one if not everyone gets a vote. Those without dollars don’t get a vote, but that doesn’t mean they don’t have an opinion on the election, just that they don’t get a vote.
Universal basic income would ensure that everyone had at least a dollar so everyone would get a vote.
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It’s Not Just the Robots
Until pretty recently most of us had never heard the term universal basic income, and now it’s everywhere. Why is it suddenly so ubiquitous? As we mentioned above, it’s partly due to the coming automation. But it’s not the only reason.
Income inequality is another. Income inequality is defined as “the extent to which income is unevenly distributed among a population.” In the US, the top 0.01% earn $27 million a year. The bottom 90% earn $31,000. CEO compensation between 1978-2013 and adjusted for inflation rose 937% compared to the average worker’s increase of a lousy 10.2% for the same period.
This model is not sustainable. People might not take to the streets because they’re underpaid, but the same won’t be said when they have no job at all. So much like universal health care, universal basic income is something that is very much on the table.
Hoarding is why trickle-down economics is bullshit. It was bullshit when Reagan touted it, and it’s bullshit now when Trump bloviates about it. The ones at the top don’t put their money back into the economy by creating jobs or spending it. They hoard it. Do you want to stimulate the economy? Then give money to low-wage workers.
“All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.”
Pros of UBI
There is a loooong list of pros for implementing UBI, but these are among the most impactful.
I Do What I Want!
Just who is the government to tell you what you can do with your money? Many entitlement programs come with strings attached, things like work requirements or limits on what this free money from specific programs (like WIC) can be used to purchase.
UBI would remove this form of government paternalism. Each recipient can do whatever they like with the money.
It’s a Trap!
A large part of the reason people can’t climb out of poverty is that of the welfare trap. Benefits are reduced or utterly eliminated if the recipient starts making over a certain amount of income from a job.
There is no incentive to advance in a job or look for a better job if it means you end up with less money. Those benefits are a steady source of help, but anyone can lose their job or have their hours cut. UBI doesn’t change if you start to earn more money. That steady source of income is always there and not taken away as you advance, so people have more incentive to try to improve.
Most people are not inherently lazy but most of us will do the intrinsically safe thing, and those benefits are the more reliable option than a job you could lose.
UBI Reduces Stigma
Were you the kid that got free lunch in school? In some cases that meant a separate line or a special ticket that marked you out as one of the “poors.” It’s humiliating for kids, and the stigma of public assistance doesn’t go away as an adult.
Some adults who genuinely need help, refuse to apply for it because they feel so ashamed. Believe me; the Waltons don’t feel ashamed of all the corporate welfare they rake in so if you need help, take it.
If everyone is getting the same thing as they would with UBI, there is nothing to be ashamed about.
When You’ve Got Them By the Balls…
Their hearts and minds will follow. All states in the US are at-will work states. There are some regulations but for the most part, in an at-will work state, you can be fired for any reason (excepting federal rules regarding race, religion, etc.) with no notice.
Unions used to offer workers some protection from unjust firings, but not many Americans are part of a Union any longer. Union membership was 10.7% in 2016. In 1983, the first year with comparable data available, that number was 20.1%.
Workers have no bargaining power. They need the job they have no matter how bad the pay or poor the conditions. UBI would give employees back some control. Employers would not be able to keep employees in jobs that offer substandard wages and conditions if employees were less reliant on a traditional paycheck.
There’s More Than One Steve Jobs Among Us
The difference between people like him and people like some of us is not a technical genius, or business acumen, or a preternatural ability to read zeitgeist. It’s that they were less risk-averse than most of us.
What innovations would we see if people knew there was a safety net to catch them if they decided to take a chance? If failure didn’t mean starving? UBI would create more entrepreneurs and more small businesses.
Just over half of people who start college graduate. More people will complete their educations when there is less pressure to earn a living, and a college education is what pushes the working class into the middle class. And a robust middle class is required for a healthy economy and a healthy country.
There are plenty of arguments against UBI. But really, can we ever have too many mixtapes?
Immigration is already a hugely contentious issue. If we adopted UBI, some people worry that economic migrants would come flooding into the country. Others fear that it would make becoming a naturalized citizen nearly impossible due to political pressure.
Too Many Mixtapes
If everyone could do whatever they wanted without worrying about earning an income, would our basic needs be met? UBI would create no shortage of painters and poets but would we have enough plumbers and carpenters?
All current social programs would be replaced by UBI by UBI only provides cash. It doesn’t provide for “targeted needs” like health and child care, addiction programs, and job training.
There would have to be additional programs because UBI can’t meet everyone’s needs so now we have the expense of UBI and the expense of other programs.
Work is a Human Need
Have you ever heard of a person who retired and promptly dropped dead? It happens, ask Andy Rooney. Humans need to work. Work provides all sorts of benefits apart from a paycheck. It gives us social interaction, a routine, a sense of purpose.
Those benefits are essential to mental health. If we didn’t have to go out to work, would we become a country of depressed hermits?
The Reciprocity Problem
I’m a filthy lefty liberal, but even people like me feel some resentment when I hear a story about someone mooching off the system. Why should they sit around getting a hand out when I work every day?
