Saturday, December 24, 2016

The Universal Basic Income

                I picked up Andy Stern’s Raising the Floor after reading a review of it. Mr. Stern, who is now age 66, spent five years exploring the new American economy. And what he found is not encouraging for workers.
                He started in Boston, where he witnessed how MIT’s Media Lab is taking on projects, funded by various corporations, to automate as much as possible. He concludes that, “As they go about inventing the future, the scientists and researchers at Media Lab aren’t thinking about the consequences of their work on the millions of Americans who are laboring in factories, building our homes, guarding our streets, investing our money, computing our taxes, teaching our children and teenagers, staffing our hospitals, driving our buses, and taking care of our elders and disabled veterans.”
                And that’s just the introduction.
                Mr. Stern, who left his position as president of the Service Employees International Union (SEIU) to pursue this project, observes today’s global corporations have no permanent home, recognize no national borders, salute no flag but their own corporate logo, and take their money anywhere they can make the most—and pay the least. (Think our new Secretary of State nominee, Exxon’s Rex Tillerson.) He points out only 62.6% of the working age population is either working or looking for work, that college is not considered as good an investment, that eight million working Americans live below the poverty line, and there’s not much on the horizon that indicates these trends will reverse.
                Further, such things as medical diagnoses, journalism, bartending, and even sex are being done by or with robots. No one—not even those in the oldest profession--seems safe from having their job taken over by a robot.
                Even for those whose jobs are not being taken over by robots, the odds of getting a traditional job with benefits are diminishing. Many jobs are now being done by freelancers, and the globalization of jobs is having quite an impact here as well. Mr. Stern gives the example of his needing some interview notes transcribed. He goes to a website called Upwork, tells what he needs done, and gets bids as low as $3 per hour. (The North American bids range from $12.50 to $25 per hour.) Based on ratings, he chooses one in Kenya who charges $7.50 per hour and pays $4.67 for the job. (He does give the transcriber a tip for a job well done.) You can see, possibly, how difficult it will be for Donald Trump to bring jobs back to America if just about anyone can get bids from around the world for just about any kind of work.
                As I said, Mr. Stern spent five years researching the state of work in America today. There are many more examples of trouble ahead as well as those already here including corporate America’s tendency to eliminate people over the age of fifty. Dan, by the way, received a total of $6,400 in unemployment benefits after he was given the boot (and that is taxable at the federal level).
                And then we get to Mr. Stern’s solution. He proposes that every American between the ages of  eighteen and sixty-four gets a universal basic income (UBI) of $1,000 per month. (Seniors who do not get Social Security benefits of $1,000 a month would receive the difference as a UBI.) Two people living together would get $2,000 per month. The checks would be mailed (or, more likely the funds would be electronically disbursed). If someone chooses to waste their allowance, well, tough. There’s no oversight on how the money is spent, and best of all, there’s no bureaucracy to “administer” the program. People will have to face the fact that they will be responsible for their own decisions. People will get this money whether or not they work, so if they find a job, they won’t lose their benefit. He points out this will give people the option not to take crappy, low paying jobs, which would probably bump up the minimum wage without passing a law to do so. He points out that a young person barely getting by in New York would be able to move to Detroit, where the city is selling homes in run-down areas for $500. And the UBI would stimulate the economy because the money would be spent.
                While Swiss voters recently voted against a UBI by a margin of 77% to 23%, experiments are being readied in Finland, France, Canada, and the Netherlands as well as in Oakland, California. India is studying the UBI.
                At first glance, this sounds like a liberal, artsy-fartsy money-for-nothing scheme, but it’s appealing to conservatives, liberals, progressives, and libertarians. I suspect these people realize that cable TV and Netflix cannot keep people home watching “The Walking Dead” forever, and the risks of not giving people enough income to live on could lead to a revolution that involves a lot more than electing a populist blowhard as president. In Kansas City we have seen some rather brazen home invasions of late, and nationally an uptick of 13.1% in the murder rate is projected this year. Not all of this increase in crime can be attributed to the economy, of course, but I would suspect at least some of it can be.
                I’ve seen some objections to the UBI. For example, Robert H. Frank, in a New York Times editorial says that the UBI would enable large groups of people to pool their resources and—gasp!—live comfortably at taxpayer expense. For example, he points out that ten families could form a commune and have $250,000 a year to live on. First, I would point out that executives at this country’s defense contractors live rather comfortably at taxpayer expense. (Lockheed-Martin’s CEO, for example, took home more than $25 million in 2013.) Second, it would be $240,000 for ten families, and third, if Mr. Frank thinks living with nine other families would be comfortable, well he and I have different versions of the good life. Mr. Frank suggests there be a work requirement (possibly as supervised unskilled workers in President-elect Trump’s infrastructure programs) associated with the UBI, which would negate a lot of the benefits of Mr. Stern’s proposal, including the ability to say no to a crap job. 
                Mr. Stern estimates the cost of his proposal at between $1.75 and $2.5 trillion per year. He has some suggestions on how to help pay for the program. To his suggestions I would add: Consider ending the wasteful war on drugs.

                Up next: Stuff

© 2016 Larry Roth


  1. Larry - I recall Nixon proposed something along these lines in his first term - and Congress promptly buried it. It really would end welfare as we know it. (By the way, posts like this is exactly why I am so pleased you are publishing again!)

  2. Thanks, Jay. I didn't know Nixon had proposed a universal basic income, but I looked it up, and you're right. Nixon proposed an annual UBI of $1600 for a family of four, which would be about $10,000 today.