Livable Basic Income: What is a luxury?

My last post inspired a lot of discussion (not because it was itself controversial but because, as I hoped, it helped frame a discussion about Universal Basic Income). I was happy about that because the discussion helped me refine my own opinion and figure out better ways to express it.

The main thing you need from that article for this once was the concept of drawing the distinction between a UBI that’s intended to be enough to live on (Livable Basic Income, or LBI) versus one that’s not, in other words, that’s intended to be only supplemental (Non-Livable Basic Income, or NLBI).

I realized that even with LBI, I didn’t picture a vast exodus from the workforce — rather, I was thinking that it simply made possible a variety of careers in which it’s relatively easy to make money but comparatively hard to make “a living,” such as art, music, and writing. Further, I realized that, although I hadn’t stated it, I didn’t assume LBI would really be livable anywhere, but rather at least livable somewhere. The (failed) Swiss proposal for LBI that I referenced in the other post stated that the amount should be enough to ensure a “dignified” living, because of course, you can live on any amount if you have to. (Similarly…)

So I propose a different, slightly more useful distinction between the two:

  • LBI: an income that covers your necessities, such that you’d only need to work for luxuries.
  • NLBI: an income that isn’t intended to cover all of one’s essential expenses, such that you’d still need to make some additional money unless you lived a seriously austere existence.

Clearly, the very next question is, “But what is an essential expense?” Of course, this answer is both variable and highly personal.

Essential Expenses

Most people will agree that the following are indeed essential to a “dignified” existence:

  • a place to live, further refined as a place that is warm and/or cool enough and dry enough (etc.) to prevent physical suffering — thus you need to be able to pay for water and power.
  • enough food that you don’t go hungry (and neither does your family in the same household).
  • a clean enough environment that you shouldn’t worry about being sickened by your home, food, water, or air.
  • a safe enough environment that you shouldn’t fear going outside or staying in.
Yes, these are a luxury by any definition.

From there, we get to a few debatable items. Maybe even ten years ago, I would have laughed at the idea that Internet access was an essential, but nowadays, it’s pretty close. If you don’t have a phone and/or Internet access at home, you’d not only feel quite isolated but have a tough time finding a job (which you might still want, even with LBI!). An iPhone seems like a luxury, but maybe a cheap Android isn’t? If you could afford to travel to a library and use the Internet there, perhaps that’s sufficient for the “essential” list. (I hope that WiFi eventually just becomes a public service provided to everyone, but that still seems like a reach for rural areas, which otherwise tend to be more affordable places to live.)

The biggest debate in America right now seems to be whether healthcare should be on this list. How much healthcare needs to be available to you before it becomes a luxury? Alternatively, how “affordable” does it have to be before it’s not a luxury? I would argue that if you can’t see a doctor when you’re sick without going to the ER, if paying for the treatment of a serious illness or accident would cause you to go bankrupt, then you’re not living in a dignified manner. While I don’t view healthcare as a right in the same ways as “life, liberty, and the pursuit of happiness,” I think any LBI that doesn’t provide for at least minimal healthcare can’t be considered to cover all the essentials. There’s still plenty of room to debate there, however.

What about where you live? I realized that I wasn’t picturing any kind of cost-of-living adjustment for the LBI, so I must be assuming that any LBI amount will be NLBI for some places — although UBI might make it possible for people who work lower-paying jobs to finally be able to live in some of the higher-cost-of-living areas. Do you make LBI the lowest possible livable number, or a number high enough that if you were to live way off the beaten path, you’d be able to cover some luxuries with it? That’s a moot point for now, since we have no idea how to fund LBI anyway, but it’s an interesting discussion.

Technically the Washington, DC, area is more expensive.