Well, with UBI, I would be getting a hand out too. So I can’t use that argument. And the handout is the minimum. Most humans want more than the minimum. Not everyone has the ambition to become a doctor or lawyer, but most of us have enough ambition to go out and do something that gives us more than the minimum.
The other factor to consider is the “so what” factor. I don’t like people gaming the system, but those doing it are a very, very small fraction of the people in the system. So which do you prefer, that no one gets SNAP because X% of claimants are scamming or no one gets it and the ones who need it starve because of that X% of bad apples?
I don’t want anyone to starve. I know there are people out there who would delight in seeing people they think beneath them and undeserving starve, but there are more people like me than people like them. Thankfully.
If UBI can lift millions out of poverty and allow them to pursue a better life, what real difference does it make if a small percentage of the country doesn’t do anything to earn more money? The net gain for those millions and all of society is worth overlooking the few moochers.
Who Will Pay?
Here’s the rub. Where are we going to get this free money?
Well, we could cut our effing military spending by a billionth of a percent, and that would probably take care of it. It’s obscene what this country spends on defense. Defense from what? The fear in this country is at about a 90 but the threat, the actual threat, is about a 10.
If the government is going to spend money to protect us, I would prefer they spend it on things like making sure bridges we drive on don’t collapse, or Monsanto and BP aren’t poisoning our air and water. Or that none of us die because we can’t afford to go to the doctor. Those are the things you should fear, and the government should be spending money to fix. Not more aircraft carriers and F-35 fighter jets.
The 2018 military budget is $824.6 billion. Being fat kills more Americans than terrorists. Obesity kills 300,000 of us per year. In 2014, 8,124 of us were killed with guns. Since September 11, 2001, foreign-born terrorists have killed an average of one of us per year in America. So that’s about 16 of us.
You are more likely to be killed by a bear, a bear from space than you are by a terrorist. So I want some of that $824.6 billion spent improving the lives of my fellow Americans. I’ll fight off the space bears on my own.
American has more people locked up than any other country on earth. Each of us pays $260 on corrections per year up from just $77 per person in 1980. That’s $80 billion annually. But the rate of violent and property crimes has fallen by 45% over the past twenty years.
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Less crime but more spending. Why? Things like mandatory sentences and three strikes laws. No one believes that the prison gates should be thrown open but locking up non-violent criminals for years or even decades is not money well spent.
Scrap the Current System
UBI would replace all or most other entitlement programs and all the money it takes to run and implement them. UBI is cheaper than the current system.
“The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.”
Tax the Rich
Rich corporations and rich people. US companies and the 1% all over the world avoid paying $70 billion a year in taxes because they stash the money in offshore tax havens like Bermuda and Seychelles. Just like the notorious Ochoa brothers, the cocaine kingpins from the 80’s. Stashing money this way is nothing new.
Apple has $128 billion in Jersey (the island, not the state) and the biggest benefit scrounger on earth; Queen Elizabeth has 10 million pounds stashed in the Cayman Islands.
It’s Not Communism
Communism means everything is owned by the state. I’m not spending any more time on this because it’s such a stupid argument.
We Have to Do Something
As I wrote, the current system is not sustainable. If we don’t move towards UBI, what are the alternatives?
Nothing is likely what will happen for a long time because as a country, we can’t agree on anything. Even we most of us do agree on something, like Net Neutrality, we lose anyway because we don’t have enough money to buy politicians the way people like Ajit Pai and his cronies over at Verizon do.
Improve Existing Programs
We have spent $24 trillion on social programs since LBJ launched the war on poverty more than 50 years ago but much like the war on drugs, the problems persist. There are more than 80 means-tested welfare programs scattered across several government agencies so you can imagine the inefficiencies.
Improving and consolidating the existing system could alleviate the problems UBI is meant to solve.
You Don’t Buy the Cow When You Get the Milk for Free
How much do you think companies like Google and Facebook have made thanks to the data we all give them for free? They could be made to compensate us for all of that generosity. I think our porn preferences should bring in a pretty penny.
It’s the Only Way to Be
The grotesque levels of income equality in the world coupled with massive unemployment are going to create a flash point. I don’t think it will start here. People like to complain about how apathetic Americans are when it comes to taking to the streets to foster change, but I don’t think that’s true.
The Civil Rights movement and more recent things like the Million Man and the Women’s March prove otherwise. It’s just that we are so big and spread out. Marseille, all the way in the southern part of France is only about 400 miles from the capital, Paris. An easy drive and an easier train ride.
It would take much longer to get from LA to DC. So when Americans protest, we can’t all march on the capital. Tens of millions of us descending on DC would get someone’s attention, but it’s just not realistic. We can’t take a week’s vacation to make the trip.
But if you have no job, you have no job to lose. And then the list of things you do have to lose becomes ever smaller. And when you have nothing left to lose… So maybe that’s what it will take for things to descend into anarchy.
Much like the protests in Tunisia are what sparked off the broader Arab Spring, things will probably kick off in Europe first and then spread.
Automation, UBI, AI, it’s all coming. It’s going to change life as we know it and faster than we can imagine. One day you will have a job and the next, a robot will be doing it. We do have time though, not much, but time to put ourselves in the best position to weather this.
Get your financial life in order now, follow the roadmap to financial independence, so you don’t become a 21st Century Luddite smashing up looms.
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