And something that’s on every parent’s mind: how much is childcare? I’ve read a lot of books on personal finance, and many of them consider childcare to be a luxury. But if you have children (which is, technically, a choice, although we do tend to hold parents responsible for caring for their children, whether they were wanted or not), childcare is either a cost or an opportunity cost (since the parent staying home doesn’t have as much time to work, whatever that job would be). The US already provides a form of subsidized childcare for older kids, called public school. Of course, I do believe that the purpose is to educate children, and that an educated population is better for everyone. It turns out, however, that providing for children before they reach school age also has measurable positive outcomes. Therefore, I think some form of aid for childcare should be included in the essential list.

With all that in mind, how would you even begin to calculate the number? This whole post is something of a thought experiment, so I’ll run some numbers at the end just for fun.

Luxuries

In software development, articulating “non-goals” — objectives you’re not trying to meet — can be as important as defining what we want. Americans are probably accustomed to thinking of the word luxury as meaning something truly indulgent, as opposed to simple non-essentials, but in this case, I just mean anything not on the above list. These are meant to be exemplary of things that we might be picturing when we read the above list, even though they’re not strictly essential.

  • living in any city in the nation.
  • living in any neighborhood you want.
  • that iPhone.
  • seeing any doctor you want with no wait time. (Which might be a pipe dream no matter how much money you have.)
  • owning a car, if public transportation is cheaper. (TBH, I hope that car ownership is on its way out anyway. Hehe.)
  • drinking mineral water and going out to eat all the time.
  • a yard as big as you want.
  • Cable TV/Netflix/Hulu. (But possibly not simple Internet access.)
  • having a nanny. (The most luxurious form of childcare.)
Dream on.

The list of luxuries is obviously endless, but I think you get the idea. Everyone makes tradeoffs in their personal budget so that they can afford the things that are important to them, and perhaps any LBI should simply include a tiny amount of wiggle room so that people can do so.

Cold, hard numbers

I’ve never tried to come up with a number before that seems reasonable for LBI (to the extent that LBI seems reasonable at all, of course). This article does a great job of approaching the question from the funding angle — not how much do we want to give out, but how much money could we already shake loose? But while we’re thinking pie in the sky, let’s talk numbers. Why not?

According to Expatistan’s worldwide cost comparison, Phoenix, AZ, is in the bottom third of U.S. cities in terms of cost of living. I think it makes sense not to set LBI to the lowest possible value (poor Detroit), but also to set it to a reasonable price.

It’s not *that* hot here. Most of the time.

So I looked up cost of living in the Phoenix area on the Economic Policy Institute website. For one adult, you can expect to spend about $2,300/month or $28,000/year, including basic healthcare. A family of four (two adults, two kids) would spend around $5,600/month or $67,000/year.

That still seemed kind-of high. Even though Phoenix is a lower-cost city, there are cheaper areas to live. So I found the lowest-cost area big enough to be an area whose cost of living is measured: McAllen, TX (and it might not be somewhere you want to live). According to the EPI, living in the McAllen area brings your annual cost down to $23,000/year for an individual and $53,500/year for a family of four.

Therefore I would say that, in 2017 dollars, for an amount to be considered LBI, it would be around $2,000/month for adults. Because children live with adults and some household costs (e.g., rent) amortize over more people, I think LBI for children would be somewhat lower. You could treat the child’s LBI paid to its guardians as the childcare aid parents need. The topic of irresponsible parents who waste their children’s money would be a separate (long) discussion.

Interestingly, that’s way above the Federal Poverty Level guidelines, which are currently $12,000/year for an individual and $24,500/year for a household of 4. (It should be noted that the EPI numbers are for family budgets, i.e., after-tax income, whereas the FPL numbers are all over the map but might as well be considered after-tax numbers, since that’s poor enough and if they were before-tax numbers, even if you paid tax, you’d be way worse off.)

The $2,000/month amount is clearly way beyond what we can conceive of affording right now, but I think it’s useful to get a dollar amount in your head. Perhaps it’s obvious that living at the poverty level is not a “dignified” way of life. However, the FPL numbers might be a good starting place for NLBI, since it’s the bare amount below which you might literally starve without assistance, making it perhaps a good level at which to set the assistance you’re not supposed to be able to live on.